KKR reported a rise in third-quarter profit that beat Wall Street’s expectations on Friday, boosted by strong fundraising, particularly in its insurance unit and credit.
Adjusted net income of $1.27 billion, or $1.41 per share, surpassed the $1.17 billion, or $1.30 per share, which analysts on average had expected from the New York-based alternative asset manager, according to estimates compiled by LSEG.
Shares of the company rose 6% in premarket trading. The stock has slipped 19% this year.
Fee-related earnings, which reflect fees charged for managing a growing stash of assets, rose to $1 billion. Total assets rose to $723 billion on the back of $43 billion in fresh capital raised in the quarter.
KKR’s co-CEOs Scott Nuttall and Joe Bae have set a target for assets to reach $1 trillion by 2030.
Transaction fees from the capital markets business, which arranges financing for companies in its portfolio and for clients dipped 35% from a year ago to $276 million.
Along with peers Blackstone BX.N, whose assets have breached the $1 trillion mark, and Apollo APO.N, which hopes to get there by 2026, KKR has added new business lines to grow beyond the traditional private equity strategy of buying and selling businesses.
Private equity firms have been all the keener to branch out as higher interest rates and market volatility hampered their ability to profit from selling companies they bought during a long period of lower rates at prices that in some cases now look expensive.
Among those newer businesses, insurer Global Atlantic, which represents a third of the firm’s assets, saw operating earnings rise 28%.
Analysts have been watching the retirement segments at KKR and Apollo for any signs of strain on profits from selling annuities, which are sold for a lump sum and guarantee periodic payouts.
KKR also tapped the wealthy individuals who alternative investment firms are increasingly targeting. Its K-Series business offering funds to retail investors grew to $29 billion from $14 billion a year ago.
One result of the generally slower pace of exiting private equity investments through sales or refinancing has been a squeeze on private equity funds’ ability to return capital to their investors.
In turn, some of them have become reluctant to make commitments to new funds. KKR said on Friday it has raised $17.5 billion for its latest North America-focused fund, which people familiar with the matter said last summer had started marketing to investors with a target of around $20 billion.
Dry powder, or money investors have pledged but has not yet been used, totaled $126 billion. During the quarter, KKR closed a deal to buy a majority stake in biopharma royalty acquisition company Healthcare Royalty Partners.
Global Atlantic received a $2 billion investment from Japan Post Insurance Company.
After the end of the quarter, KKR teamed up with Apollo to invest $7 billion in Keurig Dr Pepper KDP.O, a deal which helped ease investor concerns about the beverage group’s debt pile after it bought coffee maker JDE Peet’s.
Reuters
