1
00:00:02,440 --> 00:00:12,760
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:13,760 --> 00:00:16,080
Speaker 2: So it's a beat for KKR in the first quarter

3
00:00:16,200 --> 00:00:20,640
Speaker 2: against the estimates. The asset manager changed how it relays

4
00:00:20,680 --> 00:00:25,440
Speaker 2: its results. Shnelli Basik has the CFO in conversation, Sonali.

5
00:00:25,680 --> 00:00:28,440
Speaker 3: Thank you so much, Manis and Rob Lewin KKR CFO

6
00:00:28,520 --> 00:00:31,040
Speaker 3: is joining us. Now you're at Bloomberg and you have

7
00:00:31,280 --> 00:00:35,000
Speaker 3: your profit topping estimates, you also have assets under management.

8
00:00:35,080 --> 00:00:37,319
Speaker 3: Topping estimates puts you on the.

9
00:00:37,280 --> 00:00:39,519
Speaker 4: Way to reach the goal you've laid out at KKR

10
00:00:39,600 --> 00:00:42,160
Speaker 4: to reach a trillion worth of assets in the next

11
00:00:42,200 --> 00:00:46,080
Speaker 4: five years. Rob, is there anything that changes here in

12
00:00:46,120 --> 00:00:49,479
Speaker 4: this hire for longer environment in terms of how you

13
00:00:49,560 --> 00:00:50,479
Speaker 4: meet these goals?

14
00:00:50,800 --> 00:00:53,160
Speaker 5: Sure? Well, Snelli, thank you for having me on this morning.

15
00:00:53,159 --> 00:00:55,480
Speaker 5: Maybe we'll start with the headline of the day. Our

16
00:00:55,560 --> 00:00:58,920
Speaker 5: quarters are really strong our quarter for us at KKR,

17
00:00:58,960 --> 00:01:03,000
Speaker 5: across our core fine metrics even more encouraging as our

18
00:01:03,040 --> 00:01:06,240
Speaker 5: forward looking indicators. And so if you look across our

19
00:01:06,280 --> 00:01:10,679
Speaker 5: three core profitability measures, that's fee related earnings, that's total

20
00:01:10,680 --> 00:01:13,039
Speaker 5: operating earnings, adjustin ed income, all of which on a

21
00:01:13,040 --> 00:01:15,840
Speaker 5: per share basis, we're up between twenty and twenty eight

22
00:01:15,880 --> 00:01:19,320
Speaker 5: percent year on year, so really strong quarter in that respect,

23
00:01:19,440 --> 00:01:22,240
Speaker 5: but even more encouraging is what we're seeing going forward.

24
00:01:22,240 --> 00:01:24,919
Speaker 5: We raised thirty one billion dollars of capital in the quarter.

25
00:01:25,360 --> 00:01:27,959
Speaker 5: It's the second consecutive quarter where we've raised over thirty

26
00:01:28,000 --> 00:01:30,280
Speaker 5: billion of capital, which is actually the first time in

27
00:01:30,319 --> 00:01:32,720
Speaker 5: ky Care's forty eight year history where we've done that

28
00:01:32,760 --> 00:01:35,039
Speaker 5: in back to back quarter, so really bodes well for

29
00:01:35,120 --> 00:01:38,520
Speaker 5: the future. We've written a little bit most importantly, sorry

30
00:01:38,560 --> 00:01:39,199
Speaker 5: go ahead, Shell.

31
00:01:39,120 --> 00:01:41,720
Speaker 3: Yeah, we've written a little here about your fundraising plans here.

32
00:01:41,760 --> 00:01:45,000
Speaker 3: I know you can't talk about fundraising plans publicly, but

33
00:01:45,160 --> 00:01:48,400
Speaker 3: privately we know that you're on track to raise more

34
00:01:48,440 --> 00:01:50,680
Speaker 3: than a billion dollars here or roughly a billion dollars

35
00:01:50,720 --> 00:01:53,280
Speaker 3: for an infrastructure fund. Rob Can you give us some

36
00:01:53,680 --> 00:01:57,040
Speaker 3: picture here about where investors are putting money to work?

37
00:01:57,080 --> 00:02:00,560
Speaker 3: Where is most of this fundraising coming from across assets?

38
00:02:01,080 --> 00:02:01,360
Speaker 1: Sure?

39
00:02:01,400 --> 00:02:03,080
Speaker 5: And so the interesting thing is if you look at

40
00:02:03,160 --> 00:02:06,360
Speaker 5: KKR since the beginning of twenty twenty two, we've raised

41
00:02:06,360 --> 00:02:08,280
Speaker 5: about one hundred and eighty billion dollars of capital, which

42
00:02:08,320 --> 00:02:10,640
Speaker 5: is a really healthy number for us. But we've been

43
00:02:10,680 --> 00:02:13,120
Speaker 5: able to do that without a lot of our large

44
00:02:13,160 --> 00:02:15,919
Speaker 5: flagship strategies in the market. So as we've talked about

45
00:02:15,960 --> 00:02:19,080
Speaker 5: the go forward, we've talked about fundraising being able to

46
00:02:19,160 --> 00:02:21,639
Speaker 5: accelerate from here. If you look at where a lot

47
00:02:21,680 --> 00:02:23,720
Speaker 5: of that capital raising has been over the course of

48
00:02:23,760 --> 00:02:26,920
Speaker 5: the past number of quarters. You know, in Q one

49
00:02:27,240 --> 00:02:29,720
Speaker 5: we had a final close of six point four billion

50
00:02:29,760 --> 00:02:33,480
Speaker 5: dollars in our Asia Infrastructure strategy. That's the largest fund

51
00:02:33,560 --> 00:02:37,200
Speaker 5: by a good margin in Asia Pacific focused on infrastructure.

52
00:02:37,480 --> 00:02:40,280
Speaker 5: Lots of real good tailwinds there in terms of longer

53
00:02:40,360 --> 00:02:45,560
Speaker 5: term growth, a lot of capital raising across our credit

54
00:02:45,600 --> 00:02:49,400
Speaker 5: franchise that's the asset based finance that's direct lending leverage

55
00:02:49,440 --> 00:02:52,240
Speaker 5: credit north to twenty billion dollars in just this quarter alone.

56
00:02:52,280 --> 00:02:55,000
Speaker 5: So there's a lot of momentum for US across capital

57
00:02:55,040 --> 00:02:57,760
Speaker 5: raising and we would expect that to accelerate. What we've

58
00:02:57,840 --> 00:03:00,600
Speaker 5: articulated to our investors is we believe that we could

59
00:03:00,639 --> 00:03:03,240
Speaker 5: raise three hundred plus billion dollars of capital over the

60
00:03:03,280 --> 00:03:04,560
Speaker 5: course of the next three years.

61
00:03:04,720 --> 00:03:07,040
Speaker 3: How do you feel about the money not only brought in,

62
00:03:07,080 --> 00:03:09,920
Speaker 3: but the money that you're spitting back out to investors?

63
00:03:10,240 --> 00:03:12,880
Speaker 3: Big open question across Wall Street in terms of how

64
00:03:12,960 --> 00:03:16,799
Speaker 3: quickly firms like yours can be monetizing your assets, selling them,

65
00:03:16,880 --> 00:03:20,200
Speaker 3: putting them into public markets. With this kind of volatility around.

66
00:03:20,480 --> 00:03:24,600
Speaker 5: Sure, the important thing to think about when you're thinking

67
00:03:24,639 --> 00:03:28,240
Speaker 5: about KKR is that we have four main investing verticals,

68
00:03:28,240 --> 00:03:31,520
Speaker 5: So that's private equity, that's infrastructure, real estate, and credit.

69
00:03:31,800 --> 00:03:34,480
Speaker 5: We are also very much a global firm, and we've

70
00:03:34,480 --> 00:03:37,280
Speaker 5: got if you look at our investment professionals, nor than

71
00:03:37,280 --> 00:03:40,440
Speaker 5: fifty percent of our investment professionals today are based outside

72
00:03:40,480 --> 00:03:42,240
Speaker 5: the United States. So we are always in the market,

73
00:03:42,280 --> 00:03:45,400
Speaker 5: always able to pursue different investment themes that we have

74
00:03:45,480 --> 00:03:48,120
Speaker 5: in front of us really exciting in that respect.

75
00:03:48,160 --> 00:03:50,120
Speaker 3: Do you think in terms of do you think that

76
00:03:50,240 --> 00:03:54,280
Speaker 3: this year that that investment window can stay this open?

77
00:03:54,400 --> 00:03:56,720
Speaker 3: Do you think that that might be pushed out into

78
00:03:56,760 --> 00:04:00,440
Speaker 3: twenty twenty five in terms of monetization oportus unities with

79
00:04:00,480 --> 00:04:01,520
Speaker 3: the volatility that we're.

80
00:04:01,360 --> 00:04:03,800
Speaker 5: Seeing, Sure, let's maybe start on the deployment side and

81
00:04:03,800 --> 00:04:05,640
Speaker 5: then we'll move to monization. It's not what we're seeing.

82
00:04:05,640 --> 00:04:08,360
Speaker 5: Our pipelines on deployment are building across the firm. We

83
00:04:08,400 --> 00:04:12,800
Speaker 5: are really active in areas like infrastructure, all things digital infrastructure,

84
00:04:12,840 --> 00:04:16,960
Speaker 5: so towers, fiber, data centers. If you look, we're really

85
00:04:17,040 --> 00:04:20,360
Speaker 5: leaning in on the renewables energy transition side of investing.

86
00:04:20,400 --> 00:04:23,240
Speaker 5: We just complete our first climate investment in the US

87
00:04:23,320 --> 00:04:26,080
Speaker 5: and Q one a business called Avantis in the energy,

88
00:04:26,160 --> 00:04:31,520
Speaker 5: a solar energy storage business. Really exciting opportunities for US

89
00:04:31,520 --> 00:04:34,839
Speaker 5: across all areas of infrastructure. Asset based finance is another

90
00:04:34,880 --> 00:04:37,120
Speaker 5: area where we're really leaning in as a firm. I

91
00:04:37,160 --> 00:04:39,120
Speaker 5: think there's a lot of really good tailwinds for the

92
00:04:39,160 --> 00:04:42,960
Speaker 5: alternative asset manager in asset based finance, and KKR is

93
00:04:42,960 --> 00:04:45,240
Speaker 5: a real market leader there with nor than fifty billion

94
00:04:45,520 --> 00:04:48,599
Speaker 5: of assets under management today. Focused on that area. In

95
00:04:48,680 --> 00:04:49,080
Speaker 5: terms of.

96
00:04:49,480 --> 00:04:51,240
Speaker 3: Please go ahead monetization, yeah, sure.

97
00:04:51,240 --> 00:04:54,400
Speaker 5: In terms of your question as it relates to monetization, again,

98
00:04:54,440 --> 00:04:56,920
Speaker 5: we're starting to see pipelines building. In just Q one,

99
00:04:57,600 --> 00:05:01,040
Speaker 5: we exited a really successful investment for our firm at

100
00:05:01,080 --> 00:05:05,120
Speaker 5: these partially exited a business called app Love and at

101
00:05:05,160 --> 00:05:07,960
Speaker 5: north of eighteen times multiple money for our investors. So

102
00:05:08,000 --> 00:05:10,839
Speaker 5: we are seeing real opportunities across the firm to be

103
00:05:10,839 --> 00:05:13,679
Speaker 5: able to monetize. And likewise, just like we're seeing growing

104
00:05:13,680 --> 00:05:16,880
Speaker 5: pipelines on deployment, we're seeing growing pipelines on the monetization

105
00:05:17,040 --> 00:05:17,600
Speaker 5: side as well.

106
00:05:17,720 --> 00:05:19,800
Speaker 3: It sounds like you're trying to find opportunities or are

107
00:05:19,839 --> 00:05:23,640
Speaker 3: finding opportunities regardless of this kind of higher for longer environment.

108
00:05:24,000 --> 00:05:27,839
Speaker 3: It's fed day, Rob, How do you think about what

109
00:05:28,000 --> 00:05:31,840
Speaker 3: the investment opportunity looks like with rates potentially staying at

110
00:05:31,839 --> 00:05:35,159
Speaker 3: this level or not much soler Yeah.

111
00:05:35,240 --> 00:05:37,720
Speaker 5: So one of the unique things about our model right

112
00:05:37,800 --> 00:05:40,919
Speaker 5: is we have over two hundred companies that we're invested

113
00:05:40,960 --> 00:05:42,640
Speaker 5: in across the globe, so it gives us a pretty

114
00:05:42,680 --> 00:05:45,240
Speaker 5: good lens into what's going on from an economy standpoint.

115
00:05:45,440 --> 00:05:48,279
Speaker 5: And we're seeing goods inflation come down, we're seeing shelter

116
00:05:48,360 --> 00:05:52,600
Speaker 5: inflation come down, we are seeing core services inflation remain stickier.

117
00:05:52,960 --> 00:05:55,440
Speaker 5: And we've been feeling this way for quite some time

118
00:05:55,480 --> 00:05:58,320
Speaker 5: and we've been able to position our portfolio to be

119
00:05:58,320 --> 00:06:00,760
Speaker 5: able to address this. And so we you see interest

120
00:06:00,800 --> 00:06:02,680
Speaker 5: rates coming down over time, but we don't see any

121
00:06:02,680 --> 00:06:06,520
Speaker 5: CONTs in twenty twenty four. We would expect the tenure

122
00:06:06,560 --> 00:06:09,000
Speaker 5: to probably come down to somewhere around four percent plus

123
00:06:09,080 --> 00:06:11,320
Speaker 5: or minus. But all been very front of mind for

124
00:06:11,400 --> 00:06:14,359
Speaker 5: us as we pursued investment themes. We've been focused on

125
00:06:14,440 --> 00:06:17,120
Speaker 5: businesses now for some time that we feel can sustain

126
00:06:17,240 --> 00:06:20,520
Speaker 5: margin in a higher cost environment. You're starting or you're

127
00:06:20,520 --> 00:06:23,440
Speaker 5: really seeing that play out in our portfolio really healthy.

128
00:06:23,520 --> 00:06:26,520
Speaker 5: Back to we've driven real investment performance on behalf of

129
00:06:26,520 --> 00:06:29,120
Speaker 5: our clients again this quarter and over a longer period

130
00:06:29,120 --> 00:06:31,680
Speaker 5: of time, so we're quite proud of that. And back

131
00:06:31,680 --> 00:06:34,480
Speaker 5: to areas where we've been leaning in asset based finance

132
00:06:34,560 --> 00:06:37,680
Speaker 5: infrastructure both have a component of inflation protection baked into

133
00:06:37,680 --> 00:06:38,720
Speaker 5: those asset classes.

134
00:06:39,279 --> 00:06:42,360
Speaker 3: Speak to us more about inflation here and how inflation

135
00:06:42,480 --> 00:06:45,640
Speaker 3: might be impacting your portfolio companies, and you've we've kind

136
00:06:45,680 --> 00:06:48,039
Speaker 3: of talked about this kind of potentially higher for longer

137
00:06:48,040 --> 00:06:52,000
Speaker 3: inflationary environment as well. How are you thinking about investing

138
00:06:52,000 --> 00:06:53,520
Speaker 3: through that? Sure?

139
00:06:53,600 --> 00:06:56,760
Speaker 5: You know, back to we've got a big, global, diverse platform,

140
00:06:56,800 --> 00:06:59,200
Speaker 5: so we're able to move capital around where we think

141
00:06:59,240 --> 00:07:02,640
Speaker 5: we see the highest opportunities across the globe. As it

142
00:07:02,680 --> 00:07:05,919
Speaker 5: relates to our portfolio specifically, we feel really good with

143
00:07:05,960 --> 00:07:08,520
Speaker 5: the health of the overall portfolio. You know, there's aspects

144
00:07:08,560 --> 00:07:10,520
Speaker 5: of KKR's business that are going to perform better in

145
00:07:10,520 --> 00:07:12,920
Speaker 5: a higher rate environment and aspects of our business that

146
00:07:12,960 --> 00:07:14,880
Speaker 5: are going to perform better in a lower rate environment.

147
00:07:15,040 --> 00:07:17,120
Speaker 5: The key for us. Have we set up a firm

148
00:07:17,160 --> 00:07:19,760
Speaker 5: where we think that we could go out compete our

149
00:07:19,800 --> 00:07:22,600
Speaker 5: competitors regardless of the environment. And we feel like we've

150
00:07:22,600 --> 00:07:24,800
Speaker 5: got the tool kit inside KKR to really be able

151
00:07:24,840 --> 00:07:25,200
Speaker 5: to do that.

152
00:07:25,240 --> 00:07:27,160
Speaker 3: But do you think at KKR you have to prepare

153
00:07:27,240 --> 00:07:30,920
Speaker 3: here for potentially higher prices across those portfolio companies and

154
00:07:31,680 --> 00:07:32,400
Speaker 3: pr fuertionality.

155
00:07:32,520 --> 00:07:35,080
Speaker 5: Yeah, and we have and absolutely I think from a

156
00:07:35,080 --> 00:07:38,800
Speaker 5: portfolio construction perspective, we feel really well prepared for that boat.

157
00:07:39,040 --> 00:07:44,040
Speaker 5: At KKR, we really have to prepare across different outcomes Dynamically.

158
00:07:44,280 --> 00:07:46,760
Speaker 5: You might be in an environment where our interest rates

159
00:07:46,760 --> 00:07:49,080
Speaker 5: are higher, or you might be in an environment where

160
00:07:49,240 --> 00:07:51,200
Speaker 5: you know, we're surprised on the inflation side and it

161
00:07:51,240 --> 00:07:54,360
Speaker 5: could be lower. And so back to how we focus

162
00:07:55,080 --> 00:07:59,720
Speaker 5: our teams, it's very much real time. The information we

163
00:07:59,760 --> 00:08:02,400
Speaker 5: have back from our two hundred plus companies inform our

164
00:08:02,440 --> 00:08:04,760
Speaker 5: investment process and I think allow us to stay really

165
00:08:04,800 --> 00:08:07,520
Speaker 5: ahead of the curve, which ultimately benefits our clients with

166
00:08:07,520 --> 00:08:11,000
Speaker 5: greater investment performance relative to the competitors that we're competing

167
00:08:11,040 --> 00:08:11,920
Speaker 5: against in the market.

168
00:08:12,280 --> 00:08:14,360
Speaker 3: Rob thank you so very much for your time here,

169
00:08:14,400 --> 00:08:16,120
Speaker 3: and I know you have an earnings call ahead of

170
00:08:16,160 --> 00:08:19,640
Speaker 3: you as well. That is Rob Lewin, the CFO of KKR,