Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: So it's a beat for KKR in the first quarter
Speaker 2: against the estimates. The asset manager changed how it relays
Speaker 2: its results. Shnelli Basik has the CFO in conversation, Sonali.
Speaker 3: Thank you so much, Manis and Rob Lewin KKR CFO
Speaker 3: is joining us. Now you're at Bloomberg and you have
Speaker 3: your profit topping estimates, you also have assets under management.
Speaker 3: Topping estimates puts you on the.
Speaker 4: Way to reach the goal you've laid out at KKR
Speaker 4: to reach a trillion worth of assets in the next
Speaker 4: five years. Rob, is there anything that changes here in
Speaker 4: this hire for longer environment in terms of how you
Speaker 4: meet these goals?
Speaker 5: Sure? Well, Snelli, thank you for having me on this morning.
Speaker 5: Maybe we'll start with the headline of the day. Our
Speaker 5: quarters are really strong our quarter for us at KKR,
Speaker 5: across our core fine metrics even more encouraging as our
Speaker 5: forward looking indicators. And so if you look across our
Speaker 5: three core profitability measures, that's fee related earnings, that's total
Speaker 5: operating earnings, adjustin ed income, all of which on a
Speaker 5: per share basis, we're up between twenty and twenty eight
Speaker 5: percent year on year, so really strong quarter in that respect,
Speaker 5: but even more encouraging is what we're seeing going forward.
Speaker 5: We raised thirty one billion dollars of capital in the quarter.
Speaker 5: It's the second consecutive quarter where we've raised over thirty
Speaker 5: billion of capital, which is actually the first time in
Speaker 5: ky Care's forty eight year history where we've done that
Speaker 5: in back to back quarter, so really bodes well for
Speaker 5: the future. We've written a little bit most importantly, sorry
Speaker 5: go ahead, Shell.
Speaker 3: Yeah, we've written a little here about your fundraising plans here.
Speaker 3: I know you can't talk about fundraising plans publicly, but
Speaker 3: privately we know that you're on track to raise more
Speaker 3: than a billion dollars here or roughly a billion dollars
Speaker 3: for an infrastructure fund. Rob Can you give us some
Speaker 3: picture here about where investors are putting money to work?
Speaker 3: Where is most of this fundraising coming from across assets?
Speaker 1: Sure?
Speaker 5: And so the interesting thing is if you look at
Speaker 5: KKR since the beginning of twenty twenty two, we've raised
Speaker 5: about one hundred and eighty billion dollars of capital, which
Speaker 5: is a really healthy number for us. But we've been
Speaker 5: able to do that without a lot of our large
Speaker 5: flagship strategies in the market. So as we've talked about
Speaker 5: the go forward, we've talked about fundraising being able to
Speaker 5: accelerate from here. If you look at where a lot
Speaker 5: of that capital raising has been over the course of
Speaker 5: the past number of quarters. You know, in Q one
Speaker 5: we had a final close of six point four billion
Speaker 5: dollars in our Asia Infrastructure strategy. That's the largest fund
Speaker 5: by a good margin in Asia Pacific focused on infrastructure.
Speaker 5: Lots of real good tailwinds there in terms of longer
Speaker 5: term growth, a lot of capital raising across our credit
Speaker 5: franchise that's the asset based finance that's direct lending leverage
Speaker 5: credit north to twenty billion dollars in just this quarter alone.
Speaker 5: So there's a lot of momentum for US across capital
Speaker 5: raising and we would expect that to accelerate. What we've
Speaker 5: articulated to our investors is we believe that we could
Speaker 5: raise three hundred plus billion dollars of capital over the
Speaker 5: course of the next three years.
Speaker 3: How do you feel about the money not only brought in,
Speaker 3: but the money that you're spitting back out to investors?
Speaker 3: Big open question across Wall Street in terms of how
Speaker 3: quickly firms like yours can be monetizing your assets, selling them,
Speaker 3: putting them into public markets. With this kind of volatility around.
Speaker 5: Sure, the important thing to think about when you're thinking
Speaker 5: about KKR is that we have four main investing verticals,
Speaker 5: So that's private equity, that's infrastructure, real estate, and credit.
Speaker 5: We are also very much a global firm, and we've
Speaker 5: got if you look at our investment professionals, nor than
Speaker 5: fifty percent of our investment professionals today are based outside
Speaker 5: the United States. So we are always in the market,
Speaker 5: always able to pursue different investment themes that we have
Speaker 5: in front of us really exciting in that respect.
Speaker 3: Do you think in terms of do you think that
Speaker 3: this year that that investment window can stay this open?
Speaker 3: Do you think that that might be pushed out into
Speaker 3: twenty twenty five in terms of monetization oportus unities with
Speaker 3: the volatility that we're.
Speaker 5: Seeing, Sure, let's maybe start on the deployment side and
Speaker 5: then we'll move to monization. It's not what we're seeing.
Speaker 5: Our pipelines on deployment are building across the firm. We
Speaker 5: are really active in areas like infrastructure, all things digital infrastructure,
Speaker 5: so towers, fiber, data centers. If you look, we're really
Speaker 5: leaning in on the renewables energy transition side of investing.
Speaker 5: We just complete our first climate investment in the US
Speaker 5: and Q one a business called Avantis in the energy,
Speaker 5: a solar energy storage business. Really exciting opportunities for US
Speaker 5: across all areas of infrastructure. Asset based finance is another
Speaker 5: area where we're really leaning in as a firm. I
Speaker 5: think there's a lot of really good tailwinds for the
Speaker 5: alternative asset manager in asset based finance, and KKR is
Speaker 5: a real market leader there with nor than fifty billion
Speaker 5: of assets under management today. Focused on that area. In
Speaker 5: terms of.
Speaker 3: Please go ahead monetization, yeah, sure.
Speaker 5: In terms of your question as it relates to monetization, again,
Speaker 5: we're starting to see pipelines building. In just Q one,
Speaker 5: we exited a really successful investment for our firm at
Speaker 5: these partially exited a business called app Love and at
Speaker 5: north of eighteen times multiple money for our investors. So
Speaker 5: we are seeing real opportunities across the firm to be
Speaker 5: able to monetize. And likewise, just like we're seeing growing
Speaker 5: pipelines on deployment, we're seeing growing pipelines on the monetization
Speaker 5: side as well.
Speaker 3: It sounds like you're trying to find opportunities or are
Speaker 3: finding opportunities regardless of this kind of higher for longer environment.
Speaker 3: It's fed day, Rob, How do you think about what
Speaker 3: the investment opportunity looks like with rates potentially staying at
Speaker 3: this level or not much soler Yeah.
Speaker 5: So one of the unique things about our model right
Speaker 5: is we have over two hundred companies that we're invested
Speaker 5: in across the globe, so it gives us a pretty
Speaker 5: good lens into what's going on from an economy standpoint.
Speaker 5: And we're seeing goods inflation come down, we're seeing shelter
Speaker 5: inflation come down, we are seeing core services inflation remain stickier.
Speaker 5: And we've been feeling this way for quite some time
Speaker 5: and we've been able to position our portfolio to be
Speaker 5: able to address this. And so we you see interest
Speaker 5: rates coming down over time, but we don't see any
Speaker 5: CONTs in twenty twenty four. We would expect the tenure
Speaker 5: to probably come down to somewhere around four percent plus
Speaker 5: or minus. But all been very front of mind for
Speaker 5: us as we pursued investment themes. We've been focused on
Speaker 5: businesses now for some time that we feel can sustain
Speaker 5: margin in a higher cost environment. You're starting or you're
Speaker 5: really seeing that play out in our portfolio really healthy.
Speaker 5: Back to we've driven real investment performance on behalf of
Speaker 5: our clients again this quarter and over a longer period
Speaker 5: of time, so we're quite proud of that. And back
Speaker 5: to areas where we've been leaning in asset based finance
Speaker 5: infrastructure both have a component of inflation protection baked into
Speaker 5: those asset classes.
Speaker 3: Speak to us more about inflation here and how inflation
Speaker 3: might be impacting your portfolio companies, and you've we've kind
Speaker 3: of talked about this kind of potentially higher for longer
Speaker 3: inflationary environment as well. How are you thinking about investing
Speaker 3: through that? Sure?
Speaker 5: You know, back to we've got a big, global, diverse platform,
Speaker 5: so we're able to move capital around where we think
Speaker 5: we see the highest opportunities across the globe. As it
Speaker 5: relates to our portfolio specifically, we feel really good with
Speaker 5: the health of the overall portfolio. You know, there's aspects
Speaker 5: of KKR's business that are going to perform better in
Speaker 5: a higher rate environment and aspects of our business that
Speaker 5: are going to perform better in a lower rate environment.
Speaker 5: The key for us. Have we set up a firm
Speaker 5: where we think that we could go out compete our
Speaker 5: competitors regardless of the environment. And we feel like we've
Speaker 5: got the tool kit inside KKR to really be able
Speaker 5: to do that.
Speaker 3: But do you think at KKR you have to prepare
Speaker 3: here for potentially higher prices across those portfolio companies and
Speaker 3: pr fuertionality.
Speaker 5: Yeah, and we have and absolutely I think from a
Speaker 5: portfolio construction perspective, we feel really well prepared for that boat.
Speaker 5: At KKR, we really have to prepare across different outcomes Dynamically.
Speaker 5: You might be in an environment where our interest rates
Speaker 5: are higher, or you might be in an environment where
Speaker 5: you know, we're surprised on the inflation side and it
Speaker 5: could be lower. And so back to how we focus
Speaker 5: our teams, it's very much real time. The information we
Speaker 5: have back from our two hundred plus companies inform our
Speaker 5: investment process and I think allow us to stay really
Speaker 5: ahead of the curve, which ultimately benefits our clients with
Speaker 5: greater investment performance relative to the competitors that we're competing
Speaker 5: against in the market.
Speaker 3: Rob thank you so very much for your time here,
Speaker 3: and I know you have an earnings call ahead of
Speaker 3: you as well. That is Rob Lewin, the CFO of KKR,