KKR’s third-quarter earnings rise on capital market strength

Private equity firm KKR & Co Inc KKR.N said on Friday its after-tax distributable earnings rose 6% year-on-year in the third quarter, driven by growth in management and transaction fees from its capital markets business.

After-tax distributable earnings (DE) – the cash available for paying dividends to shareholders – rose to $410.4 million, up from $388.8 million a year earlier. This translated to DE per share of 48 cents, which exceeded the average Wall Street analyst forecast of 40 cents, according to data from Refinitiv.

“The capital markets business has been growing over time as this has been an area KKR has invested a lot in, but it can bounce around a bit from quarter-to-quarter and we expect it to moderate,” said JMP Securities analyst Devin Ryan. KKR’s shares were down 1.8% in afternoon trading, in line with the broader market.

KKR said the value of its private equity portfolio appreciated by 16% during the quarter, while real estate and infrastructure funds rose 6% and 10% respectively. Its leveraged credit funds rose by 5%.

On Wednesday, rival Blackstone Group BX.N said its third-quarter distributable earnings rose 9%, while its private equity funds appreciated by 12.2%.

Carlyle Group Inc CG.O reported a smaller-than-expected 6% drop in its third-quarter distributable earnings on Thursday, with its overall fund portfolio rising 5%. Apollo Global Management APO.N said its private equity portfolio rose 8%, although distributable earnings fell 8% during the quarter.

KKR said its net income under generally accepted accounting principles rose to $1.1 billion, from $241.2 million a year earlier, driven by income from capital allocated out of its balance sheet. The strength in its capital markets business offset a decline in profits from asset sales.

Total asset management was $233.8 billion at the end of September, up from $221.8 billion from three months earlier. KKR closed the quarter with $67.1 billion in unspent capital.

KKR said it is on track to raise its three flagship funds – Americas private equity, global infrastructure, and Asia private equity – as well as 20 other strategies over the next 18 months. It said it already amassed over $13 billion in its flagship Asia private equity fund, which began fundraising last year.

“We really did lean in when the market was dislocated, so this dry powder is particularly noteworthy given the level of capital investment we have made year-to-date,” KKR chief financial officer Robert Lewin said during an analyst earnings call on Friday.

KKR declared its regular dividend of $0.135 per share.