KKR’s Profit Grows as Fee-Related Earnings Hits Record

The New York-based firm generated $1.1 billion in profit — 30 percent more than the $859.9 million earned a year prior. Fee-related earnings grew to $1.3 billion, up by 27 percent year-over-year, the most on a quarterly basis.

The asset manager expects to return more than $40 billion to its investors, exceeding its previous annual record by more than 50 percent. KKR sold CoolIT Systems, a company that cools data centers, for $4.75 billion and private aviation infrastructure platform Atlantic Aviation at a nearly $10 billion valuation.

The investor raised $25 billion during the third quarter and $116 billion over the past year, bringing its assets under management to over $800 billion. It plans to reach $1 trillion in assets by 2030. The investment firm, which was founded in 1976, attributed some of its success to its five decades of experience.

Leadership and strategy

“A lot of the mistakes that other people are making now, we made a couple decades ago or more. We changed our investment process to reflect the mistakes we made, and become better all-weather, through-cycle investors,” Scott Nuttall, Co-CEO, said during the earnings call. “That we believe is what is showing up in our results.”

Still, revenue fell to $4.56 billion, down by nearly $1 billion from a year prior.

Real estate outlook

In real estate, KKR sees opportunity. While elevated interest rates have made fundraising harder, they’ve also cheapended existing properties. As construction costs rise and new supply remains limited, real estate could become more valuable as demand recovers.

“I think for those clients that have an appetite for some cyclicality and some volatility, we’re constructive on this environment,” said Craig Larson, a KKR partner and head of investor relations.