By Isla Binnie
July 30 (Reuters) – KKR’s second-quarter profit beat market expectations on Thursday, as it raked in higher fees from managing a growing stack of assets and cashed in on a bumper run of asset sales in the second quarter.
Fee from managing client money, which KKR earns regardless of how investments perform, jumped 25.5% to $1.25 billion from a year ago. This helped pull overall adjusted net income up to $1.63 per share, comfortably beating a $1.41 estimate from an LSEG analyst poll.
Co-CEOs Joseph Bae and Scott Nuttall said the second quarter had been its strongest ever for turning investments into cash. “We remain confident in our long-term positioning,” they said.
Shares were marginally higher in premarket trading. They have shed 22% of their value so far this year in line with other alternative asset managers.
As interest rates rose, many private equity firms have struggled in recent years to maintain their traditional model of buying companies, extracting savings and selling them profitably in recent years.
But KKR, which made its name as a buyout pioneer, closed a roster of transactions in the second quarter including the final sale of Japanese chip company Kokusai Electric and its stake in software company OneStream.
Fresh capital flows of $34 billion in the quarter were driven by the real assets business that houses KKR’s infrastructure strategies, the New York-based investment firm said.
Private equity, where KKR made its name as a buyout pioneer, brought in $9.56 billion in the quarter, a whisker ahead of flows into credit, which remains the biggest chunk of its $796 billion under management.
KKR raised $9.1 billion for its credit strategies in the quarter, a slump from $14.25 billion a year ago.
Net realized performance income, which reflects profits from asset divestments and is also known as carried interest, almost doubled from the previous year to $211.9 million.
Gross returns from its private equity and credit funds improved in the quarter, with the traditional private equity portfolio returning 4%, while composites for its leveraged credit and private credit strategies showed returns of 2% and 1%, respectively, having been negative in the previous quarter.
It invested $24 billion in the quarter and $104 billion over the past 12 months.
In June, KKR agreed to buy French power firm EDF’S North American renewable business for $4.2 billion in June, aiming to capitalize on rising power demand driven by the expansion of data center for artificial intelligence and electrification of the economy.
(Reporting by Isla Binnie in New York and Arasu Kannagi Basil in Bengaluru; Editing by Arun Koyyur)
