KKR & Co. Inc. reported that it hit a two-year $100 billion fundraising target in three quarters, an effort that was buoyed by the firm's continual business diversification.
The listed alternatives giant raised $28 billion in the third quarter, bringing the year-to-date figure to $102 billion. Across the firm's record 2020 fundraising year, KKR raised less than half that amount — $44 billion, head of investor relations Craig Larson said on its third-quarter earnings call.
The amount raised in the third quarter is the second-highest quarterly figure KKR has reported in its history, and over 90% of the capital raised has come from strategies outside of traditional private equity, Larson said. "Seven or eight years ago, if we reported one of the strongest fundraising quarters in our history, it would have meant we had a big fundraising event in private equity."
In private markets, 40% of capital raised came from KKR's real estate business, Larson said, highlighting the final close of its $4.3 billion KKR Real Estate Partners Americas III in the quarter, which was twice the size of its predecessor.
Its insurance business, Global Atlantic Financial Group Ltd., also helped add $14 billion of new capital to KKR, largely in public markets, Larson noted.
KKR "is really scaling and diversifying," new co-CEO Scott Nuttall said on the call. "Last time I counted" there was "something like 27 different line items" coming to market in the next 12 to 18 months. "There's lots of different products in the market, and that's away from Global Atlantic," Nuttall added.
Areas for growth
Outlining strategic areas of focus, Nuttall said the firm has seen a 4x increase in its perpetual and long-dated strategic capital and the firm has "a lot of new ideas and efforts to generate even more perpetual capital going forward."
Perpetual capital makes up $205 billion of its $459 billion of assets under management, up from $49 billion a year ago.
"We are big believers in the power of compounding in all aspects of our business, including AUM. The more capital we can attract that is perpetual or recycles, the faster we expect our AUM will scale and compound over the long term," Nuttall said.
Insurance is another key area of focus for the firm following its acquisition of Global Atlantic, or GA, in February 2021, which it holds on its balance sheet. GA assets have grown to $120 billion in the third quarter from $75 billion a year ago. In addition, KKR's AUM from third-party insurance clients sits at $48 billion today, up from $33 billion a year ago.
Put together, KKR's insurance AUM has grown "from $108 billion pro forma for GA to $167 billion in a year, or an increase of 55%," Nuttall said, adding that the firm sees "a lot more opportunity for significant growth in insurance."
Finally, the firm is focused on private wealth and is actively making investments to build out its capabilities to raise capital from individual investors.
Individual investors have made up 10% to 20% of the capital raised by KKR across the last few years, Nuttall said, but the firm believes that number will ramp up "to 30% to 50% of the capital we raise over the next several years."
"We are investing in sales, marketing, data and digital talent. And we are creating more democratized products that are relevant for a wide number of individual investors. This is a big opportunity for us, and we think we're incredibly well positioned," Nuttall said.
