KKR & Co. Inc.

I will now hand the call over to Craig Larson, Head of Investor Relations for KKR.

Thank you. Good morning, everybody. Welcome to our third quarter 2020 earnings call. I'm joined this morning by Scott Nuttall, our co-president and co-COL, and also by Rob Lewin, our CFO. We'd like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our press release, which is available on the Investor Center section at KKR.com. This call will contain forward-looking statements which do not guarantee future events or performance, so please refer to our SEC filings for cautionary factors related to these statements. And like previous quarters, we've also posted a supplementary deck on our website that we'll be referring to over the course of the call. We've all experienced volatility and disruption in many ways in 2020 across the globe. So we continue to hope that everyone is safe and healthy. But in terms of KKR and our results this quarter, we've continued to see strong performance really across all of our metrics. Turning to page two of our supplement to begin, you can see that our key metrics are performing nicely. Looking at the upper left-hand part of the page, asset center management came in at $234 billion. representing a 12% increase from a year ago. And as fundraising and capital deployment momentum continued, our management fees over the past 12 months, as you can see by the chart in the top right-hand corner, grew by 13% to $1.3 billion. Looking at the bottom left, you can see our book value per share saw a meaningful increase this quarter, listed by strong investment performance. In the third quarter, book value per share grew from $17.73 as of 6-30 to $20.26, up 14%, and more broadly is up 11% from $18.22 per share a year ago. And finally, on the bottom right-hand side, you see our after-tax distributable earnings. First, in terms of this quarter, DE came in at $410 million, or $0.48 on a per-share basis, Both of these figures are up approximately 25% from our results last quarter. And looking over the last 12 months, despite all of the volatility we've endured, we reported $1.5 billion of after-tax DE, which is essentially flat compared to the figure from a year ago. Moving on to our summary financials for the third quarter, please turn to page three of the supplement, and let's walk through the left-hand part of that slide. Management fees increased to 360 million, up 14% to Q3 last year, driven most significantly by Asia IV, which entered its investment period in the quarter. Transaction fees totaled 301 million. We had a strong quarter within capital markets with transaction fees here coming in at 158 million, given the breadth of deployment and monetization activities we saw over the course of the quarter. Realized performance income came in at 234 million, And with $260 million of realized investment income, total revenues were $1.1 billion this quarter, up 11% from the same quarter a year ago. Notable monetization activity in the quarter included the IPO of Hut Group, a British e-commerce firm, the dividend recapitalization of Epicor, which is a software firm in a North America Fund 11, which we subsequently sold, as well as a secondary at Fiserv. And on a blended basis, our exits this quarter were done at over three times cost. Turning to our expenses for the quarter, compensation expenses were $427 million, which brings our total compensation margin, including equity-based comp, to 40%. Non-compensation, excuse me, operating expenses were $90 million. Our operating margin increased to 52%. with after-tax distributable earnings then of the $410 million or $0.48 per share. And with that, I'd like to turn it over to Rob.

Thanks a lot, Craig, and good morning, everyone. Similar to last quarter, I want to start off by focusing on our year-to-date performance. We've clearly experienced some market volatility in 2020, and we believe our results over the past nine months highlight both the resilience of our business model and the high level of execution by our global teams. I'm going to start with the right-hand side of page three, focusing initially on three major drivers of our revenue. First, our management fees are up 13% this year. Our ability to realize carry through different market environments also remains strong, bringing our realized performance fees to just under $1 billion year-to-date. And finally, our balance sheet has continued to perform, with realized investment income up 8%, continuing to demonstrate the important contribution of this revenue stream towards our overall financial performance. In aggregate, our revenues are up 7% through the first nine months of the year. Moving to our expenses, compensation margin has remained at 40% through the year. In terms of non-compensation related expenses, we have been deliberately prudent with expense management in 2020 and have obviously benefited from the limited amount of travel and office-related expenses this year. Year-to-date, our other operating expenses, together with occupancy, are down 4% compared to this period last year, despite making some very meaningful investments across our platform. As a result, our distributable operating margins are up 100 basis points, while our total operating earnings are up 9%. In addition, our after-tax DE per share of $1.28 for the nine months ended September 2020 compares favorably to $1.23 for the same period in 2019. It is important to note here that we have completed our financing related to Global Atlantic in Q3, which has already started to burden our after-tax DE per share in advance of generating the revenue associated with the acquisition. Switching to capital raising. On a year-to-date basis, we have raised 80% more capital than we raised in the same period in 2019. which really does set us up nicely for future growth. Moving to investment performance on page four, which has largely been a real strength for us this year. Our flagship private equity funds returned 27% over the past 12 months, and our real estate and infrastructure strategies returned 10% and 7%, respectively, over that same period. In credit, we had a very positive quarter. Leveraged credit, which is the largest of our credit businesses by AUM, was up 5% in Q3 and is up 3% over the LTM period. Alternative credit was up 6% in the quarter and down 7% LTM. Our alternative credit numbers are a combination of our private performing credit strategies, which had solid performance, and our distressed portfolio, which has taken some marks LTM. Turning to page five, we thought it was worth spending a minute specifically discussing our benchmark PE performance. As you can see, really across all geographies, our flagship private equity funds are meaningfully outperforming their benchmark indices on a since inception basis. This performance is in part generated by our portfolio construction, especially in the bifurcated market like the one we have seen in 2020. We are underweight some of the harder hit sectors, while also importantly choosing to have a large exposure to technology with a focus on investments in data, e-commerce, and digitalization. Our relative weighting to Asia has also benefited our performance. Page 6 provides some additional detail on our balance sheet. Consistent with the performance across the firm, our book value per share increased to $20.26, representing a 14% increase from June 30th. Our balance sheet investment portfolio returned 11% in the quarter, and our net accrued carry balance increased 44% from Q2, providing additional visibility for future carry. Also, as it relates to our balance sheet, it's worth highlighting our buyback activity this year. Since January, we've used $324 million under our buyback program. The majority of this activity occurred in the first four months of the year as we leaned into the volatility and repurchased stock at a weighted average price of just over $24 per share. In total now, since we announced our first buyback program at the end of 2015, we've used $1.4 billion to retire shares at an average price of just under $19 per share. With our book value today in excess of $20 and the stock price where it is, we feel good about our activity levels here. Turning to fundraising. New capital raised totaled 8.7 billion in the quarter, driven by fundraisers across private markets in our U.S. real estate strategy, as well as across three strategies in Asia, real estate, infrastructure, and private equity. Additionally, we raised capital related to leverage and private credit. New capital raised from a fee-paying AUM standpoint was a record $19 billion this quarter, with $12 billion of that attributed to Asia IV as it entered its investment period in July. We now have over $13 billion of capital in Asia IV, and we'll provide further updates on the fundraise as it continues to progress. The $32 billion of capital raised year-to-date importantly sets us up with $67 billion of dry powder. which is a high point for us. As we have discussed on prior calls, 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. Now focusing on this deployment more specifically, our private markets business had a record investing quarter with $6.2 billion deployed, which was largely in transactions that were entered into during the more heightened market dislocation in the spring and early summer. In Europe, two previously announced core PE investments closed. Our infrastructure team continued to fund compelling opportunities across various sectors in Europe and in Asia, and a number of Asia PE investments closed, including our investment in GEO. And finally, an update on a couple of items related to Global Atlantic. We completed two financings in the quarter, the proceeds of which will be used to fund the acquisition. In August, we issued $1.15 billion of mandatory convertible preferred stock. You will see in our earnings release on a distributable earnings basis that this offering is reported on an as-if converted basis. And subsequent to the mandatory convertible offering, we also issued $750 million of 30-year senior notes with a 3.5% coupon. Behind the scenes, the GA team has been hard at work ahead of closing. Following KKR's announcement of the acquisition in July, GA completed two block reinsurance transactions, adding an incremental $8 billion of assets. Notably, GA's pipeline for similar transactions is quite active, and we have confidence in the team's ability to execute. We continue to see really strong opportunities here for both organic and inorganic growth. And with that, let me hand it over to Scott.

Thank you, Rob. And thank you everyone for joining our call today. All of us at KKR hope you and your families are happy, safe, and healthy. Our numbers speak for themselves this quarter, so I'm going to be brief. From my seat, there are a handful of things I thought I would highlight. First, we have invested and committed $42 billion so far this year around the world and across strategies. We were prepared to lean into this location coming into the spring, and our preparedness has paid off. Second, investment performance has been strong, and we see more upside in the portfolio from here. Third, fundraising momentum has continued. In the first three quarters, we have raised $32 billion, and we have three more flagship funds and over 20 other strategies in or coming to market over the next 18 months. Fourth, our model is working. With our combination of AUM, capital markets and balance sheet, we have multiple ways to win. We have always felt our model is resilient. One silver lining of this year has been an opportunity for that resilience to shine through. And fifth, the Global Atlantic Acquisition is on track. And as you heard from Rob, GA is winning in the marketplace and will be larger at closing than we had anticipated with multiple ways to grow from here. It has been a busy year, but we have a lot more ahead of us. And with that, we're happy to take your questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue, please press star two. We ask that you limit your questions to one so that others may have an opportunity to ask questions. You may re-enter the queue by pressing star one. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from William Katz with Citi.

Thank you very much for taking the question. I think you guys answered a little bit of it in some of your commentary. But Scott is sort of wondering, or Rob, if you guys want to maybe just sort of step back and update us around just the management fee walk up as you see it, another sort of quarter under your belt, just given sort of the outsized economics this quarter in your commentary on the Global Atlantic transaction.

Sure. Thanks a lot, Bill. So nothing's changed in our view on management fee growth from here. We communicated a little while back that our expectation is that we'll be able to generate 50-plus percent management fee growth. On top of that, you know, we believe there's an additional 200-plus million of net management fee that we would expect to generate from Global Atlantic. And so I'd say we continue to be convicted on being able to achieve that.

Okay, and just to follow up, big picture, maybe a little bit unanswerable today, but just to the extent that there would be any kind of shift in carried interest taxation, how might that impact the DE economics of the franchise, either bottom line or from a sort of comp perspective? And then the harder part is, to the extent there's any kind of sort of administrative change next week, how might that influence institutional allocations and or the relative appeal of alternatives more broadly?

Sure. So as it relates to any changes around carried interest taxation, that won't have an impact on distributable earnings for us. All forms of our income are taxed the same, and so at the statutory rate. And as you know, we benefit from a little bit of a tax step-up that we had achieved at our C-Corp conversion. But other than that, any kind of new revenue that comes into the firm is taxed at the statutory rate, all the same.

And Bill, just on the other parts of your question, Scott, so no impact on DE, no impact on compensation or how we think about it. And with respect to fundraising, we do not expect any change in the tax code to have an impact. Remember, a lot of the people that invest with us are tax exempts. And, you know, regardless of what happens from a tax code standpoint, we believe the interest in alternatives will continue to grow.

Thank you.

Thank you.

Our next question is from Glenn Shore with Evercore.

Hi, thanks very much. I wonder if you could talk a little bit more about alternative credit. You mentioned the performance, and distress is not the biggest piece, but I'm curious on what you see as temporary versus permanent impairments in that book, and the outlook, more importantly, for distress. Because we keep thinking there's a good outlook, but every time it happens, more stimulus comes. And maybe you could tie in the dislocation fund towards what's going on in the distressed landscape. Thanks so much.

Yeah, thanks a lot for the question, Glenn. This is Rob. I'll start, and I'm sure Scott will have some views here as well. I think the punchline is we continue to view, you know, a number of assets in our distressed portfolio that have taken some marks on an LTM basis, you know, quite favorably. As you also know, and you hit on this, we've shifted a number of our distress-oriented resources to our dislocation opportunity strategy. And in an eight-week period, in the spring, we raised a $2.8 billion fund. We have north of $4 billion of capital committed to that strategy. And already through, you know, the first several months of that or committed a little bit north of 40% of that fund already. And so it's a big opportunity, we think, for us, and that's why we've diverted some of the team to be focused on those activities.

Yeah, just to add on a couple thoughts, Glenn. So first, we feel good about the underlying portfolio. We think a bunch of those marks are going to come back. Secondly, when you look at the page in the deck that shows, you know, kind of the LTM period, it's important to keep in mind, you know, that the convention in terms of how that page is put together means that what's dragging that number down is our special sits to fund, which is all of 2.1 billion of fair value and a $73 billion credit business. So, you know, our perspective is, you know, that a lot of that's going to come back over time. And it's a very small part of the overall business and credit as a whole continues to perform. I think perhaps to your market opportunity question, We do think that there's going to continue to be an interesting opportunity, but what it's going to require is to be really nimble and kind of flexible as to how you deploy capital. And that's why, to your point, we raised the dislocation vehicle and sets of vehicles. They have the ability to invest across asset classes. So we're investing not only in traditional distress, but traded markets, real estate credit, corporate credit. You got to be able to move quickly. And actually, some of the early investments we've made there, we've already monetized. So I think you should expect us to continue to scale that dislocation platform over time. But that's how we're thinking about it. It's less control for just control distress than it is just being able to move quickly.

Thank you. Our next question is from Alex Bostein with Coleman Sachs.

Great, thanks. Good morning, everybody. Thanks for the question. I was hoping you could talk a little bit about deployment dynamics and the implications that might have on both the fundraising and the capital markets business. So from what we could see, you guys have been quite active, and the pipeline of deployment, just I guess in some of the public data, looks really strong coming up. So I guess what does it mean for sort of timing of North America 13, you know, the next infra fund, the next European fund, in terms of both kind of fundraising and when those fees could ultimately come online. And then I guess, secondly, the outlook for the transaction revenues, albeit I guess kind of lumpy and hard to predict, but just from a trajectory perspective, given the strong deployment pipeline, how should we think about that over the next 12 months? Thanks.

Hey, Alex, it's Craig. Why don't I give a beginning part answer there as it relates to deployment and then as well as fundraising, and then Scott and Rob may want to add on. I think you're right as it relates to deployment. It's been a really busy period for us, as you heard from Rob. You know, private markets in particular in the third quarter was a really healthy figure for us. I think that reflects a number of things. One, the overall growing platforms for us certainly also reflects the decisions that we had to lean into dislocation earlier in the year. As Rob had mentioned, the activity that closed in Q3 largely reflects transactions that were announced in the spring. And I think the third thing you see reflects the geographic breadth that we have in our presence in Asia. Asia within private equity was the busiest geography for us deployment-wise in PE in the quarter as well as year-to-date. And as you'll remember, we do run a very localized model in Asia. So I think that approach is very helpful for us as it relates to sourcing and executing opportunities. I do think as it relates to fundraising, the main dynamic is that things are on track. So as it relates to the three additional flagship funds for us, in addition to the fundraising continued for our Asia private equity strategy, and then when you layer on the 20-plus additional strategies, as we look forward, I think everything is on pace for us. And important in that is, you know, only 25% of those strategies that we see coming to market are first time for us. So I think we have predecessors that are performing and real benefits as it relates to maturation. I do think as it relates to that overall deployment dynamic, one of the things that is correct, that as it relates to accelerated deployment, finding attractive risk reward, If anything, that can move the overall timing as we try and think things more forward. But the overall message is one that we're on pace.

Alex, it's Rob. Maybe a couple of points to add on. In terms of the geographic breadth of our deployment, as we look at where we're likely to wind up in the year from a private equity perspective, it's actually close to a third, a third, a third, America's, Europe's, and Asia's in terms of deployment. And so that's really that geographic breadth and diversification has really helped us be able to lean into different opportunities on a global basis. Then as it relates to the second part of your question, in terms of the impact this can have on transaction fees, you know, our pipeline remains healthy for investment the remainder of the year. Of course, we've got a couple months left in 2020. And, you know, some of the deals in our pipeline might slip to Q1. So it's a little bit hard to predict transaction fees here. for the quarter, but certainly our deployment levels have helped those figures on a year-to-date basis. And if our deployment continues to be robust over the coming quarters, then you should see a similar level of transaction fees play out.

Thank you. Our next question is from Jeremy Campbell with Barclays.

Hey, thanks. Just a quick point of clarification for us, a question. Relative to the 200 million plus fee revenue opportunity from Global Atlantic you guys highlighted back in the summertime. Just curious if these recent block deals were baked into that or incremental to that?

The short answer, Jeremy, is they're incremental to that.

Great. And then I guess bigger picture on Global Atlantic, can you remind us what the typical organic growth looks like? I think the summer slide decks to something like $9 billion. And then maybe how you envision the growth algorithm going forward between organic flow and inorganic blocks?

Yeah, sure, Jeremy. Scott, I'll take that. So I think the way to think about it is, you know, Global Atlantic, in our view, has just multiple ways to grow. So there's the retail business where they have relationships with over 200 banks and broker-dealers. There's the institutional business, and it's really, although it could be thought of as organic or inorganic, I suppose, there's a lot of aspects of that that are, you know, fairly recurring and somewhat predictable. For example, they have flow reinsurance arrangements with a number of counterparties. They're in the pension risk transfer business. And then on top of that, you've got these reinsurance blocks that you referenced that, although they are transaction-like, there's actually been a very steady stream and a very consistent flow for the business over the last several years. So there's opportunities to grow from what they've done, group that together, and we call the institutional business. And then third, there's potential acquisitions of other companies, which is truly the inorganic. As you can see from the slide deck from July, the company has, by virtue of really that retail and institutional approach, grown quite significantly and a very steady pace over time. I think with the addition of hopefully our help in terms of access to capital and investment returns, our expectation is that we can continue to see attractive growth. We're not going to put out a forecast per se, but we're happy to share with you what we're seeing over time. And as you've noted, You know, we do expect to be larger at closing than we had expected, partially because the organic growth, frankly, has been better than we thought on the retail channel so far. And, you know, the blocks are on top of that. But we'll keep you updated along the way.

Great. Thanks so much.

Thank you.

Our next question is from Patrick Davitt with Autonomous Research.

Hey, good morning. You mentioned the Epicor sale, which looks fairly punchy. So could you give us an update of kind of the announced pipeline of carrying investment income as it sits right now?

Yeah, sure. Hey, Patrick, it's Rob. And just to clarify, that was – that Craig mentioned was a dividend for Epicor in Q3, the announced sale closed in Q4, which I could lead into your question. So as it relates to Q4 revenue, As of now, we have more than $250 million of performance and balance sheet revenue that we've got line of sight on. And so this is from deals that are already closed or have been signed up and we expect to close, as well as from booked incentive fee that have already been crystallized. And so, you know, we're only one month into the quarter, and hopefully we'll have some things break in our direction November to 7 – excuse me, November and December to elevate that number. But our – which is similar to where we were at this point last quarter. Thank you.

Our next question is from Mike Carrier with Bank of America.

Good morning. Thanks for taking the question. Just given the strength in private equity on the performance side, just wanted to get maybe some color on what you're seeing maybe across some of the different industries, regions, because it was obviously pretty broad-based. But when we look at, you know, obviously the economic activity, you know, it's pretty kind of stark difference. So just any color in terms of what the drivers and if it is as broad-based as it looks. Thanks.

Hey, Mike, it's Craig. Why don't I start? Scott may add in. I think the answers are really situation-specific. So, you know, businesses that are in, you know, troubled sectors or have seen real impacts from COVID-19, Obviously you see that. I think on the flip side, we have seen real strength in companies focused in areas that have been given tailwinds from COVID. So that's e-commerce, gaming, mobile gaming, software, housing related themes, health and wellness and the like. And I think given the conviction that we've had around several of those themes, we were better positioned as a result of that. And so that's really what you see across the performance statistics for the year. And I think it is worth, you know, mentioning Asia, again, as part of that. As you know, we have a large business in Asia, and our geographic focus, again, has helped. It helped us learn in the spring as these economies recovered first. And currently, it should help as most Asian economies haven't seen the recent spike in COVID trends that we've seen across several states in the U.S. and European countries.

Yeah, Mike, the only thing I'd add, just to put some numbers around that, so just to give you a sense, it really is about portfolio construction and the fact that we've been focused, to Craig's point, on a number of investment themes for the last several years that we think have long-term durability and that actually the pandemic has probably accelerated the development of those themes. So a big part of the answer to your question, why you're seeing the performance, is we've been meaningfully underweight the sector is most dramatically impacted. So if you aggregate, you know, hotels and leisure, retail and energy, it's a sum total of about 8% of our total exposure, even within real estate, it's a very small piece in the hotel side. So we've had very little exposure to the most impacted sectors. And we all can tell from the markets, it's a really bifurcated story. Where we have been more exposed has been tech, media, telecom. To Craig's point, that's been 25% from where we've had our exposure. And then Asia has been, you know, about a third of our total PE portfolio, 30% or so. So the answer really is around portfolio construction and leading into these themes that we think are just being accelerated. Got it. Thanks.

Thanks. Our next question is from Jerry O'Hara with Jefferies.

Great, thanks. My question sort of runs the balance sheet and the allocations there. So, clearly, the allocation is set to kind of change with the addition of Global Atlantic. I think in the past, you talked about kind of diversifying the exposure across asset classes. But perhaps you can give us an update on how you're thinking about that post the insurance assets coming into the mix, or if that's even really a focus right now.

Hey, Jerry, it's Rob. Thanks for the question. And so Global Anx certainly the largest single investment on our balance sheet. It's not going to show up in our investment table per se since it's really going to be a consolidated operating asset of KKRs like our other operating businesses. In terms of diversification of our balance sheet holdings, if you look at the chart in our earnings release, And while it does show about 70% exposure to private equity, inside of that we've got meaningful exposure to core private equity, which is about 20% of our portfolio, a little bit north of that today, and a growing exposure to growth equity. And so, you know, we do certainly want to have a greater exposure to these types of assets on our balance sheet, and I wouldn't expect, you know, dramatic changes from here around how we've allocated our balance sheet to date.

Great, thank you. Thank you.

Our next question is from Chris Katowski with Oppenheimer.

Yeah, good morning. Thank you.

I know these numbers bounce around quite a bit, but, you know, normally your realized carry is like four or five times the level of realized balance sheet gains. And this quarter, they were almost equal. And I'm just wondering, did that I was trying to figure out where that came from and why that is, and should we expect to see a kind of shift towards more realizations in the coming quarters?

Hey, Chris. Thanks for the question. No, I don't think that's a fundamental shift. I think that's just looking one quarter of time. We had, you know, meaningful balance sheet realization. through our stake in the Hut Group and while that was invested across our broader platform, it was certainly weighted towards our balance sheet. And so I would not expect this to be necessarily a trend on a go-forward basis, at least in the near term as our balance sheet, you know, continues the evolution into one that is going to be compounding in nature at some point in time in the future, you know, as we've completed, I would say, that evolution. of moving from a balance sheet that is generating cash to one that is compounding over time, that compounded balance sheet will mature to the point where it's generating meaningfully more cash. But that's sort of in the next stage of our growth profile here. For the foreseeable future, I think the expectation would continue to be to carry it via elevated gains to balance sheet income.

Okay, great. It's always felt to me like we have multiple ways to win And, you know, this was a quarter where I think you're right. Investment income and balance sheet performance contributed to DE while we still saw significant book value compounding and capital markets in addition had a very strong quarter. So it's, it's, you know, we've, we've talked about how we think the business model is really wonderfully resilient. And I think, you know, this is this, this quarter, those items were both great examples.

Yeah. And then I was also curious, uh, if you can discuss it, uh, Just why the odd kind of like two-part exit from Epicor with first a dividend recap and then a sale process? Is that tax-driven? Or if you were going to sell something, why would one do a dividend recap immediately in front of that?

Chris, it was not tax-driven. And without commenting too much on any specific situation, You know, we were able to get something done that drove liquidity back to the firm with a capital structure that was portable for a new buyer. And it just so happened that we were able to exit it a couple months later on. So there's nothing that was specifically unusual about that transaction.

Okay. All right. That's it for me. Thank you.

Thank you, Chris.

Our next question is from Chris Harris with Wells Fargo.

Thanks a lot, guys. So with the news out there that ARIES is bidding for AMP, I was hoping you could give us your updated thoughts on how you guys are thinking about M&A at this point. Are you open to deals? Are you looking at deals? Or is the main focus right now primarily Global Atlantic?

Hey, Chris, it's Scott. Thanks for the question. You know, we do have a lot of work to do on the global Atlantic front, but the answer to your question is we continue to look for new opportunities. You know, the bar remains very high, but, you know, we continue to focus on some of the areas we've talked about in the past, you know, growth areas for us, like real estate, some of the other kind of adjacent parts of the space around whether secondaries or co-invest. And then, you know, over time, you should, you know, continue to expect us to be thinking about through and with Global Atlantic whether there's more things to do in insurance. So we're continuing to look, and we'll keep you posted, but we're definitely still out there.

Our next question is from Robert Lee with KBW.

Great. Good morning, everyone. Thanks for taking my questions and your patience. I'm just curious. Actually, I have a question on Marshall Waste. I mean, I know there's a slide in your investor deck from September that shows pretty phenomenal growth. Keith, maybe just update us on maybe what its contribution was this quarter, and is there still kind of how are you working with them, and then maybe is there still an opportunity for you to increase your stake in Marshall Ways?

Hey, Rob. I'll take the first part of that, and I think Scott's going to take how we're working together. So, Our punchline is the business is performing very well, north of $45 billion of AUM today. We have a 40% share in that, and you're seeing that flow through our financial results in a couple of ways. Through most of the year, you're seeing it flow through on our pro rata share of management fees, what you'll see, and a little bit of incentive fees along the way. Their performance year-end is the end of September, and so what you'll see in our financials in Q4 is is an elevated level of incentive fees, which is our pro-rata share of Marshall Waste's incentive fees, and that was in the 250-plus million number that I gave earlier on this call around our pipeline of visibility.

Yeah, the only thing I would add, Rob, and thanks for the comment, I think the Marshall Waste management team has done a fantastic job growing the business, navigating this environment, and continuing to grow the firm. We have continued to work together on a number of different fronts, but it's just been a great partnership. And, you know, it's been satisfying in terms of the discussions we have about markets and continue to explore ways to do it more strategically together. But, you know, it's also been, you know, a partnership through which, you know, it's had a very nice economic return for the investment that we've made off the balance sheets. In terms of the question about raising the stake, the initial phase of the transaction was for us to invest 24.9%. That, as scheduled, went up to where we are now, which is about 40%. There's no near-term plan to change that. That may always change over time.

Great. Maybe just a follow-up question. I can't have a conference call without ESG coming up, I guess. You know, in thinking about, you know, you had the announcement today about in India, the renewables platform, you had your impact fund. But just more broadly, how do you think of, you know, the firm's positioning to whether it's – or how are you incorporating, you know, some of the, you know, principles within kind of, you know, within your strategies? And, you know, on the private investment side, private asset side, do you feel like it you know, more important or similar to what you're seeing on the public investing side in terms of LPs, you know, really focusing on those capabilities and how you're incorporating it into your process?

Hey, Rob, it's Craig. I think there are two things to understand. First, you know, we as a firm have been focused on ESG since 2008. So at this point, we have over a decade of experience in driving and protecting value through ESG management, and we believe we've established ourselves as a clear leader in these areas. And what it means at this point is within our firm, look, ESG considerations are integrated within the decision-making that's taking place every day within our deal teams and our investment committees on a global basis. So these aren't one-off items, one-off projects. It's part of the mindset of our teams as we evaluate opportunities and look to execute and create value. And I think the second point is really as a result of all of this work, you know, we were finding good investment opportunities through the work that everyone was doing, but there were cases when we didn't have a home for these investments. So you're right. We've created a business around this. That's our impact business. You know, that's a strategy that's focused on opportunities to generate private equity-like returns while driving positive impact at the same time. That's the opportunity. So, you know, earlier this year, we held our final close. I think it was February on our impact funds, and we're off to a very good start. And I think as it relates to trends and dynamics from a public shareholder standpoint, from an LP standpoint, et cetera, All these considerations and dynamics are only increasing, I think, in importance and increasing in terms of focus from third-party constituents, consistent with what I expect you're hearing from others.

Great. Thanks, Greg. Thanks for taking my questions, guys. Thank you.

Our next question is from Mike Cypress with Morgan Stanley.

Hey, good morning. Thanks for taking the question. I wanted to follow up on the strong investment returns that you guys posted today and touched on earlier. I was just hoping you could elaborate a bit more on your views on the investment return outlook on both the existing investments that are in the ground and also the new capital that you're putting to work today in terms of what sort of returns are you expecting to generate across the different types of strategies that you're managing, and how is the attribution of those returns evolving?

Hey, Mike, it's Scott. Thanks for the question. Look, I think the short answer to the first part of the question is that we continue to see a lot of upside in the portfolio. And as you can tell from the amount of deployment we've had this year, you know, $42 billion in total in terms of closed and announced transactions, we've been deploying more capital into those investment themes that we think have a lot of legs. The opportunity to continue to generate attractive returns from here, we think, is very attractive. We believe that it's, you know, going to continue to be driven by having the exposures to the parts of the economy globally, where we see those long-term trends playing out. And we think our globality is going to help. You know, the fact, to Rob's point, that the deployment's been about a third, a third, a third U.S., Europe, Asia, we think also will help the returns on a go-forward basis. And most investors, I think, look at us and how we're performing relative to the public markets when they look at our private markets returns. And that's, you know, I think our expectation is, you know, we can continue to outperform nicely and hopefully meet their hurdles. And in terms of the go-forward opportunity, we continue to stay focused on a number of those themes and continue to involve them all the time. And at kind of the meta level, there's the investment themes. But the other thing we probably should talk about more on these calls is our growing real assets businesses where we are seeing real opportunities to invest in real assets with yield. And that's part of the reason you're seeing such growth in our infrastructure and real estate businesses in particular.

Great. Thank you.

Thank you.

Our next question is a follow-up from Patrick Davitt with Autonomous Research.

Hey, thanks for the follow-up. I have a quick follow-up on the tax question. I think, you know, obviously as public shareholders, it's really just the change in the corporate rate that impacts us. But as you think about a potential change in the capital gains tax rate, would that cause any kind of rethink of how the balance sheet growth strategy works for you kind of internally or not?

No, no change in how we would, short answer, no change in how we would evaluate opportunities in our balance sheet strategy.

Okay, thanks.

And we have a follow-up question from Mike Cypress with Morgan Stanley.

Thanks for taking the follow-up. I just wanted to ask about the balance sheet, if you guys gave or are able to share with us the amount of capital that was deployed off the balance sheet in the quarter and also how much was monetized from the balance sheet. Thanks.

Yep, sure, no problem. In the quarter, we deployed a little bit more than $800 million. of capital at the balance sheet, and we realized about $360 million.

Great.

Thanks so much.

Yeah, of course.

Ladies and gentlemen, we've reached the end of the question and answer session. I would like to turn the call back to Craig Larson for closing remarks.

Just would like to thank everybody for joining us. If you have any follow-ups, we look forward to following up with you directly. Please reach out directly. And thank you once again. Bye-bye.

Thank you. This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.