KKR & Co. Inc.

Ladies and gentlemen, thank you for standing by. Welcome to KKR's fourth quarter 2024 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following management's prepared remarks, the conference will be open for questions. If you'd like to ask a question that time, the command is star one. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to hand the call over to Craig Larson, Partner and Head of Investor Relations for KKR. Craig, please go ahead.

Thank you, operator. Good morning, everyone. Welcome to our fourth quarter 2024 earnings call. This morning, as usual, I'm joined by Rob Lewin, our Chief Financial Officer, and Scott Nuttall, our Co-Chief Executive Officer. We would 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. And as a reminder, we report our segment numbers on an adjusted share basis. This call will contain forward-looking statements, which do not guarantee future events or performance. Please refer to our earnings release and our SEC filings for cautionary factors about these statements. So beginning with our financial results, we had a really solid end to the year. Fee-related earnings per share came in at 94 cents. That is up 24% from a year ago and is the second highest quarterly figure in our history. An adjusted net income came in at $1.32 per share. That is up 32% -over-year and is also the second highest quarterly figure in our history. For the year, FRE per share and ANI per share were $3.66 and $4.70, up 37% and 38%, respectively, compared to 2023. And both are record annual figures for us. So very healthy growth during a period of time where it has fell to us as the market conditions have just begun to improve. Walking through our quarterly results in a little more detail, management fees in Q4 came in at $906 million. That's up 15% -over-year, driven by the breadth of our fundraising activities alongside of a pickup and deployment. Total transaction and monitoring fees were $324 million in the quarter. Capital markets transaction fees in particular ended the year on a strong note with $270 million in revenue, driven primarily by deployment activity within private equity as well as infrastructure. Fee-related performance revenues were $25 million in the quarter. And so in aggregate, fee-related revenues were $1.3 billion and that's up 17% -over-year. Turning to expenses, as usual, fee-related compensation was right at the midpoint of our guided range at .5% of fee-related revenues for the quarter as well as for the year. Other operating expenses were $192 million in Q4. So in total, fee-related earnings were $843 or $0.94 per share, as I mentioned a minute ago, with an FRE margin of 67%. Insurance operating earnings were $250 million and strategic holdings operating earnings were $8 million. Both of these figures came in right in line with the levels we discussed on our call last quarter. Total operating earnings, as a reminder, comprised of our fee-related earnings, insurance, and strategic holdings operating earnings, were $1.23 per share. So total operating earnings for KKR, again, these are the more durable and recurring components of our earnings, comprise almost 80% of total segment earnings for the year. Moving to investing earnings within our asset management segment, realized performance income was $676 million and realized investment income was $110 million for total monetization activity of $786 million. That's up almost 50% year over year. This activity was driven by combination of secondary sales and strategic transactions, dividends and interest income, as well as the annual performance fee for Marshall Waste. So in total, investing earnings were $399 million. Turning to investment performance, you can see the details here on page 10 of our earnings release. The private equity portfolio was flat in the quarter and appreciated 14% for the year. In real assets, the opportunistic real estate portfolio was up one in the quarter and four for the year. Infrastructure, up two for the quarter and up 14% for the year. And in credit, the leverage credit composite and the alternative credit composite were both up 2% in Q4. And for the year, performance here was up 10% and up 12% respectively. And then finally, consistent with our historical practice, we intend to increase our annual dividend from 70 cents to 74 cents per share, which will go into effect alongside first quarter 2025 earnings. And with that, I'm pleased to turn the call over to Rob.

Thanks a lot, Craig. And thank you all for joining our call this morning. KKR had a strong 2024. And our fourth quarter results that Craig just walked through give us continued confidence as we head into 2025. I'm going to begin today by reviewing some key operating metrics from the quarter and the very tangible signs of momentum that we are seeing across our businesses. Let me start first with our asset management business. As it relates to our capital raising efforts, we raised 27 billion this quarter, which was driven by diversified activity across each of our business lines. Our private equity and real asset businesses together raised $15 billion of capital across a number of strategies. And momentum and credit continued across our asset based finance and direct lending vehicles. And we also saw an uptick in CLO formation. Total new capital raised for 2024 is $114 billion. That is the second most active year in our history and up meaningfully from the approximately $70 billion that we raised in 2023. While we are only six months into our fundraising super cycle, we are seeing meaningful progress. In our North America private equity strategy, where we are in early stage fundraising, we are ahead of where we thought we would be at this point in time. Our efforts here are benefiting from really strong investment performance. Also of note, 2024 was the eighth consecutive year that we returned more capital to our North American private equity clients than we have called. And alongside the encouraging first steps in our flagship fundraising within private equity and infrastructure, we continue to raise capital across the breadth of our asset classes and vehicles. Taking a step back, over the past 12 months, only 15% of our $114 billion of new capital raised was from our flagship funds. Client interests feel strong in areas like private credit, including asset based finance in particular, our IV sidecar franchise and insurance, as well as in newer strategies for us such as climate. Turning to wealth, we are seeing continued scaling with AUM across our K-series vehicles at $16 billion as of year end. And including activity that closed January 1st, 2025, we are now at $18 billion, which compares to $7 billion just a year ago. Looking more broadly, we now have approximately $100 billion of assets under management from individuals, largely via family offices and ultra high net worth clients, as well as the accredited investor universe. And looking ahead, we expect our reach will expand to a new client base as we continue to track towards the launch of our two hybrid credit products in the first half of 2025. These are developed exclusively in partnership with Capital Group, targeting the mass affluent. At the same time, we continue to work on product design across other asset classes, which will follow over the coming several quarters. So we feel good about where we are from a private wealth perspective, and we really do believe that this is just the beginning for us. Turning now to monetizations. Over the past couple of quarters, we've been noting signs of an improved backdrop with increased M&A volumes and firmer global equity and debt markets. This strength is evidenced in our 2024 gross realized performance income and realized investment income figures of $1.8 billion and over $600 million, respectively. Overall, our monetization activity is up over 40% year on year. And now looking at deployment. In 2024, we invested $84 billion of capital. That's up meaningfully from $44 billion in 2023 and compared to $71 billion in 2022. This was driven by a significant ramp in credit, along with a rebound across many of our private market strategies. As we head into a more constructive environment, we do feel very well positioned. As a result of the current activity levels, especially in relation to deployment, our capital markets business saw another strong revenue quarter at $270 million, bringing the 2024 total to $1 billion for the first time in our history. This is a major milestone in the evolution of the business, and it was only just four years ago when this business was roughly half the size and largely private equity driven. Now turning to insurance. 2024 marked the first year that we've owned 100% of Global Atlantic and the connectivity between KKR and GA only increased over the course of the year. You've seen investment opportunities for GA increase in strategies like infrastructure and real estate equities. And as our businesses continue to integrate, we see even more opportunities to invest strategically against the long dated liabilities that Global Atlantic is able to source at scale. And finally, focusing on strategic holdings for a minute. Our strategic holdings business represents a big differentiator for us, and the announcement this morning is a further accelerant of this segment. We will be increasing the existing stakes of three businesses that we know well and really like by at least $2.1 billion. KKR will invest $1.1 billion, which will show up in strategic holdings, while the remainder will be from one of our strategic partners. This piece will become fee-paying assets under management and will be additive to management fees and future carried interest. As a reminder, these businesses have high quality management teams. They are cash generative, tend to be less cyclical, and typically have lower leverage over the hold period, to name just a few of the key attributes. In other words, these are businesses that we want to own for the long term. Today, we have 18 companies that we've invested behind over the course of the last eight years, and we're continuing to see consistent growth across the underlying franchises. For context, KKR's share of these businesses as of the third quarter, so this is on a one-quarter lag basis, generated approximately $3.7 billion of revenue and approximately $900 million of EBITDA over the trailing 12 months. We believe strategic holdings will be a truly unique driver of future financial performance for KKR for years to come. Remember, no employees sit within strategic holdings. We didn't have to hire anybody new to lean into this growth opportunity, which aligns really well with our focus on preserving our collaborative, one-firm culture. And with these additional purchases, alongside continued strong performance across our portfolio, we are increasing our guidance for strategic holdings operating earnings that we introduced roughly a year ago by $50 million in 2026 to $350 plus million, and by $100 million in each of 2028 and 2030 to $700 plus million and $1.1 plus billion, respectively. I don't believe that there are many corporates that give guidance at the 2030. Hopefully, this gives you a very clear sense of our confidence in the outlook, durability, and the growth trajectory for our business. With that, let me hand it off to Scott.

Thanks, Rob. Given this is our year-end call, I want to spend a few minutes sharing how it feels inside the firm. And forgive the analogy, but I'm a runner, and this is how I think about it. The punchline is that despite all the progress you've seen and the progression of the numbers Craig and Rob just took you through, we have not been running at full pace the last couple years. Said another way, we are not yet operating at our true potential. But it does feel like we're picking up speed on multiple fronts. What do I mean by that? Let's go back for a minute to the last two years so you have some context for 2025. And we'll start with 2023. In asset management in 2023, buyers and sellers were far apart. Owners of assets, including ourselves, did not want to sell or finance assets in a dislocated market. So deployment, monetizations, and fundraising were more muted. Capital markets were closed for large portions of the year. There was more fear than greed in the market. And private wealth was just launching for us. At Global Atlantic, we were at approximately 63% ownership. We were not utilizing all of KKR. And we were still figuring out what was possible. And in strategic holdings, the portfolio was still maturing and generating little cash earnings for the firm. And we were still working on the vision of what it could be. So in short, we were running uphill in bad weather, on rough terrain, in new gear. Now let's go to 2024. In asset management, the market began to open in the first half of last year. And buyers and sellers started finding each other again. It usually takes some time for the M&A market to turn back on. And that's what we saw in the first half. The market was gearing back up. But then the election distractions slowed things down again in the back half. So we didn't see a full year of normalcy. And it felt a bit on-off. Private wealth was still ramping for us with more hiring and the team getting embedded while we were being added to many more platforms, but nowhere near what's possible. And you saw only the first steps in our fundraising super cycle. So overall, as you heard, deployment and monetizations and fundraising were all up materially last year, but not what it could be in a full year hospitable market. In Global Atlantic, we got to 100% ownership at the beginning of last year. And then we spent the year sorting out how to use all of KKR and all of GA truly together on an integrated basis. It was a learning year. And in strategic holdings, we explained to the market what we were doing at our investor day in April and continued to focus on how to scale dividend flow faster and portfolio optimize. And throughout the year, it became clear the earnings and dividend compounding opportunity was even greater than we expected. But it was early. So 2024 was a good year, not a great year. We executed reasonably well, but we were still running uphill with intermittent rain after some sun. And we were learning how to use our new gear. But to be clear, overall conditions were much better than 2023. And we got smarter about how to use the model we built. So let's talk about how it feels now, heading into 2025 and 2026. In asset management, pipelines are up, more exits are possible, and we see more deployment opportunities globally and across asset classes. Exits should be fundraising momentum even more at the exact time we're in the market with a number of our flagship funds. Private wealth is showing real progress, and we are seeing flows increase and broaden globally and across platforms. And our capital group partnership is expected to launch soon in credit with other asset classes to follow. We expect this partnership to be significant for us. At Global Atlantic, we're much smarter now after a year of owning 100%. We are shifting our strategy to emphasize longer duration, more private markets assets, more global, and more integration across operational areas. We're starting to capture the opportunities we see in capital markets in Asia as just two examples. And we see a path to fully use the power of the combined model and what that could mean. There's more opportunity than we thought. And in strategic holdings, we can really see the potential of what this could be. Today's announcement is just a start. The dividend scaling and compounding opportunity is real. So where are we now? The sun is out and we're running on flat road. The conditions and forecasts are good. We're comfortable in our new gear. We're stronger for the last two years of hard work, and we're picking up speed. Conditions could, of course, change, which would impact some of this. Political, geopolitical, inflation, rates, to name just a few. But remember, KKR's business model is different. That's on purpose. The combination of asset management plus insurance plus strategic holdings create the model with a massive addressable market, significant recurring earnings, and the opportunity to grow with few additional people at KKR. Preserving culture and enhancing our ability to perform for clients and further increase our margins. So we're optimistic, still out there running, and happy to take your questions.

At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. We ask that analysts ask one question and return to the queue if there is a follow-up. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Craig with Bank of America. Please proceed with your question.

Good morning, everyone. Hope you're doing well. Our question is on the investing outlook across the firm. So the consensus outlook for 25 was always stronger, but the macros become a little bit more challenging versus 90 days ago. You can see this in the 10-year and in the VIX. So sitting here today in January, what is the investing outlook for 2025 relative to last year, and what has been the sensitivity to some of the macro trends that have developed?

Hey, Craig. It's Scott. Let me start off with that one. Our view has not changed. I think when we were talking at the end of last year, I think the perspective was heading into 25. You'd see an improved M&A environment. A lot of the transactions that maybe didn't get done in 23 and then maybe got put on hold in late 24, we'd come back to the market. That is still very much our expectation that you're going to see the M&A market pick up this year. We expect there's going to be a lot of noise, no doubt. But as we look through the noise and try to figure out the signal, there's nothing that we're seeing that changes that perspective, as we said here today. And remember for us, volatility creates opportunities. We are expecting there will be some volatility, but we think that will make the investment environment even more interesting for us. And so we remain optimistic, as you heard in the prepared remarks. No change. And I think remember how global our business is. So a lot of the opportunities we see are not just in the U.S. but around the world. But if you think about what we're telling you, we expect more investing, more monetizations, and more fundraising. And so the punch line to kind of keep everybody keeping their eye on the ball really hasn't changed for us.

Thanks,

Scott. Thank

you. Our next question comes from Benjamin Budish with Barclays. Please proceed with your question.

Hi. Good morning and thanks for taking the question. You know, maybe follow up on Craig's question, thinking about the 2025 outlook. Maybe to start, could you give us a little bit of an update on the Americas Fund raise? But in terms of 2025, just maybe tying that into how should we think about sort of the trajectory of management fee growth into the year? There's obviously some dynamics with catch-up fees, you know, timing of fund activations. But curious on those two items, the Americas Fund and, you know, how we should think about broader 2025 management fee growth. Thank you.

Hey, Dennis, Craig, why don't I start? I'm sure Rob will pick up on the management fee trend. Thanks for asking about America's private equity. That, as you know, is a front burner topic for us. As Rob had noted, we did take some capital prior to year end. And without getting into the details, as the first closed period is still ongoing, as Rob noted, we're definitely ahead of where we thought we'd be, which has been really encouraging. And we do expect to be wrapped up with a first close in Q1 here. So you should expect more news here shortly. So good news, good progress to date with more to come.

Ben, I'll pick up on the management fee side. As you know, management fee growth has been a real area of relative strength for us. If you look back over the past three years, we've grown our management fees at a CAGR of 19%. We were up 14% in 2024. And as we look forward, we can see some acceleration of management fee growth off of that level. We've got a lot of good things, as Scott noted, happening across our business right now. Current expectation is that America's biofund plus or minus will turn on midpoint of the year. But there's lots of other real signs of tangible management fee growth. And as you think of maybe a further step back and you look at our $4.50 plus cent per share FRE target in 2026, it's obviously a target we've got a lot of confidence in being able to hit in order to achieve that. We're going to need to drive real execution around management fee growth from here. We feel like we're well positioned to be able to do that. It's still a lot to get done.

All right, great. Thank you so much.

Thank you.

Our next question comes from Alex with Goldman Sachs. Please proceed with your question.

Thank you. Good morning, everybody. I was hoping we could go back to the strategic holdings announcements. Obviously an important stuff for you guys. Could you just maybe walk us through sort of why now? Why is now the right time to add? When you're looking across the 18 portfolio companies that you have, what is the percentage that KKR owns today on balance sheet? And I guess what percentage of any portfolio company would you feel comfortable owning over time?

Thanks, Alex. Why don't I start? So to answer maybe the last part of your question first, strategic holdings owns roughly directly 20% of the core private equity businesses. Now, that will vary from business to business as a whole, roughly 20%. Listen, we've articulated that we view strategic holdings as a real differentiator for our business model. It is an end on top of asset management and insurance. And we've talked often about how we believe capital allocation can drive incremental long term accretion to our recurring earnings per share. And so we saw an opportunity to buy a larger stake in three businesses that we know really well that we believed would be really accretive to our long term earnings per share growth. And we're excited to be able to do that.

Yeah, Alex and Scott, I'll just add on. Just as a reminder, at least what's in strategic holdings today is the balance sheet exposure to our core private equity business. And so that, to answer your first question, we're roughly a third of that capital on the whole across that platform. When you look at the last partnership that we created there, we had us and two partners. This incremental investment we're making, one of our partners, Chubb, the large insurance company, is going to be investing alongside of us. And so we'll be half of the capital in this add on, as Rob mentioned in the prepared remarks. And in terms of the timing, there's nothing magic about it. We feel great about these companies. They continue to mature. They're getting that much closer to paying meaningful dividends and already are in a couple of the instances. And so as the portfolio matures and we look at the opportunity to continue to scale what strategic holdings can be, it felt like a good time. We had some partners that were looking to get liquidity and so it lined up nicely for us.

Thank you.

Thank you.

Our next question is from Bill Katz with TD Cowan. Please proceed with your question.

Okay, thank you very much. I was wondering if you could maybe double click into the wealth management opportunity. You spoke very constructively about the outlook from here. Just sort of wondering where you sort of see the greatest opportunity. I know it's a fairly in-depth question just from a multi-vector perspective, a product or geography or distribution channel. And I was wondering if you could tie that to your outlook for the other expense line as we should think about further scaling of the platform. Thank you.

Hi Bill, it's Craig. Why don't I start? I'm sure Scott will add then on Capital Group. So just taking a step back in level setting for everyone, as of 1231, we had about 100 billion of AUM from individuals. And that number, just to be clear, does not include policyholders at Global Atlantic. So if anything, that figure is understated as you think about the breadth of our presence and activities with individuals. The largest part of that and probably the most mature would be capital that we have from high net worth and ultra high net worth individuals, family offices that have invested in our funds over time. One of the pieces that is growing significantly and where we still see lots of room for growth relates to the K Series products. And again, just for everybody, these are funds and strategies that are designed and tailored specifically for wealth investors and the accredited investor as well as qualified purchasers. And so over 100 billion, as Rob noted, 16 are from the K Series products as of 1231. And that 16 goes up to 18 if you include the January subscriptions. So just in terms of K Series, a couple of thoughts first, again, that 18 a year ago compares to seven. So early days, but we feel really good about our progress. I think that is true in particular in infrastructure as well as in private equity, which are newer asset classes for many of these investors. In total, we raised over 8 billion last year for infra in PE and have leading market share in both of those asset classes. And again, it's tough to draw broad conclusions from really short periods of time. But in January, we raised again over a billion dollars, the strongest fundraising month for us in both private equity as well as infrastructure. And in terms of the numbers in total, we did launch our private BDC more recently, much younger in its seasoning and more growth and presence. And so I think that the K Series growth opportunity is one that's significant. And even taking a step back, mass affluent investors, it's not been easy for them to access alternatives historically. And we do believe over the coming years there continues to be lots of opportunities for us to grow, build and scale. We think given our brand, our track record, the investments we've made in distribution and marketing, there's lots of near term opportunities for us in terms of these strategies, longer term opportunities as we think again out in the long term about retirement and 401K. And then another piece of that is a strategic partnership with Capital Group. And I'll let Scott touch on that.

Yeah, Bill, more broadly, I think part of the reason you're hearing such optimism in our voices is it does feel like we're just getting started here. And we're pleased that we're already ahead of our early expectations. So just put it in context, Craig mentioned the K Series. So across all four major product areas, we really only got the products out there in the last 12 months across private equity and for real estate and credit. So it's relatively recent for us. We also have our ID vehicle in the market that is being also sold to high net worth individuals. So there is a big opportunity and there's more product ideas that are coming out of those conversations with platforms. So we have great early momentum and we're picking up pace, as I said. Craig mentioned Capital Group. We think that is a big opportunity for the firm. The K Series really goes, and it would be pretty in the U.S. context, to accredited investors, which is something that's less than 10 percent of U.S. mass affluent, called the other 90 percent of U.S. households. They have been fantastic partners. And you should expect that we and Capital Group will be doing more together over time. So it's early, but we're really pleased with the results. And as we look at the opportunity and size it for ourselves and think about what this can mean five, ten years from now, it just continues to get larger and the more time we spend. Rob, do you want to hit the expenses question?

Yep, sure. Bill, just real quickly. Any K Series distribution related costs we show in other operating expenses, which is part of the reason why you saw a little bit of an uptick this year. We were, as I'm sure you know, able to grow our fee revenue at a pace that well exceeded our operating expense growth, even with some of those upward pressures. We were, I want to say roughly 15 and a half percent up X margin last year, and that number was closer to 14 percent this year. And as we look forward, as it relates to our operating expense and placement fees and related distribution costs, that's about as clear an ROI as we have from a spend here at KKR. So those going up is generally a good thing overall to the model. But other than that, we try and do a really good job to be vigilant on expenses and we do see the opportunity from here for further margin expansion because we really do believe we're going to be able to continue to scale our revenue base at a level that meaningfully exceeds our headcount growth across the firm and the operating complexity that we'll be taking on.

Thank you very much. Thank you.

Our next question comes from Glenn Shore with Evercore ISI. Please proceed with your question. Hi, thanks

very much. There's a question in real assets and in for you obviously grew a big diversified platform very well. There's these huge TAMs that we've been seeing in data data warehouse power. You have your recent partnership with Energy Capital. You have some recent power company acquisitions. So my question is, has anything changed on the heels of deep sea? Has it changed the way you think about prices paid on recent assets and or demand in the future for what everybody seems to be building in this tremendous data oriented addressable market? Thanks.

Hey, Glenn. It's Craig. Why don't I start? I guess why don't we begin with two high level observations. I think first, and you would have heard this a number of times last week, and I'm thinking on some of the earnings calls across the tech industry in general. Innovation that drives efficiency is a good thing, and that can result obviously in greater adoption and increased demand that can result from that. And second and more specific to the data center business with the growth and overall data generation cloud and AI. There's just a need for much more compute. So there's little question in our minds that long term data center power infrastructure demand is growing. Now, with that said, as you noted, deep sea can introduce questions on the demand side that really focused on how much and where. Right. So and while it's probably too early for really anyone to have a great view around capex, band and the like, when we look at our portfolio and our approach, we think we have a number of things really working in our favor. So first across our five platforms, we did not ascribe any meaningful value to AI demand in our original underwrite. So as an example, our largest investment in the space, Cyrus one, that was a take private announced in 2021. The thesis is that at that point was entirely driven by cloud demands in the AI dynamics have all been upside. And in our more recent examples, investments rather growth driven by cloud not AI again has been really the critical driver. Other things that we look at location matters in our view. And so our team's been focused on locations that are proximate to key population centers that we think will be difficult to replicate or replace. We do not build speculatively at the platforms. And so instead, you'll see capex once you have a contractual customer commitment in hand. And remember, again, these counterparties are often some of the largest, most credit worthy counterparties in the world. And also in a number of our investments, we enjoy downside protection given the terms and the type of security we own in the capital structures. And then in terms of exposures, as you've heard from us on these calls, look, this theme is one that's really critical for us. It's an opportunity where in our view, scale does matter. So today we have data center platforms in the US, Europe, Asia, Middle East, and on 100 percent on basis, total enterprise value here would be about 50 billion. So it's meaningful. Now, at the same time, we have a diversified approach to portfolio construction across our pools of capital, as you know. So at 1231, these investments are about 6 percent of our AUM across the infrastructure platform in total. So, again, we expect this theme to continue to be really important for us. We'll continue to watch developments very closely. Hope that's helpful.

Gary, thank you. You were prepared

for that

question.

Our next question comes from Dan Fannin with Jefferies. Please proceed with your question.

Thanks. Good morning. Can you talk to the monetization environment and how you're thinking about that as we start 2025 and really how you see it progressing this year and what gives you confidence, which I assume is a bit more of a positive outlook on that activity level versus what we've seen in previous periods.

Thanks for the question, Dan. We do see our monetizations up in 2025 relative to 2024. And looking at the environment today pretty comfortably. Equity markets

are

really conducive for that. Equity values are high. Credit availability is very high. And spreads are really as tight as they've been in quite some time. I also think it's probably helpful to look at some context around the overall monetization environment. You know, we've been monetizing at a pretty healthy pace, even through what's been a more challenged time for our industry. And so to give you a data point, if you look at our LTM realized private equity carry, and this is a number as of 930, we were up 67%. Our public peers were roughly flat. And we think the industry is probably much more in line with our public peers. And so I think you can see across the industry, maybe some client pressure to push unnaturally monetizations in 2025. I don't think that same dynamic exists here. And so while we expect monetizations to increase in 2025, we also expect monetizations to continue to increase on the back of that in 26 and 27. So we'll see. Things can move around, but we've got a very healthy portfolio. As you know, our investment returns have been really strong. Linear deployment as a key theme across the firm has really helped that. We feel like we're as well positioned as we ever have been, as evidenced by the embedded gains that sit on our balance sheet today, close to and approaching 16 billion, a high point for us. And so there's a lot here that gives us the confidence that you're going to see an uptick in monetization, but you're going to need somewhat of a relative benign environment to be able to access that over time.

Great. Thank you.

Thank you.

Our next question comes from Michael Cypress with Morgan Stanley. Please proceed with your question.

Great. Thank you. Good morning. Just a question on asset-based finance. I was hoping maybe you could update us on the platform today, the progress that you've made over the past year. And as you look ahead to 25, just maybe you can give us a sense of some of the steps you guys are going to be taking to further expand the sourcing funnel and bank partnerships of the like. How do you see that coming together? And as you look out over the next couple of years, maybe you can kind of give us a little bit more of a flavor sense for how you see this evolving. Thank you.

Hey, Mike. It's Craig. Why don't I start? Look, I'm glad you asked about. So first on page 13 of our release, this is a page that details the credit and liquid strategies. We break out for that portion for us, our 276 billion or so of AUM. We started doing this second quarter of 23. Obviously, we'll continue to do that. So total credit AUM is about 250 billion. The private credit piece is about 110. And of that 110, we've got about 70 billion in asset-based finance and another 40 in direct lending. And in asset-based finance, those numbers continue to grow at a pretty impressive rate that compares to roughly 50 at Q4 of 23. So we're up over 40 percent on a year over year business basis rather. So big businesses with healthy growth. I think in terms of your question in the outlook, look, ABS is a massive market, six trillion on its way to nine. In our view, you have high barriers to entry, a lack of scale capital. And in our view, lots of folks leaving this market that's creating a void. So we're finding attractive risk reward. I think our clients like the diversification away from regular way corporate credit. And I think the education that our clients have as it relates to asset-based finance just continues. It feels like we're in the early innings. And in some ways, it feels as though it's like direct lending was three, four, five years ago. And we do think that by having global Atlantic fully integrated into everything that we're doing in the framework of the firm, this positions us really well for this opportunity. And I think as it relates to banks and bank partnerships, we see their activity. We expect the broad trends to continue. I think when we look overall in the industry, banks today are well capitalized and they have healthy liquidity, right? Capital ratios are up. I know you know this very well. What that brings though is a real focus on ROE. And banks have a finite amount of risk weighted assets to generate that ROE. So a bank can be an excellent originator. But if there aren't additional economics, if there aren't recurring fees or other revenues, they may not be an excellent holder. And that creates opportunities for us because as banks make these decisions and how and where they're going to allocate their RWA, some business lines are going to be kept, they're going to be optimized, you're going to be scaled, and others are going to be shed. And in some ways, it almost feels like there isn't much of an in-between. And so this dynamic in our view isn't going to change. Now, maybe we see a little less SRT activity at the margin, but the broad trends, again, aren't changing. Lots of continued opportunity for us.

Great. Thank you.

Thank you. Our next question comes from Steven Chepak with Wolf Research. Please proceed with your question.

Good morning. So I wanted to ask a question on the fundraising outlook. I asked a similar one last quarter. But Scott, just borrowing from the running analogy, you noted that you guys achieved $114 billion of fundraising. And that was with little contribution from flagships and some tougher market conditions. So given the upcoming fundraising supercycle in 25, some better conditions you cited, I was hoping you could frame the upside potential versus that $100 billion fundraising target and the sustainability of some of the drivers of strength in 24, whether that should continue into 25.

Yeah, I'll try, Steven. You know, we don't, as you know, we don't put out specific numbers on this. We had shared at our investor day $300-plus billion over the course of 24 through 26. We're still very comfortable with those numbers and the plus after them. In terms of the sustainability of the drivers, I think part of the reason that you're hearing the optimism in our voices is we think a number of what you, you saw last year are sustainable into this year. So Global Atlantic continuing to grow. Institutions being more aggressive around deploying capital now that they're getting more capital back. We've seen that continue across areas like private credit and infrastructure. We're seeing more optimism across private equity now. And I'd say there's a more universal view that real estate equity, which had been out of favor, has bottomed. And so there's more interest in that asset class as well that's just emerging. So a continuation of what we saw last year and frankly, a bit more optimism and momentum than we had last year. Private wealth, capital group gaining momentum, capital group just starting out. And so you kind of put all that together and say everything we saw last year we expect will continue or improve over the course of this year and next. And then on top of that, to your point, you've got the flagship funds that are going to be in the market for greater percent of the year. And so, you know, when we put all that together, that's part of the reason that you're hearing us be more upbeat about what we're seeing. And we think all of that gets fed by the monetization environment improving. As people get more money back, they're going to look to deploy. So we managed to raise the 114. It was our second best year ever, frankly, with a backdrop that was imperfect. And we think when we look at everything that I just mentioned, it feels like we're going up. I can't give you numbers to where it goes. But if we execute and the environment stays as we expect, we think you'll continue to see increased momentum.

Only thing I'd add, a couple of fun facts just on this. The first relates to the breadth of the platform. So if you add up the capital we raised in 24 in our more traditional private equity strategies, so mid-market P.E., America's P.E., our case series, that represented five percent of the new capital we raised across the firm. It's an interesting statistic. Now, to be clear, we feel great about the work done across all of those initiatives. But I think it speaks to the development and growth across KKR. And in contrast, 85 percent of the capital we raised came from our credit and real assets businesses where we think there's a lot more running room as well. And then the second piece relates to innovation. Again, two-thirds of the capital raised in 2024 were in strategies that didn't exist within KKR five years ago. And with opportunities for us in things like the capital group, again, knock on wood, there'll be an opportunity for that to continue to grow. And we did speak at our investor day, I know you'll remember, about the maturation and the continuing maturation of our strategies and funds. So again, just thought some of those statistics would be interesting.

That's great, Coller. Thanks for taking my question.

Thank you. Our next question comes from Mike Brown with Wells Fargo. Please proceed with your question.

Great. Good morning. Thanks for taking my question. I've got some questions on the performance on slide 10. I just wanted to ask about the zero percent return or kind of the flat return quarter over quarter for the traditional PE. Four-year result at 14 percent is certainly good, but I guess why flat quarter over quarter? Was there something to call out that drove that? And then just in buyout land, the trend of public to private has certainly been a very popular theme. How do you think about opportunities here and what are some of the key themes you're leaning into now? Thank you.

Mike, why don't I start? Look, I think in many ways, Q4, evidence of the difficulty looking at big broad indices. So S&P was up two and a half percent in Q4. And look, the average market cap S&P name is about 110 billion dollars. I think in contrast, if you look at the Russell 2000, which in many ways is a lot more representative of the companies and portfolios and opportunities that we're pursuing, it was flat in the quarter. And that dynamic is one that's even greater when you look over the course of calendar 24. S&P was up 25 and the Russell was up 11 and a half. So I think to the heart of your question, we actually feel it's tough to look at these performance numbers over any 90 day period and draw any broad conclusions. But we continue to feel really good about broad execution in the traditional PE part of our business. I think that's true in 24 and think that's true more broadly looking across vintages.

Yeah. And the second part of your question, Mike, I'd say I'd broaden it. Yes, there's opportunity in public to private space. And there's just a lot of dispersion in the market. There are some industries that are getting a lot of attention. But if you're a smaller market cap company, a lot of what we're doing is one to five billion dollars. You don't get the same attention from the analyst community, from the investor community. You can get a little left behind and we're finding a number of management teams that just are not enjoying the quarter to quarter reality. And so we continue to see that as a big opportunity for us globally, which I'll come back to. I would also point to not just that type of transaction. I think corporate carve outs, you know, strategic's want to have simple stories. And so if they've got something that's creating some complexity, an operating subsidiary that maybe doesn't fit their current narrative, they're looking to sell those. And that's actually been our best performing type of investment in private equity over our 40, nearly 49 year history is corporate carve out. So we're seeing opportunities there. I think you're also going to see more sponsor to sponsor activity. The sponsors look to give capital back to their LPs in this environment. And as I mentioned, this really is a global set of opportunities. So Japan, we've been particularly active in market that continues to open up Europe is relatively cheap. A number of companies based there that have global operations or maybe trading at a European discount today. So there's lots of different ways for us to express these views around the world. Let me stop there. But, you know, we do see the deployment opportunities very attractive.

Great. Thank you for all that. I call her Scott. And, yeah, thank you. Correct. Definitely understand that. The quarterly moves are just one data point and not the bigger trends. Thank you for that.

Thank you. Our next question comes from Vikram Gandhi was HSBC. Please proceed with your question.

Hi, good morning. Thank you for the opportunity. My question is really related to GA. Looking at the growth in the adjusted book value was the operating earnings. It appears that the group has been injecting about 400 million of capital each quarter last year. The impression I had was that GA was quite well capitalized, even considering a reasonable growth. So I wondered how should we think about the growth going forward in the earnings run rate for 2025?

Yeah, great. Thanks, Vikram. I'll handle both those questions. So first thing, the capital contributed in the course of 2024. Some of that capital was contributed as part of the original transaction when we funded it in early January. And then we also said at the time that we were going to look across the KKR balance sheet on the asset management side. So we decided to see what assets could be really conducive to an insurance company balance sheet. So what you also see is some contribution in kind of some investments that fit, frankly, better on an insurance company balance sheet. As it relates to performance, let me reiterate and go back to what Scott said in the prepared remarks. We're feeling great about how our teams are coordinating today, the opportunity in front of us. You know, ours all the ingredients that reside inside of our broader firm today to continue to build what we think is a really unique and highly profitable insurance franchise. And we've also talked about evolving our approach a bit. And you're seeing that play out through the P&L. What that means is on behalf of our clients, we are taking on longer dated liability. So elongating our liability profile is part of that. We're doing a bit more on the private side, really taking advantage for the first time the full breadth of KKR's investment suite. And so what you're going to see, we believe, is definitely if we perform, we've got confidence, we will definitely better P&L outcomes and ROEs over time from this evolved shift. But very intentionally, we're bringing down ROE and the accounting P&L as we transition. And the reason for that is many of the privates that we are doing and where we've got really differentiated origination capabilities, they've got modest yields and in some cases, no yields. And so we feel good about the underlying economics, even at the time when naturally you're going to see subdued accounting P&L. And so to be clear, we would expect over the next couple of quarters to have insurance operating earnings that is plus or minus, you know, where we were in Q4. And that is the expectation as we make this shift. But at the same time, the underlying economics of what we are doing, we feel good about and as we perform, it's going to show up in the P&L over time.

It's

very helpful. Thank you.

Thank you.

Our next question comes from Chris with Oppenheimer and Company. Please proceed with the question. Yeah,

good morning. Thank you. I was just wondering if you could expand on the question you had earlier about the flagship private equity funds. And I guess just I'm looking at Infrastructure 5 and the Global Climate Fund. They are still raising money, but don't look like they've made investments yet. And I'm wondering how long is that investment period open and should we expect kind of meaningful catch up fees there at some point? And then on Europe and Asia, you know, those funds look like they're roughly half called. When should we expect, you know, fundraising to commence for those successor funds?

Chris, it's Craig. Why don't I start? Look, I think we've got a very healthy pipeline in terms of individual funds and strategies that we're fundraising for. Infra strategy continues to be a front burner topic for us as a 1231. We raised 11. Last one was 17. So we feel great about progress. We did turn that fund on in the middle of last year. So that is something where you're seeing management fees. We do expect also to launch fundraising for our Asia infrastructure strategy here shortly. So more to come as it relates to businesses that in particular we think there's a real big opportunity for us to to grow, build and scale at the same time. So it's it's just tough on individual funds to parse through. I think the one other reminder when you look at the fund table, we will often draw when we make an investment, draw capital under a capital call line that's paid back typically in 180 days or less. So when you actually look at those deployment figures, they often are understated relative to capital as we look at the available capital that's remaining. And then the second dynamic there is if we have a platform build again that and something where we expect to invest capital over a multi period of time. And if the first piece of that has been called, only that first piece shows up in that invested line. So I think just overall when you're looking at the funds and the status where we are and how close we are to whether it's fundraising or turning on a fund, the numbers that you would or the percentage figures that you would be looking at in terms of that table, if anything, tend to be understated.

Yeah, the only thing I'd add Chris is you're you're you're right to observe that we're in the market with a number of these strategies still today, including in front climate. You got North American private equity, Europe private equity to follow and Asia probably before Europe would be my guess. And just in terms of sequencing. So we'll keep you posted in future quarters as we launch those incremental strategies. I think the bigger higher level point, though, is last two years we raised one hundred and eighty three billion dollars. Give or take only about 10 percent of that was from flagship funds. So the point from the prior discussion, you know, it should be quite additive as we had in the next couple of years.

Okay, great. Thanks. That's it for me.

Thanks. My last question is from Patrick Debit, who was autonomous research. Please proceed with your question.

Hey, good morning, everyone. Just quickly back on the monetization theme. Could you give the usual visible real realized cash flow stat that you give and then more broadly another firm made it pretty clear. I think last week that they thought this this monetization thing was more a second half event. It sounds like today you might think the situation is different for KKR. Is that the case or do you agree it could be more of a second half event? Thank you.

Yeah, Patrick, just in terms of timing, I think things will be pretty fluid here. So it's hard to pinpoint it in any half of the year. I'll reiterate our expectation is that we do expect monetization to be up for us in twenty five versus twenty four based on the current market conditions as really specific question on visibility that we have. We've got approaching four hundred million dollars of that high visibility revenue. Things that have already been signed up or announced just based on regulatory approvals. Unclear that all hits in Q1. So pretty good visibility as we head into the year. You typically see this period of time where pipelines are rebuilding after deals get closed, try to get closed by year end. Of course, five weeks into the quarter and our pipelines are are pretty strong right now. So we'll see what transpires for the quarter and we'll keep you guys abreast.

We have reached the end of the question and answer session. I'd now like to turn the call back over to Craig Larson for closing comments.

Thank you. And we just like to thank everybody for your continued attention and interest in KKR. And we look forward to giving everybody the next update in 90 days or so. Thank you so much.