Dive Brief:

• Private equity giant KKR & Co. is seeing a rise in limited partner appetite in assets with yield: “Anything with some inflation protection," Co-CEO Scott Nuttall said, according to a transcript of the company’s fourth quarter earnings call today. "Think infrastructure and real estate. As we see inflation expectations go up, we’re finding even more interest in those asset classes.”
• Asked about the slower start to the year for capital markets and its impact on the company's capital markets’ pipeline, CFO Robert Lewin said the firm doesn’t need “straight line markets up” to be able to monetize over $15 billion of embedded revenue that is on its balance sheet. What "we will need is a market environment that does have some stability over periods of time,” Lewin said.
• KKR reported net income of $507.5 million and earnings per share of $0.87 and total revenue of $4.05 billion in the fourth quarter compared with net income of $1.479 billion and $2.60 per share on total revenue of $2.01 billion.  

Dive Insight:

Financial executives are watching private equity firms like KKR closely this year as they seek to gauge whether the 2021 boom in global mergers and acquisitions will continue through 2022. Global M&A volumes were set to top $5 trillion last year for the first time ever, according to Dealogic data reported by Reuters. But analysts focused numerous questions on the potential for recent market volatility to damp the sector. 

KKR executives said the firm’s momentum would continue despite market volatility, citing the $112 billion of dry powder that it can tap to take advantage of market dislocations.  

So far in the first quarter the company has about $700 million or a bit above that in revenue from monetization activity, including deals that are already closed or are expected to close in the quarter, Lewin said. “This is one of the strongest figures we’ve ever had at this stage of the quarter…. So, yes, we feel like it’s a pretty good start to the year and gives us some support going into Q1 in 2022,” he said. 

Lewin also said the firm would be focusing on four areas going forward: private wealth, Asia, broader core franchises and real estate.

“More than half of global GDP growth is expected to come from Asia,” he said. “We were early in Asia, and we’ve seen significant scaling as assets under management across our Asia dedicated strategies has gone from $20 billion to $42 billion over the last two years with private equity being the biggest driver of that growth.”