Earnings call transcript: KKR & Co Q2 2025 sees record fee earnings

KKR & Co. reported robust financial performance in its Q2 2025 earnings call, showcasing record fee-related earnings of $0.98 per share and total operating earnings of $1.33 per share. The firm saw a notable rise in management fees and continued expansion in its wealth management platform. Despite these achievements, KKR’s stock experienced a slight decline, with a 0.31% drop in regular trading hours and a 0.52% decrease in premarket trading, closing at $117.5.

Key Takeaways

• Record fee-related earnings of $0.98 per share.
• Management fees increased by 18% year-over-year.
• Significant capital deployment of $37 billion year-to-date.
• Continued expansion in digital and energy infrastructure sectors.
• Stock price declined by 0.31% following the earnings report.

Company Performance

KKR & Co. demonstrated strong financial performance in Q2 2025, driven by increased fee-related earnings and management fees. The company’s strategic initiatives, including acquisitions and partnerships, have bolstered its market position. KKR’s expansion into digital and energy infrastructure sectors has been a key growth driver, aligning with industry trends towards sustainable investments.

Financial Highlights

• Fee-related earnings per share: $0.98, highest in company history.
• Total operating earnings per share: $1.33.
• Adjusted net income per share: $1.18.
• Management fees: $996 million, up 18% year-over-year.
• Transaction and monitoring fees: $234 million.
• Fee-related performance revenues: $54 million, up 45% year-over-year.

Market Reaction

Following the earnings announcement, KKR’s stock experienced a slight decline, with a 0.31% drop in regular trading and a further 0.52% decrease in premarket trading. The stock closed at $117.5, moving away from its 52-week high of $170.4. This reaction reflects a cautious investor sentiment despite the company’s strong financial performance.

Outlook & Guidance

KKR remains confident in its ability to achieve its 2026 financial targets, including $15+ per share in long-term earnings and $350 million in operating earnings. The company plans to continue scaling its management fees and capital markets business while exploring opportunities in AI, blockchain, and digital infrastructure.

Executive Commentary

Scott Nuttall, Co-CEO, remarked, "Uncertainty creates volatility, creates opportunity for us in the investing side." Rob Lewin, CFO, added, "We’re seeing significant momentum in an important part of our strategy and are pleased by the receptivity of our client base to insurance as a new and compelling asset class."

Risks and Challenges

• Market volatility could impact investment returns.
• Regulatory changes in the financial sector may pose challenges.
• Competition in alternative investment markets remains intense.
• Economic downturns could affect asset valuations.
• Technological disruptions in the finance industry require continuous adaptation.

Q&A

During the earnings call, analysts inquired about KKR’s strategy for 401(k) retirement reform opportunities and its asset-based finance growth plan. The company highlighted its focus on expanding Global Atlantic’s third-party capital and leveraging AI and technological innovations to enhance its investment strategies.

Full transcript - KKR & Co LP (KKR) Q2 2025:

Operator: Ladies and gentlemen, thank you for standing by. Welcome to KKR’s second quarter 2025 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 anyone should require operator assistance during today’s conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I will now hand the call over to Craig Larson, Partner and Head of Investor Relations for KKR. Craig, please go ahead.

Craig Larson, Partner and Head of Investor Relations, KKR: Thank you, operator. Good morning, everyone. Welcome to our second quarter 2025 earnings call. This morning, as usual, I’m joined by Rob Lewin, our Chief Financial Officer, as well as 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. 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, so please refer to our earnings release as well as our SEC filings for cautionary factors about these statements.

First, beginning with our results that we’ve just announced for the second quarter, we’re pleased to be reporting fee-related earnings of $0.98 per share, total operating earnings of $1.33 per share, and adjusted net income of $1.18 per share. All of these figures are among the highest we’ve reported in our history as a public company. Now going into more detail, management fees in the quarter were $996 million. With Americas 14 turning on in Q2, alongside our broader fundraising initiatives and continued deployment, management fees in total are up 18% on a year-over-year basis. Total transaction and monitoring fees were $234 million in the quarter. Capital markets transaction fees were $200 million, driven by activity with infrastructure and private equity, with just over half of capital markets fees this quarter coming from our activities in Europe. Fee-related performance revenues in the quarter were $54 million.

That figure is up 45% year-over-year, with the growth here driven by the performance allocation from our offshore infrastructure K-series vehicle. Fee-related compensation was, again, right at the midpoint of our guided range, which, as a reminder, is 17.5%. Other operating expenses for the quarter came in at $172 million. In total, FRE was $887 million, or the $0.98 per share that I mentioned a moment ago, and our FRE margin came in at 69%. Looking at fee-related earnings more broadly for a moment and the results you’ve seen over the last 12 months, driven by healthy management fee growth and a strengthening in our capital markets activities, alongside operating leverage, FRE per share increased 33% for the 12-month period ended June 30, 2025, compared to June 30, 2024. With a 360 basis point improvement in our FRE margin.

Now back to the quarter, insurance segment operating earnings came in at $278 million, so modestly ahead of the $250 plus minus level we discussed last quarter, which is where we continue to expect to see insurance operating earnings over the next few quarters. Remember that this line item alone does not capture how our model works in all of our insurance-related economics, recognizing the economics that show up within our asset management segment. When you include the management fees from the approximately $50 billion of AUM from our IV Sidecar and Coinvest vehicles, capital markets fees also associated with Global Atlantic, as well as the management fees from our investment management agreement with GA, our all-in pre-tax ROE continues to approach that 20% level.

Strategic Holdings operating earnings were $29 million, so total operating earnings, which again represents the more recurring components of our earnings streams, were $1.33 per share. Over the last 12 months, nearly 80% of our segment earnings were driven by our more recurring earnings streams, demonstrating in our view the durability that you’re seeing across our business model. Turning to investing earnings, realized performance income was $419 million, and realized investment income was $154 million. These earnings were driven by a combination of public secondary sales and private transactions, as well as KPRIME’s annual crystallization along with dividends and interest income. Finally, turning to investment performance and page 10 of our earnings release, broadly, when you look at the statistics on the page, you’re seeing healthy investment performance on behalf of our clients across asset classes during periods of time with uncertainty alongside real spikes in volatility.

Looking at the statistics themselves, the private equity portfolio was up 5% in the quarter and 13% over the last 12 months. Within real assets, the opportunistic real estate portfolio was up 3% in the quarter and 7% over the LTM. Infrastructure was up 3% in the quarter and appreciated 14% over the latest 12 months. In credit, the leveraged credit composite was up 2% in the quarter and up 7% over the last 12 months, with the alternative credit composite up 1% and 9% respectively over those same periods. With that, I’m pleased to turn the call over to Rob. Thanks a lot, Craig, and thanks to everyone for joining our call this morning. As Craig Larson just walked through, our model continues to deliver consistent results. I’d like to begin by highlighting our deployment and monetization activity, which demonstrates the strength of our global and diversified platform.

KKR & Co. Inc. has been around now for 49 years and has navigated a range of macroeconomic backdrops over those five decades. We understand that volatility and uncertainty create opportunity, and have positioned our firm to ensure that we are maximizing that opportunity on behalf of our clients. We build portfolios for the very long term, and when you invest in companies and assets for 5 to 10-plus year horizons, you need to be thoughtful about how the world is going to evolve, and we have found it less important to try and time the market. It is why we are so disciplined in linear deployment and creating outperformance through our approach to value creation at the asset level. Since the start of the year, we’ve deployed nearly $37 billion of capital, with around half of that deployed in the second quarter.

Within private markets, nearly 50% of our year-to-date activity has been outside of the U.S., and we’ve been balanced in deploying capital across traditional private equity, growth equity, infrastructure, and real estate. In credit, we’ve deployed $18 billion of alternative capital since January, diversified largely across direct lending and asset-based finance. ABF, in particular, is an area where we continue to see a lot of growth opportunity, which I’ll touch on in a bit more detail in a few minutes. Importantly, there remains a healthy pipeline for deployment in the second half of 2025. We feel well-positioned with $115 billion of uncalled capital. As a result of this consistent approach to investing, we also have a mature portfolio that we can monetize opportunistically. Over the last 12 months, realized performance and investment income totaled $2.6 billion. That number is up over 20% from the same period a year ago.

Even with that healthy momentum on monetizations, our unrealized carried interest across our global portfolio today stands at a record $9.2 billion. That number is up roughly 30% from $7.1 billion just 12 months ago. Looking at our private equity portfolio specifically, approximately 60% is marked at over one and a half times our cost. On average, our public names are marked at over five times our cost. Our portfolio is in very good shape, and ultimately, that is the most important indicator of future monetizations. I would say that it is really our global footprint that is a large driver of the continued deployment and monetization activity that we are seeing across the firm. For example, we’ve seen robust activity out of Asia recently, where we have nine offices, nearly 600 executives, and manage over $75 billion of assets.

Over the past 20 years, we’ve built a very large, localized business, and we’ve grown and diversified. Today, traditional private equity comprises less than half of our Asia AUM. That’s compared to approximately 90% in 2019. Just to give you a sense of our activity here, we recently signed a definitive agreement to exit an investment in a pharmaceutical company in India, closed on our previously announced exits of a telecom tower company in the Philippines and a grocery store chain in Japan, invested in a leading agricultural infrastructure business in Australia and a new financial services platform in Singapore, and established a battery energy storage joint venture in Korea. As you can hear, we got a lot going on across Asia and really continue to be at the forefront of activity in the region.

To close out my remarks this morning on monetizations, if you take a look at our pending monetizations as we head into the second half of 2025, transactions that are signed but not yet closed, we have direct line of sight to north of $800 million of monetization-related revenue, the vast majority of which will be performance income. This is a healthy figure for us and consistent with the overall health of our portfolio. Now turning to the fundraising environment and a few other notable items for the quarter. In Q2, we raised $28 billion of capital and continue to see meaningful progress across asset classes. We held the final close in the second vintage of our asset-based finance drawdown fund and parallel separately managed accounts with a total of $6.5 billion in commitments. This is more than triple the $2.1 billion predecessor pool of capital.

The composition of investors in the fund is encouraging, with approximately 50% of limited partners new to the KKR credit platform, and commitments are roughly evenly split across clients from the U.S., Europe, and Asia. More broadly, our ABF business continues to see meaningful growth, with AUM increasing over 20% from this time last year to $75 billion. We see ABF as a $6 trillion addressable market today, increasing to over $9 trillion over the next four years. The alternative credit ecosystem overall, including not only ABF but also direct lending and capital solutions, is now larger than the traditional high-yield and leveraged loan markets combined. ABF is a growing market with secular tailwinds for our industry, and we believe that we are already a leader in the space today. In real assets, we’ve begun raising capital for our Asia infrastructure strategy.

As we think about demand, we feel encouraged by our historical success in this asset class and the differentiated investment returns that we’ve been able to achieve, as well as the depth of our pan-Asian presence and breadth of our global connectivity. Turning to wealth, K-series AUM was $25 billion across private equity, infrastructure, real estate, and credit as of June 30. That figure compares to $11 billion just a year ago. We’ve been really pleased here to see inflows continue to track at or ahead of our expectations despite the market volatility that we’ve experienced year to date. As you know, in April, we launched two public-private solutions through our strategic partnership with Kappler Group, making the KKR platform available to an even broader universe of clients.

Our continued momentum is earmarked most recently with the filing of a registration statement with the SEC for a public-private equity product, which, on the private side, will be investing in a K-series private equity vehicle as well as PE Coinvest opportunities. Looking ahead, we continue to work on a real asset product. We feel great about our partnership with Kappler Group and believe that there is more to do together as partners. Next, I’d like to give a brief update on our insurance business, first with a focus on elongating and further diversifying our liabilities. Over the last four months, we’ve successfully issued approximately $2.5 billion of funding agreements with a weighted average duration of eight years through separate transactions in the U.S., Europe, Japan, and Canada.

We believe the local currency liability funding will also help support asset origination outside of the U.S., and you should expect us to continue to be active here with a real focus on the longer duration parts of the FABN market. Alongside of this, we continue to make very good progress on the addition of alternatives to the portfolio, where we believe that we have a differentiated sourcing advantage as a firm. We expect these changes will ultimately drive up overall returns while at the same time naturally reducing our leverage profile. Second, an update on third-party capital, which is a critical component of our strategy at Global Atlantic. Earlier this week, Japan Post Insurance announced that it would invest $2 billion through a new vehicle managed by Global Atlantic, expanding our existing strategic partnership.

As we have talked about since our initial purchase of Global Atlantic, our ability to marry third-party capital alongside the GA balance sheet is a real differentiator for us. Our IV sidecar vehicles, which pay fee and carry similar to a drawdown credit or PE fund, allow us to grow GA in a very capital-efficient way. More specific to the Japan Post Insurance commitment, this is another milestone in that effort. When you aggregate the JPI commitment and where we stand on our IV strategy capital raise, we currently have approximately $6 billion of third-party capital capacity versus IV2, which was at $2.7 billion. Once this new capital is put to work, we expect it will translate to over $60 billion of additional fee-paying AUM.

We are seeing significant momentum in an important part of our strategy and are pleased by the receptivity of our client base to insurance as a new and compelling asset class. The last item I wanted to touch on is more of a strategic update. Yesterday, we announced an expansion of our life sciences footprint through the acquisition of a majority stake in Healthcare Royalty Partners, or HCR, a leader in biopharma royalty investing. The company’s total AUM of approximately $3 billion is largely perpetual in nature. As part of this transaction, HCR’s approximately 30 employees will continue to focus on royalties and credit investing opportunities and will collaborate closely with KKR’s existing teams. HCR builds on KKR’s longstanding experience in healthcare investing across traditional private equity and middle market funds, our dedicated healthcare strategic growth strategy, as well as our existing strategic investment in Cattalio Capital.

This acquisition is also very consistent with our framework for evaluating strategic asset manager M&A. HCR brings us long-duration, unique, and largely perpetual capital, access to large addressable markets where HCR is already a top-three player. Importantly, we believe that HCR will bring additional origination capacity to our overall platform, primarily across Global Atlantic and our credit pools of capital. Thank you all for joining our call this morning. Our team remains very excited around the business momentum that we are seeing across the firm and, importantly, how that will translate into further P&L outcomes. To be clear, given all of this momentum, we continue to feel confident in our ability to achieve the 2026 guidance that we shared last year across both our fundraising and our core financial metrics, which include FRE per share, TOE per share, and, of course, ANI per share.

Now, before we move on to questions, I’d like to briefly hand it off to Scott. Thank you, Rob. Before we start today, we want to acknowledge the tragic events of earlier this week. We all have a lot of friends at Blackstone, and a number of people here were friends with Wesley. Our hearts and thoughts are with all of the victims and their families. We mourn with them. Operator, let’s please open the line. Thank you. We will now be conducting a question-and-answer session. We ask that all callers limit themselves to one question. If you have additional questions, you may re-queue, and those questions will be addressed time permitting. 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.

You may press Star 2 if you would 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 pull for questions. Thank you. Our first question comes from a line of Craig Siegenthaler with Bank of America. Please proceed with your question. Good morning, Scott, Rob. Hope everyone’s doing well, and thanks for taking my question. You called out K-series credit in the release, and we wanted to circle back on KFIT. This was previously somewhat of a gap for KKR and Wealth, but it’s been progressing as of late. I was hoping you could update us on the fundraising front, progress on platform additions, and how this product is differentiating itself versus an increasingly crowded field of players in private wealth. Hey, Craig. It’s Craig Larson.

Just to take a step back for a moment on K-series more broadly before diving into credit, just to level set for everyone, as of June 30, we had approximately $120 billion of assets under management from individuals. That number does not include policyholders at Global Atlantic. If anything, that figure is understated as you think of the breadth that we have and the presence that we have with individuals. In terms of K-series, Rob gave some of these stats. A year ago, we were at $11 billion of AUM. As we look at where we are today, we’re at $25 billion, so early days, but we are really encouraged about the progress that we have. I think that is particularly true in infra and private equity, which are newer asset classes for more mass-affluent investors.

In terms of credit, if you look at the decisions and how we’re situated, we did make the active decision to launch PE and infra ahead of our private BDC. I think we did want to be earlier to market in these newer asset classes. When you look at market share across new capital raise, across all of these different strategies, we ranked second on a year-to-date basis. I think we feel very good about our progress. In terms of KFIT specifically, we do have a specific allocation to asset-based finance as we think about how to position and how to differentiate KFIT relative to, as you noted, a space where you have a lot of competition. It’s early days. We are continuing to see progress from here as it relates to distribution partners. We did raise more capital on KFIT in Q2 than we have in its history.

We are seeing progress, albeit off a lower base, and we see lots of continued opportunities for runway for us. Just to be clear, we also are converting what is called KCOP, which was a multi-sector credit vehicle, to a primarily asset-based finance-focused vehicle, which we’re calling KABF. As we look at this opportunity in asset-based finance, it feels to us like there is real demand for a dedicated evergreen ABF product that’s tailored to individuals. It felt to us like converting KCOP was the best way for us to develop this solution efficiently. This is contingent, to be clear, on a proxy that we have with KCOP shareholders. We do anticipate that conversion to take effect on or around the end of August. At the heart, lots of progress. It does feel like there’s a lot more for us to do on this front, most specifically.

Just to be clear, everything that we’ve launched with Kappler Group is incremental to all of this. Hey, Craig, it’s Scott. I think that’s well said. The main difference I think we’re hearing in the market is this allocation to asset-based finance as part of KFIT. I think that’s helping. We’re getting added to more platforms every quarter. Appreciate you pointing out the momentum that we’re starting to see there. We’ll keep you posted on KABF that Craig just referenced. We’re optimistic about that. As you know, it’s early days with capital in terms of what we’ve done there. As a reminder, that public-private solution that we’ve launched with our partner has a 40% allocation to what we do, about 20 of those points to direct lending, 20 to asset-based finance. We have another avenue to the wealth channel through our partnership with capital.

We’ll keep you posted, appreciate you highlighting it. Craig, there’s just one other thought here. I’d be remiss if I didn’t mention, if you do look at KFIT returns, whether that’s on a year-to-date basis or on an inception-to-date basis, they’re as good as it gets in the industry in terms of private BDCs. I think if we continue to perform from an investment standpoint, that, again, will bode exceptionally well in terms of where we think we can end up ultimately in the size of the vehicle. Our next question comes from a line of Alex Blostein with Goldman Sachs. Please proceed with your question. Hey, good morning. Thank you, guys, for taking the question. I wanted to zone in a little bit on the institutional dynamic. The environment, of course, has changed drastically relative to prior quarter’s call.

I know we’ve talked in the past more about more of a, I guess, a barbelled approach to institutional fundraising. Given a better outlook for monetization activity, obviously a much healthier equity market as well, is that still the case? How are you sort of gauging the pulse of institutional clients as you go through this fundraising cycle? Thanks for the question, Alex. Scott, I would say, as you can tell from our numbers, I mean, we’ve been really busy on the fundraising front. $109 billion the last 12 months. If you look at the last couple of years, $217 billion. Pretty consistent momentum throughout. We read the same headlines you do. As we look at kind of what’s happening here in the firm, we remain very, very active. I’d say investors are kind of back to or getting back to business as usual.

We’re having highly constructive discussions on multiple fronts and around the world. I think the punchline that probably matters for most of the people listening is last April, we had shared a target for fundraising for 2024 through 2026 at over $300 billion. We’re halfway through those 36 months, and we’re ahead of pace and feel really good about the target we shared with you, including the plus behind the $300 billion. I would say the institutional investors we’re talking to, it’s a little bit of a different story depending on where you are and what you’re talking about. I’d say infrastructure people are still trying to catch up to their allocation. Same thing with private credit with increasing interest in asset-based finance. Rob mentioned this development of insurance as an asset class that we think has an attractive opportunity on the forward.

I think most of the noise has been around private equity and how those with mature programs on the institutional front are thinking and acting. Given the fact that we have sent back so much cash relative to that which we’ve called, and as a reminder, over the last eight years, approaching two-to-one dollars back to dollars called, we are finding that to be a very productive set of discussions and very much business as usual for us. The other thing I’d call out is, and we’ve referenced this before, but I think it’s actually accelerating as a theme, we are finding institutions consolidating their relationships. They want to do more with fewer partners. We’re having more strategic partnership dialogues, more multi-product dialogues, and that plays to our strengths, as you know. You add on private wealth and Capital Group and Global Atlantic, it just feels really good right now.

Our next question comes from a line of Steven Truebach with Wolfe Research. Please proceed with your question. Hi, good morning. Morning. Appreciate you guys taking my questions. I did want to circle back. ABF deployment opportunity, the strong fundraise in ABF vehicle is juxtaposed with the announcement of the Harley-Davidson deal. I know you took a stake in the financing unit, purchased a significant portion of the loan portfolio. I was hoping to whether you could speak to opportunities to consummate similar transactions with other retail participants. I’m just trying to gauge whether there’s more of a one-off or where other retail firms might be open to exploring similar transactions, just given the positive reaction to HRG shares following the announcement. Yeah, Steven, thanks for the question. Why don’t I start broadly on ABF, and then we can talk about Harley-Davidson.

Just to level set again, on page 13 of our release, we detail in our credit and liquid strategies business the composition of our $290 billion-somewhat of AUM. Within private credit, you’ve seen that grow at a very healthy rate. We’re up 20% year over year, $120 billion of AUM. $75 billion of that is asset-based finance. That year-over-year growth is in the mid-20%. I think with $75 billion of ABF AUM growing at a north of 20% year-over-year rate, you get a sense of the significance of this business and the growth trajectory that you’ve seen. Rob had mentioned in our prepared remarks just how we feel we’re really well-positioned, strategically looking forward from here. In this environment, back to your more specific question on Harley-Davidson in the outlook, we think this should be a wonderful environment for asset-based finance.

This is one of the things that Henry McVey and our macro team have actually written about as opportunities for us. As we think about this overall environment, our companies that want to see or are electing to go in a more capital-like fashion, if there’s a way for them to free up capital and use that capital for other strategic initiatives. I think at the heart, that’s what you saw in the Harley-Davidson deal. They sold the majority of their motorcycle loan portfolio, and then there’s also a long-term flow partnership to sell new motorcycle loan originations. I think as we look at Harley-Davidson, it’s a company, obviously, with a truly iconic brand, a really passionate, loyal customer base. It is another example of this broader trend. You’ve seen this in a number of instances for us, whether this is Discover, PayPal, BMO Financial Group, GreenSky Home Loan Improvements.

You’ve just seen a handful of these instances of companies electing to go capital light, to free up capital, to pursue other strategic objectives. It was great from our standpoint to see the reaction in their stock. I think it was up 12 or 13%. It certainly seemed to be very well received by Harley-Davidson shareholders. They reacted very positively to the news. Our next question comes from a line of Glenn Shore with Evercore. Please proceed with your question. Hi, thanks very much. Let me go to Scott. I think it was after the quarter he announced just the other day the first investment with Energy Capital Partners relationship, that big $50 billion announcement. My question is, I get the huge benefit of having dedicated 24/7 power, and you’re building. The question I have is, do you have those type of relationships pre-leased and pre-spoken for?

If we build it, they will come, and there’s so much demand that we’re going to start leasing it. I’m just curious on how you put that money to work and what year the cash flows start beginning. Just curious on how that ramps because the TAMs are so big. I’m looking to get a little context. Yeah, Glenn, it’s Craig. Why don’t I start? Just to be clear, we are not speculative builders. The answer to the question, yes, the project’s already been leased to an RV, a very attractive counterparty. The other broad point, as you note, is there is just a massive need for capital. In many ways, the opportunity is broader than just data centers.

There is going to be need for data centers, certainly, but at the same time, you need massive investment in fiber, massive investment in mobile infrastructure at the same time to support the growth in data creation and consumption. For us, when we look at our digital infrastructure presence and you add what we’ve done in those three pieces together, in total, there’s over $40 billion, $40 billion of equity invested across these areas. To be clear, that does include co-investment and co-underwrite, but it certainly gives you a very good sense of how active we’ve been in this area. One of the things that plays to our strengths here is the connectivity and the culture you have across the firm. We’re able to invest in these themes across a whole bunch of different pools with different risk return, different geographic exposures, etc.

If you look at just the data center piece in that, we have exposure across global infra, Asia infra, real estate, core private equity, our wealth strategies in addition to Global Atlantic. It is a huge mega theme. I think you’re going to hear more from us over time related to this. Thank you for the question. We do look at last night’s announcement. It’s just a really interesting direction of travel as it relates to the intersection of both infrastructure as well as energy infrastructure and the need to link power as a solution. Glenn and Scott, to your question on timing, construction is already underway. Expected completion date is fourth quarter next year. To give you a sense of when you start to turn on and the lead times. Our next question comes from a line of Ben Boudish with Barclays. Please proceed with your question.

Hi, good morning, and thank you for taking my question. Helpful updates on Global Atlantic and the prepared remarks. I was wondering if you could unpack a little bit more of just the performance in the quarter itself. What specifically changed that led to the outperformance versus your prior guide of kind of around $250 million for the next couple of quarters? As we think longer term, how important is the sort of elongation of the liability profile? How dependent is that on the FABN market or sort of pivoting the liability profile of your retail flows? Does one matter more than the other, and how long may that take to get to where you want it to be? Thank you. Thanks a lot, Ben, for the question. It was definitely a solid quarter for Global Atlantic in Q2, $278 million of operating earnings.

To be clear, there was some variable investment income that drove that number. As we’ve previously provided a guide of plus or minus $250 million of operating earnings, our expectation for the foreseeable future is that is still the right number to model going forward. As it relates to the evolution of the business, I think there’s really three things going on simultaneously. Number one, third-party capital is a big advantage for us. We talked about where we stand today relative to where we were when we had IV2, which we’re still investing as a strategy. We’re north of double the amount of capital, and that’s a really important strategic imperative. A lot of good momentum there. In terms of the liabilities and wanting to elongate those liabilities, it’s definitely not just the FABN channel, but that’s a component. We’re seeing that more in the individual channel as well.

We continue to have an active pipeline on the block side, which is longer duration liabilities too. There are a number of different ways that we can effectuate longer duration liabilities. I think that’s going to be ultimately a multi-year process. Alongside that, as we are elongating our liabilities, we’re going to methodically take up our allocation to alternatives. We’re making good progress there too. We’re still only about 1% allocated to alternatives at Global Atlantic. Industry average is closer to 5%, so we’ve got some work there to go, but we’re not in a rush. We’re going to make sure we do this in the right way and to ensure that when all elements of those business models come together, it’ll really set us in a very differentiated way from the industry. I think to be really beneficial to our shareholders over the long term.

We’re excited with the progress, but still relatively early days. Our next question comes from a line of John Barnish with Piper Sandler. Please proceed with your question. Good morning, and thank you for the opportunity. Can you talk about the opportunity presented for the company from potential 401(k) retirement reform and how meaningful this could be? Thank you. Craig, you want to start? Sure. So John, a couple of thoughts just to begin. Look, at the heart, we are encouraged to hear the policymakers are discussing ways to help make private market investments more available to U.S. retirement plans. I think as we hear this, we have two overarching thoughts. The first, and this is a phrase that our public affairs team uses internally, is that we think in many ways this is about giving similarly situated people similar options.

What we mean by that is that right now, across many states in the U.S., if you’re a teacher, probably 30% or so of your retirement is provided through alternative investments. That percentage, though, for a dentist is going to be closer to 0%. In many ways, this is about giving people an option to increase, to allocate a portion of their savings to higher performing asset classes, no different than what we’ve seen from institutions over the last many number of decades. The second part of this is that we think at the heart, fiduciaries should be able to act as fiduciaries and increase the investment options that are available to fiduciaries to consider on behalf of their clients. Back to your question in terms of what this means for us. We think there’s a real opportunity here. That’s true for individual investors.

That’s also true for firms like ours. It’s a massive market. I think these statistics are broadly well known. In the U.S., retirement is a $40 trillion market, with defined contribution being $12 trillion, if not even north of that. It does make a lot of sense to us that target date funds, which have been taking 60%+ of share of 401(k) flows, if you will, is where you’ll probably see alternatives first. If you think of someone who’s early in their retirement planning, it just makes sense to us that someone who’s early in that glide path with that really long-term vision is where all is going to be most relevant. As we think about this opportunity, we do look at it as a very interesting long-term opportunity, no question, but it is a long-term opportunity.

We don’t think you should expect this to be like flipping a switch, but it is incremental to everything that you see across the firm currently. We think we’re really well positioned. We do think brand will matter. We think track records, investment expertise will matter. We think depth and breadth of origination will matter. These are all things that we think are truly differentiated aspects of KKR. Given all of that, just to be clear, we are dedicating the resources against this that you’d expect. Hey, John, it’s Scott. I think to your question, we don’t know the quantum and we don’t know the timing. I think Craig said it right. This is all incremental to everything that we’ve talked about and the longer-term vision that we’ve shared for the firm in the past. We’re trying to make sure we’re well positioned as it plays out.

Craig referenced it, but 60% of 401(k) flows go to target date funds. If you think of that format, it just makes sense for an individual investor because probably the allocation to alternatives and private markets should be different for somebody who’s 30 versus someone who’s 70. It’s a nice format to be able to provide that flexibility. The target date market is very concentrated. The top five players have over 80% market share. Our partners at Capital Group are one of those five players. You can imagine we’re having discussions as to what the future might look like together. Not a lot more color to share with you today, but we’ll keep you posted over time as this plays out. Our next question comes from a line of Michael Cyprus with Morgan Stanley. Please proceed with your question. Hey, good morning. Thanks for taking the question.

More of a bigger picture question for you guys on AI and blockchain, just as you look at it over the next 5, 10 years. Curious how you see the industry evolving given potential changes here from AI to blockchain. Curious how you’re adjusting your business model. What steps are you guys taking today and might take in the coming years, and what does this all mean for your business? Thank you. Yeah, Mike, this is Craig. Really interesting question. Not surprisingly, lots of activity around this across the globe, both as we’re considering our portfolio as well as as we’re considering new investments. Very early, but I think what we’d say at this stage, a couple of thoughts. First, our areas of focus are broad, certainly.

We’re first focused on building smarter solutions at our companies, and I think that framework is one where we’re looking to bring solutions that deliver more value to our customers. I think there’s a second aspect, and that’s helping our people at our portfolio companies be even more productive so they can do more, solve more, and have a better experience on the job. Finally, in some cases, it’s reimagining business models to unlock even bigger upside. In addition to the portfolio companies and opportunities, back to Glenn’s question earlier on data centers, this is increasing our opportunity set even at the same time. We’ve talked a lot about digital infrastructure on these calls and all the activity that you’re seeing. AI is creating a massive need for capital and solutions.

We want to make sure as we look to position ourselves strategically that we’re bringing the right resources to bear for us across those opportunities. It’s our portfolio companies, it’s new investments, it’s areas like digital infra. I’m sure there’ll be more to come over time as it relates to other aspects. I think you have seen other signs of this for us. I’d point you back to, and Mike, I expect you to remember this, but even back in 2022, we partnered with a firm to offer a tokenized interest in our healthcare growth fund. This was the first time that one of our strategies was offered in a digital blockchain format. It was not a significant part of that fundraise, and I think these aspects are not material as we think of the go-forward fundraise for us, but do think it’s a sign of.

The creativity that you’re going to see in our firm as we look at evolving even the more traditional parts of our business model. Hey, Michael and Scott, appreciate the question. Look, it’s early. We’re still learning from our companies. We’re spending a lot of time with young companies in the AI space and their founders, and helping to connect dots between what they’re building and how an alternative asset management firm actually functions. When it comes to how we run KKR, which I think is part of the thrust of your question, we’re still figuring that out, and we’re connecting those dots. So far, it’s clear it’s going to help make our teams more productive. It’ll help us scale the firm using technology in a way that we’ve never been able to before. The specific answers to exactly what does that mean, that’s what we’re still working on.

We’ll keep you posted, but it’s clear that there’s meaningful opportunity, especially as we approach areas like private wealth and scale our insurance businesses to do some of this stuff in a different way operationally. Our next question comes from a line of Bill Katz with TD Cowen. Please proceed with your question. Okay, thank you very much. Good morning, everybody. Just coming back, one of the pushbacks we get on KKR and the group at large is as the industry continues to scale, particularly in private credit, that the ability to drive differentiated returns goes down. We don’t agree with that. We think scale will win. That being said, I’m sort of curious if you could maybe update us on your origination platform. I know a couple of your peers do a pretty good job of delineating what their capacity is.

I’d be curious to maybe get a little bit of a refresh of just number of origination platforms you have and why you think that could translate into the ability to generate further alpha. Thank you. Hey, Bill, it’s Craig. Why don’t I start, and then I’m sure Scott and Rob will chime in. Just in terms of the platform question, looking holistically across the firm, we have 35 platforms. That’s both in asset-based finance as well as in real estate to help generate differentiated origination. I think in terms of, in addition to the activity, you are going to have a whole bunch of different aspects for us to look to drive that origination flow. I do think depth and breadth of origination is a really critical part to your point of generating attractive investment returns for us.

I think as we look at our IG footprint today and look at that in total, that number for us is approaching $30 to $35 billion annually. Again, the largest piece of that is going to be in high-grade ABF, which was not the heart of your question as it relates to direct lending. I think as we think of the framework broadly and the credit business, the connectivity that we have, and as direct lending is just becoming a much more mainstream part of how companies look to finance themselves, it just feels like the opportunity set is one that is continuing to increase and does feel very differentiated relative to even five plus years ago. Hey, Bill, it’s Scott. Maybe just a historical perspective. Private credit as a space is getting some of the same kind of noise that private equity got 20 plus years ago.

Number of new entrants, can it scale, what does this mean? To your point, what we and others have found, if you go up in size, you build different capabilities. You look at adjacencies. There are lots of different ways to continue to grow. In the grand scheme of the capital markets, the trillion eight, even in direct lending, is pretty small. ABF, five or six trillion on its way to seven to nine, much larger space. The 7,500 people or so we have sourcing today across our platforms, 19 of them just in ABF. That number will continue to grow. With the announcement this week, with Healthcare Royalty Partners is another example of adding another platform and a team that’s originating really private credit opportunity. You will continue to see us scale our ability to originate.

It has a bit of an echo to me of a lot of the things we’ve done in other asset classes across the firm, whether that be private equity or infrastructure or otherwise. I’m with you on this. I think the sentiment’s a bit overdone. Our next question comes from a line of Patrick David with Autonomous. Please proceed with your question. Hey, good morning, everyone. To your prepared remarks, KKR obviously in a good position with its large high-MOIC public position. Commentary from other execs and even the tangible data we see still suggests that strategics seem to be hesitant to buy sponsor-backed companies more broadly. Could you update us on your conversations with strategic buyers, where you think that bid-ask is now, and what do you think needs to change to really open up that side of the realization equation? Thank you.

Yeah, what you read, Patrick, that hasn’t been our experience. We’ve been really active on the monetization front around the world, particularly in Asia this year. I know a lot gets talked about the IPO market, but we’ve been selling assets to strategic buyers. I think the bid-ask that we were seeing, the spread that we were seeing 12, 24 months ago continues to dissipate. For the public strategic, their stocks are up, so they have a more attractively priced currency and a lower cost of capital. We’re not experiencing what we’re reading about, would be a simple way to say it. Our next question comes from a line of Brian Bedell with Deutsche Bank. Please proceed with your question. Great, thanks. Good morning. Thanks for taking my questions. Just a two-parter, if I may. One on the investment management fees in both private equity and real assets.

They were ahead of our estimates, and I think ahead of consensus. I know that Fund 14 turned on. Just trying to get a sense of, is there anything else unusual in terms of catch-up fees or anything else? I think there’s maybe some step-down dynamics that might go into third quarter. Any kind of color you could give on that? The second question is just capital markets momentum and obviously the environment. Seemingly good into the second half. I just wanted to get your view on whether you think the capital markets fees can be even stronger in the second half than they were in the first half. Right. Thanks a lot for the question. On investment management fees, nothing out of the ordinary. Other than, to your point, we’re turning on some larger funds.

If you look in the quarter, we probably benefited around $30 million from the turn-on of NAX 4 in Q2. We did have a bit of catch-up fees in our real assets business, but again, nothing really out of the ordinary across the platform. I think it’s just solid organic growth across our platform and feel good about our trajectory on management fees, both on an absolute basis and relative to our industry. As it relates to capital markets, I think another solid quarter, roughly $200 million of fees. I think we’re $430 million on a year-to-date basis. We see some strength, absolutely, on the industry-wide side as we look at Q3 and the pipeline. We’re only a month in, but feel good that we’ll be plus or minus in line with where we were in Q2.

Obviously, some upside if the capital markets stay healthy over the course of the rest of the quarter. It’s probably a little bit premature at this stage to have a view with any precision on Q4. Pipelines are building. Much more importantly, as we look at our capital markets business, we’re able to hire the right talent. I think we’ve got the business model fully in place. If the capital markets really do continue to stay strong and healthy and stable, we feel really good about growing our franchise heading into 2026. Hey, Brian, it’s Scott. One of the things we reflect on is I think the sentiment around our space is dramatically more volatile than the reality. If you think about April and May and the commentary over that period of time, you kind of would have guessed what Q2 would have looked like in terms of activity.

We raised $28 billion. We invested $18 billion. You heard the financial metrics in terms of fee-related earnings up over 30% last 12 months. A&I, 27%. Uncertainty creates volatility, creates opportunity for us in the investing side. As we’ve shared, 70% to 80%, and more recently, 80% of our pre-tax income is coming from activities that we think are highly repeatable, durable, and can grow. I think you have that come through in the quarter. That’s the broader takeaway from our standpoint. The commentary makes it sound like the business is very difficult. The results and our day-to-day experience speaks otherwise. Our next question comes from a line of Arnold Giblot with BNP Paribas. Please proceed with your question. Yeah, good morning. Thank you for taking my question. I’d like to come back to the KKR ECP joint venture and just follow up on that question.

I was hoping to get a bit more color around the $50 billion JV there in terms of how this money gets deployed. Part of it is going to go through existing funds, if I understood well, and the rest are probably through SMAs and coinvest. I’m just wondering if you could give us a bit of color around that. Also, clearly, there’s ECP in that joint venture. How should we think about the split of that $50 billion between you and your partner? In terms of timing, how long should we be looking for the deployment of those $50 billion? Thank you. Thanks for the question. It’s Craig. Why don’t I start? In late 2024, we formed a partnership with Energy Capital Partners that effectively combines our respective capabilities and capital across digital and energy infrastructure.

If you think about the surge in AI demand and what that requires, I think we all have a clear sense of this, that it’s stretching infrastructure, but it’s doing more than that. It’s changing the blueprint for how these projects need to be built. If you look at the announcement we made last night, that is really a direct reflection of the reality. What we formed with Energy Capital Partners (ECP) is the ability for us to approach hyperscalers and make their lives easy and be a one-stop shop and provide creative, thoughtful solutions from the construction side, from the real estate side, from the energy solution side. That’s how we’re going to differentiate ourselves. I think a lot of these firms are incredibly cash-generative firms with a lot of capital. I think if you’re only showing up with capital, that’s not going to be a differentiator.

How do we look to be a really value-added partner? This was our approach. I think the transaction you saw last night is a direct reflection of that. Would think of that overall partnership as being 50/50 between the two of us. Would expect over time that capital from us to come from our existing funds and strategies. There’s no timing or specific threshold through which we need to invest that capital, etc., in partnership with ECP. I think, again, really powerful outcome as you would have seen last night. The only thing I’d add on now is that as we find more projects, in addition to using our existing funds and SMAs, as you point out, there’s definitely an ability to raise capital, incremental capital, to further fund the activity. Our next question comes from a line of Brian McKenna with Citizens JMP. Please proceed with your question. Great.

Thanks for squeezing me in and appreciate all the detail this morning. I just had a quick question on the trajectory of earnings over the next 12 to 18 months. You’re on track to generate about $5 of adjusted EPS in 2025. That implies about 40% earnings growth in 2026 to get to the low end of your target. Can you just help us bridge the gap here and what some of the bigger drivers will be for this earnings growth over the next four to six quarters? Brian, thanks a lot for the question. Maybe just to unpack a bit of the P&L. You’re seeing, obviously, a lot of momentum on the management fee line item. In a lot of ways, I think this speaks maybe best to the financial health. Of our firm and where we’re going.

We feel like we got a lot of momentum in our capital markets franchise, especially as the capital markets continue to open up, feel really well-positioned to be able to grow. You’re starting to see some fee-related performance revenue now flow into our P&L, which we think can scale really nicely. We’ve talked about a lot of the things that we’re doing across the insurance space, including a much more meaningful contribution of third-party capital. One of the things that’s really important to think about over the next 12 to 18 months as we look at how our earnings can scale. Today, we have roughly $17.1 billion of embedded gains that sit on our balance sheet. That’s a record high for us.

That’s an aggregation of our gross unrealized carried interest, as well as the differential between the fair value and the costs of both our asset management investment portfolio and what sits in strategic holdings. When you add all those things together and we look forward, not just in 2026, but importantly, over the long term, we feel like we’re in a really good position to be able to scale the firm and its earning trajectory. In addition to that, what we’re doing in strategic holdings, we think will further benefit the overall growth of our platform.

It’s just this new segment that today is still not generating a lot of operating earnings, but as you look at 2026, as a management team, we look at that portfolio, we look at our $350 million of operating earnings guidance for next year, and we feel really good in our ability to beat that. Those are a bunch of the pieces to the puzzle as we look over the course of the next 12 months. Importantly, as a management team, we’re looking long-term as well. We not only feel good about what we’re going to be able to achieve in 2026, but also feel like we’re very much on track for some of our longer-term goals, which, as you know, is to grow to $15-plus per share of earnings. We think that we’ve got the business model to be able to do that without creating anything new.

We do see some new things on the horizon that we think we can add to our platform. Our next question comes from a line of Kyle Voight with KBW. Please proceed with your question. Hi, good morning. So Rob, you just mentioned management fee growth as a kind of key part of the algorithm to how to get to your targets for 2026. I’m just wondering if I can get some clarity on 2025. I know you previously outlined that you could see a bit of an acceleration in 2025 versus the 14% realized in 2024. I think you posted 15% in the first half of the year, but that accelerates to 18% in Q2 with NA14 turning on. Just wondering if we can get an update on how to think about second-half management fee growth.

Is that 18% year-on-year growth rate the right jumping-off point for the second half of the year? Any other notable activations or final closes to call out for 2H? I know Infra 5 is still in the market, so anything to call out there from a timing perspective? Thank you for the question, Kyle. We continue to raise capital across the platform. I think it’s worth noting, as you look at that 18% growth rate we had in the quarter, 30 million having come from NAX 4. Our largest product only contributed $30 million of growth in the quarter, a fairly immaterial number as you think about our roughly $1 billion of management fee in the quarter.

I don’t have any specificity for you around the back half of the year in management fee other than to say we feel good about the capital-raising momentum we have across all of KKR, not just in our big flagship products. Our expectation is that we’ll continue to post solid results as we go through the end of the year. Kyle, it’s Craig. Just one thing. Rob at our firm meeting had mentioned a statistic earlier that I thought was interesting. I think the breadth and diversification in our fundraising is just worth highlighting. Over the trailing 12 months, we’ve raised $110 billion. If you look at that, that’s $50 billion in credit, $30 billion in private equity, $30 billion in real assets. We’ve noted historically on some of these calls, in turn, the diversification you’re seeing in management fees.

On a trailing 12-month basis, management fees are between $1.1 billion and $1.4 billion across each of our three businesses. When you think of the breadth and diversification we have across strategies, across geographies, it just feels like we’ve got a number of ways to win. Thank you. We have no further questions at this time. Mr. Larson, I’d like to turn the floor back over to you for closing comments. Elizabeth, just thank you for your help this morning. Everybody who joined, thank you for your interest in KKR. We look forward to following up further with those of you who have more specific questions. Otherwise, we’ll be back. Chatting with everybody in 90 days. Thank you so much. Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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