KKR doubled capital deployment year-on-year in Q1

The opening three months of the year provided sounder market conditions than the same quarter last year, which began with rocky and uncertain markets.  

KKR’s private credit arm reported a sharp year-on-year uptick in the capital it invested during the first quarter, earnings results show, which comes as the firm still holds a substantial amount of dry powder and is in the market for its third direct lending fund.

The alternative asset manager behemoth deployed $893.6 million of private debt over the three months ending 31 March, more than double the $418.3 million it put to work in the first quarter of 2016.

Among the Q1 2017 investments was leading a financing of more than $3 billion involved in Liberty Media’s $4.4 billion acquisition of Formula One. Notably though, market conditions in 2017 were much more favourable over the initial three months of the year than in 2016, when the year opened with weeks of volatile markets.

Uncalled capital held by KKR’s credit arm at the end of the first quarter stood at $6.15 billion, a small portion of the $41.22 billion of dry power held across all the firm’s strategies. The $6.15 billion figure is a year-on-year decrease from the $7.59 billion reported at the same time last year. At year-end 2016, the firm had $6.31 billion of dry powder.

KKR’s public markets division, which houses its alternative credit operations, reported a 10 percent year-on-year increase in management fees as well as $4 billion in capital that has yet to earn fees. KKR executives said in the earnings calls that the firm’s latest direct lending vehicle in the market, Lending Partners III, will help up the firm’s fee-earning assets under management.

So far, LP III has raised $421.91 million, according to US Securities and Exchange Commission filings. Its predecessor, LP II, raised $1.34 billion. LP II has invested $867.1 million, according to Thursday’s earning results. The vehicle, whose investment period ends in June, has $468.8 million of untapped capital.

For the first quarter, KKR posted an economic net income of $668.5 million, an increase of from a $506.9 million loss of economic net income from the same time last year. Revenues stood at $1.02 billion, of which $104.27 million came from its private credit division. In the first quarter of 2016, the firm reported a $374.61 million loss.

The firm’s assets under management rose to $137.62 billion, notching a year-on-year increase from $126.39 billion at the same time last year. The Q1 2017 figure also reflects an increase from the $129.56 billion of AUM reported at year-end 2016. The firm’s total alternative credit AUM stood at $57.42 billion as of 31 March.