KKR reported an economic net income (ENI) loss of $506.9 million in the first quarter as market volatility hit the value of some of its biggest public holdings.
Speaking on KKR’s earnings call, management admitted the firm was not immune to adverse market conditions, but believed that its locked-up fund structures put the business in a good position to achieve long-term returns.
KKR’s flagship US and Asia private equity funds were down as the firm’s overall PE segment posted a 0.9 percent loss in the first quarter while remaining up 7.7 percent over the 12 months ending in March.
“Q1 was a strange and volatile quarter. Since 1986, no period besides 2008 to 2009 has had a larger number of three standard deviation moves across asset classes,” said Scott Nuttall (pictured), head of global capital and asset management.
“Looking through the volatility, we feel very good about how we’re positioned. We’re pleased with our fund investment performance. Fundraising has been strong. With record dry powder. We’ve been deploying capital into a dislocated environment. And we successfully exited investments through strategic M&A, secondary sales and leverage recaps.”
The firm had $35 billion in dry powder at the end of the first quarter and most funds were still posting gains on a one-year trailing basis.
KKR’s assets under management (AUM) rose 17 percent to $126 billion from the first quarter in 2015, partly on the back of $27 and a $6 billion stake purchase in Marshall Wace, a London-based hedge fund.
Management added that $18 billion of that capital had yet to be put to work so was not appearing in fee-paying AUM.
Within credit, the firm recently closed its second special situations fund on $3.35 billion. KKR also held a final close on its first European direct lending fund at $847 million.
Management also reported a first close on its Private Credit Opportunities Fund II, KKR’s second mezzanine fund, which is gathering $2 billion.