Private equity giant KKR expects between 30 percent and 50 percent of new capital raised over the next few years to come from the private wealth channel, said the firm’s new co-chief executive Scott Nuttall.
Nuttall noted on the the firm’s third-quarter earnings call on Tuesday that the private wealth channel is an area of strategic focus, alongside perpetual and long-dated capital and its insurance business.
“There’s been 10 to 20 percent of capital raised from that individual investor channel, broadly defined,” Nuttall said on the call. “It’s so early; we see a lot of upside here. And we think that 10 to 20 percent number will move up to 30 to 50 percent over time. And it’s an area for us where we see a significant amount of growth ahead.”
KKR’s moves in the private wealth arena are line with peers Blackstone, Ares Management and Apollo Global Management, which have in recent weeks highlighted the significance of individual investors in their near-term capital-raising targets.
Blackstone said in a media briefing in London a week ago that it plans to double its private wealth staff, currently at 160, by the end of next year. New offices in Germany and Italy are also in the pipeline. Ares, meanwhile, launched a 90-strong team dedicated to private wealth in October, and Apollo said it expects AUM from the private wealth channel to grow from 5 percent today to 30 percent or more.
KKR has been making investments in headcount, sales and distribution, Nuttall said, adding that he expects the private wealth team – now at 40 employees, compared with 10 about 18 months ago – to “likely triple over the relatively near term”. The firm is also ramping up investments in tech and operations, as well as product development.
He added: “We are clearly building and we are doing some renting as we sit here today. And we are, as part of our development efforts, assessing whether there is anything that makes sense to buy. But right now, it is build and rent and create partnerships [with external managers].”
During the earnings call, Craig Larson, head of investor relations, said that in the first nine months of the year, KKR had raised $2 billion from the private wealth channel. “We’re just getting started and we are focused on ramping.”
KKR’s AUM grew 96 percent year-on-year to $459 billion, according to its third-quarter earnings statement. The rise was driven primarily by its takeover of Global Atlantic, as well as $28 billion of new capital raised in Q3 and $113 billion in the trailing 12 months. It had gathered $16.8 billion for its North America Fund XIII as of end-September.
Perpetual capital made up one-third of KKR’s AUM and reached $150 billion as of end-September, up 8x year-over-year and also attributable to the Global Atlantic deal.
Dry powder as of end-September stood at $111 billion, up 65 percent from the same period last year. Total investments reached $24 billion in the quarter and $60 billion over the last year. PE investments came to $10.9 billion in the quarter. Traditional PE deals accounted for 26 percent of KKR’s total investments in Q3; core private equity, 28 percent; and growth equity, 8 percent.
Its overall PE portfolio delivered the highest gross returns across asset classes, appreciating 52 percent over the last 12 months. KKR’s flagship PE funds delivered gross returns of 79 percent, according to earnings materials.