KKR’s infrastructure and credit strategies pay off

The new co-COO said the firm has tackled larger debt and equity deals in Asia.  

KKR’s investment focus on infrastructure and private credit has increased the firm’s assets under management and portfolio earnings recently, executives said on Thursday’s second-quarter earnings call.

The firm’s assets under management topped $148 billion as of 30 June, compared to $129.56 billion as of 31 December, earnings results showed. Scott Nuttall, the firm’s new co-president and co-chief operating officer, attributed this growth to its private credit platform, which has seen significant deal activity involving underwriting debt deals or financing portfolio companies for third-party sponsors globally.

Over the second quarter, KKR deployed $1.3 billion in capital from its public market bucket, which includes its alternative credit vehicles. That total was primarily direct lending, added Nuttall. Overall, the firm deployed $4.9 billion over second quarter, with $43 billion in dry powder as of 30 June. He said the firm’s focus on global infrastructure investments and in Asia across all strategies were also instrumental to the growing AUM and earnings.

“Infrastructure and Asia [are] two areas where we’re starting to do larger transactions, where we have been able to underwrite equity and debt, syndicating both of those, and generating fees,” Nuttall said.

The firm’s three large alternative credit vehicles also showed strong gross returns over the last year, according to the earnings results. Special Situations Fund II showed gross returns of 13 percent and 34 percent year-to-date and the twelve months ending 30 June, respectively.

KKR’s latest mezzanine-focused vehicle showed 9 percent and 11 percent returns year-to-date and over the last twelve months, respectively. Lending Partners II fund showed returns of 6 percent and 15 percent across similar time periods. 

KKR’s overall portfolio showed a total investment income of $585 million and $1.25 billion for the three and six months ended 30 June, respectively. At the same time last year, KKR posted a $125.7 million in net investment income for the second quarter and a $487.2 million loss for the first half of 2016.

Nuttall assumed his new role as co-COO, along with his colleague Joe Bae, earlier this month. Nuttall and Bae took the reins from Henry Kravis and George Roberts, who will continue their roles as co-chairmen and co-chief executive officers.

He said on the call that these co-roles are “natural extensions of what Joe and I were already doing” and that he is honoured to join Henry and George to lead the next stage of the firm.