Bill Katz

Bill Katz inquired about the expected ROE trajectory for KKR's insurance business, seeking a normalized level and timeline for achieving it, and also asked about potential expense mitigants to soften any differential from the $7+ ANI guidance if monetization slows.

Answer

CFO Rob Lewin emphasized focusing on the $1.8 billion LTM insurance economics (page 20 of the earnings release) and scaling these through KKR's investment platform, global origination, and third-party capital. He noted that the $200 million annual run rate of accrued income, not yet in reported numbers, is expected to start hitting the P&L around 2027-2028. Lewin reiterated confidence in achieving the $7+ ANI guidance for next year, acknowledging its dependence on a constructive monetization environment, and clarified that the 2026 TOE target is less relevant due to the cash vs. accrued impact on insurance earnings.

Bill Katz inquired about the ROE trajectory for KKR's insurance business, seeking a normalized level and timeline, and asked about potential expense mitigants for the 2026 Adjusted Net Income (ANI) guidance.

Answer

Rob Lewin, Chief Financial Officer, referred to page 20 of the earnings release, highlighting the LTM insurance economics of $1.8 billion. He emphasized scaling these economics through KKR's investment platform, global origination, and third-party capital. Lewin noted that the $200 million of annual run-rate accrued income not yet in the P&L is expected to start hitting in 2027-2028. He reaffirmed confidence in achieving the $7+ ANI guidance for 2026, acknowledging its dependence on a constructive monetization environment, and clarified that the 2026 Total Operating Earnings (TOE) target is less relevant due to cash vs. accrued impacts.

Manu on behalf of Bill Katz at TD Cowen asked for an update on KKR's asset-backed finance (ABF) platform, including its sourcing funnel and bank partnerships, heading into the rest of 2025.

Answer

Executive Craig Larson highlighted the significant scale and growth of the ABF business, with AUM at $74 billion, up 35-40% year-over-year. He described the market as a massive opportunity with high barriers to entry, noting that KKR is well-positioned to fill a void left by traditional providers. He also pointed to strong deployment, with over $4 billion in Q1, suggesting a favorable environment for the strategy.

Bill Katz requested an update on the GCP transaction, focusing on the growth opportunities within infrastructure and real estate, in addition to the margin expansion discussed.

Answer

Jarrod Phillips, CFO of Ares Management Corporation, confirmed the GCP integration is progressing well, highlighting the expansion of the real estate platform to become one of the three largest alternative real estate managers, providing scale and global presence. He also emphasized exciting opportunities in data centers, particularly urban-adjacent sites for cloud computing and AI, with $6 billion in the ground for development. He noted that GCP's growth profile aligns with Ares' targets for FRE and RI growth.

Bill Katz requested an update on the GCP transaction, focusing on its growth opportunities in infrastructure and real estate, in addition to the margin expansion discussed by Jarrod Phillips.

Answer

Jarrod Phillips, CFO, Ares Management Corporation, highlighted the successful integration of GCP, emphasizing the expansion of the real estate platform, which made Ares one of the three largest alternative real estate managers globally. He also expressed excitement about data center opportunities, particularly urban-adjacent sites for cloud computing and AI, with $6 billion in the ground for development. He mentioned smaller growth areas like the self-storage business, affirming that GCP aligns with Ares' FRE and RI growth targets.

Bill Katz asked for an update on the QQQ proposals, specifically regarding the quorum, approval rate, and the reclassification of marketing spend, and if this reclassification impacts the probability of achieving the required vote.

Answer

CFO Allison Dukes stated that Invesco is pleased with the progress, with an overwhelming majority voting in favor, and that the reclassification of marketing expenses is an accounting adjustment with no impact on the proposal's perception or operating income.

Bill Katz inquired whether the discrete spend related to inorganic activity is expected to persist and if the company is currently active in the market for share buybacks. He also asked for more details on the fourth-quarter institutional trends, specifically areas of strength and weakness, and the demand for liquid alternatives.

Answer

George Aylward, President and CEO, stated that the company remains very active in evaluating potential inorganic opportunities, implying the discrete spend could continue. He reaffirmed share buybacks as a core element of their capital strategy, balancing it with other considerations. Regarding institutional trends, Aylward highlighted strength in emerging market debt, global REIT, and domestic REIT, particularly in non-U.S. institutional business, noting a variety of managers contributing to the pipeline. Mike Angerthal, CFO, added that the pipeline is across managers and geographies, including European and Middle Eastern teams.

Bill Katz asked if the discrete business initiative spend was concluded or expected to persist, and whether Virtus was back in the market for share buybacks. He also requested further details on the fourth-quarter institutional trends, specifically identifying areas of strength and weakness, and insights into general allocation trends, particularly demand for liquid alternatives.

Answer

George Aylward, President and CEO, stated that the company remains active in evaluating potential inorganic opportunities, implying discrete spend could persist. He affirmed that share buybacks remain a core element of their capital strategy, balancing it with other considerations. Regarding institutional trends, Mr. Aylward highlighted strength in emerging market debt, global REIT, and domestic REIT, noting that non-U.S. institutional business sometimes shows interest in strategies less favored in the U.S. market. Mike Angerthal, CFO, added that the pipeline is diversified across managers and geographies.

Bill Katz asked about the drivers of success in AllianceBernstein's private wealth business and the rate sensitivity of cash balances within that segment.

Answer

Onur Erzan (Global Head of Private Wealth, Alternatives and Distribution) attributed the strong Q3 performance (7%+ annualized net new assets growth) to record advisor productivity and reduced outflows. He stated that the private wealth business has very little sensitivity to rates regarding cash economics, as it represents less than 5% of total revenue, with a locked-in spread that protects against absolute fee level changes.

Bill Katz asked about the economic opportunity within AllianceBernstein's insurance business, specifically comparing it to Carlyle's involvement and inquiring about any delays or drivers behind the Ruby Re sidecar's extended timeline to 2026. He also questioned the credit quality in private credit, potential rate sensitivity, and implications for performance fees into 2026.

Answer

Onur Erzan, Global Head of Private Wealth, Alternatives and Distribution, explained excitement for the insurance asset management business, highlighting FCA REIT as a second sidecar investment with Carlyle and Asian insurers, synergistic with their Asia strategy. He confirmed Ruby Re is performing as planned with no delays. Seth Bernstein, President and CEO, clarified that Ruby Re's funding timing has not changed. Regarding private credit, Seth noted competitive environments, manageable maturities, and positive cash flow, expressing confidence in their position despite isolated credit deteriorations. Tom Simeone, CFO, added that declining rates could impact performance fees.

Bill Katz asked Michael Chae about the interplay between Blackstone's FRE margin outlook and the healthy pipeline for realizations, specifically how compensation is allocated between fee-related earnings and gross realizations.

Answer

Michael Chae, Vice Chairman and Chief Financial Officer, affirmed healthy FRE margin dynamics and expected operating leverage over time. He noted that compensation ratios vary based on the mix and vintages of realizations, and Blackstone maintains flexibility in allocating compensation between FRE and carry.

Bill Katz inquired about the interplay between Blackstone's FRE margin outlook and its healthy pipeline for realizations, specifically regarding compensation allocation between FRE and gross realizations.

Answer

Vice Chairman and CFO Michael Chae stated that FRE margin dynamics remain healthy, expecting continued operating leverage over time. He noted that comp ratios can vary based on realization mix and vintages, but the firm is content with its basic approach and ability to allocate compensation between the two.

Bill Katz asked about Raymond James' strategy for funding future earning asset growth, specifically inquiring if the firm would bring third-party sweep deposits onto the balance sheet or run off parts of the investment securities portfolio. He also sought guidance on non-operating expenses and targeted pre-tax margins for the upcoming year.

Answer

CEO Paul Shoukry confirmed that Raymond James has ample funding capacity, including bringing third-party sweep deposits onto the balance sheet and potentially running down parts of the securities portfolio, leveraging its diversified funding apparatus. Regarding expenses, Paul Shoukry reiterated the existing guidance of generating over 20% adjusted pre-tax margins, which was achieved in the current fiscal year. He noted that updated targets would be provided at the next Analyst Investor Day, emphasizing the firm's commitment to growth and technology investments while maintaining strong margins.

Represented by Robin Holby, Bill Katz asked about the addressable market for the new JABS ETF, the drivers behind improved investment performance, and the client profile and strategy for the firm's tokenized funds.

Answer

CEO Ali Dibadj described the JABS ETF as a client-led innovation, particularly for insurance clients like Guardian, designed to complement the floating-rate JAAA ETF. CFO Roger Thompson attributed the strong one-year performance improvement to a rebound in key US and global equity products. Regarding tokenization, Ali Dibadj explained that the primary clients are on-chain users, such as those holding stablecoins, who are seeking to earn a yield, with the firm aiming to stay ahead in disruptive financial technologies.

A representative for Bill Katz asked about the firm's fee rate dynamics, including the exit rate from Q1, trends in April, and the outlook for the rest of 2025.

Answer

CFO Jen Dardis explained that the Q1 effective fee rate decline was driven by two factors. Approximately 60% of the impact came from persistent structural shifts toward lower-cost vehicles like ETFs and CITs, and strategies like blend target-date funds. The remaining 40% was cyclical, caused by an AUM mix shift away from higher-fee equity assets due to market performance and flows. She noted the cyclical impact was more significant than typical this quarter and advised analyzing the fee rate over a multi-quarter period.

Inquired about the potential fundraising quantum for upcoming vehicles, specifically asking for more detail on the Newbury secondaries platform's traction. He also asked for an update on the retail accredited investor strategy, including products, AUM, and distribution efforts.

Answer

Fundraising momentum is building in flagship Workforce & Affordable Housing and Debt strategies. The Newbury secondaries platform is gaining traction through re-ups and by leveraging Bridge's broader client network, with fundraising expected to continue into 2025. The retail strategy is focused on a single triple net lease product and is expanding distribution channels beyond wirehouses to RIAs and independent broker-dealers.

Bill Katz from Citigroup sought to unpack the fiscal 2020 guidance, asking about the underlying interest rate assumptions for the net interest margin forecast and why the net new asset outlook was not increased.

Answer

CFO Steve Boyle clarified the guidance was based on one rate cut in March but provided sensitivity for further cuts. Regarding net new assets, President & CEO Tim Hockey explained they chose not to adjust the 7-10% range, calling it a conservative approach given it was only two weeks after the commission change, despite strong anecdotal trends.

Bill Katz from Citigroup asked for clarification on commentary about potentially being below the low end on pricing within the trading business. He also sought more detail on expense dynamics, questioning if operating leverage would primarily build in 2020 rather than the second half of the current year.

Answer

President and CEO Tim Hockey confirmed the competitive environment continues to put moderate pressure on commissions through customer-by-customer negotiations, despite stable headline rates. EVP and CFO Steve Boyle clarified that while they have levers to pull, the expense reduction will be a gradual grind, with the bigger impact on 2020 expenses rather than the remainder of the current fiscal year.

Bill Katz inquired about the expected behavior of deposit betas in a flat interest rate environment and questioned the pace of share buybacks during the fourth quarter's stock price decline.

Answer

CFO Steve Boyle stated he would be 'extremely surprised' if pricing on deposits changed in a flat rate environment, seeing rational behavior from customers and competitors. On capital management, Boyle attributed the buyback pacing to accounting and settlement timing of ASR and 10b5-1 plans, reaffirming comfort with their capital levels and guidance.