Private Equity Deployment
Q: How will KKR utilize direct lending vs. syndicated markets in private equity?
A: KKR expects increased private equity deployment in the second half, with a healthy backlog of traditional PE investments. The revival of syndicated debt markets provides flexibility, allowing KKR to choose the best financing solution for each deal. While syndicated markets may reduce private debt’s market share, overall deal volumes should rise, benefiting both private equity deployment and KKR’s private debt business.

Fundraising and LP Demand
Q: What's the outlook on fundraising volume and LP demand across asset classes?
A: The fundraising environment is improving, with strong interest in infrastructure and private credit. KKR has raised $214 billion over the last 2.5 years, with only $14 billion in flagship funds. Private equity fundraising may have bottomed, and activity is picking up as LPs receive more capital back. The oversubscription of KKR's Ascendant strategy indicates positive investor sentiment. Insurance companies remain active allocators to alternatives.

Capital Markets Revenue Outlook
Q: What is the long-term outlook for Capital Markets revenue?
A: KKR's Capital Markets pipeline is robust, potentially the best they've ever seen for the next two quarters. In 2021, they generated approximately $850 million in Capital Markets revenue. With expanded activities across debt, equity, geographies, and third-party clients, KKR believes the business can grow meaningfully from current levels. The partnership with Global Atlantic alone could contribute hundreds of millions of dollars annually.

Net Investment Income and ROE
Q: How will yields improve as KKR deploys GA's excess liquidity?
A: KKR has been operating with elevated liquidity levels, holding roughly $8 billion in cash at quarter-end compared to $4 billion a year ago. As they thoughtfully deploy this excess liquidity into higher-yielding assets, yields are expected to improve. However, investments in assets like core real estate may be dilutive to near-term ROE but are expected to generate meaningful long-term returns. KKR anticipates operating slightly below their long-term ROE range of 14% to 15% in the near term, focusing on long-term growth.

Growth in Carry-Eligible AUM
Q: How has carry-eligible AUM above cost grown, and what's the outlook for realizations?
A: KKR's gross accrued carried interest on the balance sheet stands at approximately $7.1 billion, up from $6 billion two quarters ago. This growth, despite realizing more carry than expected, indicates a healthy outlook for future monetization-related revenue. Over 50% of the private equity portfolio is marked at 1.5x cost or greater, with roughly 30% at 2x cost or greater, reflecting a mature and profitable portfolio poised for future gains.

Retail Distribution and Partnerships
Q: What's the update on K-Series rollout and the Capital Group partnership?
A: KKR's K-Series products have grown to around $11 billion in AUM, up from $3 billion a year ago. Monthly fundraising increased from $500 million at the end of 2023 to $900 million in Q2. KKR expects to expand platform presence and introduce new products, particularly in private BDCs. The partnership with Capital Group aims to create hybrid products targeting the broader mass market beyond accredited investors, starting with credit products in the first half of next year.

Infrastructure Opportunities
Q: How does the partnership with HASI enhance KKR's infrastructure strategy?
A: The partnership with HASI allows KKR to expand in the climate and energy transition space, leveraging their experience investing behind this theme. With infrastructure AUM growing from $15 billion four years ago to $73 billion today, KKR sees significant opportunities in areas like digital infrastructure and renewables. They have invested $5 billion in data infrastructure and view partnerships like HASI as a way to capitalize on thematic investments across the firm.

Realizations Pipeline
Q: What's the outlook for realizations, and what drove Q2 results?
A: KKR has a healthy level of monetizations expected for Q3, with approximately $500 million in monetization-related revenue planned. This includes roughly 60% carry and 40% investment income. In Q2, they exceeded earlier estimates and ended up with over $600 million in monetization-related revenue due to several deals closing within the quarter.

FRE Margins and Capital Markets Impact
Q: How will elevated Capital Markets fees affect FRE margins?
A: Elevated Capital Markets revenue positively impacts FRE margins, as operating expenses are more fixed compared to incremental Capital Markets revenue. KKR believes they can operate sustainably with FRE margins in the mid-60% range across most market environments. Successful scaling of revenues and fees above headcount growth and operating complexity could lead to further margin expansion.

Management Fee Dynamics
Q: What are the expected base management fee dynamics with Infra V and the next PE fund?
A: KKR is turning on Infra V management fees in Q3 as they begin deployment. For the next flagship North America private equity fund, they are nearing the end of the investment period for the current fund but still have time to go. Fundraising for the new fund is underway, but specific target sizes have not been disclosed.

Secondaries Market Opportunity
Q: Is KKR considering entering the secondaries market to address individual investors?
A: While recognizing the opportunity in the secondaries market, KKR is not currently focusing on this area. They are concentrating on existing asset classes and believe there's ample opportunity without entering the secondaries market at this time.