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. "