KKR profit leaps as private equity deals flourish

By Isla Binnie and Arasu Kannagi ‌Basil

NEW YORK, July ​30 (Reuters) - KKR's ​second-quarter profit beat market expectations on Thursday, as it raked in higher fees from managing a growing stack of client money and cashed in on a bumper ‌run of asset sales.

Many private equity firms have struggled in recent years, as interest ⁠rates rose, to maintain their traditional model of buying companies, extracting savings and selling them profitably.

But KKR, which made its ‌name as a buyout pioneer and ‌expanded into other areas including credit, closed a roster of transactions in the second quarter, including the final sale of Japanese chip company Kokusai Electric and its stake in software company ​OneStream.

Evercore analyst Glenn Schorr said the sales were "further evidence of the bifurcation in the sponsor market between large- and mid-cap, with bigger deals getting done more readily".

"The second quarter was the ⁠largest monetization quarter in our history. We have tremendous confidence in our forward monetization pipeline," finance chief Robert Lewin said.

Fees from managing money, ​which KKR earns regardless of how investments perform, jumped 25.5% to $1.25 billion. Adjusted net income of $1.63 per share comfortably beat a $1.41 estimate from an LSEG ​analyst poll.

Co-CEO Scott Nuttall said AI infrastructure and the related ‌real estate and credit deals were a huge opportunity. "We're focused not so much on investing in what's going to be the next chip company or ⁠the next LLM," he said, referring to large language models.

Shares fell 1.7%. They had shed 22% so far this year as of the last close, in line with other alternative asset managers.

Inflows of $34 billion was driven by the ⁠real assets business that houses KKR's infrastructure strategies. Private equity brought in $9.56 billion.

A total $9.1 billion to credit was a ​roughly 36% slump from a year ago. But Nuttall said he expects a record year for fundraising in credit, which remains the biggest chunk of its $796 billion under management.

Net realized performance income, which reflects profits from divestments ‌and is known as carried interest, almost doubled from the previous year to $211.9 million.

The traditional private equity portfolio returned a gross 4%, while composites for ‌leveraged credit and private credit showed returns of 2% and 1%, respectively, having been negative in the previous quarter.

In ⁠June, KKR agreed to buy French ‌power firm EDF'S North American renewable ​business for $4.2 billion, aiming to capitalize on rising power demand for artificial intelligence.

(Reporting by Isla Binnie in New York and Arasu Kannagi Basil in Bengaluru; Editing by ‌Arun Koyyur)

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