KKR & Co. earnings fell 26% during the first quarter from a year earlier as a dealmaking drought continued to weigh on the alternative asset manager.
(Bloomberg) — KKR & Co. earnings fell 26% during the first quarter from a year earlier as a dealmaking drought continued to weigh on the alternative asset manager.
The firm reported $719.3 million in distributable earnings, or 81 cents a share, during the quarter ended March 31, according to a Monday statement. That beat the 74-cent average estimate of 15 analysts surveyed by Bloomberg.
Shares of KKR fell 4.3% to $49.31 at 4 p.m. in New York.
Fee-related earnings dropped 9% to $549 million, driven by a decline in its capital markets business.
New York-based KKR took in $12 billion of new capital in the quarter, led by $9 billion gathered for its credit and liquid strategies. Assets under management grew 6% to $510 billion.
“Over the last 12 months, 95% of the new capital entrusted to us has been outside of our traditional private equity funds, reflecting our continued diversification,” Co-Chief Executive Officers Joe Bae and Scott Nuttall said in the statement.
In an era of ultra-low interest rates prior to last year, private equity grew rapidly as pensions and endowments scouted around for alternative investments with higher returns. More recently, institutional investors have hit the limits of what they can invest in private equity — and higher interest rates have put the brakes on borrowing that greases deals.
On Thursday, Carlyle Group Inc.’s shares tumbled the most in three years after the firm reported disappointing earnings and told investors its next private equity vehicle would be smaller than previous funds.
While KKR’s traditional private equity portfolio grew 2% during the quarter, it fell 9% over the past 12 months as the firm marked down the value of investments. Its opportunistic real estate portfolio fell 3% during the quarter and 9% over the past year. Infrastructure assets gained 7% during the period and 9% over the past year.
Realized investment income from selling assets fell 43% to $198 million and realized performance income, or carried interest, fell 71% to $175.4 million.
Uncalled commitments — money pledged by investors — declined 7% year-over-year to $106 billion as investing outpaced fundraising. KKR invested $10 billion during the quarter, about half of which the firm deployed in infrastructure and real estate.
KKR’s shares have gained about 3.3% over the past year.
(Updates share price in third paragraph)
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