KKR & Co. Inc. (KKR) Q3 2025 Earnings Call Transcript
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Overview
The earnings call highlights strong financial performance with record fundraising and investment, significant embedded gains, and a robust insurance segment. The Q&A section supports this with positive growth prospects in Asia, strong ROE projections, and confidence in achieving future targets. Despite some uncertainties in management responses, the overall sentiment remains positive, supported by optimistic guidance and strategic growth plans.
Key Financial Performance
Fee Related Earnings $1.15 per share, a record figure for the company.
Total Operating Earnings $1.55 per share, 17% higher than the previous quarter.
Adjusted Net Income $1.41 per share, an 8% increase year-over-year.
Management Fees $1.1 billion, up 19% year-over-year, driven by fundraising success and capital deployment. Excluding catch-up fees, growth was 16%.
Fee-Related Performance Revenues $73 million, up nearly 30% year-over-year, driven by performance and scaling at K-INFRA vehicle.
Insurance Segment Operating Earnings $305 million, with a $41 million benefit from GA's actuarial assumption review process.
Strategic Holdings Operating Earnings $58 million, significantly ahead year-to-date compared to the previous year.
Realized Performance and Investment Income $935 million within Asset Management, with $70 million of net realized investment income in Strategic Holdings.
Capital Raised $43 billion in Q3, the second-highest fundraising quarter in company history. Organic new capital raised across the credit platform comprised 60% of this.
Capital Invested $26 billion in Q3, with $85 billion invested over the last 12 months, up 12% compared to the prior period.
Embedded Gains $17 billion of embedded gains on the balance sheet, at or near record levels.
Total Insurance Economics $1.4 billion year-to-date, net of compensation, up 16% compared to the same period last year.
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Operating Highlights
Capital Raising: Raised $43 billion in Q3, the second-highest fundraising quarter in KKR's history. Organic new capital raised across the credit platform comprised 60% of the total, with strong contributions from asset-based finance and insurance businesses. Private equity and real asset business lines raised $16 billion, and private wealth efforts brought in $4.1 billion, up 80% year-over-year.
Global Expansion: Aggressively expanding outside the U.S. to align with global investment management footprint. Strategic partnerships, such as with Japan Post Insurance, contributed significantly to inflows.
Management Fees: Management fees grew 19% year-over-year to $1.1 billion, driven by fundraising success and capital deployment. Excluding catch-up fees, growth was 16%.
Insurance Business Evolution: Focused on originating longer-duration liabilities and assets, expanding globally, and raising third-party capital through Ivy sidecar strategy. Total insurance-related economics increased 16% year-over-year to $1.4 billion net of compensation.
Investment Deployment: Invested $26 billion in Q3 across geographies and asset classes. Over the last 12 months, $85 billion was invested, up 12% year-over-year.
Private Wealth Growth: K-Series vehicles now manage $32 billion, up from $15 billion a year ago. Strategic partnership with Capital Group launched new public-private credit solutions and filed for a public-private equity solution.
Monetization Strategy: Realized carry is up over 50% year-to-date, with $800 million in monetizations expected over the next two quarters. Unrealized carry balance has grown 14% year-to-date.
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Risk or Challenges
Asia II Fund Underperformance: The second Asia private equity fund has underperformed, raised 12-13 years ago, and stopped investing 8 years ago. It is expected to roughly return its cost, leading to a $350 million clawback charge in Q4. This impacts net realized performance income and ANI per share.
Private Equity Deployment Risks: Some firms in the private equity industry deployed capital too aggressively in 2021-2022, leading to potential overexposure to high valuations before interest rate hikes. This could result in underperformance and delayed monetizations.
Private Credit Default Risks: Default rates in private credit are ticking up, signaling a return to a more normal default environment. However, this could pose risks to performance if defaults increase further.
Insurance Segment Reporting Challenges: The insurance segment's operating earnings do not fully capture the total economics of the business. The conservative cash-based reporting approach understates profitability, potentially leading to misinterpretation of the segment's performance.
Monetization Environment Uncertainty: While the monetization environment is currently constructive, any deterioration could delay monetization activities, impacting earnings in 2026 and beyond.
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Guidance & Outlook
2026 Financial Guidance: The company remains confident in achieving its 2026 guidance of $4.50+ in FRE per share and $7-$8 in after-tax ANI per share. This is supported by strong fundraising momentum, management fee growth, and a constructive monetization environment. However, if the monetization environment deteriorates, some activities may be delayed, potentially impacting 2026 earnings but benefiting 2027 and beyond.
Capital Raising Outlook: 2025 is on track to be a record year for capital raising, with $55 billion raised year-to-date in the credit business, surpassing the $56 billion raised in all of 2024. The company expects continued strong momentum in capital raising across various platforms, including private equity, real assets, and private wealth.
Insurance Business Evolution: The company is evolving its insurance business to originate longer-duration liabilities and assets, expand globally, and raise more third-party capital. These changes are expected to enhance competitive advantage and generate higher, more durable returns over the long term.
Private Wealth Growth: The K-Series suite of products has grown significantly, with $32 billion in assets under management as of November 1, 2025, compared to $15 billion a year ago. The company expects continued strong performance, deployment, and capital raising activity in this segment.
Monetization Pipeline: The company has a strong monetization pipeline, with approximately $800 million expected over the next two quarters from transactions already closed or announced. The monetization environment is constructive and expected to remain so into 2026.
Embedded Gains and Future Monetizations: The company has $17 billion in embedded gains across the firm, the second-highest level in its history. This provides a strong foundation for future monetizations and earnings growth.
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Shareholder Return Plan
Net Dividends: Tracking nicely towards our expected $350-plus million of net dividends for 2026.
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Key Q&A
Q:Can you summarize the international perspective on Asia and its impact on KKR's growth?
A:Investor demand for Asia is increasing rapidly across all asset classes. KKR has a strong local presence in Asia with 9 offices and over 600 people. Their AUM in Asia has grown from $12 billion during the Asia II fund to over $80 billion now. Asia is expected to grow faster than the rest of KKR due to demographic tailwinds and capital market development.
Q:What is the normalized ROE trajectory for the insurance business and when will it be achieved?
A:The normalized ROE trajectory for the insurance business is expected to exceed 20% over time. The $200 million of annual run rate accrued income will start hitting the P&L around 2027-2028. KKR believes it can achieve $7+ ANI next year, depending on the monetization environment.
Q:What are the building blocks for achieving the $450+ FRE target for 2026?
A:The building blocks include strong fundraising (tracking ahead of the $300+ billion target for 2024-2026), significant outcomes from the Capital Markets business, scaling fee-related performance revenue, and maintaining operating costs below revenue growth. KKR feels confident about achieving the FRE target.
Q:What is the all-in ROE potential for the insurance business?
A:The all-in ROE potential is expected to move from high teens to over 20% as the alts portfolio matures and third-party capital is leveraged. KKR has $6 billion of dry powder that could turn into $60+ billion of fee-paying AUM, contributing to management fees and ROE growth.
Q:How does KKR's ownership of Global Atlantic enhance its partnership with insurance clients?
A:KKR's ownership of Global Atlantic allows for deeper engagement with insurance clients, sharing deal flow, and structuring investments collaboratively. This has led to $80-$85 billion of third-party insurance AUM since the acquisition, with increasing growth and stronger relationships globally.
Q:What is the outlook for KKR's Capital Markets business?
A:KKR's Capital Markets business is expected to grow alongside the firm's overall scaling. The business has shown resilience, generating $600 million annually even during market downturns, and is well-positioned to take advantage of mid-market PE deployment and opportunities with Global Atlantic.
Q:What is the impact of recent credit inflows on KKR's business?
A:KKR had a record quarter with $27 billion in credit liquid strategies, including $15 billion from Global Atlantic. The private IG and third-party ABF mandates also grew significantly, with total AUM in the ABF franchise reaching $84 billion, up 30% year-over-year.
Q:How does KKR view the current M&A and IPO environment?
A:KKR sees active dialogues with strategic buyers, financial sponsors, and opportunities in the IPO market. The firm has visibility on $1 billion of monetization over the next couple of quarters, indicating a constructive environment for exits and capital deployment.
Q:What is the average multiple on invested capital for KKR's carried interest eligible AUM?
A:While specific data was not provided, KKR's portfolio is described as mature with healthy multiples. Approximately 30% of the private equity portfolio is marked at 2x or higher, indicating strong embedded gains.
Q:What is the baseline for KKR's Capital Markets transaction fees?
A:KKR's Capital Markets business generated $328 million in transaction fees in Q3. While specific guidance is not provided, the business is expected to grow as M&A activity increases and mid-market PE deployment resumes.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the average multiple on invested capital for carried interest eligible AUM, stating that the data could be pulled later. Additionally, while discussing the Capital Markets business, no explicit guidance was given for future transaction fees, leaving some uncertainty about the baseline for growth.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ANI
Asia II
Asia III
Asia IV
Asia equity
Asset segment
GA fee
II year
Insurance
Ivy vehicle
PL
Page
Strategic Holdings
acquisition
approach investment
balance
behalf party
capital Ivy
capital raising
carry
cash outcome
charge
compensation
credit platform
economics insurance
economics page
figure
fund Asia
history
insurance client
line
momentum asset
net
question topic
record level
release
reminder
reporting
success
tax
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Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
