By Pritam Biswas and Arasu Kannagi Basil
(Reuters) -KKR & Co’s fourth-quarter assets under management fell short of expectations on Tuesday, dampening the optimism around strength in its capital markets business and sending the company’s shares to a two-week low.
New York-based KKR’s assets under management (AUM) jumped 15% to $638 billion in the quarter, but missed the average analyst estimate of $643.4 billion, according to data compiled by LSEG.
The results highlight the challenge of navigating higher growth expectations even as an anticipated business-friendly regulatory environment under the Trump administration has improved the outlook for deals and exits.
Rival Apollo Global Management’s AUM also missed Wall Street expectations.
KKR’s fee-related earnings (FRE) jumped 25% to $843 million in the quarter, but also missed expectations of $852.8 million.
The stock may also see some pullback, given that it has been the best performer among its peers over the past year, Wolfe Research analyst Steven Chubak said.
KKR’s shares fell 8.5% on Tuesday. They had jumped 78.5% in 2024.
One of the world’s largest alternative asset managers, KKR has set a target of surpassing $1 trillion in assets in the next five years.
“This (stock) action today is likely a moment where simply the rate of growth may be slowing and some profit taking as well,” said Brian Mulberry, client portfolio manager at Zacks Investment Management.
In a bright spot, KKR’s capital markets business recorded $270 million in transaction fees in the fourth quarter, driven primarily by private equity and the infrastructure sector.
For the full year, the business generated $1 billion in revenue for the first time.
Adjusted net income surged 33% to $1.19 billion, or $1.32 per share in the quarter, beating estimates of $1.28.
KKR’s infrastructure funds gained 2%, opportunistic real estate funds rose 1%, while the private equity portfolio was flat in the fourth quarter.
PRIVATE EQUITY BETS
KKR on Tuesday raised the earnings forecast from its strategic holdings unit, which houses long-term private equity investments, and said it will boost stakes in USI Insurance Services, 1-800 Contacts and Heartland Dental by about $1.1 billion overall.
It now expects $350 million-plus in 2026 and $1.1 billion-plus by 2030 in operating earnings from the unit.
KKR raised $27 billion of new capital in the reported quarter and deployed $23 billion in investments.
In the past few months, KKR has announced a series of deals including the acquisition of a 25% stake in Italian energy group Eni’s biofuel business Enilive for 2.94 billion euros.
The asset manager has also been involved in an extended bidding war with private equity firm Bain Capital over Japan’s Fuji Soft. It sweetened its offer for Fuji Soft on Tuesday.
KKR also trimmed its stake in financial software maker OneStream in November through a secondary offering.
(Reporting by Arasu Kannagi Basil and Pritam Biswas in Bengaluru; Editing by Shinjini Ganguli and Shounak Dasgupta)
