KKR’s Private Markets to Experience Flows, Subdued Sequential Growth
KKR’s private markets in 2017
KKR’s (KKR) Private Market division has attracted flows toward fee-paying assets under management (or FPAUM) from $101.5 billion in 4Q16 to $107.1 billion in 1Q17. The division saw Asian Fund III entering during the investment period. The higher inflows and market appreciation were partially offset by distributions made to limited partners.
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KKR’s major competitors include Blackstone Group (BX), Carlyle Group (CG), and Apollo Global Management (APO). These companies’ private portfolios have witnessed strong performance in recent quarters. Alternative asset managers (XLF) have seen record performance over the past few quarters across their divisions, reflecting strong macro fundamentals.
As far as KKR’s holdings by asset classes are concerned, private equity holdings constitute 41% of the total investments. KKR’s private markets’ FPAUM saw a 23% year-over-year increase. In 1Q17, the division made investments of $4.5 billion, primarily from private equity funds in the US and Europe.
KKR’s Private Market segment saw an increase in economic net income (or ENI) to $549.9 million in 1Q17 compared to $339.2 million in 4Q16. The growth was mainly due to a rise in broad markets and private equity holdings.
2Q17: Expected performance
KKR & Co. decided to invest $150 million in Pandora Media, which is expected to close in 2Q17. This transaction would result in increasing revenues for KKR’s Private Markets segment. L&T decided to unload its valves business, which could bring in 30 billion–40 billion Indian rupees for three private equity players, including KKR.
The company’s major investments include First Data Corporation (FDC), which reported EPS of $0.46 in the last quarter. FDC’s EPS is expected to fall in the June quarter to $0.40. FDC is expected to beat the market performance due to strong valuation multiples. FDC’s return on equity on a TTM (trailing-12-month) basis stands at ~16.6%. KKR’s other investment include GoDaddy (GDDY) and HCA Holdings (HCA).