KKR sees 7.8% asset gain spurred by new capital raised

KKR & Co. on Friday reported assets under management of $66.3 billion as of Sept. 30, up 7.8% from three months earlier and 12.9% from a year earlier, according to the alternative investment firm's quarterly report.

The asset increase in the quarter was primarily because of new capital raised, which was partiallyoffset by a reduction in fees as the $17.6 billion KKR 2006 Fund entered its post-investment period.

During the quarter, KKR North America Fund XI, which has raised $6.2 billion to date, became the firm's primary North American private equity investment vehicle. That fund hasn't yet had a final close and had no fundraising target, Kristi Huller, spokeswoman, said in an e-mailed response to questions.

KKR's asset total does not include the $8.1 billion managed by hedge funds-of-funds manager Prisma Capital Partners, which it acquired Oct. 1.

During an earnings call Friday, Scott Nutall, member and head of KKR's global capital and asset management group, said that so far this year, the firm has raised $10 billion in North America and Asia. In all, KKR has $16 billion in committed but uninvested capital for its private equity business.

Net income under GAAP was $127.4 million for the latest quarter and $464.1 million for the nine months ended Sept. 30. By comparison, KKR had a net loss of $243.4 million in the third quarter 2011 and a net loss of $44.2 million for the first nine months of last year.

Total investment income in the third quarter was $420.5 million — $179.6 million net carried interest and $240.9 million other investment income. By comparison, total investment income was $477.6 million in the second quarter, of which $137.5 million was net carried interest and $340.1 million was from other investment income.

KKR earned management fees of $126.5 million in the quarter ended Sept. 30 and incentive fees of $17.8 million. In the previous quarter, management fees totaled $129.6 million and incentive fees, $4 million. Most of the management fees in both quarters were from KKR's private markets business.

KKR's real estate team made three property investments during the third quarter, which were funded by KKR's North American private equity fund, balance sheet capital and KKR Financial Holdings, a public vehicle that makes debt investments.

During the call, Mr. Nutall said that “building out our non-private equity businesses remains a priority for the firm, and our real estate franchise is a good example of this.”