KKR's Q3 2025 Earnings Call Unveils Contradictions on Asia AUM, Capital Markets, Insurance Strategy, and Investment Outlook

Date of Call: None provided

Financials Results

• Revenue: $1.1B management fees (up 19% YOY; +16% YOY ex catch-up); total fee-related earnings $1.0B
• EPS: Adjusted net income $1.41 per share, up 8% YOY; total operating earnings $1.55 per share (record, up 17% sequentially); fee-related earnings $1.15 per share (record)

Guidance:

• 2026 FRE target: $4.50+ per share; management reaffirmed this unreservedly.
• 2026 ANI target: $7+ per share (prior framework $7–$8); management remains confident but notes outcomes depend on monetization activity.
• One-time Q4 Asia II clawback will reduce ANI by about $0.18 per share.
• Fundraising goal of $300+bn (2024–26) is tracking >70% complete and underpins management-fee growth.

Business Commentary:

* Strong Financial Performance: - KKR reported fee-related earnings of $1.15 per share, total operating earnings of $1.55 per share, and adjusted net income of $1.41 per share for Q3 2025, marking the highest in their history as a public company.

- The growth was driven by strong demand across all asset classes, record fundraising, and successful monetization of the portfolio.

• Fundraising and Capital Deployment:
• KKR raised $43 billion in capital for Q3 2025, the second-highest quarter in their history, with significant contributions from insurance and credit platforms.

• The strong fundraising was attributed to the aggressive expansion of the insurance business globally and increased capital deployment across asset classes.

• Increasing Monetization and Embedded Gains:

• The company reported realized performance and investment income totaling $935 million, with nearly half from private equity in Asia.

• This was supported by the company's disciplined approach to investment pacing and portfolio construction, resulting in significant embedded gains across their portfolios.

• Impact of Insurance Business Expansion:

• Total economics from the insurance business, including management fees and capital markets fees, reached $1.4 billion net of compensation in Q3 2025, up 16% year-on-year.

• This growth was driven by an increase in management fees due to expanding GA's assets, third-party sidecar business, and capital markets fees.

• Strategic Partnerships and Market Expansion:

• KKR's private wealth efforts through K-Series products raised $4.1 billion in Q3, a 20% increase from the previous quarter.
• The strong performance in private wealth is attributed to the strategic partnership with Capital Group and the successful launch of new private credit solutions.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management called Q3 "strong" with record fee-related earnings ($1.15/sh) and record 12-month metrics; management reiterated an "unreserved yes" on 2026 FRE and confidence in achieving $7+ ANI, cited fundraising momentum ($43B in Q3) and $17B of embedded gains as signs of strength.

Q&A:

• Question from Glenn Schorr (Evercore ISI): Can you summarize investor demand outside the U.S., especially in Asia, and how that contributes to KKR's growth and differentiation?
  Response: Demand across Asia and Europe is rising across asset classes; KKR has deep local presence (9 offices, 600+ staff), Asia AUM >$80B, and management expects Asia to grow faster than the firm average and to be a meaningful differentiator.

• Question from William Katz (TD Cowen): What is a normalized ROE trajectory for the insurance business and can expenses mitigate downside to ANI if monetizations falter?
  Response: No single explicit ROE target beyond aiming to scale LTM insurance economics (~$1.8B); ~$200M annual accrued income should begin hitting P&L ~2027–28; management remains confident in $7+ ANI for 2026 despite cash/accrual headwinds.

• Question from Alexander Blostein (Goldman Sachs): Can you walk through the FRE $450+ building blocks given current fundraising and operating leverage dynamics?
  Response: FRE upside driven by fundraising (tracking well toward $300B+ 2024–26 target, >70% achieved), growing capital markets, rising fee-related performance revenue and operating leverage; management expects these components to support the $450+ FRE ambition.

• Question from Steven Chubak (Wolfe Research): What is a reasonable all-in ROE for the insurance business as upside sources mature?
  Response: Management expects to move all‑in insurance ROE from the high teens to north of 20% over time; primary drivers are alts maturing (cash outcomes) and scaling third‑party capital ( ~$6B → $60B+ fee AUM).

• Question from Brian Bedell (Deutsche Bank): On Slide 20, is the capital markets contribution net of FRE comp and how large can KCM expand from the GA relationship?
  Response: Yes—Slide 20 KCM figures are net of the 17.5% fee comp; management believes capital markets tied to GA origination and distribution could add hundreds of millions of dollars annually over the next few years.

• Question from Benjamin Budish (Barclays Bank): Any modeling details on fee rates this quarter—PE and credit impacts and how to think about near quarters?
  Response: Management fees up 19% YOY (16% ex catch-up); PE fee step‑downs (e.g., Americas XII) are formulaic and not indicative of structural fee erosion; strong credit inflows (including FABNs and third‑party ABF mandates) should translate into P&L over upcoming quarters.

• Question from Michael Cyprys (Morgan Stanley): How do the changes to the insurance business make KKR a better partner to insurers over 3–5 years?
  Response: Owning GA improves the quality of client dialogue and allows KKR to co‑originate insurer‑specific transactions, structure solutions alongside clients, and has driven meaningful growth in third‑party insurance AUM, strengthening partnerships.

• Question from John Barnidge (Piper Sandler): Is partnering with life insurers on product creation an opportunity to expand relationships and distribution globally?
  Response: Yes—significant global opportunity across life and P&C insurers for product and transaction-based partnerships; KKR has formed a dedicated team to coordinate insurer relationships and sees reinsurance as a notable opportunity.

• Question from Patrick Davitt (Autonomous Research): What's driving apparent disconnect in exit activity and will exit channel mix (IPOs vs strategic buyers) differ this cycle?
  Response: From KKR's perspective exit activity is broad (strategics, IPOs, recaps); management has ~$800M (potentially ~$1B) of near-term monetization visibility and views the environment as constructive with dispersion across managers rather than a uniform slowdown.

• Question from Brian Mckenna (Citizens Bank): For the $270B of carried-interest-eligible AUM above cost, what's the average multiple on invested capital and average investment vintage?
  Response: No specific average multiple/maturity data on hand, but the portfolio is relatively mature; ~30% of private equity remaining fair value is marked at 2x+; management will provide detailed breakdowns later.

• Question from Craig Siegenthaler (Bank of America): Is the Q3 capital markets fee run‑rate (≈$328M total transaction fees, ~$278M KCM) a baseline to grow into 2026 or were there lumpy items?
  Response: While quarter-to-quarter lumpiness exists, management views the capital markets business trajectory as durable and growing—it produced ~ $600M revenues in 2022/23 and ~ $1B in 2024 (2025 won't match 2024 fully), and management expects continued growth and share gains.

Contradiction Point 1

Asia AUM Growth and Strategy

It involves strategic direction and growth expectations in the Asian market, which is crucial for KKR's global expansion and investor confidence.

Can you summarize the international perspective in Asia, discuss investor demand for international allocations, and explain how much this can contribute to KKR's growth rate? - Glenn Schorr(Evercore ISI)

20251107-2025 Q3: Asia AUM is over $80 billion, up from $12 billion when Asia II fund was raised. - Scott Nuttall(CEO)

How is KKR handling institutional fundraising amid market volatility, and what are current fundraising targets? - Alexander Blostein(Goldman Sachs Group, Inc., Research Division)

2025Q2: The Asia business, as a business, is now over $70 billion. - Scott Nuttall(CEO)

Contradiction Point 2

Capital Markets Performance and Expectations

It involves expectations and performance in capital markets, which significantly impacts KKR's financial results and investor confidence.

Is $328 million in transaction fees a solid baseline for 2026 growth? - Craig Siegenthaler(Bank of America)

20251107-2025 Q3: We're pleased with capital markets performance, especially when markets were down. We expect continued growth alongside KKR's scale. The $328 million figure is a strong baseline, and we are well-positioned for future growth. - Robert Lewin(CFO)

How is K-FIT differentiating in the private wealth market, and what is the progress and strategy for asset-based finance? - Craig Siegenthaler(Bank of America)

2025Q2: The public market, capital markets have really continued to be very strong across our platform. - Craig Larson(CIO)

Contradiction Point 3

Insurance Business Growth and Strategy

It involves strategic direction and growth expectations for KKR's insurance business, which is a significant component of its operations.

What is the normalized ROE level for the insurance business and by when? How will expenses be managed to address the ANI differential in 2026? - William Katz(TD Cowen)

20251107-2025 Q3: Our goal is to increase total insurance economics from $1.4 billion net to $1.8 billion without impacting the total P&L. - Robert Lewin(CFO)

Can you discuss Global Atlantic's performance and its strategy for liability elongation and alternatives allocation? - Ben Budish(Barclays Bank PLC, Research Division)

2025Q2: Total P&L grew 24% and net operating income grew 48%. - Robert Lewin(CFO)

Contradiction Point 4

Asia AUM Growth Trajectory

It involves differing perspectives on the growth of KKR's Assets Under Management (AUM) in Asia, which is a key strategic focus for the company and crucial for investors to assess future growth.

How does the international perspective on Asia impact investor demand for allocating capital outside the U.S., and how much could this contribute to KKR's growth rate? - Glenn Schorr(Evercore ISI)

20251107-2025 Q3: Asia AUM is over $80 billion, up from $12 billion when Asia II fund was raised. - Scott Nuttall(CEO)

How does KKR view the impact of the trade war on its Asia strategy, fundraising, and investment efforts? - Craig Siegenthaler(Bank of America)

2025Q1: At end of 2019, our AUM in Asia was $21 billion, 90% in private equity. By Q1 '25, it reached $70 billion, with private equity below 50%. - Craig Larson(CIO)

Contradiction Point 5

Investment Outlook and Market Conditions

It involves differing perspectives on the investment outlook and market conditions, which are crucial for investors to understand the company's strategic direction and market expectations.

How does investor demand for international allocations outside the U.S. impact KKR's growth rate, and what role does Asia play in this perspective? - Glenn Schorr(Evercore ISI)

20251107-2025 Q3: Our view remains unchanged, expecting an improved M&A environment and increased transaction activity in 2025. We expect volatility to create opportunities rather than hindrances. - Scott Nuttall(CEO)

Can you discuss the flat QoQ performance in traditional PE and opportunities in public-to-private transactions? - Michael Brown(Wells Fargo)

2024Q4: We're having active dialogues with both strategic buyers and financial sponsors. The market is broad-based, with opportunities for IPOs, recaps, and refis. - Scott Nuttall(CEO)