KKR’s cash earnings from items such as management fees, carried interest and portfolio exits dropped 65 percent to $168.7 million in the first quarter ended 31 March, from $487.7 million in the previous quarter.
The private equity giant cited market volatility in describing the quarterly depreciation in its PE portfolio and investments on its balance sheet, which dropped 0.9 percent and 5.4 percent in the first quarter, respectively.
KKR had a performance loss in private markets of $101.2 million in the first quarter ended 31 March, down from a gain of $205.3 million in the previous quarter and $429.4 million in the first quarter a year ago. The performance loss included realised carried interest of $93.5 million and unrealised carried interest of negative $194.7 million in the private markets segment.
Given the downturn in global capital markets during this quarter, KKR was hit hard through its exposure to companies it took public and kept in its ownership. The biggest exposure was to First Data Corporation, which represents 13 percent of KKR’s total investments. The fair value of KKR’s exposure to First Data slid 19 percent to $1.03 billion this quarter, from $1.27 billion in the fourth quarter.
The firm’s total income from management, monitoring and transaction fees in private markets also fell, to $144.6 million from $205.3 million in the fourth quarter 2015 and from $183.8 million in the same quarter a year ago.
The fair value of its private equity investments, including co-investments, was $3.87 billion as of 31 March, down 5 percent from $4.06 billion in the previous quarter and 3 percent from $3.98 in the same quarter of 2015.
Its 11 private equity funds with active investments, including its European Fund IV and North America Fund XI, and co-investment vehicles, together stood at a fair value of $37.34 billion. This marked an increase of 0.2 percent from $37.27 billion in the previous quarter and a decline of 7 percent from $40.2 billion in Q1 2015.
Private equity accounted for almost half of KKR’s assets, at 47 percent, up from 45 percent in the previous quarter and 40 percent in the year-ago period.
Meanwhile, its assets under management in private markets rose 7.6 percent to $71.06 billion from $66.03 billion in the previous quarter and 9 percent from $65.22 billion a year ago. This increase was led by new capital raised in its private equity, credit and hedge fund activities, including the KKR Special Situations II fund, which closed on $3.35 billion earlier this month, as reported by Private Debt Investor.
KKR’s economic net loss for the quarter was $553 million, or minus $0.65 per share, down from a net income of $70.5 million in the previous quarter and $525.9 million in the first quarter of 2015. In the afternoon following the results, KKR’s shares were down 3 percent, or 46 cents, at $14.48, from the previous close.