KKR(US:KKR)2022-02-27 16:00Investment Overview - KKR has completed over 650 private equity investments with a total transaction value exceeding $675 billion as of December 31, 2021[22]. - Approximately 90% of KKR's assets under management (AUM) consists of capital that is not subject to redemption for at least 8 years from inception, referred to as perpetual capital[30]. - KKR and its employees have approximately $26.9 billion invested in or committed to its own funds and portfolio companies, including $11.1 billion funded from its balance sheet[31]. - The firm aims to generate attractive investment returns through a patient and disciplined investment approach, employing world-class people[21]. - KKR's balance sheet serves as a significant source of capital for business growth and expansion, aligning interests with fund investors[22]. - The firm operates in two segments: asset management and insurance, with the latter beginning in the first quarter of 2021[27]. - The company focuses on long-term appreciation through controlling ownership or strategic minority positions in companies[32]. - The firm has expanded its investment strategies from traditional private equity to include leveraged credit, infrastructure, energy, and real estate[22]. Assets Under Management (AUM) - As of December 31, 2021, the Private Markets business line had $257.0 billion in Assets Under Management (AUM)[32]. - The AUM consisted of $153.3 billion in private equity, $83.3 billion in real assets, and $20.4 billion in other related strategies[32]. - The growth in AUM from 2005 to 2021 shows a significant increase from $19.7 billion to $257.0 billion[35]. - The AUM growth chart indicates a steady increase over the years, highlighting the company's expanding market presence[34]. - The definition of AUM was amended in 2015 to include KKR's pro rata portion of AUM managed by strategic partners and capital commitments eligible for fees or carried interest[36]. Investment Performance - From inception in 1976 to December 31, 2021, the investment funds generated a cumulative gross IRR of 25.6%[41]. - The S&P 500 Index achieved a gross IRR of 12.1% over the same period, while the MSCI World Index achieved 9.5%[41]. - Total investments amount to $221.029 billion, with a gross IRR of 25.6% and a net IRR of 18.9%[42]. - Legacy funds have a total invested capital of $16.475 billion, generating a total value of $50.269 billion, resulting in a gross IRR of 26.1%[42]. - The 1984 Fund has a commitment of $1 billion and a total value of $5.964 billion, achieving a gross IRR of 34.5%[42]. - The 1996 Fund shows a commitment of $6.012 billion with a total value of $12.477 billion, yielding a gross IRR of 18.0%[42]. - The Americas Fund XII has a commitment of $13.5 billion, with a total value of $30.784 billion, reflecting a gross IRR of 50.1%[42]. Private Equity Funds - KKR's private equity funds typically have a finite life of 10 to 12 years, with investment periods lasting up to six years[59]. - The general partner of KKR's private equity funds is entitled to a carried interest of 20% of net profits realized by limited partners, subject to a performance hurdle of 7% compounded annually[60]. - KKR has raised over 30 private equity funds, leveraging a global network and industry knowledge to attract world-class management teams[44]. - KKR's core investments strategy targets lower-risk investments with longer holding periods, focusing on stability and lower leverage compared to traditional private equity investments[47]. Global Atlantic Overview - Global Atlantic, acquired on February 1, 2021, serves approximately three million policyholders and offers a range of retirement and life insurance products[23]. - KKR owns a 61.5% economic interest in Global Atlantic, which operates as a separate business with its existing brands and management team[117]. - Global Atlantic generated $7.5 billion in sales for the year ended December 31, 2021, with total retirement products sales amounting to $7,267 million[120][130]. - Global Atlantic's investment portfolio as of December 31, 2021, had a carrying value of $125.7 billion, with fixed maturity securities making up 56.1% of the total[143]. Risk Factors - The company warns that difficult market conditions could negatively impact net income and cash flow[41]. - The report includes risk factors related to business and asset management that could affect financial prospects[41]. - Market conditions may lead to declines in equity, debt, and commodity markets, potentially causing write-downs of investments to as low as 67% of original cost during downturns[211]. - Unfavorable market conditions may reduce opportunities for the company and its funds to make and exit investments, leading to lower-than-expected returns[212]. - Changes in tax laws and regulatory restrictions may hinder the ability to find suitable investments or secure financing on attractive terms[212]. Regulatory Environment - Global Atlantic's U.S. insurance subsidiaries are regulated under U.S. federal and state laws, with primary regulators located in their state of domicile[183]. - The subsidiaries must prepare financial statements on regulatory capital in accordance with statutory financial accounting and report on risk management and corporate governance[184]. - The Bermuda Monetary Authority regulates Global Atlantic's subsidiaries in Bermuda, imposing solvency, capital, and liquidity standards[194]. - The company faces risks from difficult market conditions, which can adversely affect investment values and capital raising abilities[209].