So, we are seeing this trend spread from Europe to the U.S. on the risk transfer side. I think that just speaks to the fact that you know deployment opportunity will continue to be robust, and banks are trying to free up capital whether for M&A, or to redeploy into other areas that they find interesting. So we’ve got that plenty of opportunity here.
Steven Chubak: It’s great color. Thanks for taking my question.
Scott Nuttall: Thank you.
Operator: Our next question is from Brian Bedell with Deutsche Bank. Please proceed with your question.
Brian Bedell: Oh, great, thanks good morning folks. Thanks for taking my question also. Maybe switching gears the capital markets business, I think you formed a little bit better than you had indicated at the conference Rob. I think back in March for 1Q, maybe if you could just talk about I guess the near-term trajectory and 2Q what you’re seeing so far and more broadly longer term given the improvement in leverage credit markets and M&A activity. And of course the structural growth in your credit business, including in the asset based finance area. You maybe just your confidence on you’re getting back to say an $800 million plus run rate level and even a timeline to get to call it $1 billion plus annual level provided markets are conducive for that?
Rob Lewin: Yes Brian, a few thoughts. One, if you look back at 2022 and 2023 really tough operating conditions for our capital markets business. And for much of that time capital markets on the equity side on the leverage finance side were largely shut. And our business generated ballpark $600 million of revenue in each of those two years. And so, we’re really proud of the durability of the franchise that we created. As I look at our pipelines today, for the remainder of 2024, and we get updated pipelines weekly. Our pipelines are a lot better today than they were this time last year. Now, there’s a lot to go execute on, between now and the end of the year, but the forward indicators for our capital markets business sitting here in early may are, definitely better than they were you know in May of 2023.
And then more to your question around the longer term, if you look back in 2021 our capital markets business generated the ballpark $850 million of revenue. And clearly you have buoyant capital markets that helped in 2021, but you look at KKR today, as a firm we do more today than we did in 2021. I believe, we have greater market share with our third-party clients than we did in 2021. And we’ve talked about the real opportunity to scale, what we’re doing in coordination with Global Atlantic. So when you combine all that, we continue to be really optimistic about what we’re going to be able to create, over the next several years with our capital markets franchise, but it’s truly a unique business relative to any of our competitors out there right now.
Scott Nuttall: Yes. So Brian, we’ve been in this business since 2006. And over that period of time, what you see is that the revenue tends to be quite correlated with deployment and monetization, especially in private equity and infrastructure. So if you go back to the prior discussion, around the fact that our pipelines have picked up significantly, especially in those areas. And we’re seeing more activity on the monetization side as well as the markets open up and strategic buyers come back. I think that bodes well. We had $800 million plus of revenues at KCM at a period of time, where we had less dry powder, we had less overall AUM, we had less firm activity. So as the markets open back up, our expectation is we’ll do better than that, but it’s going to be somewhat dependent on deployment and monetization across the firm. But it looks pretty good as we sit here today.
Brian Bedell: Yes, no that’s great color. Thank you.
Operator: Our next question is from Michael Cyprys with Morgan Stanley. Please proceed with your question.
Michael Cyprys: Great. Thank you. Just wanted to ask on ABF. You guys have had a lot of success. Heard the $50 billion ABF AUM figure, 19 platforms, $20 billion originations, I think last year. Just hoping you could talk more around the steps and actions you guys are taking to drive the originations meaningfully higher. How much of that do you think would be coming from more resources that are adding to the existing platforms versus – or do you see a bigger needle mover from adding more platforms over time? And maybe you could talk about your vision around how you see this evolving over the next five years? Thank you.
Craig Larson: So why don’t I start, Mike. I think you hit on a lot of the key points. I think that the asset-based finance business for us as a whole has just changed really dramatically post the Global Atlantic acquisition. And this is a business where scale begets scale. And so I think we’ve real advantages of partnering with GA, partnering with additional third-party clients. And then an important part of that have been all the platforms that Scott had mentioned and that Chris Sheldon had run through over the course of our Investor Day. And I think specifically, when you look at those 18, 19 platforms, they’re global. As Scott mentioned, 7,000 people – some-odd people, helping us source and originate unique deal flow for the benefit of our clients as we look forward from here.
Will we look to grow that universe of platform? I’m sure the answer to that is yes. As that a number that’s going to be 2x what it is today two years from now? I wouldn’t want you to think anything along those lines. But I think there’s continued opportunity for us to continue to build and drive scale. And one of the other important points, again, as Scott mentioned a few minutes ago, it does feel like client knowledge of this opportunity is one that’s been increasing dramatically. It felt to us like infrastructure and direct lending in these other asset classes, there was a period of time where it took some real education on the part of our clients, and that education can come in baby steps. And ABF is a unique asset class because it’s been around for a long, long time, but it’s really not been a distinct asset class as many of our clients have thought about their portfolios.
So at the same point in time that our strategic position is one that’s increased dramatically and improved dramatically, it just feels like that knowledge level with our clients is coming up the curve at the same time. And I think that’s what you’re seeing in our results.
Scott Nuttall: Michael, it’s Scott. I think we’re going to – we’ll add more platforms, probably not as many as we have. We will add resources to the existing platforms. But remember, these businesses are already out in the market sourcing investment opportunity. And so to some extent, the way I think about it is we’re capital constrained, not opportunity constrained. So to the extent we continue to scale our capital base here, we can do more with the existing origination platforms we’ve already set up. And it’s less about needing to add a lot of resources as opposed to just taking more advantage of the flow we’re already seeing. And as Craig said, now that private credit has become a better understood part of what we do, as private credit allocations get created, more work is getting done on this part of the space.
And so, we’re seeing allocations to direct lending and ABF as part of that continue to pick up. And we’ve seen this across other asset classes, there’s pattern recognition. As those allocations get created and people look to get to the number that they picked, what we tend to see on the back of that is quite a bit of capital formation. So we feel like we’re ready for that.
Michael Cyprys: Great. Thank you.
Scott Nuttall: Thank you.
Operator: Our next question is from Patrick Davitt with Autonomous Research. Please proceed with your question.
Patrick Davitt: Hi. Thanks for the follow-up. Could you give us the updated visible announced but not closed realization revenue number? And then more broadly, I guess we’ve got some conflicting messages out there about how good the realization environment really is, overall sense that you’re still pretty constructive. So maybe just update us on what your – what’s driving your confidence and maybe what you think is – why your tone is diverging from what we’ve heard from some other players out there? Thank you.
Rob Lewin: Great. Thanks for the follow-up, Patrick. So today, we’ve got north of $400 million of visible pipeline as it relates to monetization, call that roughly 60% carry, 40% investment income. As you noted, our pipelines are pretty healthy. As we look at that $400 million, I should be clear, it’s not certain all if that’s going to close in Q2.Some of that’s got some regulatory approvals as part of that. But as we look at our pipelines, they are better on the monetization side that they’ve been at any point over the past 12 to 18 months. I can’t really comment on what others are saying. I could just comment on what we’re feeling across the firm. And I’m not sure to be all that much of a surprise. We’re seeing the leverage finance market come back.
You’re starting to see CLO formation sit behind the leveraged finance market. And that all creates additional dry powder in the system for deal activity, which is the fuel to greater monetization. And so we’ll see. There’s a lot to get done in order to monetize the pipeline. But at least for KKR, we’re feeling relatively constructive versus where we had been maybe 12 months ago at this time.
Scott Nuttall: Yes. Patrick, I’d say we – I don’t know why you’re hearing a bit of a different tone. Maybe the markets themselves have a little bit of fragility. The geopolitical risk, there’s a good amount of angst about the marrow, that could be part of it. Our comments are based on kind of the environment continuing like we see it right now. But if something happened, exogenous shocks, then sure, it could change the environment. But it could be that our portfolio is maybe more global than some, maybe the more mature aspects of what we invested in some. But we’re seeing it. This isn’t a speculation, we can see it and feel it in terms of the discussions we’re having.
Craig Larson: And only part, Patrick, I’d add on to both of those comments really would relate to that investment performance aspect of this, you look at our gross unrealized carry, that number is up 50% year-over-year. That’s a pretty big increase, recognizing both the value creation we’ve seen, together with the fact that we’ve been in a more modest realization environment. And I think when you look at some of the underlying statistics, as Scott said, we’ve got a healthy amount of the portfolio that’s pretty seasoned. So roughly 50% of that would be four years or greater as we look at the maturity of the private equity portfolio. But then you’ve got to layer in investment performance alongside of that. So almost 30% of that is marked at two times or greater.
And somewhere between 55% and 60% is marked at 1.5 times cost and greater. So I think, you have this combination of maturing portfolio together with strong investment performance that, as we look forward, gives us confidence and, again, ultimately seeing that flow through to our financials.
Patrick Davitt: Helpful. Thanks.
Scott Nuttall: Thank you.
Operator: We’ve reached the end of the question-and-answer session. I would now like to turn the call back over to Craig Larson for closing comments.
Craig Larson: I would just like to really thank everybody for the time that you’ve invested in KKR. When we think of the announcements, we made in November and at the Investor Day just a few weeks ago, and then together with our Q4 and Q1 earnings. We’ve been very active in taking a lot of mind share from everyone. So thanks for your investment in understanding KKR better. And please follow-up as directly with any follow-on questions. Thanks so much.
Operator: This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.
