KKR Investment Strategy

KKR has put an emphasis on insurance in its latest reported quarters in order to yield long-term capital which to invest in its private equity and private credit business along the lines of Warren Buffett's Berkshire Hathaway conglomerate. 

Here is an excerpt from KKR's  second quarter 2024 earnings statement.

Non-GAAP measures net out the insurance fees, however. 

The stable insurance premiums insure the longevity of KKR and the long-term viability of the private equity and private credit business.

33
Reconciliation of GAAP to Non-GAAP Measures (Unaudited)
(1) Represents equity-based compensation expense in connection with non-dilutive share grants from outstanding units in KKR Holdings.
(2) Amounts represent the portion allocable to KKR.
($ in thousands) 2Q'23 2Q'24 2Q'23 YTD 2Q'24 YTD 2Q'23 LTM 2Q'24 LTM
Net Income (L os s ) - K K R C ommon S tockholders $ 844,463 $ 667,926 $ 1,167,207 $ 1,350,140 $ 1,320,954 $ 3,863,447
Preferred Stock Dividends 17,249 — 34,499 — 68,999 17,248
Net Income (Loss) Attributable to Noncontrolling Interests 264,346 325,310 184,040 736,946 139,873 2,177,731
Income Tax Expense (Benefit) 324,955 216,969 473,702 486,170 664,955 1,209,991
Income (Loss) Before Tax (GAAP) $ 1,451,013 $ 1,210,205 $ 1,859,448 $ 2,573,256 $ 2,194,781 $ 7,268,417
Impact of Consolidation and Other (257,366) (151,775) (163,855) (343,294) (35,905) (1,749,030)
Equity-based Compensation - KKR Holdings(1) — — — — 19,500 —
Income Taxes on Adjusted Earnings (171,542) (238,244) (344,599) (454,610) (783,019) (873,393)
Asset Management Adjustments:
Unrealized (Gains) Losses (235,521) (76,175) (115,587) (475,253) 809,787 (1,203,293)
Unrealized Carried Interest (435,495) (190,143) (638,154) (1,136,959) 741,805 (2,155,779)
Unrealized Carried Interest Compensation 195,361 153,003 279,191 910,455 (313,979) 1,424,022
Transaction-related and Non-operating Items 7,192 1,308 13,999 62,983 38,424 80,789
Equity-based Compensation 45,261 66,535 104,278 140,312 209,341 266,892
Equity-based Compensation - Performance based 63,654 83,050 130,927 163,618 252,072 304,649
Strategic Holdings Adjustments:
Unrealized (Gains) Losses (222,790) (344,709) (243,397) (417,966) (667,717) (865,876)
Insurance Adjustments(2):
(Gains) Losses from Investments(2) 125,483 312,614 256,597 559,531 427,307 666,890
Non-operating Changes in Policy Liabilities and Derivatives(2) 57,463 106,465 163,954 180,328 22,242 245,303
Transaction-related and Non-operating Items(2) 3,199 — 3,199 — 12,445 4,148
Equity-based and Other Compensation(2) 23,898 35,323 60,291 64,389 120,837 75,677
Amortization of Acquired Intangibles(2) 2,794 4,412 5,588 8,824 11,014 14,411
Adjusted Net Income $ 652,604 $ 971,869 $ 1,371,880 $ 1,835,614 $ 3,058,935 $ 3,503,827
Interest Expense, Net 95,357 77,101 177,597 149,908 331,560 298,230
Net Income Attributable to Noncontrolling Interests 6,118 2,851 11,744 4,774 22,793 18,980
Income Taxes on Adjusted Earnings 171,542 238,244 344,599 454,610 783,019 873,393
Total Segment Earnings $ 925,621 $ 1,290,065 $ 1,905,820 $ 2,444,906 $ 4,196,307 $ 4,694,430
Net Realized Performance Income (52,249) (122,839) (113,638) (200,837) (474,768) (486,148)
Net Realized Investment Income (100,839) (117,764) (265,959) (232,306) (673,606) (507,788)
Total Operating Earnings $ 772,533 $ 1,049,462 $ 1,526,223 $ 2,011,763 $ 3,047,933 $ 3,700,494
Strategic Holdings Operating Earnings — (40,852) — (61,572) (20,316) (76,103)
Insurance Operating Earnings (170,224) (253,213) (375,336) (526,053) (775,536) (967,354)
Fee Related Earnings $ 602,309 $ 755,397 $ 1,150,887 $ 1,424,138 $ 2,252,081 $ 2,657,037

The private equity asset have a natural inclination towards North America where are the biggest funds. 2006 one of the biggest funds was raised:

23
Investment Vehicle Summary
($ in millions)
Investment Period Amount
Start
Date
End
Date Commitment Uncalled
Commitments Invested Realized Remaining
Cost Remaining
Fair Value
PRIVATE EQUITY BUSINESS LINE
North America Fund XIII 8/2021 8/2027 $ 18,400 $ 8,200 $ 10,199 $ 12 $ 9,947 $ 12,276
Americas Fund XII 5/2017 5/2021 13,500 1,614 12,493 11,270 9,234 17,736
North America Fund XI 11/2012 1/2017 8,718 48 10,165 23,097 2,526 3,283
2006 Fund(1) 9/2006 9/2012 17,642 — 17,309 37,423 — —
Millennium Fund(1) 12/2002 12/2008 6,000 — 6,000 14,129 — —
Ascendant Fund 6/2022 6/2028 4,097 4,097 — — — —
European Fund VI 6/2022 6/2028 7,437 5,774 1,663 — 1,663 1,028
European Fund V 7/2019 2/2022 6,365 729 5,751 1,320 5,486 7,247
European Fund IV 2/2015 3/2019 3,512 20 3,643 5,726 1,621 2,608
European Fund III(1) 3/2008 3/2014 5,506 146 5,360 10,625 151 20
European Fund II(1) 11/2005 10/2008 5,751 — 5,751 8,533 — —
Asian Fund IV 7/2020 7/2026 14,735 8,321 7,129 715 6,893 10,107
Asian Fund III 8/2017 7/2020 9,000 1,328 8,192 6,658 6,602 13,298
Asian Fund II 10/2013 3/2017 5,825 — 7,494 6,694 2,697 1,971
Asian Fund(1) 7/2007 4/2013 3,983 — 3,974 8,728 — —
Next Generation Technology Growth Fund III 11/2022 11/2028 2,740 2,321 419 — 419 490
Next Generation Technology Growth Fund II 12/2019 5/2022 2,088 88 2,197 548 1,952 3,221
Next Generation Technology Growth Fund 3/2016 12/2019 659 4 670 1,235 258 871
Health Care Strategic Growth Fund II 5/2021 5/2027 3,789 2,498 1,291 — 1,291 1,414
Health Care Strategic Growth Fund 12/2016 4/2021 1,331 111 1,350 283 1,108 1,853
Global Impact Fund II 6/2022 6/2028 2,704 1,885 819 — 819 744
Global Impact Fund 2/2019 3/2022 1,242 211 1,207 483 1,028 1,732
Co-Investment Vehicles and Other Various Various 22,741 3,279 20,038 10,486 14,400 17,461
Core Investors II 8/2022 8/2027 11,814 8,963 2,851 — 2,851 3,241
Core Investors I 2/2018 8/2022 8,500 23 9,369 1,106 8,469 16,312
Other Core Vehicles Various Various 5,133 1,248 3,955 1,444 3,491 6,272
Unallocated Commitments(2) N/A N/A 3,969 3,969 — — — —
Total Private Equity $ 197,181 $ 54,877 $ 149,289 $ 150,515 $ 82,906 $ 123,185

Private equity is the largest net asset management fees generator for KKR. KKR has its roots in private equity and continues to develop the segment. Raising big funds and collecting management, performance fees and principal activities fees.