KKR & Co. Inc. Quarterly Report for Q3 Ended Sep 30, 2011

Summary

KKR & Co. Inc. (KKR) filed its 10-Q for the period ending September 30, 2011, reporting a net loss attributable to KKR & Co. L.P. of $243.4 million for the third quarter and $44.2 million for the first nine months of the year. This was largely driven by a significant net loss from investment activities in the third quarter, amounting to $3.34 billion, primarily due to unrealized losses on private equity investments. Total fees increased year-over-year, reflecting growth in transaction and management fees, but this was offset by a substantial increase in expenses, largely due to lower equity-based compensation in the prior year's comparable period. Despite the reported net loss, KKR's Assets Under Management (AUM) showed resilience, increasing to $58.7 billion as of September 30, 2011, up from $51.8 billion at the end of 2010, with the Private Markets segment showing a slight decrease in AUM due to market value declines and distributions, while the Public Markets segment saw a modest increase. The company's liquidity position remained adequate, with significant cash and cash equivalents, though it continued to manage its debt obligations.

Key Highlights

• 1KKR reported a net loss attributable to KKR & Co. L.P. of $243.4 million for Q3 2011 and $44.2 million for the first nine months of 2011.
• 2Net losses from investment activities were substantial in Q3 2011, totaling $3.34 billion, primarily driven by unrealized losses in the private equity portfolio.
• 3Total fees increased significantly, particularly transaction and management fees, indicating growth in advisory and capital markets activities.
• 4Expenses also increased, notably compensation and benefits, though equity-based compensation charges decreased year-over-year.
• 5Assets Under Management (AUM) grew to $58.7 billion as of September 30, 2011, demonstrating continued growth in the firm's managed capital.
• 6The company maintained a strong liquidity position with $821.8 million in cash and cash equivalents at the end of Q3 2011.
• 7Despite the net loss, the firm's Fee Related Earnings (FRE) and Economic Net Income (ENI) metrics showed segment-specific performance, with Private Markets experiencing a loss in ENI for the quarter, while Public Markets and Capital Markets segments showed positive ENI.

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