While KKR pulled off edutech, fintech and real estate deals in the third-quarter, the private equity investor’s profit slipped, a victim of the record-setting U.S. stock market’s downside.
Lofty valuations made cutting deals more difficult for the New York-based PE firm. KKR reported that profit fell in the third quarter amid a revenue decline from asset sales and a slowdown in fundraising. Still, the bullish stock market helped the firm in one sense: its private equity portfolio gained 20% this year through September.
Many PE firms, including KKR, have made fewer sales this year as high stock valuations discouraged potential acquirers. So-called exits have tumbled 20% through the third-quarter, compared with the same period last year, according to PitchBook. Fewer sales mean that the PE firms are collecting lower amounts of the fees that the deals generate.
KKR anticipates a wide range of buying opportunities ahead. In a presentation accompanying the firm’s conference call, KKR said it planned on launching a fund over the next 12 months dedicated to American equities, Asian equities and global infrastructure opportunities. The presentation slides indicated that KKR will be seeking deals in such areas as Asian infrastructure, energy, healthcare and impact over the next three years .
The firm also has raised more than $2 billion for its Next Generation Technology Growth Fund II, Bloomberg reported, citing unidentified sources. The fund invests in technology, media and telecommunications. The first Next Generation fund totaled $714 million in 2016.
“We anticipate further growth as we begin to raise capital for a number of our benchmark strategies in the coming months,” Henry Kravis and George Roberts, KKR’s co-chairmen and co-CEOs, said in a statement.
- KKR reported $210 million in total realized investment income, down from $243 million a year earlier. Transaction fees in the quarter dropped about 40%.
- Blackstone Group Inc., the world’s largest manager of alternative assets such as PE and real estate, last week also reported a drop in third-quarter profit amid a decline in asset sales.
- The Standard & Poor’s 500 Index hit a record high on Monday and has increased about 17% this year. The Dow Jones Industrial Average is up about 16%