KKR & Co. L.P. Morgan Stanley Financials Conference June 2014 DISCLAIMER: This presentation will also contain forward-looking statements, which do not guarantee future events or performance. Please refer to the Important…
Update 1 Under-utilizing investment ideas and relationships Build new investing businesses 2
We Have Filled Out Our Product Offerings 2009 2014 North America PE North America PE Asia PE Asia PE Europe PE Europe PE Private China Growth Markets Infrastructure Natural Resources Energy Income and Growth Real Estate Bank…
Update 2 Valuable content we source should be delivered to our own relationships Build global, multi-product capital markets business 5
Significant Development in Capital Markets Then Now North American focused Global Private Equity focused All Strategies KKR only KKR + 3rd Party / MerchCap Solutions 23 Employees(1) 38 Employees(1) KKR Capital Markets Fee…
Update 3 Too few investor relationships Build broader, global relationship / distribution team 7
Significant Development in Client and Partner Group Then Now Institutional clients only Diverse client base Institutional High Net Worth/Retail/RIA US-centric, PE only Global across all strategies Funds Solutions-oriented 21…
Update 4 Permanent capital would help create better alignment and help accelerate growth Our Balance SheetKPE and KFN Transactions 9
In Summary Invest more behind ideas and relationships Capture more from content we create Bring ideas and products to more investors Invest our own capital / seed new efforts Multiplier Effect 10
History 2004 2009 LTM Firm Revenues: Fees 181 618 1,135 Carry (Gross) 532 580 1,343 Balance Sheet N/A 353 917 Total Segment Revenues 713 mm 1,551 mm 3,395 mm FPAUM 12 bn 43 bn 84 bn Book Value N/A 4.2 bn 8 bn 10…
KKRGlobal Leader in Alternative Asset Management Capital Markets & Private Markets Public Markets Principal Activities 61 bn AUM 42 bn AUM 10.7 bn of Cash and Investments(1) Private Equity Leveraged Credit Capital Markets…
FPAUM Growth 84 77 61 35 41bn 27 46 20 11bn 9 50 48 38 41 2011 2012 2013 Q1 2014 Private Markets FPAUM (bn) Public Markets FPAUM (bn) Non PE FPAUM has grown from 11 bn to 41 bn 13
Our Business, Quite Simply We have investment capabilities that can originate investment opportunities for our limited partners capital and our own capital We have unique, illiquid-investment distribution capabilities that allow us…
Our Model Ways We Monetize 3rd Party Balance KCM Ideas Managed Capital Sheet HF Stakes/ HF Seeding/JVs/ Other Relationships Adjacent Other Idea PE Infra Energy RE Leveraged Alternative HFS Asset Mgmt Originators Credit…
Its Not Just About AUM (Illustrative) Traditional Model KKR Approach 1 bn In a 20% carry Fund 1 bn Fund takes 500 mm With a 15% IRR Firm syndicates 250 mm Investment With a 1-year hold Investment Firm Balance Sheet takes 250 mm…
KKR Balance Sheet Economics (Illustrative) KKRs investment advisory business with greater balance sheet participation is more profitable than a pure PE Fund model Desired Financial Profile 1.1 bn ENI 900 mm TDE Hypothetical…
Our Total Distributable Earnings Profile 1,612mm of TDE per AUM: KKR: 1.6% Average of Public Peers(1): 0.8% 51% Q1 2014 LTM Non-KCM Cash Earnings and Realized Cash Carry (2) Realized Balance Sheet Income and KCM…
What Weve Created Our business: 60+% margins(1) 20+% ROE (with no net leverage) 70% payout ratio Global, flexible capital Can invest in anything we like Can maximally monetize what we see through funds, KCM, Balance…
KKR vs. The S&P 500Net Income/Head S&P 500 LTM Net Net Income Company Employees Rank Income Per Head 17 Apple 37,707mm 80,300 470k 41 Facebook 1,912 6,818 280 Technology 48 Google 13,026 49,829 261 162 Netflix 163 2,022 81…
ROE Fees + Carry + Balance Sheet Income All Expenses Total Firm ROE Average Equity Return on Average Equity 39% 40% 31% 27% 26% 20% 9% 15% S&P 500 0% Average 2010 2011 2012 2013 LTM Q1 2014 Attractive ROEs Generated…
GoalsSimultaneous Equation Keep generating 20+% ROE Double our cash flow Minimal leverage Keep culture Limit equity dilution How Scale our businesses Make more money from what we are already doing Note: Our goals above…
Case Study 4 bn transaction, 1.2 bn of equity, 3x MOIC Traditional New Fund equity 500 500 Balance sheet 0 300 Syndication0% carry 700 0 Syndication10% carry 0 400 Total 1,200 1,200 Capital Markets fees paid over life 250 250 KKR…
Case StudyDollar General Traditional Old New PE World World(1) Equity Invested: Private Equity Fund 1,017 mm 1,017mm 1,017 mm KCM Syndication with Carry 0 324/10% 500/10% Balance Sheet Hold 0 0 300 Other 1,758 1,433 958 Total 2,775…
Last Twelve Months Progress Total Distributable Distribution per Unit Distribution per Unit Earnings (mm) 1.56 447 1.56 30% 50+% 1.40 1.22 1.22 291 0.74 0.60 Q1 2013 Q1 2014 LTM Q1 2013 LTM Q1 2014 2010 2011 2012…
Our Cash Carry Potential Has Grown Significantly Trailing 4 Quarters of Cash Carry / Unit 0.90 95% of Remaining 0.80 PE Fair Value in Cash Carry Position 0.70 0.60 33% of Remaining 0.50 PE Fair Value in Cash Carry Position…
In Summary 1 Scaling of Fund 1 Fund 2 China Growth Real Estate Direct Lending 10 bn(1) Natural Resources EIGF Mezzanine of Committed Infrastructure Special Sits Capital 2 Growth in Cash Carry Potential 3 Our Business…
Where to Performance Carry generation Balance sheet cash flow and growth Scale Newer Efforts Fund 1 Fund 2 Global Grow Private Equity Geography and sector-specific Acquisitions / Investments Control-oriented, stakes, seeding…
Appendix 29
KKR Supplemental Statement of Operations and Other Selected Financial Information (Sample)Total Reportable Segments (Unaudited) (Amount in thousands, except unit and per unit amounts) LTM March 31, 2014 Segment Revenues Fees…
Segment Balance Sheet as of March 31, 2014 (Amount in thousands, except per unit amounts) Total Reportable Segments Cash and short-term investments 2,139,940 Investments 5,380,306 Unrealized carry 1,276,776 Other assets 695,246…
Reconciliation of Net Income (Loss) Attributable to KKR & Co. L.P. (GAAP Basis) to Economic Net Income (Loss), Fee Related Earnings, Fee Related EBITDA, and Total Distributable Earnings (Unaudited) (Amount in thousands) Quarter Ended…
Reconciliation of Net Income (Loss) Attributable to KKR & Co. L.P. (GAAP Basis) to Economic Net Income (Loss), Fee Related Earnings, Fee Related EBITDA, and Total Distributable Earnings (Unaudited) (Amount in thousands) Year Ended Year…
KFN Reconciliation from Total Capital to Total Shareholders Equity (Amount in thousands) As of March 31, 2014 Portfolio holdings 3,006,547 Plus: Working capital 33,328 Plus: Cash 185,073 Total capital 3,224,948 Less: Allocation of…
Reconciliation of GAAP Common Units Outstanding to Adjusted Units As of As of March 31, 2014 December 31, 2013 GAAP Common Units Outstanding - Basic 300,354,288 288,143,327 Unvested Common Units (1) 30,098,382 24,164,354 Other…
Reconciliation of KKR & Co. L.P. Partners Capital (GAAP Basis Unaudited) to Book Value and Book Value per Adjusted Unit (Amount in thousands, except per unit amounts) As of March 31, 2014 KKR & Co. L.P. partners capital 3,011,683…
Reconciliation of GAAP Cash and Cash Equivalents to Cash and Short-Term Investments (Amount in thousands) As of March 31, 2014 Cash and cash equivalents 1,324,925 Liquid short-term investments 815,015 Cash and short-term…
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