KKR (KKR) Q1 FY26 earnings call: guidance and Q&A

Asked about increased competition in the annuity business, underlying ROE potential, and growth trajectory, especially with softer institutional funding.

Rob Lewin acknowledged high competition on the liability side and tight asset spreads, impacting Q1 origination. He emphasized viewing insurance through cycles, noting KKR's $6 billion dry powder equity (translating to $60+ billion buying power) to capitalize on future volatility. Scott Nuttall added that the U.S. retail market is competitive, but the institutional and longer-duration liability markets offer diversification.

“We sit on $6 billion of dry powder equity that we can draw down to invest into that dislocation, much like you would in a private equity fund. And as a reminder, that $6 billion of equity, we think translates into $60-plus billion of buying power on the liability side.”

asked by Craig Siegenthaler · answered by Robert Lewin

Inquired about the reasons for potential delay in achieving the $7 ANI target, given strong DPI and embedded gains, and what holds back monetization.

Rob Lewin stated that while monetization guidance is at a historical high ($1.2+ billion), the operating environment has been more challenging than planned, making the $7 ANI target less likely. Scott Nuttall clarified that the value is there (embedded gains), but strategic exits might be delayed if the market backdrop (e.g., war, energy prices) is uncertain, as they prefer to sell into a clearer environment. This is a timing issue, not a magnitude issue.

“if you've got an asset that you've built value in for 5, 7 years. And if the backdrop in terms of war energy prices, et cetera, is a bit uncertain or uncomfortable I'm not sure you'd want to necessarily sell that wonderful asset into that environment if it's a strategic buyer and give them a little bit more time for the world to write itself.”

asked by Glenn Schorr · answered by Robert Lewin

Asked for a mark-to-market on fundraising expectations for the rest of the year, especially with flagship funds closing and Asia starting, and confidence in maintaining FRE growth.

Craig Larson highlighted the breadth and diversification of fundraising, with $127 billion raised over the last 12 months across credit, real assets, and private equity, and K-Series representing only 12% of that. He listed numerous active fundraising opportunities across strategies (PE, Real Assets, Credit) and geographies, expressing high confidence in continued fundraising momentum and FRE growth. Scott Nuttall added that the "consolidation theme" among clients is driving KKR's ability to take market share.

“flagships were around 15% of new capital raised in the quarter, 12% over the trailing 12 months. Again, that number was very different at KKR 5-plus years ago.”

asked by Alexander Blostein · answered by Craig Larson

Asked how KKR underwrites AI risk in its Strategic Holdings portfolio (especially business services) and broader portfolio, and for KPIs to handicap this risk.

Craig Larson stated that software is 7% of AUM (15% in PE, 5% in credit, 2.5% in GA). He explained that KKR assesses AI's impact on margins, pricing power, workflow relevance, and cash flow resilience during underwriting. From a value creation perspective, AI is deployed across 150+ portfolio companies to automate workflows and enhance products, with Capstone facilitating knowledge sharing. He also noted digital infrastructure as a massive investment opportunity.

“From an underwriting standpoint... we're focused on AI, how it affects margins, pricing power, workflow relevance and cash flow resilience.”

asked by Steven Chubak · answered by Craig Larson

Asked about the typical markup on private equity investments from the prior unrealized mark to realization, and if net unrealized performance income is understated.

Craig Larson confirmed that KKR typically sees a "healthy markup" at realization compared to the prior quarter's mark, attributing it to a rigorous and conservative valuation process involving third-party firms. Rob Lewin added that KKR has nearly 20 years of experience with these valuations, and they feel good about how Level 3 assets are valued, with most significant holdings validated by third-party agents. They do not believe accrued carry numbers are understated.

“in our experience, when you look at the final mark of those private equity investments that we monetize, you see a healthy markup relative to the prior quarter.”

asked by Brian McKenna · answered by Craig Larson

Asked how potential further delays in monetization are going across with the LP community, given industry-wide delays and potential frustrations.

Rob Lewin reiterated that the ANI target miss is due to a non-normalized environment, but KKR's DPI remains industry-leading, with realized carry up 120% in Q1 and a record forward monetization guide of $1.4+ billion. Scott Nuttall emphasized that KKR has returned more cash than called in 9 out of the last 10 years for its U.S. private equity funds, leading to positive LP feedback and record fundraising. He stated that the firm's performance helps it grow faster, and LPs are happy.

“We have... a slide somewhere that talks about how we've given cash back from our private equity fund in the U.S. or that business, we've given more back than we called 9 out of the last 10 years.”

asked by Brennan Hawken · answered by Robert Lewin

Asked about the impact of challenges in private credit vehicles on KKR's retail/private wealth products and the roadmap with Capital Group.

Craig Larson noted that K-Series AUM grew 80% year-over-year to $38 billion, representing only 12% of KKR's total LTM fundraising, highlighting the firm's broad diversification. Scott Nuttall acknowledged that media attention on private credit might slow things down for a bit but reiterated that private wealth is a multi-decade build focused on performance. He stated that the partnership with Capital Group is ahead of expectations, still in product development.

“AUM across K- series at 3/31 was $38 billion. A year ago, that was $21 billion. So... K-Series AUM is up 80% year-over-year.”

asked by Daniel Fannon · answered by Craig Larson

Asked about institutional interest in direct lending and asset-based finance (ABF), how it evolved, and the trajectory of their thought process.

Scott Nuttall explained that institutions were less interested in direct lending 12-24 months ago due to retail flows and spread compression, pivoting to ABF. However, in recent weeks, institutions are returning to direct lending, viewing current market dislocations (wealth headlines) as an entry point where risk/reward is improving (spreads up, fees up, terms better, leverage down). ABF dialogues remain robust, and the shift is increased institutional intrigue in direct lending.

“The shift we're seeing in the last several weeks has been the institution is kind of coming back to direct lending a bit and saying, okay, I see all these headlines about wealth, that should mean that risk/reward is getting better. on new deals.”

asked by Crispin Love · answered by Scott Nuttall