KKR (KKR) Q4 FY25 earnings call: guidance and Q&A

How has KKR re-underwritten its portfolios for tariffs and AI, and what actions are taken to de-risk and ensure monetization?

KKR has proactively addressed tariff risks, resulting in low single-digit portfolio exposure. On AI, the firm has focused on disruption and opportunities for several years, selling assets where AI posed a threat. Software is 7% of AUM, below industry averages. KKR's $118 billion dry powder positions it to capitalize on market dislocations. Monetization momentum is strong, with over $900 million visibility from signed deals for H1 2026, up from $400 million a year ago.

“We have a single-digit percentage of our portfolio and a lot of our business is low single-digit percentage of our portfolio that we've got any anxiety about tariffs. So we feel very comfortable and relaxed on that front.”

asked by Glenn Schorr · answered by Scott Nuttall

Was the strong 2025 deployment a level to build off, and what were the key themes driving it given tighter credit spreads and higher public equities?

KKR expects to deploy more capital in 2026. 2025 deployment was broad-based across strategies and geographies, including $16 billion in real assets/private equity and $15 billion in credit. Key themes included take-private activity globally (nearly 30 since 2022), strong activity in Asia, and specific transactions like the Sapporo real estate carve-out and a European renewable transaction for Global Atlantic. Deployment as a percentage of private markets AUM was 12% in 2025, consistent with prior years.

“last year it was record despite some of the market hiccups around the tariff dislocation in the spring. But as Craig said, you got to remember just how global we are. So last year was a record year for European deployment for us is just one example.”

asked by Craig Siegenthaler · answered by Craig Larson

What are the building blocks for confidence in exceeding the $4.50+ FRE target for 2026, and what management fee growth is expected?

Confidence is driven by strong capital raising ($130 billion in 2025, on track to exceed $300 billion target for 2024-2026), increasing Capital Markets activity (insurance-related fees could reach hundreds of millions annually), scaling fee-related performance revenue, and operating leverage. Management fees grew 46% from end of 2022 to LTM 9/30, while operating expenses grew 21%, demonstrating strong cost control.

“We've got a lot of momentum on the management fee side of things and have been for some time, been growing at above industry level growth rates. And the best forward indicator that we have for management fees is, of course, capital raising.”

asked by Alex Blostein · answered by Robert Lewin

What is the potential for realized investment income, and should balance sheet exits drive it higher?

KKR expects an increase in realized investment income for 2026 and an upward trajectory over the next couple of years, potentially meaningful. However, the firm's strategy is to reinvest free cash flow into growth areas (strategic M&A, insurance, strategic holdings, buybacks) to increase recurring earnings. Therefore, realized investment income, while growing, should decrease relative to more recurring earnings over the long term.

“However, I think it's important to understand our realized investment line item in the context of the broader firm, right? What we've been doing with our balance sheet over the last several years on the asset management side of our balance sheet is taking every dollar of finite capital that we have available or marginal free cash flow and reinvesting it back into our firm for growth.”

asked by Michael Brown · answered by Robert Lewin

Clarify the moving pieces in Global Atlantic's earnings, particularly net investment spread and G&A, and confirm 2026 expectations.

KKR maintains the $250+ million per quarter target for Global Atlantic in 2026. The reported earnings exclude significant accrued income (mid-$90s million in Q4, potentially $300-350 million in 2026) from alternative investments that are cash-accounted. This accrued income is expected to convert to cash earnings in 2027-2028. The broader insurance economics, including management fees and capital markets fees from GA, continue to show strong growth.

“We continue to think that the right level to model the business is in that 250-plus range per quarter over the next 4 quarters. But keep in mind, and we talked a lot about this last quarter, is in our transition to move our book to more of an industry average on alternatives exposure, we are taking on assets that have no yield or limited yield, and we are choosing to not have that show up in our P&L by cash accounting for those outcomes.”

asked by Benjamin Budish · answered by Robert Lewin

How will wealth management flows evolve, and are historical return assumptions still valid for deployment across private equity and credit?

KKR's K-Series wealth products are scaling well, with $1.3 billion raised in January 2026, up 20% YoY, despite volatility. The long-term opportunity in wealth management remains strong, driven by investment performance. For deployment, KKR expects increased activity in 2026 and maintains its return expectations. Scott Nuttall noted that market anxieties often create strong buying opportunities for KKR's stock and lead to strong vintage years for investments.

“Every time the market gets anxious about virtually anything, our space and our stock trade off. So we went back and looked. So we've been public 16, 17 years. This is the 10th time we've seen our stock down more than 20% in a month.”

asked by Bill Katz · answered by Scott Nuttall

What is the current mix between sports and solutions in Arctos' $15 billion AUM, and why hasn't Arctos raised more AUM in secondaries, and how will KKR's distribution help?

Arctos, founded in 2019, primarily focuses on sports (majority of AUM, long-dated capital) and GP Solutions (raising first fund successfully). Secondaries is a new area for KKR Solutions, not Arctos' current business. KKR sees an opportunity to build a secondaries platform with a "blank sheet of paper" leveraging Arctos' team credibility and KKR's expertise and capital access. The goal is to innovate and potentially disintermediate the space.

“This is not a business they're in today. Again, the firm has only been around for 6 years, 7 years. However, when we think about the experience of the team and where they've come from, when we think about their credibility in the marketplace and with investors is really high.”

asked by Patrick Davitt · answered by Robert Lewin