Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

KKR & Co. L.P. (NYSE:KKR)

Q4 2012 Earnings Conference Call

February 7, 2013 10:00 am ET

Executives

Craig Larson – Head, IR

William J. Janetschek – Chief Financial Officer

Scott Nuttall – Global Head, Capital and Asset Management

Analysts

William R. Katz – Citigroup

Matthew Kelley – Morgan Stanley

Patrick Davitt – Autonomous Research USA

Michael Kim – Sandler O’Neill & Partners L.P.

Howard Chen – Credit Suisse

Michael Carrier – Bank of America/Merrill Lynch

Roger A. Freeman – Barclays Capital

Chris Kotowski – Oppenheimer

Marc Irizarry – Goldman Sachs

Operator

Ladies and gentlemen, thank you standing by. Welcome to KKR’s Fourth Quarter 2012 Earnings Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following management’s prepared remarks, the conference will be opened for questions. (Operator Instructions)

I’ll now hand the call over to Craig Larson, Head of Investor Relations for KKR. Craig, please go ahead.

Craig Larson

Thank you, Sean. Welcome to our fourth quarter 2012 earnings call. Thank you for joining us. As usual I am joined by Bill Janetschek, our CFO, and Scott Nuttall, Global Head of Capital and Asset Management.

We’d like to remind everyone that this call will contain forward-looking statements, which do not guarantee future events or performance. Please refer to our SEC filings for cautionary factors related to these statements and we’ll also refer to non-GAAP measures on this call, which are reconciled to GAAP figures in our press release.

This morning, we reported our fourth quarter and full-year of 2012 results, a few highlights. For the quarter, economic net income was $348 million, which translates into $0.48 of quarterly after-tax economic net income per unit 45% higher than the $0.33 per unit reported in the fourth quarter of 2011.

For all of 2012, we generated $2.1 billion of ENI or $2.90 of after-tax economic net income per unit, almost four times the $0.73 per unit we reported for 2011. These strong results were driven by the performance of our private equity funds, which appreciated 4% this quarter ahead of the public market indices.

In 2012, our private equity funds were up 24%, meaningfully ahead of both the S&P 500 and the MSCI World indices, which increased 16% and 16.5% respectively. Our private equity portfolio beat those yearly returns by over 700 basis points. This was also an active quarter for us on the realization front, so I want to emphasis some of our cash metrics.

We reported a record $546 million of total distributable earnings this quarter, which included record contributions from both cash carry, as well as gains off the balance sheet. As a result, our fourth quarter distribution per unit $0.70 is also the highest quarterly figure we’ve ever reported. Our 2012, total distribution per unit is $1.22 up 65% from the $0.74 distribution for 2011.

Before we move on, I would like to bring your attention to an upcoming event. On May 23, we will host our second Investor Day in New York featuring presentations and Q&A session with our senior business leaders. We will be sending our formal invitations in the coming week. So if you like to attend, please follow-up with Sara or with me after the call. Additionally, we will put out a press release in the coming months information on the live webcast. We hope you’ll be able to join us.

And with that, I’ll now turn it over to Bill to discuss our performance in depth and also give you an update on netting. And then Scott will walk you through what we have been focused on across our segments.

William J. Janetschek

Thanks, Craig. When we look at our financial results for the fourth quarter and the full-year 2012, and compare those results with the fourth quarter and full year of 2011. There are four important trends to remember. First, our funds in our balance sheet perform well in 2012, which drove greater economic net income. Second, our level of monetization activity was greater causing significant growth in our total distributable earnings and our distribution.

Third, although the fourth quarter was almost active investing quarter in 2012, we invested less in 2012 than 2011, which resulted in a decline in transaction fees and fee-related earnings. And fourth, our public market business now includes Prisma in its segment results. These four trends will broadly explain the underlying movement in our numbers that we reported this morning.

More specifically, we reported total distributed earnings of $1.4 billion for the full-year 2012, up over 80% from the same time last year. And our full-year distribution per unit of $1.22 was held by the $0.70 we’ve recorded in the fourth quarter.

Fee-related earnings were $86 million in the quarter and $320 million for the full-year. Our lower level of investment activity in 2012 lead to a decrease in transaction monitoring fees, driving the year-over-year decline. However, the 24% write-off in our private equity portfolio more than out laid lower fee-related earnings this year, resulting in ENI of over $2 billion, nearly three times our 2011 reported ENI.

We ended the fourth quarter with record assets under management of $76 billion and fee paying assets under management of $61 billion, up 28% and 31% from the same time last year. This increase is in part attributed to the $8.5 billion from Prisma. The hedge fund-to-funds manager that we acquired in the fourth quarter, which is now included in our public market segments.

These figures also benefited from $11 billion of new capital we raised in 2012. And please remember, these numbers do not factoring in an additional $8 billion of committed capital. $4 billion from Asia II rise to date, $1 billion of the Texas Teachers mandate, and about $3 billion of capital in other vehicles that will be included in AUM once it’s invested.

Turning to our segments, in private markets fee-related earnings were $32 million, down from the fourth quarter of 2011, as a result of lower transaction fees. ENI was a $178 million for the quarter, up from the same time last year, given the increase in private equity valuations we discussed earlier. The full year showed essentially the same trends for both fee-related earnings and ENI in this segment.

Touching on pubic markets, fee-related earnings were $29 million, up 26% from last quarter and more than double the fee-related earnings year-over-year. The 80% increase in management fees, largely offset lower incentive fees this quarter leading to sizable fee-related earnings growth.

Public market ENI for the quarter was $37 million, up slightly from $35 million last quarter, and up meaningfully from $12 million a year ago. For the year, the segment earned over a $100 million of ENI, 78% increase over 2011. As we continue to growth and scale the capital in our carry eligible funds, we expect the carry potential of the public market segments to continue to increase.

Moving on to capital markets and principal activities, fee-related earnings were $24 million for the quarter, up from last quarter, but down from the fourth quarter of 2011 when our capital market teams indicated almost $1.2 billion of capital. Fourth quarter ENI and the segment was $133 million driven by 2% appreciation in our balancing investments.

Turning to our balance sheet, our book value per unit increased 19% last year to $9.87 as of December 31. This growth was attributed to increasing carrying value of our balance sheet investments, which were up 24% in 2012. As I mentioned earlier, our distribution for the fourth quarter was $0.70. And this is now the 11 consecutive quarters, we have seen cash carry in the distribution. We know that the timing of the cash carry remains the topic of interest, so I wanted to provide an update on netting holes.

For the last few quarters, we have disclosed the size in the netting holes in both the 2006 funds in Europe II. The goal is to inform our unitholders of the size of these holes and to provide more clarity around our path to filling them. We made significant progress since the end of 2011, and this is especially important given the size of our 2006 fund. Once the domestic netting holes still in 2006, our carry eligible AUM will increase substantially and subsequent 2006 fund realizations can be distributed to all of us as unitholders.

Today, the domestic portion of the 2006 fund netting hole has been reduced to approximately $275 million. Additionally, the 2006 fund overseas partnership netting holes has been filled and we are paying cash carry on that $6 billion of AUM. Our ability to reduce these netting, positions was tied to the significant realization activities we had in 2012.

On our second quarter earnings call in July of last year, we also disclosed the size of netting holes in Europe II. Today Europe II is market 1.2 times costs and the netting hole is about $500 million down from $1.3 billion at June 30, 2012. That’s $800 million of progress just the last six months. And except for NAXI, all of our active private equity funds are not subject to a preferred return. So we get carry from $1 of gain. We feel good about the improvements we are making with respect to netting and we will remain focus on increasing the percentage of our assets that are in a position to generate cash carry.

Before I move on, I want to touch one other recent announcement. A few weeks ago, we priced $500 million 30-year senior notes offering for KKR with a coupon of 5.5%. This is our second senior notes offering following the $500 million 10-year deal we completed in September 2010.

Both Fitch and S&P indicated that there ratings for KKR A and A minus respectively, remain unchanged with a stable outlook. We believe that this is a highly attractive financing for the firm. The 30-year term on the debt, in addition to the low cost of funding will allow us to maintain a long term focus on investing in our business.

With that I’ll pass it over to Scott.

Scott Nuttall

Thanks, Bill. We’ve been pursuing six overarching goals. As we look back on our performance last year, we thought we give you an update on the progress we are making against each. The first goal we laid out was creating value for our clients. Here, I’m going to let the numbers speak for themselves.

As Craig mentioned, our private equity portfolio was up 24% in just the last 12 months or over $8 billion. The breadth of the performance is interesting. Our public investments were up 20% and our privates were up 26%, outpacing the MSCI World by 300 and 900 basis points respectively. We also feel good about some other specifics, in particular, our European private equity portfolio, were despite the uncertain macro backdrop, our funds appreciated by nearly 50% in 2012.

Additionally, we are pleased with the performance in the balance sheet, which increased 24% last year and generated over $1.1 billion of investment income. The second goal was monetizing investments when it is sensible to do so. And our private equity teams have been very effective in generating distributions.

Last year, we participated in over 20 liquidity events, returning over $9 billion of cash to our fund investors, and in the fourth quarter alone we had over $3 billion of realizations in our private equity portfolio. We continue to focus on filling netting holes, and increasing the cash earnings of the firm. The third goal, sourcing attractive new investments, we completed $7 billion of private markets transactions in 2012, and invested over $3 billion of equity from our funds and co-invest vehicles.

While below 2011 levels, if you can trust capital deployed with the amount of capital we’ve returned in 2012, we distributed in excess of $6 billion of net positive cash back to our fund investors. The fourth goal was monetizing more of the content we generate. And over the last year, we’ve built out adjacent capabilities that allow us to do this.

We’re pursuing this strategy both organically and through acquisitions. On the organic front, last summer, we announced the formation of a capital markets joint venture with Stone Point, now called MerchCap Solutions, which is focused on servicing midmarket and sponsor-backed companies.

We recently announced the addition of the Canada Pension Plan Investment Board as a joint venture partner. In addition to the $300 million of capital previously committed by a Stone Point and KKR, CPPIB credit will commit an additional $50 million of equity to MerchCap to support its business. And has initially earmarked up to $2 billion of sidecar investment capital.

The expansion of our retail platform is another example of our organic growth efforts. From the launch of our 40X funds at the end of 2012, to CCT or BDC that is approaching $1 billion of capital. We have continued to increase the avenue through which we can partner with our clients and invest behind our ideas.

In addition, we’ve begun pursuing strategic acquisitions and investments. On that front, our hedge fund business has been the initial focus. As Bill mentioned, we’ve integrated Prisma into our organization and their results are now included in our financials. We also recently announced the acquisition of a 25% stake in Nephila, a leading investment manager specializing in reinsurance risk.

Our balance sheet affords us the flexibility to pursuit these inorganic growth opportunities, which we view as a good way to deploy capital at a high return. The fifth goal was earning the trust of new investors. We made a meaningful investment in distribution around the world for our client and partner group and while we still have room for growth we are pleased with the increase in our LP base last year.

At the end of 2011, we had approximately 380 limited partners. As of December 31, that number was over 450, an increase of about 20% in just 12 months time. And these figures exclude an additional 110 relationships coming from Prisma. The diversification of our investor base has also positively impacted our fundraising. We raised $11 billion of new capital for our investment vehicles in 2012 across a variety of strategies.

Regarding our fund rates for Asia II, we had documentation in hand on over 5 billion of commitments and are confident we will achieve the hard cap of $6 billion with the final close in the next 30 days to 60 days. However, we won’t see the impact of Asia II in our financial statements and our AUM figures so we finished investing Asia I and actually turn on the Asia II Fund.

We also have good news on NAXI, we have now closed on or will have hard-circled approximately $7.5 billion of capital and we have also extended the fundraising period for NAXI to the second half of 2013. We said last quarter that we ultimately think the fund will be between $7 billion and $8 billion. Given the extended fundraising timeline and the line of sight we have today we feel very comfortable about hitting the high end of that range.

The sixth goal was creating more scale in the newer businesses, we’ve created. When we reflect on last year, there are few key examples of the progress we’ve made on this front. The Asia II fund raiser that I just mentioned is one of them. The AUM associated with this fund is currently excluded from our financials and when this capital comes online, it will nearly double the AUM, in our Asian private equity business. A similar trend is also true of our non-private equity businesses in aggregate, where we have grown for managing 18 billion of AUM at the end of 2011, just 30 billion at the end of 2012. The increase scale in our newer businesses help drive record AUM and fee paying AUM.

So how do we track this collective progress for all us as shareholders? Ultimately the distribution to unitholders should reflect our firm’s success. When you look at the growth of this metric for us over the last year, it tells a good story. Our distribution increased 65% in 2012 to a $1.22 per share. We also think about the return on capital we are generating as another measure of how we are doing. We generated $1 billion of fee and carry-earnings in 2012.

In addition, our balance sheet generated $1.1 billion of earnings or 24% return, including $900 million of realized gains. In total this is $2.1 billion of earnings on an average $6.3 billion of book value or a 34% return on average equity for the year. In summary, when we look at our business today. Our portfolio is performing, our cash distributions are starting to flow, and our balance sheet is generating attractive returns, all of which help create equity value for investors and fellow shareholders. We appreciate you joining our call and we are happy to take any questions.

Question-and-answer session

Operator

Thank you. (Operator Instructions) Our first question comes from Bill Katz of Citigroup. Please go ahead with your question.

William R. Katz – Citigroup

Okay, thank you very much. And thank you very much for the very concise update. Really appreciate your efficiency. When you look at the Prisma, it’s only been for a short period of time and Scott, you mentioned you still have another 110 L.P. relationships if you will. Could you talk specifically about the opportunities set that you are see in front of you for that? And then the broader question on this topic is, as you look at the $8 billion of, sort of capital still to be invested between Asia II and few of the other funds, how do you think about the timing of that roll-through, if you will?

Scott Nuttall

Thanks Bill. It’s Scott. On the first, look, I think we’re very excited about the Prisma transaction closing, as you know it closed at the beginning of October. The team has done a great job generating investment performance, had a very strong year last year, and particularly strong fourth quarter that allowed them to scale capital. So, although they were only part of the KKR family for the fourth quarter for the year in total, they increased their overall assets quite meaningfully for about $7.3 billion to about $8.5 billion and had very good flows in Q4.

In terms of the opportunities that we see, I think there’s several different ways to win here. One is just continuing to grow organically. And what we are doing is working very closely with the Prisma team and introducing them to the KKR L.P.s and trying to make sure that we can broaden their investor base, which should hopefully allow us to attract new capital in the businesses they are already in.

The second thing that we are doing is thinking about new products that we could launch together and we have a variety of initiatives in the works on that front. And then the third is thinking about adjacent businesses that we can go into together and thinking about different ways to build out the hedge fund platform whether that’s buying stakes or thinking about the (inaudible) business. A lot of those ideas are in the formative stages, but we do think by putting what they do and with their intellectual capital together with ours, there’s a lot of interesting ways to grow the platform. So, we’re quite excited about where we can take the business.

In terms of your second question in capital coming online, Bill, do you want to take that?

William J. Janetschek

Sure. Bill, that’s probably easiest, if you go to page 19 which it lays out our fund table. And so just real quickly going through the fund table, when you’re talking about uncalled commitments, obviously we just closed the NAXI fund and that went live on October 1. And so, as of December 31, where we’re talking about only $6.3 billion being raised, that’s not taking to account any capital that will be raised in between the $6.3 billion and $8 billion Scotty mentioned earlier, that $6 billion which is going to be invested over a six-year period.

China growth, we have until the end of 16 to invest. Europe, three; we have until March of next year to invest that in sales. After we do the final fundraising for NAXI, we will turn our attention at the end of this year or really the end of the second half of this year to Europe four. And then Asia, we’ve got about $800 million and that’s pre any sort of reserve we would set up and we expect that Asia will roll off the investment period and this is a post-investment period either in the second quarter or for sure in the third quarter when the Asia investment period ends on June 30.

Scott Nuttall

Yes, I think, Bill just add on to that. If you think about the $8 billion of capital Bill mentioned, that’s kind of been raised but not yet turned on. The biggest piece of that is going to be Asia II, which to Bill’s comment, I would expect return on later this year. And then the other pieces of it, it really varies across different strategies. And so I think it’s fair to say some of those will be later this year, some may go into next. But think about it in the next couple of years, it’s a likely time frame.

William R. Katz – Citigroup

Yeah. Just one final question from me; given the debt raise, and given the return profile coming off the balance sheet, where are you in terms of having seeded some of the new businesses within the public and capital markets businesses, such that as you continue to monetize anything on the balance sheet, that could amplify the distribution story?

Scott Nuttall

I think we’ve actually seen quite a few new businesses, as you know, and the way that we think about the overall balance sheet today, so we ended the quarter with about $1.5 billion of cash give or take. And then we did the debt deal on top of that, but we are also making as we just laid out a quite large distribution. So if you think about $0.70 for the fourth quarter, that’s a better part of $500 million of distribution that will get paid out here in the near-term.

So as we think about the overall amount of cash we generated and paid out to the shareholders last year, if you translate that $22 into actual dollars out of the door, it’s about $850 million of cash distributions that we paid for 2012. And so we are actually paying out quite a bit of capital, but as you know we are also committed to several of our existing strategies.

And if you look at the funds that we are committed to and the strategies that we’ve committed to like real estate, our energy business etcetera, that’s about $1 billion in a quarter of commitments that we have in aggregate across those strategies. So, while I don’t think that there is anything like a real estate $300 million type commitment coming in the near-term. We do see lots of ways to put this balance sheet to work, and as we have been seeding more liquid funds and thinking about ways to grow these other businesses.

I think we will keep using the balance sheet opportunistically, but the way I think about it though is we actually paid out about 60% of our distributable earnings in 2012. And then on top of that we did the Prisma transaction, we’ve now announced Nephila transaction which is just closed. So we’re using the balance sheet not only to grow things organically but also inorganically. So we’re going to continue to think about the way we talk about in the past as where we can get the most attractive return on capital for the balance sheet and so far we like what we’ve been able to do with it. If that answer changes where we visit it?

William R. Katz – Citigroup

Okay thank guys, appreciate the taking all my questions.

William J. Janetschek

Thank Bill.

Scott Nuttall

Take care, Bill.

Operator

Our next question comes from Matt Kelley of Morgan Stanley. Please go ahead with your questions.

Matthew Kelley – Morgan Stanley

Good morning guys, thanks for taking my question. Just wanted to follow up on the recent deals for Prisma and Nephila and following up on what Bill was asking. As you think about redeploying the investments on your balance sheet over time, should we thinking broadly that you are looking to grow the fee side of that business with also an attractive return profile? But is this along the lines of what you are thinking longer term, that the hedge funds platform is one that you want to build significantly from here?

Scott Nuttall

Hey, Matt it’s Scott. I think the quick answer is yes. We do like the hedge fund platform as you know we have been investing pretty meaningfully in that area and I think it’s going to be in a few different manners. One is building out direct hedge fund businesses like we have with the KES team.

Two of our fund-to-funds platform, which I just talk about in the answer to Bill’s question, Prisma where we see a lot of opportunity to scale it. And I think we can use balance sheet to create new products there and continue to build that business. And then three are going to be thinks like Nephila, where we could stakes in existing hedge funds, plug them in part into our relationships and hopefully help them scale.

So I think there is a lots of other ways to grow that business and will do it both organically and inorganically. The other thing noted, we are doing is looking not just in hedge fund base were looking across our different businesses, add potential acquisition opportunities, and we’ll see, we’re going to be opportunistic and start to find a good fit, but we are looking at building these businesses, both organically and inorganically.

And so, we have a concerted effort on that front. It’s just hard to predict if anything is going to happen and when and where. But in addition to all those uses of capital, we’re also using our balance sheet to scale our capital markets business. I mentioned in the remarks about our joint venture with Stone Point and CPPIB and we see opportunities to scale there as well in this balance sheet to do that.

So the answer to the hedge fund growth question is yes, but it’s also much broader than just the hedge fund business.

Matthew Kelley – Morgan Stanley

Okay, great. And then, Scott, last quarter you gave some good color on the fundraising dynamics and LP demand for your Asian Fund and NAXI. So, just, given the comments of Asian Fund over $5 billion, NAXI, you’re going to hit up or end of your prior quarter guidance. Has anything changed versus last quarter in terms of what LPs are demanding, are you seeing now that Asian Fund across the $5 billion number are you seeing more LPs one is NAXI fund as a result and that place in your decision to extend the fundraising timetable.

Henry R. Kravis

I think overall, this is more of a stable backdrop and this is generally more momentum around fundraising. And if you think about what we said is it relates to private equity, our funds were up 24% last year and we gave back 9 billion in cash. And if you’re an investor in that asset class both of those are good numbers. And so I think that overall performance is helping quite a bit.

So I think sure, ramping up the Asia fundraise will help a bit on the NAXI front, but if you look at the numbers and get more granular, our 2006 fund which is the predecessor to NAXI was up 23% last year. So we’ve had good performance, very good performance in our North American private equity business, which I think has its own right is helping to drive more interest in that fund. And that’s what we see in the capital scale since our last call and, yes, our hope is that will allow us to continue to grow the fund from here.

Matthew Kelley – Morgan Stanley

And last one from me and then I’ll jump back in. Just on the Asian Fund opportunities you are seeing for capital deployment over there, I’m assuming broad-based, but anything, any few specifics you can point to where you see really attractive opportunities? Thanks, guys.

Henry R. Kravis

Sure, I think it’s pretty broad-based, you said it well. I mean we’re seeing opportunities in markets like Vietnam, where we just made an add-on investment in our Masan consumer business. We are looking at opportunities in Japan, Korea, and Australia on more than control buyout front. And then we continue to be active looking at minority and more growth equity investments in markets like India and China. So it’s pretty broad-based.

Operator

Our next question comes from Patrick Davitt with Autonomous Research. Please go ahead with your question.

Patrick Davitt – Autonomous Research USA

Good morning, guys.

Henry R. Kravis

Good morning.

Patrick Davitt

There have been a lot of reports about difficulty of both investing and exciting in China and, given your position of strength there, can you speak to what you are experiencing from that standpoint? Particularly as you talked about the opportunities for investing in places outside of there.

Scott Nuttall

Sure, thanks, Patrick. It’s Scott, I’ll take it. In terms of investing in, we have actually made a number of investments in China in a variety of different types of business. And our focus continues to be the same, which is investing in business that really benefit from the growth of the consumer and the rise of the middle-class. And so that that continues to be the case and we’ve made, I think something like 14 investments in that markets, so it’s been a very active market for us. And we’ve also been able to monetize. So we take in companies like Modern Dairy and Far Eastern Leasing Public and have been able to actually access the public markets and start to sell down our position. It is a very local market. And so we have a large team of folks that grew up in China, that local expertise, we have a team in Beijing on the ground is absolutely critical to getting this right.

So to us that’s a real secret to the success as people with those local relationships, know with whom to partner, know to whom to avoid, and if you can do that well, you can also create a path to exit. And so that’s really been our success in China. And frankly, we’re applying the same formula across the region. We now have seven offices in Asia, including the newly opened office in Singapore, and we think that approach of marrying the local talent with a broader KKR capabilities works well in that region.

Patrick Davitt – Autonomous Research USA

Okay, thanks. And then on Prisma, you mentioned they had net flows in the fourth quarter, which is good to hear. But it’s widely known the traditional hedge fund-to-fund business has generally been posting outflows and weakness. Can you speak a little bit about how Prisma’s style differentiated from more traditional hedge fund to fund that have been kind of been in decline over the last few years?

William J. Janetschek

Sure. I think you’re right. I mean I think the fund-to-fund market is in the period of change. I mean when we did our work on the industry in funds, something like 1,900 funds. I mean it’s a very large number.

Patrick Davitt – Autonomous Research USA

Okay.

William J. Janetschek

It’s about 350 million of AUM on average; and that industry is going to continue to consolidate, and we think there’s going to be a few winners, and frankly, put reasonably a large number of losers. What we really like about the Prisma approach is we think it fits well with what investors want. And really Prisma built its business by focusing on specialized customer accounts with institutional investors in the first instance. And we find that CIOs want to have more of a separate account approach. They want to have an investment in a specialized manager as opposed to going into multi-strat. And so I think that was really the beginning of Prisma’s success as they identified a need in the market, and then they created a business focused on specialized managers into separate accounts.

And then really frankly what happened from there is they had very strong growth. And so the combination of the offering that was attractive to the market plus the performance has allowed them to scale. And as we look at kind of plugging them now into our boarder relationships that we think it’s resonating well, the KKR’s historic investors, which is one of the reasons that we’re optimistic that we can continue to grow from here, and frankly take share in a market that can flux.

And when you think about it, take for example of family office, it really don’t have the capability to identify and select 15, 20 GP, and by going through Prisma, although there is a reduction in performance because of the double layer of fees, what they end up doing is do a quite a good job, picking the right managers and from a risk perspective they monitor these GPs on a weekly basis. So you’re actually able to raise halfway decent amount of capital from people that want to invest in its space, both don’t really have the capability to overseas that investment.

Patrick Davitt – Autonomous Research USA

Okay. Thanks a lot, guys.

Scott Nuttall

Thank you.

Operator

Our next question comes from Michael Kim of Sandler O’Neill. Please go ahead with your question.

Michael Kim – Sandler O’Neill & Partners L.P.

Hi guys, good morning. First, can you talk a bit more about what are you seeing in terms of exit opportunities more specifically across IPO strategic sales, secondary offerings and kind of dividend as well? Maybe where you see the biggest opportunities for realizations going forward.

William J. Janetschek

When you talk about exits really, and you hit the three major ones, the secondary’s, IPOs and strategics, when you think about what we did in 2012, we had significant portfolio, that it already gone public, and so we entered into several secondary transactions with positions that we already held. So it would be likes of ATA and Dollar General et cetera. What was quite a bit surprising to us is the activity in the strategic area. It’s been pretty quite, however when you think about what happened with KKR in 2012, we were able to actually exit several investments through the strategic route. One in particular was the Boots transaction.

As it relates to the IPO arena, as you probably know we haven’t taken a company public of size in the past year or so. However, as the capital markets arena picks up there’s always going to be an opportunity for us to take companies public as you probably know we have a wide breadth of private portfolio companies. They number in excess of 80 companies and there will be an opportunity at certain times, to take those companies public.

Scott Nuttall

The other thing I would add to that is with the capital market, with that capital markets as receptive as they are, we also did a dividend deal, for CapEx portion of that long ago. So there has been some activity on across all the different funds that you mentioned but as Bill said a lot of what we have been doing is just showing down our big public positions, and that’s been complimented by a couple of big strategic opportunities as well.

Michael Kim – Sandler O’Neill & Partners L.P.

Okay, and then second, can you just kind of walk through the different moving parts as it relates to the AU change in the public market segments, excluding Prisma can you talk about the impacts from maybe the special situations fund as well as kind of the ongoing fund redemptions were those primarily a function of rebalancing, and kind of where you think you are in that cycle. Thanks.

Scott Nuttall

You’re referring to page 18. So in public markets we actually raised $1.8 billion during this quarter alone, and that came from a combination of various platforms. So we actually raised $400 million CLO for KFN of which we’re entitled to be on a portion of that. And so that’s why you will see that the Fee paying AUM is a little less than the AUM.

We also raised $200 million for separately managed accounts, you mentioned Prisma and there from acquisition and at the end of the year Prisma was able to raise about $400 million. CCT that Scott mentioned earlier of BDC raised about $200 million. And then we had a final closing comment and thought, and also first close on special-6 sits which amounted to about $500 million. So that total is $1.8 billion that you referring to.

On the distribution side we did have some redemption, a 150 from Prisma and to be honest with you the biggest number there is really the reduction in CLOs and KFN, which amounted to about $250 million. And there is nothing really to report there I just call it CLO run down plus and rebalancing from a couple investors.

Michael Kim – Sandler O’Neill & Partners L.P.

Got it that’s helpful thanks for taking my questions.

Scott Nuttall

Thank you.

Operator

Our next question comes from Howard Chen of Credit Suisse. Please go ahead with your question.

Howard Chen – Credit Suisse

Hi, good morning everyone.

Scott Nuttall

Good morning.

Howard Chen - Credit Suisse

Following up on that last question or two go and, you’ve been really extremely active on the realization front for your LPs, but if you take step back Scott and you look across your entire portfolio of investments, can you give us some thoughts and maybe how you think about the next leg of what’s getting closer to harvest period?

Scott Nuttall

Sure, I would say first that those lines of side, we can provide with that already public. So, 25% of our investments on our underlying private equity funds are liquid. And so we still hold big stakes in a number of large companies, where we’ve been exiting investments so far and that was a lot of activity in the latter half of last year in particular. So big companies like HCA, Dollar General, Nielsen and NXP. I think we continue to have meaningful positions. And we have been kind of just systematically selling down those positions forward.

So, that was where a lot of that came from and in terms of near-term I think that’s the place we could give best visibility, but we also really think there is value to be created in those companies. So just to give you an example in January, our public portfolio was up 11%, kind of well in excess of the public markets. So they are still performing well. So the combination of continuing the benefit from that performance is selling those down.

The strategic exit front it’s very hard to predict, when it happens it tends to be sizeable, but it’s going to be lumpy and hard to predict quarter-to-quarter. Frankly one of the things we look at as the portfolio matures and you know that a lot of our portfolios really starting to get to the more mature phase. We get in a position where we feel like the value creation job has been largely done in terms what we want to do with the business. It gets closer to have being in a position, where we have an opportunity to consider a strategic sale.

And as the portfolio overall matures, we think we’re getting closer to a period of time, where we can do that. Other than that we’re going to be pretty opportunistic, the dividend deals from time to time. And we’ll consider other ways to monetize portions of businesses but the big two I pointed to you at the sell down of the publics and then strategic sales.

William J. Janetschek

Just to put some numbers on that. Scott mentioned about 25% of our portfolio on private equity is public, that’s about $9 billion worth of value that we could exit in the near future. And in addition, you might have noticed that we actually did do secondary sale in the first quarter of 2013, the NXP and there we sold down approximately 20% of our remaining position.

Scott Nuttall

And I’ll describe the one other follow-up on that, which ties into that as a performance of the portfolio. We have at times given the performance within the portfolio that number is actually remain pretty consistent. So as we look over four quarters of this year, first quarter from an EBITDA standpoint, trailing EBITDA growth that was up 8%, second quarter 9%, third quarter 9%, and this quarter again at about 8%. So it’s frankly been helpful to see a consistent trend if you will from that standpoint.

Howard Chen – Credit Suisse

Great, thanks for that comprehensive answer. Scott, you know the last quarter that if the firm was active in monetizing investments, you might see some of those funds come back to you with respect to NAXI or issues both are as they finish up. Where are you in those follow-up conversations, and how are they going?

Scott Nuttall

I’d say it’s going well. A part of the reason that Asia frankly has moved as quickly as it has in performance of the portfolio and some of the cash we’ve been given back in that portfolio. And also frankly we’ve seen a bit of deceleration on the NAXI fund raising fronts since our last as well. And it’s hard to pinpoint precisely why, Howard, but I would tell you, it really helps when your funds are up 24 plus percent and you are giving back a lot of cash, and that’s certainly lends credence to our overall outlook for cash that we can get back from those funds and our overall predicated outcome in terms of multiple of invested capital and IRR that we’re discussing with these LTEs. And I think that just create the backdrop in which, LPs potentially, you’re going to give us more capital for the vehicle. And also as I mentioned, we are now approximately 2.5 and we go little bit more time hit a raise money and frankly I think if you had asked me quarter ago I wouldn’t have predict it will be as far long as we are today.

Howard Chen – Credit Suisse

Thanks. And then finally for me, in 2012 I think your deployment levels were may be half that of 2011. So when you look at this backdrop of rallying equity market, continued tight credit spreads, how are you thinking about in overall deployment in 2013 and are there any incremental areas of focus or less focus? Thanks.

Scott Nuttall

Sure. You really can’t look at a year-to-year or quarter-to-quarter. So if you look at 2011 and 2012 together, I think we did something like $36 billion worth of transactions across the tighter markets and the more opportunistic credit accounts. So that’s a reasonably large number in levels little bit.

In terms of the private equity environment, I think we are seeing more general stability in the economies globally. The credit markets are wide open and financing is quite low across today. And the real constraint on deals is how much equity that you can raise for a transaction. It is hard to predict how much is going to happen in 2013. What I can give you from a color standpoint is that our investment committees in our private equity business are actually quite busy.

And frankly we are seeing a level of dialog and activity that’s increased pretty meaningfully over the course of the last two to three months. And so that needs us to be over optimistic that there will be some interesting opportunities for deployment this year.

In our other businesses whether its real assets businesses or mezzanine, direct lending, special situations, I think the answer is a little bit different business-to-business and opportunistic credit, given the strength of the credit markets in the U.S. We’re frankly more busy across those in special sits and direct lending in the Europe than we are in the U.S. today, but we’re seeing some could activity in that part of the world. Our real assets businesses continue to be quite busy from a pipeline standpoint, as that our real estate effort will continue to look at a variety of different opportunities.

So overall, I would say we’re pretty constructive on deployment for this year. And the good news is when there’s stability as a backdrop, companies are more likely to want to do something. And so that I think helps overall, and as I mentioned that there is just a matter of finding some interesting things to invest in.

Howard Chen – Credit Suisse

Great. thanks for taking all the questions.

William J. Janetschek

Thank you.

Operator

Our next question comes from Michael Carrier of Bank of America Merrill Lynch. Please go ahead with your question.

Michael Carrier – Bank of America/Merrill Lynch

Hi, thanks guys. You gave some color on Prisma, and I’m just, how you guys look at the fund-to-funds, industry in the environment? Just when you look at Nephila, it seems like the reinsurance business, there is a lot of interest particularly on the outside, and assume the demands coming from the institutional side. But when you guys look at that market or that opportunity like what’s changing there like, what’s taking place, where you see that as a newer opportunity for KKR and obviously for Nephila?

Scott Nuttall

Thanks, Michael it’s Scott. I’ll take it. Just my way of background, we’ve known the Nephila team for about 15 years. it was actually Willis Asset Management. When we own a company called Willis Corroon, which is a deal we did in 1998. So we’ve known them for a longtime and have followed their success over a long period of time. And I will tell you that they have really been the pioneers in marrying the opportunities in the reinsurance market with investment management product that is appealing for institutional investors.

And I tell you, what we see going on there is that what they’ve been able to do is create a product that is in effect, it’s like a one to three year lockup hedge fund type product that institutional investors can invest in that critically generates returns that are not correlated with the public markets. And as we all see in the last few years, just about every investment product has to be correlated with each other, especially as we went through the downturn, and if you look at the correlation of their results with those of the public market, it’s virtually nil.

And the reason for that obviously is where the wind blows and the earth shakes doesn’t have anything to do with what the S&P does that week. And so what they’ve been able to do is create an investment product that’s pretty unique, that’s non-correlated, and that’s meeting a need that the market is quite interested in. We think that will continue and they are continuing to evolve the offering, so that they can scale their business.

The other thing that’s going on however is we’ve also seen a compression in the trading values of the traditional insurance and reinsurance players. And so from an access to capital standpoint, we think it will provide an opportunity for players like Nephila to fill a need when there is an interesting underwriting opportunities. And so what they do, they don’t actually rely on our rating like normal insurance or reinsurance company because they are cash collateralizing the risk.

And so that allows them to go places that the larger kind of rating agency constrained insures and reinsures cannot. And so that’s allowing them to create a broader market and find interesting risk award because the supply demand dynamic there is pretty attractive. So happy to spend more time line, but may be that gives you some top of the waves answers. They have done a very good job in growing the business and we’re hopeful that we can help accelerate that growth.

Michael Carrier – Bank of America/Merrill Lynch

Okay, yeah, That was helpful. And then, two markets. There's some news on your front and then also just what is going on in the country. But in Brazil, is any update there? And in Japan I think in the past Henry said that it tends to be a market where there could be good potential, but a lot of things would have to change. It seems like over the last 3 to 6 months, at least the market is hopeful, that things are changing. We will see how it plays out. But I guess any change in thought or any renewed interest on either market?

Scott Nuttall

Well in Brazil, I think our interest is quite high. We’ve opened an office in São Paulo. We are beginning to step up that office and we brought on the senior advisor and we hired someone to head up our South American effort, and then we’ve kind of moved an existing KKR executive down. So we’re starting to build the presence. It is relative nascent, but what we’re also doing is rotating some of our private equity teams through the region to look for opportunities and partner with the local team. So it’s a little bit early to give you too much commentary but we’re pretty excited about what we can build in South America over time.

In Japan, look I’d say we’re ever optimistic because we see a significant amount of opportunity there. We continue to have a meaningful presence in Tokyo and a team on the ground, looking at opportunities. I would say we’re starting to see things change. I wouldn’t say that they’ve completely changed. But we’ve got more interesting opportunities that we’re looking at; our first investment there that we made not that long ago is performing quite well.

And I’d say that market is increasingly receptive to the types of investment that we make. And so we’re optimistic. I don’t think it’s going meaningfully change kind of the deployment rate for 2013, but we’re big believers that over time, there’s going to be a lot of interesting things to do in Japan.

William J. Janetschek

And Michael as it relates to South America, we have the ability on our NAXI Fund to deploy capital out of that fund in two South America and in that region, but we are building up a team as Scott mentioned. And so we will have four people down there full time over the next month or so. And the whole idea is that over time, we’re optimistic that we could be able raise capital dedicated just to that particular region.

Michael Carrier – Bank of America/Merrill Lynch

Okay, thanks. That’s helpful. And just last one, Scott, you mentioned just when you get the question on the balance sheet and you know whether to hold on to that capital and continue to deploy it or pay it out in distribution. You mentioned the return and a 30% plus return in equity seems pretty attractive in this environment. When you look longer term, where does that hurdle have to be, meaning at some point in your balance you get so big you build out and then you might say, okay, the return is less than 12%, less than 15%, that that option of your distributing some of that is going to start to pick up. Just wanted to get your thoughts on that.

William J. Janetschek

Well, as Scott mentioned, this is Bill, the return of the balance sheet was quite high in 2012. We don’t have a very specific target as to what we need to earn on our balance sheet. However, it would be probably somewhere in the 20% ZIP code. But keep in mind that we, as KKR executives, go on about 65% of the underlying securities of KKR. And so we’ve got just as much of investing interest and making sure that that balance sheet is working hard for all of us as our unitholders.

Michael Carrier – Bank of America/Merrill Lynch

Okay, thanks guys.

Scott Nuttall

Yeah, the only other comment I’d make, as if you actually look at it, I think there is a little bit of a misunderstanding about how the balance sheet is working for all of us because as I mentioned, we actually made a meaningful distribution of the balance sheet last year. And if you go through it, we did pay out kind of close to 40% of the overall income the balance sheet generated in our current distribution policy. So I think there is a kind of a belief that we don’t pay any of that out, a big chuck of that $850 million of distributions for 2012 that I referenced actually came from the balance sheet earnings. But I agree with that. We’re very focused on this. We track the return on every dollar that we deploy of the balance sheet. And the good news is as we sit here today, we see a lot of opportunities to generate attractive returns on that capital.

Michael Carrier – Bank of America/Merrill Lynch

Okay, thanks guys.

Scott Nuttall

Thank you.

Operator

Our next question comes from Roger Freeman of Barclays. Please go ahead with your question.

Roger A. Freeman – Barclays Capital

Hi, good morning. When you went through your new clients you’ve taken on over the last year, it’s a nice pretty impressive number. It looks like about 120 over a third. Can you classify a little bit what types of clients those are? And I’m wondering how many of those came into new products, new funds or that you didn’t have the year before as opposed to sort of ramped up sales efforts that you pass them in.

Scott Nuttall

Sure, Roger. It’s Scott. To give you as a few statistics that might be helpful. I would say that where they are coming from is pretty broad based. So there is state pension plans. There are insurance companies, sovereign wealth funds, and family offices and high net worth individuals. And so if you look kind of at where they’re coming from it’s a fairly broad based answer to the first part of your question.

In terms of what they are investing in that’s also pretty broad based. And just to give you a little bit a color, it’s over our Asia Fund. In terms of capital that we closed on to date, 42% of the LPs in that fund are actually new investors to KKR. And for the North American Fund, the NAXI Fund, so far it’s a 24% of the LPs, our new investors to the firm. But also we’re attracting new investors to our direct lending platform, to our energy businesses, to our hedge fund businesses. So it is pretty broad gauged, which is great to see.

And obviously what we’re doing as we’re out talking with our marketing team at CPPIB, is we’re out talking to them about every things KKR is doing. And so the nice thing is not that we have a broader product set to talk to them about. We have different ways for people who start to trust us. And then as we’ve discussed, we are focused on then building a relationship when we have covered the trust to certain different things, and that’s why we talk about the cross-sell statistics, which continue to trend nicely.

Roger A. Freeman – Barclays Capital

Okay, now that’s helpful. Thanks. And then, I guess, on retail can you just remind me sort of longer term what the aspirations there are in terms of relative size importance within KKR? And whether how you plan to or think you need to sort of attack distribution? Is there ever a point where you need to look at acquiring a platform? Do you have a traditional manager that has us got a wide distribution arm?

Scott Nuttall

Sure. It’s good question. Look I think, the quick answer on retail is we are relatively new to the effort, but let me just walk through how we think about it. So as you know, we kind of started with an institutional effort, and we’ve been building that up and growing that team pretty meaningfully over the last few years. And then probably a couple of years ago, we started a high net worth direct calling effort which with a very few number of people we’ve been able to actually generate a meaningful amount of capital and new relationships to the firm. So that’s worked well.

And the retail effort is the newest of the three. And really our retail effort to date has broken down into a couple of different areas, the first is that the BDC that I mentioned, the corporate capital trust or CCT where we have a partnership with CNL where we’re actually placing this BDC privately that has been the first foray into the individual investor market for us and that’s been a good experience to date. I mentioned in the prepared remarks that’s about a $1 billion of fee paying assets so far and it continues to grow. And that is really for our, over time our direct lending and our mezzanine businesses and help fund those business on a longer term basis.

The two new more recent efforts have been our highly yield fund and then our more liquid special situations fund, which we initially launched with Schwab. It is very early days and it’s hard to predict exactly what that’s going to be. We’re keeping expectations internally pretty low because we’re still learning this market and just building relationships in this RIA space.

And in terms of your questions about distribution and how we think about it, I think the goal is to probably to partner as opposed to acquire or combine with the traditional manager at least in the near term. And so we’re looking to partner with others maybe access their distribution to be able to scale those business as opposed to building a very large team, or certainly going to acquire a very large retail platform, that’s the initial focus. But our expectations for this year is to get these products established and learn this market and I don’t think it’s going to be a big part of where we raise capital in 2013.

Roger A. Freeman – Barclays Capital

Okay, all right, thanks. And maybe just lastly, just on the long and short equity fund, just wondering with sort of the improved market environment and seemingly greater interest in hedge funds, whether that may you bring, actually bring that to the market this year?

Scott Nuttall

I think we will, I think that a very good end of 2012 and a strong 2012 overall, and we’re off to a very strong start in 2013. And so the quick answer is that we are going to be out talking to investors again over the course of the first half and talking to them about the track record now that we’ve got 18 months of results.

Roger A. Freeman – Barclays Capital

Okay, great. Thanks a lot.

Scott Nuttall

Thank you.

Operator

Your next question comes from Chris Kotowski with Oppenheimer. Please go ahead with your question.

Chris Kotowski – Oppenheimer

Good morning. I wanted to kind of square the circle between you said there was $8 billion committed that would flow into AUM, four from Asia, one from Texas and three from other. And then subsequently you said that you thought Asia would come at $6 billion, so presumably and that NAXI would close at $8 billion versus the $6.3 billion that it is currently at. So presumably, if all that worked out as you’d expect, then the total inflow to feepaying AUM would not be $8 billion, it would be $11.7 billion or thereabouts.

William J. Janetschek

That’s absolutely right, Chris. And so right now, we’ve got nine documents for Asia II at $4 billion and so when I quoted the $8 billion, that’s the only number I mentioned. However, we’re very optimistic that we’ll go up to that $6 billion. And obviously once that fund turns on, you will see that full six…

Chris Kotowski – Oppenheimer

Okay.

William J. Janetschek

Go up in AUM as fee paying AUM.

Chris Kotowski – Oppenheimer

Okay, then the next question I had was on the distribution. It was my understanding that that like the $119 million, I’m looking at page 25 of the press release. It was my understanding that that was primarily thought of as a tax distribution to offset or to help pay for the gains that would flow through on folks K-1s as they came in. And then Scott just said it wasn’t. So I was confused on that.

William J. Janetschek

This is Bill. I’m not sure of what Scott said, but that number is very specific to taxes that may be paid to investors that are taxable investors. And so when you look at what the earnings are on the balance sheet, you figure out what the taxability of that is and ballpark. We distribute out about 30% of that number. And so one could at it, if you are a taxable investor that a good portion of that is got to go to you and you got to actually have to use those funds to pay taxes. However, if you are a tax-exempt, you could look at that as just being a full distribution, look the balance sheet, paid directly to you as a unitholder.

Chris Kotowski – Oppenheimer

Right, got it. And then lastly, I was just wondering on a more philosophical plane, I mean, one of KKR’s hallmarks has been the megadeals are going all the way back to RJR, but certainly also HCA and First Data. And I am wondering does the smaller size of this fund constrain that strategy?

Scott Nuttall

Hey, Chris, it’s Scott. This I think in terms of level setting that we have done some large transactions in our history, but and they tend to get quite a bit of media attention, but they have actually been some less than 10% of the transactions that we’ve done kind of in excess of $5 billion. But quickly what I would tell you is as we’ve talked about in the past, the build out of our capital markets business was really started in part, so that we could speak for more equity than that which we could put into our funds or into our balance sheet, so that we could sophisticate excess equity to third parties.

And that’s worked quite well and we built that business up quite a bit over the course of last several years. So when we find an investment opportunity that we like that requires more capital than that which we can speak for. We’ll partner with our capital markets colleagues and then place back capital with third parties. So we do have an ability to speak for more. So there is a large transaction. We think we can still do it, and still lead it, despite NAXI being smaller than the 2006 fund.

Chris Kotowski – Oppenheimer

Okay.

William J. Janetschek

One thing to keep in mind is the size of the fund really doesn’t dedicate investment page. I mean we’re going to see investments come in and we’re going to jump on the opportunity if it’s there. The one thing to keep in mind is that the 2006 fund was a bigger fund, but that investment period was over six year period. If in fact, we see the opportunities in NAXI, it could very well be that we invest all of that capital in three or four years and then we’re out raising the NAXI North America fund sooner than historically.

Chris Kotowski – Oppenheimer

Okay. Fair enough. And as a follow-up to that, like for the Texas Teachers program and the syndicated funds, would we tend to see that when those are deployed? I am looking at page 24 of your press releases. Would we see that come up under the coinvestment vehicles? Is that…

William J. Janetschek

When the Texas Teachers, a billion that I mentioned actually gets dedicated to a particular fund or strategy. At that moment in time, it will come online in AUM and fee paying AUM because we will be collecting a fee and then, we will be entitled to carry generation on that asset.

Scott Nuttall

But I think the answer is that it depends on the where capital goes, so…

Chris Kotowski – Oppenheimer

Okay.

Scott Nuttall

If it gets committed to an energy strategy, Chris, it would show up in the energy line.

Chris Kotowski – Oppenheimer

Okay.

Scott Nuttall

If it gets coinvested alongside of fund that we would get, it would show up in the coinvested line. And then in terms of the non-Texas Teachers money that gets turned on when it’s actually invested. That really varies. There’s some of that in our energy strategy that some in our credit strategies. And so that will more likely to show up in specific line items of those businesses.

Chris Kotowski – Oppenheimer

All right, so it will be all over the place. We can’t track it really. Okay, all right. Thank you. That’s it for me.

Scott Nuttall

Thank you.

Operator

Our next question comes from Marc Irizarry with Goldman Sachs. Please go ahead with your question.

Marc Irizarry – Goldman Sachs

Great, thanks. Scott, if you could just go back to the balance sheet for a second. When you’re thinking about acquisitions outside of the hedge fund space, what are some of the areas where we should be thinking that you are most interested in?

Scott Nuttall

Well, I think to couple that I pointed to you Marc. One, if you think about that $30 billion or so of non-private equity AUM that I referenced, the vast, vast majority of that is in North America today. And as we have built our non-private equity business as we really started in North America, but as you know we have a quite global footprint as a firm.

And so one thing that we’re thinking about and looking at are different ways to now that we created track records and scaled here is there other opportunities to scale through acquisition in Europe, in Asia, in South America. We’re thinking through those types of questions and that could be across a variety of the different non-private equity businesses that we’ve been building, as number one. As number two, and there are as you know we have building an energy business and real estate business, hedge funds, credit. I think we’re continuing to be open minded and opportunistic about how we can grow those businesses.

I would say historically our go-to answer had been entirely organic with Prisma and now in Nephila and frankly a balance sheet that gives us the ability to do this more aggressively. We are looking across different strategies and different ways to grow including through acquisition across all those different platforms, but where I caution you is it took us two plus years to get the Prisma transaction done. These things may happen, but you spend a lot of time, kind of frankly diligencing opportunities but don’t actually occur.

And the most important thing that we focus on is whether there is a good cultural fit with us. And so it takes lot of time due diligence, it’s a bit of a needle in a haystack type of strategy, but we are looking both to grow geographically, and to expand the current platforms we have both are broaden here.

Marc Irizarry – Goldman Sachs

Okay. And is there a limit in terms of how much you would want to be direct in strategies versus indirect, i.e., owning the strategies and having them branded KKR versus having them non-KKR brand?

Scott Nuttall

There is no set number Marc. I think really what we are focused on is taking sure whether it’s 100% part of KKR or like Nephila 25% that we’ve just got best-in-class investment capabilities, best-in-class results and probably most critically best-in-class people, let’s say, culturally. And so that really what drives the thinking as opposed to the specific present ownership or direct or indirect.

Marc Irizarry – Goldman Sachs

Okay, thanks.

Scott Nuttall

Thank you.

Operator

I’m not showing any other questions in the queue. I’d like to turn it back over to Craig Larson for closing comments.

Craig Larson

Okay, thank you Sean. Thank you everyone for joining us.

Operator

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the conference. You may all disconnect. Good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: KKR & Co's Management Discusses Q4 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts