KKR & Co Inc at TD Cowen Inaugural Financial Services Summit Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Bill Katz - Cowen & Co., LLC - Analyst : So I thought maybe just to warm up the conversation a little bit, maybe a couple of big picture questions, then we can dive into some more of the aspects of the business in particular. Just from a big picture down, first, as you look around in your conversation with investors, obviously KKR has a very wide net of relationships, whether it be retail, institutional, or the insurance side, I was wondering if you could talk a little bit about how the conversation is going around allocations and maybe you can answer that through the prism of both in the US as well as maybe abroad.

Question: Bill Katz - Cowen & Co., LLC - Analyst : Great. In April, at your Investor Day, you laid out a number of very impressive KPIs in terms of $1 trillion of assets on the management. The opportunity to get to $15 of adjusted net income inside of 10 years. And I think the base year was 2023. And that you expect to get to more annuitized business model, including 70% of earnings from asset management insurance as well as strategic holdings. As you look ahead from the management side of things, how do you see the opportunities and challenges for the team as you further scale along multiple dimensions here?

Question: Bill Katz - Cowen & Co., LLC - Analyst : Okay, maybe one more big picture question. Just in terms of -- and I know it's been coming up over the last couple of weeks through the conference season, but how would your categorize today in terms of some of the key flywheel for the industry in terms of deployment and net realizations as we look out maybe deeper into this quarter or even into the second half of the year? Should investors be anticipating a continued pickup in activity levels as we lookout, maybe the second half of the year into next year? Or will it take longer than that, just given the mix macro backdrop?

Question: Bill Katz - Cowen & Co., LLC - Analyst : Okay, terrific. Maybe we can dive into -- (Conference Instructions) Maybe diving into now some of the businesses, if you will, I'd like to start in the wealth management retail area. By any calculation, it seems like a massive global opportunity, whether it be your management team guesses or others. I think one of your competitors at a recent Investor Day had a very interesting statistic that 50% of semi liquid product sales in 2023 went to top two to three -- top two to six players, and that's up from like I think 17% just a couple of years ago. And then almost about the same time, Schwab at their Investor Day had indicated that they want to curate an alternative platform across five different vectors and only use about 8 to 10 manufacturers along the way, right, one to two per vertical. So as you see the industry evolving, I was wondering if you could talk about how do you see the industry evolving and then how should investors be bullish on KKR within that evolution?

Question: Bill Katz - Cowen & Co., LLC - Analyst : Great. And then maybe related to that -- and first off, congratulations on the alliance with Capital Group. We think this is a particularly momentous announcement for not only KKR, but the industry at large. We put out a pretty big piece on this just the other day. I think from talking with your team and just what we're reading, it's expected that you'll roll out products beginning in 2025 and first in credit. And then the opportunity is to have these co-branded hybrid vehicles go across your verticals, if you will. I was wondering if you could talk a little bit about the cadence of the launches and maybe the size of the TAM. And then I have a follow-up question on that. Maybe just two at once here.

Question: Bill Katz - Cowen & Co., LLC - Analyst : We look forward to that. And just one clarification, is this -- you said it's additive to the K series. Is this also additive to the $300 billion three-year gross inflow guide you provided at the Investor Day between '24 and '26? Or will be -- is that embedded inside that?

Question: Bill Katz - Cowen & Co., LLC - Analyst : Okay. Terrific. We do have a question from the audience. It's a little more narrow than this big conversation, but I think it's interesting one. The question is, could you give an update on capital market fees for the second quarter? And then maybe if you could expand that to think about how you think the rest of the year might play through?

Question: Bill Katz - Cowen & Co., LLC - Analyst : Terrific. All right. Thank you, and thanks for the question. All right, maybe just diving into -- the other big area of interest is credit. And maybe it's interwoven with the insurance opportunity which I want to come back to as well. Actually, let me start with insurance. I think it make more sense. So just it ties back with the Investor Day a little bit, so apologize for back and forth. When -- at the Investor Day, I think you mentioned you think you can double the AUM in Global Atlantic. I was wondering if you could help us understand some of the key drivers to that growth. I was wondering REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2024 / 12:35PM, KKR.N - KKR & Co Inc at TD Cowen Inaugural Financial Services Summit if you could maybe break it down between what you're able to do on the retail side and maybe the institutional side and then between the US and maybe the more nascent but seemingly very large opportunity outside the United States.

Question: Bill Katz - Cowen & Co., LLC - Analyst : Great. So it leads me to my other question on insurance. You guided to a 14% to 15% -- this was actually -- we just got this question through the question board as well. So you've guided to a 14% to 15% pre-tax ROE. I was sort of wondering if you could break down your key assumptions to that. And then maybe think about -- how should we be thinking about that against interest rates and to the extent that interest rates were to potentially trend lower based on the forward curve?

Question: Bill Katz - Cowen & Co., LLC - Analyst : And any way to think about interest rate sensitivity for 100 basis point move what it might mean in terms of the pressure or opportunity for ROE?

Question: Bill Katz - Cowen & Co., LLC - Analyst : Great. I did get a sort of a follow-up question on your comments around bit of a tough backdrop to raising capital. You said allocation is softening. The question is, can you just refine your answer a little bit across the asset classes? Is it soft in private equity or real estate or credit? Where are you seeing some of those pressures?

Question: Bill Katz - Cowen & Co., LLC - Analyst : Okay. Thank you for clarifying that. Okay, maybe just switching gears a little bit in credit, which I skipped in my own head. I apologize. So maybe this is interwoven with your comments just in terms of the work you're doing on with Global Atlantic. But where are you seeing the best opportunities for KKR to participate in the fixed income replacement theme? Maybe you could update us on direct lending. There's certainly a lot of focus on that in the last week or so, asset-based finance, or maybe some other initiatives that is being cooked up inside KKR right now.

Question: Bill Katz - Cowen & Co., LLC - Analyst : Great. I know we're running a little tight on time, so maybe just skip down to real assets. We got a question this morning. There was a very large, announced transaction offshore. Was wondering you and your peers have talked about just how great opportunity in real assets, specifically in infrastructure. Just wondering how you could think about the opportunities for KKR? And maybe, talk a little bit about the debt and or the credit side of the opportunities. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2024 / 12:35PM, KKR.N - KKR & Co Inc at TD Cowen Inaugural Financial Services Summit

Question: Bill Katz - Cowen & Co., LLC - Analyst : Great. I think we have time for maybe one last question. I was wondering if you could address the one bear case, we hear quite a bit is just a dividend yield payout is rather low. I just wonder if you could talk a little bit about how we should be thinking about capital allocation.

Question: Bill Katz - Cowen & Co., LLC - Analyst : All right, Rob, look, I think we're out of time. I have questions for another hour, at least. So I apologize for not getting to all of them but thank you so much for joining today. Terrific conversation. Thank you for help kicking off set day two of our conference. And this completes the presentation for today. Great to see you again, Rob. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2024 / 12:35PM, KKR.N - KKR & Co Inc at TD Cowen Inaugural Financial Services Summit