(Reuters) – KKR & Co LP on Thursday reported fourth-quarter profit that soared by 127 percent, beating most analysts’ expectations, as the value of its private equity portfolio rose and it earned more fees from its credit investments.
KKR said that its private equity assets appreciated 8.4 percent in the quarter, buoyed by a stock market rally that also drove the value of peer Blackstone Group LP’s private equity portfolio up by 11.5 percent.
Economic net income (ENI), KKR’s headline earnings metric that takes into account the mark-to-market valuation of its assets, was $789.6 million in the fourth quarter of 2013, up from $347.7 million in the fourth quarter of 2012, the New York-based firm said.
This translated into after-tax ENI of $1.08 per adjusted share versus the average 89 cents forecast by analysts in a Thomson Reuters poll. KKR’s principal investments, which originate from its balance sheet, contributed almost as much to this result as its private equity funds.
Huge by industry standards, the size of KKR’s balance sheet is the legacy of the firm’s merger in 2009 with KKR Private Equity Investors, a fund vehicle whose listing KKR transferred to New York from Amsterdam in 2010.
That balance sheet is expected to grow further with KKR’s $2.6 billion acquisition of the assets of its specialty finance company KKR Financial Holdings LLC, which it hopes to complete in the first half of 2014.
KKR’s fourth-quarter total distributable earnings, which show actual cash available to pay dividends, dropped 6.6 percent to $510.4 million, in contrast with a 46 percent rise in distributable earnings reported by Blackstone last week.
That discrepancy is attributed more to the comparison with the fourth quarter of 2012, which was exceptionally strong for KKR in terms of asset sales, rather than a choice by the private equity firm not to take advantage of red-hot capital markets to exit investments to the same extent as its peers.
KKR’s asset sales in the fourth quarter of 2013 included secondary offerings of shares in hospital operator HCA Holdings Inc, discount retailer Dollar General Corp and television ratings company Nielsen Holdings NV, as well as the initial public offering of French flooring maker Tarkett SA.
Assets under management totaled $94.3 billion as of the end of December, up from $90.2 billion as of the end of September. KKR disclosed it had completed fundraising for its flagship North American Fund XI, amassing $9 billion.
KKR announced a fourth-quarter dividend of 48 cents per share, bringing total distributions for the year to $1.40 per share, its highest since it went public.
KKR, which was founded in 1976 by Henry Kravis, George Roberts and Jerome Kohlberg, declared a new payout policy in April 2013 and promised to distribute 40 percent of its balance sheet income as a dividend every quarter.