As the markets have improved, so have the fortunes of private equity firms like Kohlberg Kravis Roberts.
The investment firm said on Friday that it earned $509.9 million in its third quarter, swinging to a profit from a loss the same time last year as the value of its holdings improved. That amounts to 69 cents a share.
And the firm's assets under management grew as well, rising 7.8 percent to $66.3 billion.
Coupled with the Blackstone Group‘s third-quarter results, which also showed a profit after reporting a loss in the year-ago period, K.K.R.'s quarter augurs well for the private equity industry. Such firms have been the beneficiaries of steady markets that have supported the value of their portfolio companies.
The firm's founders and co-chief executives, Henry R. Kravis and George R. Roberts, crowed about the performance, arguing that the results outpaced broader stock indicators.
“We are pleased with the firm's performance for the nin e months through Sept. 30,†they said in a statement. “Our private equity funds appreciated by 20 percent and our balance sheet investments appreciated by 22 percent, outperforming the MSCI World Index by over 600 and 800 basis points, respectively.â€
K.K.R.'s profits were reported as economic net income, a pro forma measure that includes unrealized investments and depends in part on how portfolio companies are valued. Using generally accepted accounting principles, the firm earned $127.4 million.
Much of the firm's good news in its core private markets unit came from a rise in fees, including monitoring fees that it charges its portfolio companies. The division reported an 8.5 percent gain in fee-related earnings, at $44.7 million.
Nearly all of K.K.R.'s private equity holdings, including the hospital operator HCA and the pharmacy chain Alliance Boots, were valued at well above the firm's initial costs. Still, some investments, like Energy Future Hold ings, remained well in the red.
And its assets under management grew nearly 10 percent, to $49.8 billion, as the firm added new capital from its 11th North American buyout fund.
Yet some clouds lingered over the business. The firm said that it has raised $6.2 billion for its latest North American fund, which is short of an expected $8 billion goal. K.K.R. is still raising money for the fund, however.
The firm's public markets segment also fared well, nearly doubling its fee-related earnings to $23.3 million. Its assets under management also rose, to $16.5 billion.
And it is adding Prisma Capital Partners, an investor in hedge funds with $8.1 billion worth of assets.
But K.K.R.'s capital markets and principal activities unit reported a halving of fee-related earnings, to $22.7 million. The firm said that the business was hurt by a less-busy quarter.
