Kohlberg Kravis Roberts more than doubled its earnings in the fourth quarter of last year, as rising markets helped the private equity giant reap big gains from its investments.
The firm said on Thursday that its quarterly profit, measured as economic net income, which includes unrealized investment gains, rose to $789.6 million from $347.7 million in the period a year earlier. After taxes, the economic net income amounted to $1.08 a unit, handily beating the average analyst expectation of 89 cents a unit, as compiled by Standard & Poor’s Capital IQ.
K.K.R. sold some of its holdings in the quarter and achieved an 8.4 percent appreciation in its private equity portfolio. That helped the firm’s net carried interest, a measure of realized and unrealized profit from investments, more than double to $347.8 million, from $152.7 million a year earlier.
According to generally accepted accounting principles, K.K.R.’s profit was $277.9 million in the quarter, 187 percent higher than a year earlier. By that measure, the firm made $691.2 million for all of 2013, an increase of 23 percent from 2012.
K.K.R. announced a fourth-quarter dividend of 48 cents per unit, bringing its dividends for 2013 to $1.40, the highest in its life as a public company.
Still, K.K.R. reported that its distributable earnings, a measure of the cash generated by the firm, declined 6.6 percent to $510.4 million in the quarter, compared with a record period a year earlier.
“We continued to see progress across our capital raising, investment performance, monetization and strategic initiatives,†Henry R. Kravis and George R. Roberts, the co-chief executives of K.K.R., who founded the firm in 1976, said in a statement.
For the private equity industry, last year presented plenty of opportunities to harvest investment gains by selling companies to stock market investors or other buyers. One of K.K.R.’s main rivals, the Blackstone Group, also reported impressive results in the fourth quarter, saying its profit more than doubled.
K.K.R., for its part, was able to attract more money from investors, closing a North American private equity fund with $9 billion in commitments. The firm raised its first real estate fund in December with $1.5 billion of commitments.
Over all, K.K.R.’s assets under management rose to $94.3 billion as of Dec. 31, compared with $75.5 billion a year earlier.
Though K.K.R. is best known for its leveraged buyouts, it showed strength across all its businesses in the fourth quarter.
In its public markets business, which includes hedge funds and specialty finance, economic net income nearly doubled to $73.3 million. The capital markets and principal investments business reported economic net income of $347.8 million, an increase of 162 percent from the period a year earlier.
The firm announced a structural change in December, saying it would buy its publicly traded credit investment affiliate, KKR Financial Holdings, for about $2.6 billion. That deal is expected to close in the first half of this year.
