KKR & Co Inc (KKR.N) said on Tuesday its second-quarter after-tax distributable earnings fell 9% year-on-year, as a slowdown in dealmaking amid the market downturn resulted in a plunge in transaction fees it earns from its companies and clients.
After-tax distributable earnings — which represents the cash used to pay dividends to shareholders — was $840 million in the second quarter, down from $925.5 million a year earlier. That resulted in after-tax distributable earnings per share of 95 cents, in line with the average of Wall Street analysts’ estimates and down from $1.05 a year ago.
KKR said much of this was attributed to a decline in transaction fee income, which dropped 61% to $84.6 million during the quarter.
That was because its capital markets business booked fees on fewer deals. The unit charges KKR’s portfolio companies a fee for helping them with transactions such as initial public offerings (IPOs) and debt financing. It also acts as an investment bank, helping arrange financing for companies not owned by KKR that pay for its services.
Dealmaking slowed down in the second quarter as rising interest rates and the Russia-Ukraine conflict rattled markets and shook the confidence of executives contemplating mergers and acquisitions. IPOs were few and far between as the volatility deterred most stock market hopefuls.
KKR said its private equity funds depreciated by 7% in the quarter, while its leveraged credit portfolio fell 6%. Its infrastructure fund declined by 1%, and its performance was in line with its peers.
Blackstone Inc (BX.N), the world’s largest alternative asset manager, said last month its private-equity portfolio dropped by 6.7% in the second quarter, while Carlyle Group Inc’s (CG.O) corporate private equity funds were flat during the quarter.
KKR said it spent $19 billion on new investments, taking advantage of the downturn to snap up assets at bargain prices. It raised $25 billion of new capital through fundraising and generated $723.6 million of carried interest income mostly from asset sales in its private equity unit.
Under generally accepted accounting principles (GAAP), KKR posted a massive paper loss of $827.9 million, compared with a $1.3 billion profit a year ago owing to its asset management loss.
Total assets under management stood at $491 billion, up from $479 billion in the prior quarter. Unspent capital was flat at $115 billion.
KKR declared a regular dividend of 15.5 cents per share.