KKR co-CEO Nuttall: ‘It’s too early to declare a return to normalcy’

Expectations around private equity’s investment environment have improved in recent months, and there is optimism this could carry through the challenged fundraising environment, according to KKR’s co-CEO Scott Nuttall.

Speaking on a call accompanying the firm’s second-quarter results, Nuttall said: “It’s too early to declare a return to normalcy. But there is no doubt that over the last several weeks, it feels like the markets are thawing a bit.”

He added: “The new deal pipeline and activity is up. Monetization discussions are up. If that continues and if the public markets continue to perform, then we’d expect it to carry through the fundraising environment over the next few quarters.”

He warned, however, that this could “reverse again with bad news,” although “overall, there is no doubt that activity is up and the tone has improved.”

Nuttall noted he expects both deployment and monetization to increase if the capital markets open up. “We’ve got $100 billion of dry powder, [which is] great from a deployment standpoint.”

KKR’s deployment across strategies was at $10 billion in the second quarter – down from $19 billion in Q2 2022 – and $51 billion over the last 12 months.

New investments in private equity halved year-on-year to $3 billion in the quarter to end-June, compared with $6 billion in the same period last year. Deployment was mainly via core PE and Europe- and US-focused PE funds, according to the firm’s earnings statement.

Commenting on the deal environment, head of investor relations Craig Larson said that the firm is “value-focused” as it relates to private equity. “We’re looking for those opportunities where we can bring our operational resources to bear and where those can really move the needle.”

The firm has been active in pursuing corporate carve-outs and take-privates, with some 14 take-private transactions announced since the beginning of 2022, Larson said. KKR’s latest deals in the space include German satellite group OHB and the yet-to-be-closed acquisition of publisher Simon & Schuster.

KKR’s managed assets reached $519 billion as of the end of the second quarter, up 6 percent year-on-year. The firm raised $13 billion of new capital across strategies in the quarter and $54 billion in the last year.

Private equity assets stood at $170 billion, roughly the same as Q2 2021. Inflows in the quarter reached $2 billion, driven by KKR Ascendant Fund, a mid-market focused PE strategy, as well as a dedicated vehicle for private wealth investors, according to the earnings statement.