| NEW YORK, April 25
NEW YORK, April 25 Private equity firm KKR & Co
LP posted a 10.9 percent quarterly decline in earnings
on Thursday due to a slower appreciation of its funds and said
it will share 40 percent of profits from its own investments
New York-based KKR's cash profits nearly doubled as it took
advantage of strong markets to sell shares in companies and sell
some assets outright. But using an alternative asset management
industry metric, its earnings fell.
First-quarter economic net income (ENI), a measure of
profitability that takes into account the mark-to-market
valuation of assets, dropped to $647.7 million, from $727.2
million a year earlier.
Its private equity fund portfolio appreciated 5.9 percent in
the quarter versus a 9 percent rise a year ago. The value of
KKR's principal investments also grew at a slower pace.
Blackstone Group LP, the world's largest alternative
asset manager, reported a 28 percent rise in first-quarter ENI
last week as its real estate, private equity, credit and hedge
fund units successfully sold assets and appreciated in value.
In the first quarter, KKR sold shares in discount retailer
Dollar General Corp, hospital operator HCA Holdings Inc
and Jazz Pharmaceuticals Plc.
It also sold its 51 percent stake in music rights management
company BMG to Bertelsmann AG, Europe's largest media
company, and Japanese recruitment services firm Intelligence
Holdings Ltd to peer Temp Holdings Co Ltd.
Total distributable earnings, used to pay dividends, jumped
to $290.6 million in the first quarter from $164.1 million a
year earlier. Just over half of the rise was due to profits from
KKR's own investments rather than management and performance
fees it got from funds.
Fee-related earnings, mostly reflecting fees it charges to
investors and portfolio companies that are not based on KKR's
performance, rose to $88 million from $73.4 million a year ago.
Realized performance fees from KKR's funds resulted in income of
$52.9 million, up from $44.9 million a year ago.
KKR's principal investments made a significant difference.
They yielded income of $153.2 million, versus $52.6 million a
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.
KKR said it would now strive to distribute 40 percent of its
balance sheet income as a dividend every quarter. Its previous
dividend policy focused on sharing profits from its principal
investments to compensate shareholders for taxes they must pay
on the dividends.
It resulted in about 35 percent to 37 percent of the balance
sheet gains being shared every year and only in the fourth
quarter, as opposed to 40 percent every quarter.
The new policy resulted in a 2013 first-quarter dividend of
27 cents per share.
KKR, which has investments in retailer Toys R Us Inc and
Internet domain registration company Go Daddy Group Inc, said
assets under management rose to $78.3 billion at the end of
March from $75.5 billion at the end of December.
The firm was founded in 1976 by Henry Kravis, George Roberts
and Jerome Kohlberg. It gained widespread recognition through
its $25 billion leveraged buyout of RJR Nabisco in 1988, a
battle that was immortalized in the bestseller, "Barbarians at