(Reuters) - Private equity firm KKR & Co Inc (KKR.N) reported a smaller than expected 19% drop in second-quarter distributable earnings on Thursday, as a surge in transaction and management fee revenue helped offset some of the decline in performance fee income.
The decline in performance fees was due to a slowdown in asset sales, KKR said. While the markets are hovering near all-time highs, KKR and other private equity firms have already sold many of their holdings for top dollar, leaving them with fewer mature assets to sell to generate performance fees.
However, KKR compensated somewhat for this drop by gathering more fees from its growing assets under management, as well as its capital markets business, which helps arrange transactions for companies such as initial public offerings.
KKR said its second-quarter after-tax distributable earnings (DE) - the cash available for paying dividends - fell to $327.3 million in three months to June this year, down from $404.7 million a year earlier.
This translated to 39 cents per share in the second quarter, more than the 34 cent average that analysts on average forecast, according to data compiled by Refinitiv.
Last week, Blackstone Group Inc (BX.N), the world’s largest manager of alternative assets such as private equity and real estate, said its distributable earnings in the second quarter rose 1% year-on-year, more than most analysts expected.
KKR reported net income per share on a diluted basis of 93 cents for the quarter, based on generally accepted accounting principles, down 25 percent from a year earlier. Blackstone posted 45 cents per share, down 59% from a year ago.
KKR’s revenue from transaction fees, which came mostly from its capital and private markets units, rose 85% to $303.8 million in the quarter. The New York-based firm booked fees from capital raising deals including the initial public offering of ride hailing startup Lyft Inc (LYFT.O).
KKR’s performance fee income dropped from $359.7 million to $233.7 million because of the slowdown in asset sales.
Asset under management reached $205.7 billion, up 3% from three months earlier. The growth was driven mainly by fundraising activity and private equity investments, which partly offset divestments in public market holdings in the quarter.
KKR declared a dividend of 12.5 cents per share.
Reporting by Chibuike Oguh in New York; Editing by Cynthia Osterman