Thank you for joining us. Welcome to KKR's Second Quarter 2025 Earnings Conference Call. This call is being recorded. I will now turn it over to Craig Larson, Partner and Head of Investor Relations for KKR. Craig, please proceed.

Thank you, operator. Good morning, everyone. Welcome to our second quarter 2025 earnings call. This morning, as usual, I'm joined by Rob Lewin, our Chief Financial Officer; as well as Scott Nuttall, our Co-Chief Executive Officer. We would like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our press release, which is available on the Investor Center section at kkr.com. And as a reminder, we report our segment numbers on an adjusted share basis. This call will contain forward-looking statements, which do not guarantee future events or performance, so please refer to our earnings release as well as our SEC filings for cautionary factors about these statements. So first, beginning with our results that we've just announced for the second quarter. We're pleased to be reporting fee-related earnings of $0.98 per share, total operating earnings of $1.33 per share and adjusted net income of $1.18 per share. All of these figures are among the highest we've reported in our history as a public company. Now going into more detail. Management fees in the quarter were $996 million, with Americas XIV turning on in Q2, alongside our broader fundraising initiatives and continued deployment, management fees in total are up 18% on a year-over-year basis. Total transaction and monitoring fees were $234 million in the quarter. Capital Markets transaction fees were $200 million, driven by activity with infrastructure and private equity, with just over half of capital markets fees this quarter coming from our activities in Europe. Fee-related performance revenues in the quarter were $54 million. That figure is up 45% year-over-year with the growth here driven by the performance allocation from our offshore Infrastructure K-Series vehicle. Fee-related compensation was again right at the midpoint of our guided range, which, as a reminder, is 17.5%. Other operating expenses for the quarter came in at $172 million. So in total, FRE was $887 million or the $0.98 per share that I mentioned a moment ago, and our FRE margin came in at 69%. Looking at fee-related earnings more broadly for a moment and the results you've seen over the last 12 months, driven by healthy management fee growth and a strengthening in our capital markets activities, alongside operating leverage, FRE per share increased 33% for the 12-month period ended June 30, '25 compared to June 30, '24. And with a 360 basis point improvement in our FRE margin. Now back to the quarter. Insurance segment operating earnings came in at $278 million, modestly ahead of the $250 million plus/minus level we discussed last quarter, which is where we continue to expect to see insurance operating earnings over the next few quarters. And remember that this line item alone does not capture how our model works and all of our insurance-related economics, recognizing the economics that show up within our Asset Management segment. So when you include the management fees from the approximately $50 billion of AUM from our Ivy sidecar and co-invest vehicles, Capital Markets fees also associated with Global Atlantic as well as the management fees from our investment management agreement with GA, our all-in pretax ROE continues to approach that 20% level. Strategic Holdings operating earnings were $29 million. So total operating earnings, which again represent the more recurring components of our earnings streams, were $1.33 per share. And over the last 12 months, nearly 80% of our segment earnings were driven by our more recurring earnings streams, demonstrating in our view, the durability that you're seeing across our business model. Turning to investing earnings. Realized performance income was $419 million and realized investment income was $154 million. These earnings were driven by a combination of public secondary sales and private transactions, as well as K-PRIME's annual crystallization alongside dividends and interest income. And finally, turning to investment performance on Page 10 of our earnings release. Broadly, when you look at the statistics on the page, you're seeing healthy investment performance on behalf of our clients across asset classes during periods of time with uncertainty alongside a real spikes in volatility. Looking at the statistics themselves, the private equity portfolio was up 5% in the quarter and 13% over the last 12 months. Within Real Assets, the opportunistic real estate portfolio was up 3% in the quarter and 7% over the LTM, Infrastructure, up 3% in the quarter and appreciated 14% over the last 12 months and Credit, the leverage credit composite was up 2% in the quarter and up 7% over the last 12 months with the alternative credit composite up 1% and 9%, respectively over those same periods. And with that, I'm pleased to turn the call over to Rob.

Thanks a lot, Craig, and thanks to everyone for joining our call this morning. As Craig just walked through, our model continues to deliver consistent results. I'd like to begin by highlighting our deployment and monetization activity, which demonstrates the strength of our global and diversified platform. KKR has been around now for 49 years and has navigated a range of macroeconomic backdrops over those 5 decades. We understand that volatility and uncertainty create opportunity and have positioned our firm to ensure that we are maximizing that opportunity on behalf of our clients. We build portfolios for the very long term. And when you invest in companies and assets for 5 to 10-plus year horizons, you need to be thoughtful about how the world is going to evolve. And we have found it less important to try and time the market. It is why we are so disciplined in linear deployment and creating outperformance through our approach to value creation at the asset level. Since the start of the year, we've deployed nearly $37 billion of capital, with around half of that deployed in the second quarter. Within private markets, nearly 50% of our year-to-date activity has been outside of the U.S., and we've been balanced in deploying capital across traditional private equity, growth equity, infrastructure, and real estate. In Credit, we've deployed $18 billion of alternative capital since January, diversified largely across direct lending and asset-based finance. ABF in particular is an area where we continue to see a lot of growth opportunity, which I'll touch on in a bit more detail in a few minutes. Importantly, there remains a healthy pipeline for deployment in the second half of 2025, and we feel well positioned with $115 billion of uncalled capital. As a result of this consistent approach to investing, we also have a mature portfolio that we can monetize opportunistically. Over the last 12 months, realized performance and investment income totaled $2.6 billion. That number is up over 20% from the same period a year ago. Even with that healthy momentum on monetizations, our unrealized carried interest across our global portfolio today stands at a record $9.2 billion. And that number is up roughly 30% from $7.1 billion just 12 months ago. Looking at our private equity portfolio specifically, approximately 60% is marked at over 1.5 times our cost. And on average, our public names are marked at over 5 times our cost. So our portfolio is in very good shape, and ultimately, that is the most important indicator of future monetizations. I would say that it is really our global footprint that is a large driver of the continued deployment and monetization activity that we are seeing across the firm. As an example, we've seen robust activity out of Asia recently where we have 9 offices, nearly 600 executives, and manage over $75 billion of assets. Over the past 20 years, we've built a very large localized business, and we've grown and diversified. Today, traditional private equity comprises less than half of our Asia AUM, compared to approximately 90% in 2019. Just to give you a sense of our activity here, we recently signed a definitive agreement to exit an investment in a pharmaceutical company in India, closed on our previously announced exits of a telecom tower company in the Philippines and a grocery store chain in Japan, invested in a leading agricultural infrastructure business in Australia and a new financial services platform in Singapore and established a battery energy storage joint venture in Korea. As you can hear, we got a lot going on across Asia and really continue to be at the forefront of activity in the region. To close out my remarks this morning on monetization, if you take a look at our pending monetization as we head into the second half of 2025, so transactions that are signed but not yet closed, we have direct line of sight to north of $800 million of monetization-related revenue, the vast majority of which will be performance income. This is a healthy figure for us and consistent with the overall health of our portfolio. Now turning to the fundraising environment and a few other notable items for the quarter. In Q2, we raised $28 billion of capital and continue to see meaningful progress across asset classes. We held a final close in the second vintage of our asset-based finance drawdown fund and parallel separately managed accounts, with a total of $6.5 billion in commitments. This is more than triple the $2.1 billion predecessor pool of capital. The composition of investors in the fund is encouraging with approximately 50% of limited partners new to the KKR Credit platform and commitments are roughly evenly split across clients from the U.S., Europe, and Asia. More broadly, our ABF business continues to see meaningful growth with AUM increasing over 20% from this time last year to $75 billion. We see ABF as a $6 trillion addressable market today, increasing to over $9 trillion over the next 4 years. The alternative credit ecosystem overall, including not only ABF, but also direct lending and capital solutions, is now larger than the traditional high-yield and leveraged loan markets combined. So ABF is a growing market with secular tailwinds for our industry, and we believe that we are already a leader in the space today. In Real Assets, we've begun raising capital for our Asia infrastructure strategy. And as we think about demand, we feel encouraged by our historical success in this asset class and the differentiated investment returns that we've been able to achieve as well as the depth of our Pan-Asian presence and breadth of our global connectivity. Turning to wealth, K-Series AUM was $25 billion across private equity, infrastructure, real estate, and credit as of June 30, that figure compares to $11 billion just a year ago. We've been really pleased here to see inflows continue to track at or ahead of our expectations despite the market volatility that we've experienced year-to-date. As you know, in April, we launched 2 public-private solutions through our strategic partnership with Capital Group, making the KKR platform available to an even broader universe of clients. Our continued momentum is earmarked most recently with the filing of a registration statement with the SEC for a public-private equity product, which on the private side will be investing in a K-Series private equity vehicle as well as PE co-invest opportunities. And looking ahead, we continue to work on a real asset product. We feel great about our partnership with Capital Group and believe that there is more to do together as partners. Next, I'd like to give a brief update on our insurance business. First, with a focus on elongating and further diversifying our liabilities. Over the last 4 months, we successfully issued approximately $2.5 billion of funding agreements with a weighted average duration of 8 years through separate transactions in the U.S., Europe, Japan, and Canada. We believe the local currency liability funding will also help support asset origination outside of the U.S. And you should expect us to continue to be active here with a real focus on the longer-duration parts of the FABN market. Alongside this, we continue to make very good progress on the addition of alternatives to the portfolio where we believe that we have a differentiated sourcing advantage as a firm. We expect these changes will ultimately drive up overall returns while at the same time naturally reducing our leverage profile. And second, an update on third-party capital, which is a critical component of our strategy at Global Atlantic. Earlier this week, Japan Post Insurance announced that it would invest $2 billion through a new vehicle managed by Global Atlantic, expanding our existing strategic partnership. As we have talked about since our initial purchase of Global Atlantic, our ability to marry third-party capital alongside the GA balance sheet is a real differentiator for us. Our Ivy sidecar vehicles, which pay fee and carry similar to a drawdown credit or PE fund, allow us to grow GA in a very capital-efficient way. More specific to the Japan Post commitment, this is another milestone in that effort. And when you aggregate the JPI commitment and where we stand on our Ivy strategy capital raise, we currently have approximately $6 billion of third-party capital capacity versus Ivy II, which was at $2.7 billion. Once this new capital is put to work, we expect it will translate to over $60 billion of additional fee-paying AUM. So we are seeing significant momentum and an important part of our strategy and are pleased by the receptivity of our client base to insurance as a new and compelling asset class. The last item I wanted to touch on is more of a strategic update. Yesterday, we announced an expansion of our life sciences footprint through the acquisition of a majority stake in HealthCare Royalty Partners or HCR, a leader in biopharma royalty investing. The company's total AUM of approximately $3 billion is largely perpetual in nature. As part of this transaction, HCR's approximately 30 employees will continue to focus on royalties and credit investing opportunities and will collaborate closely with KKR's existing teams. HCR builds on KKR's long-standing experience in healthcare investing across traditional private equity and middle-market funds, our dedicated healthcare strategic growth strategy as well as our existing strategic investment in Catalio Capital. This acquisition is also very consistent with our framework for evaluating strategic asset manager M&A. HCR brings us long-duration, unique, and largely perpetual capital, access to large addressable markets where HCR is already a top 3 player. And importantly, we believe that HCR will bring additional origination capacity to our overall platform, primarily across Global Atlantic and our credit pools of capital. Thank you all for joining our call this morning. Our team remains very excited around the business momentum that we are seeing across the firm. And importantly, how that will translate into further P&L outcomes. And to be clear, given all of this momentum, we continue to feel confident in our ability to achieve the 2026 guidance that we shared last year across both our fundraising and our core financial metrics which include FRE per share, TOE per share and, of course, ANI per share. And now before we move on to questions, I'd like to briefly hand it off to Scott.

Thank you, Rob. Before we start today, we want to acknowledge the tragic events of earlier this week. We all have a lot of friends at Blackstone, and a number of people here were friends with Wesley. Our hearts and thoughts are with all of the victims and their families. We mourn with them. Operator, let's please open the line.

Our first question comes from Craig Siegenthaler with Bank of America.

You called out K-Series credit in the release, and we wanted to circle back on K-FIT. This was previously somewhat of a gap for KKR and Wealth, but it's been progressing as of late. So I was hoping you could update us on the fundraising front progress on platform additions and how this product is differentiating itself versus an increasingly crowded field of players in private wealth.

I’ll begin by providing an overview of K-Series before addressing credit. As of June 30, we managed around $120 billion in assets from individuals, not including Global Atlantic policyholders, so that figure might even be understated considering our extensive reach with individuals. Regarding K-Series, last year we had $11 billion in assets under management, and today we are at $25 billion. Although it's still early, we are very encouraged by our progress, particularly in infrastructure and private equity, which are newer asset classes for more mass affluent investors. Regarding credit, we made a strategic choice to launch Private Equity and Infrastructure before our private BDC, aiming to enter the market early in these asset classes. In terms of market share for new capital raised across these strategies, we rank second year-to-date, which we feel confident about. Specifically for K-FIT, we have made a dedicated allocation to asset-based finance to distinguish it in a competitive landscape. We have made significant strides with distribution partners and raised more capital for K-FIT in Q2 than ever before, indicating progress despite starting from a lower base and recognizing further opportunities ahead. Additionally, we are transitioning what was known as KCOP, a multi-sector credit vehicle, to focus primarily on asset-based finance, now called K-ABF. We believe there is genuine demand for a dedicated evergreen ABF product tailored for individuals, and converting KCOP represents an efficient path to create this solution. This conversion is subject to approval from KCOP shareholders, and we expect it to take effect around the end of August. Overall, we see substantial progress, but there remains much more to accomplish, especially since everything launched with Capital Group is an addition to our efforts.

Craig, it's Scott. I think that's well said. The main difference, I think, we're hearing in the market is this allocation to asset-based finance as part of K-FIT. I think that's helping. We're getting added to more platforms every quarter. So I appreciate you pointing out the momentum that we're starting to see there. We'll keep it posted on K-ABF that Craig just referenced; we're optimistic about that. And as you know, it's early days with capital in terms of what we've done there. And as a reminder, that public-private solution that we've launched with our partner has a 40% allocation to what we do, about 20 of those points to direct lending and 20 to asset-based finance. So we have another avenue to the wealth channel through our partnership with Capital. So we'll keep you posted, but I appreciate you highlighting it.

And Craig, there's just one other thought here. I'd be remiss if I didn't mention if you do look at K-FIT returns, whether that's on a year-to-date basis or on an inception-to-date basis, they're as good as it gets in the industry in terms of private BDCs. So I think if we continue to perform from an investment standpoint, that again will bode exceptionally well where we think we can end up in terms of ultimately in the size of the vehicle.

Our next question comes from the line of Alex Blostein with Goldman Sachs.

I wanted to zone in on the environment; of course, has changed drastically relative to prior quarter call. I know we've talked in the past more about, I guess, a barbelled approach to institutional fundraising. But given a better outlook for monetization activity, obviously, a much healthier equity market as well. Is that still the case? How are you sort of gauging the pulse of institutional clients as you go through this fundraising cycle?

Thank you for the question, Alex. It's Scott. As you can see from our numbers, we've been quite active on the fundraising front, with $109 billion raised in the past 12 months. Looking at the last couple of years, that's $217 billion, which shows consistent momentum. We see the same headlines as you, but within our firm, we are staying very active. Investors seem to be returning to a more typical business pace, and we are engaged in constructive discussions globally. Last April, we set a fundraising target of over $300 billion for 2024 through 2026. Now that we're halfway through those 36 months, we're actually ahead of schedule and feel optimistic about reaching our target, including the potential to exceed it. Depending on the context, institutional investors' situations can vary. However, in infrastructure, many are still catching up with their allocations, and private credit is gaining more interest, particularly in asset-based finance. Rob mentioned the emerging insurance asset class, which presents appealing opportunities ahead. Most of the conversation has centered around private equity and how mature programs are evolving, but given the significant cash returned relative to what's been called — approaching a 2:1 ratio over the last 8 years — our discussions have been productive and feel quite normal for us. Additionally, we’ve noticed institutions are consolidating their relationships, preferring to work with fewer partners, which is leading to more strategic partnerships and multi-product discussions. This aligns well with our strengths. With the addition of Private Wealth and Capital Group and GA, the current environment feels very promising.

Our next question comes from the line of Steven Chubak with Wolfe Research.

So I did want to circle back to the ABF deployment opportunity, the strong fundraise in ABF vehicle is juxtaposed with the announcement of the Harley-Davidson deal. I know you took a stake in the financing unit, purchased a significant portion of the loan portfolio. I was hoping to whether you could speak to opportunities to consummate similar transactions with other retail participants. I'm just trying to gauge whether there's more of a one-off or where other retail firms might be open to exploring similar transactions just given the positive reaction to HOG shares following the announcement.

Thank you for the question, Steven. I'll begin with an overview of asset-based finance before discussing Harley-Davidson. As highlighted on Page 13 of our release, our credit liquid strategies business has approximately $290 billion in assets under management. Private credit has shown robust growth, increasing by 20% year-over-year to $120 billion. Of that, $75 billion is in asset-based finance, which has seen year-over-year growth in the mid-20s. This illustrates the importance and growth potential of this business, as mentioned by Rob in our remarks. We believe we are strategically well-positioned moving forward. Regarding Harley-Davidson, we see this as a favorable environment for asset-based finance. Our macro team has identified similar opportunities. Companies are increasingly opting for a capital-light approach to release capital for other strategic initiatives, which is evident in the Harley-Davidson deal. They sold off most of their motorcycle loan portfolio and established a long-term partnership for new motorcycle loan originations. Harley-Davidson is an iconic brand with a dedicated customer base, and this deal aligns with a broader trend we are observing among companies like Discover, PayPal, BMO Financial Group, and GreenSky. It's encouraging to note the positive stock reaction from Harley-Davidson shareholders, with shares rising by 12% or 13% following the announcement.

Our next question comes from the line of Glenn Schorr with Evercore.

I think it was after the quarter that you announced the first investment with Energy Capital Partners, that significant $50 billion announcement. My question is, while I understand the advantage of having dedicated 24/7 power in your building, do you have those types of relationships already established and secured? Are we relying on the demand to draw in tenants once it's built? I'm interested in how you plan to utilize that investment and when the cash flow is expected to start. I'm curious about the ramp-up process given the large total addressable markets.

It's Craig. Why don't I start? So just to be clear, we are not speculative builders. So the answer to the question, yes, the project has already been leased to, in our view, a very attractive counterparty. And I think the other broad point, as you note, there is just a massive need for capital. And in many ways, the opportunity is broader than just data centers. So there's going to be a need for data center, certainly, but at the same time, you need massive investment in fiber, massive investment in mobile infrastructure at the same time to support the growth in data creation and consumption. And so for us, when we look at our digital infrastructure presence and you add what we've done in those 3 pieces together, in total, there's over $40 billion of equity invested across these areas. Now to be clear, that does include co-investment and co-underwriting, but it certainly gives you a very good sense of how active we've been in this area and I think one of the things that plays to our strength here is the connectivity and the culture you have across the firm. So again, we're able to invest in these themes across a whole bunch of different pools with different risk return, different geographic exposures, et cetera. And so if you look at just the data center piece in that, we have exposure across global infra, Asia infra, real estate, core private equity, our wealth strategies in addition to Global Atlantic. So it is a huge mega theme. I think you're going to hear more from us over time related to this. And again, thanks for the question. We do look at last night's announcement; it's just a really interesting direction of travel as it relates to the intersection of both as it relates to infrastructure as well as energy infrastructure and the need to link power as a solution.

And Glenn, it's Scott. To your question on timing. So construction is already underway, expected completion date fourth quarter next year. Let's give you a sense of when we start to turn on in the lead times.

Our next question comes from the line of Ben Budish with Barclays.

Helpful updates on Global Atlantic in the prepared remarks. I was wondering if you could unpack a little bit more of just the performance in the quarter itself, what specifically changed that led to the outperformance versus your prior guide of kind of around $250 million for the next couple of quarters? And then as we think longer term, how important is the sort of elongation of the liability profile? How dependent is that on the FABN market or sort of pivoting the liability profile of your retail flows? Does one matter more than the other? And how long may that take to kind of get to where you want it to be?

Thanks a lot, Ben, for the question. It was definitely a solid quarter for Global Atlantic in Q2, $278 million of operating earnings. To be clear, there was some variable investment income that drove that number. And so as we've previously provided a guide of plus or minus $250 million of operating earnings, our expectation for the foreseeable future is that is still the right number to model going forward? As it relates to the evolution of the business, I think there's really 3 things going on simultaneously. Number one, third-party capital is a big advantage for us, and we talked about where we stand today relative to where we were when we had Ivy II, which we're still investing as a strategy. We're north of double the amount of capital, and that's a really important strategic imperative. So a lot of good momentum there. In terms of the liabilities and wanting to elongate those liabilities, it's definitely not just the FABN channel, but that's a component. We're seeing that more in the individual channel as well. We continue to have an active pipeline on the block side, which is longer-duration liabilities too. And so there's a number of different ways that we can effectuate longer duration liabilities. But I think that's going to be ultimately a multiyear process. And alongside that, as we are elongating our liabilities, we're going to methodically take up our allocation to alternatives, and we're making good progress there, too. We're still only about 1% allocated to alternatives. At Global Atlantic, the industry average is closer to 5%. And so we've got some work there to go, but we're not in a rush. We're going to make sure we do this in the right way and to ensure that when all elements of those business model come together, it will really set us in a very differentiated way from the industry. And I think to be really beneficial to our shareholders over the long term. So we're excited with the progress, but still relatively early days.

Our next question comes from the line of John Barnidge with Piper Sandler.

Can you talk about the opportunity presented for the company from potential 401(k) retirement reform and how meaningful this could be?

Craig, do you want to start?

Sure. So John, I have a few initial thoughts. We are pleased to see that policymakers are considering ways to make private market investments more accessible to U.S. retirement plans. In this context, we have two main points to share. First, our public affairs team often emphasizes that this initiative is about providing similar options to people in comparable situations. For instance, currently, around 30% of a teacher's retirement savings may come from alternative investments, while for a dentist, that figure is closer to 0%. Thus, this is about enabling individuals to allocate a portion of their savings to higher-performing asset classes, which institutions have been doing for decades. The second point is that fiduciaries should have the ability to act in the best interest of their clients and expand the investment options available for their consideration. In terms of implications for us, we see significant potential here, not only for individual investors but also for firms like ours, in a vast market. The U.S. retirement market is approximately $40 trillion, with defined contribution plans exceeding $12 billion. It’s logical that alternative investments will likely see initial adoption in target date funds, which have captured over 60% of 401(k) flows. For those early in their retirement planning, it makes sense that alternatives would be particularly relevant. We view this as an intriguing long-term opportunity, but it is just that—a long-term opportunity. We don't anticipate rapid changes; rather, we expect incremental progress. We're focusing on the current work across the firm, and we believe we are well-positioned. Factors such as brand reputation, investment track record, and expertise, along with the depth of our origination capabilities, will be vital. These are characteristics that set KKR apart, and we are committed to dedicating the necessary resources to capitalize on this opportunity.

John, it's Scott. I think to your question, we don't know the quantum and we don't know the timing. But I think Craig said it right, this is all incremental to everything that we've talked about and the longer-term vision that we've shared for the firm in the past. So we're trying to make sure we're well positioned as it plays out. Craig referenced it, but 60% of 401(k) flows go to target date funds. If you think of that format, it just makes sense for an individual investor because probably the allocation to alternatives in private markets should be different for somebody who's 30 versus someone who's 70. And so it's a nice format to be able to provide that flexibility. The target date market is very concentrated. The top 5 players have over 80% market share. Our partners at Capital Group are one of those 5 players. So you can imagine we're having discussions as to what the future might look like together. But not a lot more color to share with you today, but we'll keep you posted over time as this plays out.

Our next question comes from the line of Michael Cyprys with Morgan Stanley.

More of a bigger picture question for you guys on AI and blockchain. Just as you look out over the next 5, 10 years, curious how you see the industry evolving given potential changes here from AI to blockchain. Curious how you're adjusting your business model. What steps are you guys thinking today and might take in the coming years? And what this all mean for your business?

Yes, Mike, it's Craig. That's a really interesting question. There's a lot of activity around this globally as we look at our portfolio and new investments. It's still early, but I'd like to share a couple of thoughts. Our focus areas are broad, and we're primarily concentrating on creating smarter solutions at our companies, aiming to provide more value to our customers. Another key aspect is enhancing productivity among our workforce at portfolio companies so they can achieve more and have a better work experience. Additionally, we're rethinking business models to unlock greater potential. This extends to our portfolio companies and the opportunities we see, including the increased focus on digital infrastructure. AI is driving a significant demand for capital and innovative solutions, and we want to ensure that we are well-positioned to leverage these opportunities strategically. We're focused on our portfolio companies, new investments, and areas like digital infrastructure, with more developments likely on the horizon. You may have noticed signs of our innovation, such as our partnership in '22 that allowed for a tokenized interest in our healthcare growth fund. While this wasn't a large part of that fundraising, it shows the creativity we aim to implement as we evolve even the traditional aspects of our business model.

Michael, it's Scott. Thank you for the question. It's early days, and we're still learning from our companies. We're dedicating a lot of time to young companies in the AI space, working closely with their founders to bridge the gap between their innovations and the operations of an alternative asset management firm. In terms of how we manage KKR, which is at the core of your inquiry, we are still in the process of figuring that out. It’s becoming evident that this will enhance our teams' productivity and allow us to scale the firm through technology like never before. However, we are still determining the specific implications of this. We will keep you updated, but it’s clear there is a significant opportunity, especially as we explore areas like private wealth and scale our insurance businesses to implement some of these approaches in new operational ways.

Our next question comes from the line of Bill Katz with TD Cowen.

So just coming back, one of the pushbacks we get on KKR and the group at large is as the industry continues to scale, particularly in private credit, that the ability to drive differentiated returns goes down. We don't agree with that. We think scale will win. But that being said, I'm sort of curious if you could maybe update us on your origination platform. I know a couple of your peers do a pretty good job of delineating what their capacity is. I'd be curious, maybe get a little bit of a refresh of just number of origination platforms you have and why you think that could translate into the ability to generate further alpha?

Bill, it's Craig. I'll begin, and I'm sure Scott and Rob will add their thoughts. Regarding the platform question, we have 35 platforms across asset-based finance and real estate to help drive differentiated origination. In addition to our activities, there are various aspects we will focus on to enhance that origination flow. The depth and breadth of origination are crucial for achieving attractive investment returns. Currently, our investment-grade footprint is approaching $30 billion to $35 billion annually, with the largest portion in high-grade asset-based finance. Although that wasn't the main focus of your question about direct lending, it's important to note the overall framework of our credit business. Direct lending is becoming increasingly mainstream for companies seeking financing, which expands the opportunity set and feels more differentiated than it did over five years ago.

Bill, it's Scott. Maybe just historical perspective. Private credit as a space is getting some of the same kind of noise that private equity got 20-plus years ago, number of new entrants. Can it scale? What does this mean? And to your point, what we and others have found, if you go up in size, you build different capabilities, you look at adjacencies, there's lots of different ways to continue to grow. In the grand scheme of the capital markets, $1.8 billion even in direct lending is pretty small. ABF, $5 trillion or $6 trillion on its way to $7 trillion to $9 trillion, much larger space. The 7,500 people or so, we have sourcing today across our platforms, 19 of them just in ABF. That number will continue to grow with the announcement this week with HCR is another example of adding another platform and a team that's originating really private credit opportunity. So you'll continue to see us scale our ability to originate, and it has a bit of an echo to me of a lot of the things we've done in other asset classes across the firm, whether that be private equity, infrastructure, or otherwise. So I'm with you on this. I think the sentiment is a bit overdone.

Our next question comes from the line of Patrick Davitt with Autonomous.

To your prepared remarks, KKR obviously in a good position with its large high MOIC public position, but commentary from other execs and even the tangible data we see still suggest that strategics seem to be hesitant to buy sponsored-backed companies more broadly. So could you update us on your conversations with strategic buyers where you think that bid ask is now? And what do you think needs to change to really open up that side of the realization equation?

Yes, we share the same information as you, Patrick. However, our experience has been different. We've been very active in monetization globally, especially in Asia this year. While there is much discussion about the IPO market, we have been selling assets to strategic buyers. The bid-ask spread we observed 12 to 24 months ago is continuing to narrow. Public strategic buyers have seen their stock prices rise, giving them more appealing currency and reducing the cost of capital. In short, we are not experiencing the trends being reported.

Our next question comes from the line of Brian Bedell with Deutsche Bank.

Just a 2-parter, if I may. One, on the investment management fees in both private equity and real assets, they were ahead of our estimates and I think ahead of consensus. I know Fund XIV turned on. Just trying to get a sense of, is there anything else unusual in terms of like catch-up fees or anything else? And I think there's maybe some step-down dynamics that might go into third quarter. So any kind of color you could give on that? And then the second question is just good capital market momentum. And obviously, the environment seemingly good into the second half. So I just wanted to get your view on whether you think the capital markets fees can be even stronger in the second half than they were in the first half?

Great. Thanks a lot for the question. So on investment management fees, there's nothing out of the ordinary other than to your point, we're turning on some larger funds. If you look in the quarter, we probably benefited around $30 million from the turn on of Next IV in Q2. We did have a bit of catch-up fees in our Real Assets business, but again, nothing really out of the ordinary across the platform. I think it's just solid organic growth across our platform and feel good about our trajectory on management fees, both on an absolute basis and relative to our industry. As it relates to capital markets, I think another solid quarter, roughly $200 million of fees. I think we're $430 million on a year-to-date basis. We see some strength absolutely on the industry-wide side as we look at Q3 and the pipeline. We're only a month in, but feel good that we'll be plus or minus in line with where we were in Q2. Obviously, some upside if the capital markets stay healthy over the course of the rest of the quarter. And it's probably a little bit premature at this stage to have a view with any precision on Q4. But pipelines are building. I think much more importantly, as we look at our capital markets business, we're able to hire the right talent. I think we've got the business model fully in place. And if the capital markets really do continue to stay strong and healthy and stable, we feel really good about growing our franchise heading into 2026.

Brian, it's Scott. One thing we reflect on is that the sentiment in our space is much more volatile than the actual situation. If you consider April and May and the discussions during that time, you might have anticipated what Q2 would look like in terms of activity. We raised $28 billion and invested $18 billion. The financial metrics indicate that fee-related earnings are up over 30% in the last 12 months, and ANI is at 27%. Uncertainty and volatility create opportunities for us in investing. As we have mentioned, 70% to 80%, and recently 80%, of our pretax income is generated from activities we believe are highly repeatable, durable, and able to grow. This has been reflected in our quarter results. The broader takeaway from our perspective is that while commentary may suggest the business is challenging, the results and our daily experiences tell a different story.

Our next question comes from the line of Arnaud Giblat with BNP Paribas.

I would like to return to the KKR ECP joint venture and follow up on that question. I was hoping to get more details about the deployment of the $50 billion joint venture. From what I understand, a portion will be allocated through existing funds, while the remainder will likely go through separately managed accounts and co-investments. Could you provide more insight into that? Additionally, since ECP is involved in the joint venture, how should we consider the division of the $50 billion between you and your partner? Lastly, regarding timing, how long should we expect for the deployment of that $50 billion?

Thanks for the question. It's Craig. Why don't I start? So in late '24, we formed a partnership with Energy Capital Partners that effectively combines our respective capabilities and capital across digital and energy infrastructure. And really, again, if you think about the surge in AI demand and what that requires, I think we all have a clear sense of this that it's stretching infrastructure, but it's doing more than that. It's changing the blueprint for how these projects need to be built. And so if you look at the announcement we made last night, that again is really a direct reflection of the reality. And so what we formed with ECP is the ability for us to approach hyperscalers and make their lives easy and be a one-stop shop and provide creative thoughtful solutions from the construction side, from the real estate side, from the energy solutions side. And it's really that's how we're going to differentiate ourselves. So I think a lot of these firms, again, are incredibly cash-generative firms with a lot of capital. And I think if you're only showing up with capital, that's not going to be a differentiator. So again, how do we look to be a really value-added partner and so this was our approach, and I think the transaction you saw last night is a direct reflection of that. I would think of that overall partnership as being 50-50 between the two of us, yes, I would expect over time that capital from us to come from our existing funds and strategies. And again, there's no timing or specific threshold through which that we need to invest that capital, etc., in partnership with ECP. But I think, again, a really powerful outcome as you would have seen last night.

The only thing I'd add, Arnaud, is that as we find more projects in addition to using our existing funds and SMAs, as you point out, there's definitely an ability to raise incremental capital to further fund the activity.

Our next question comes from the line of Brian Mckenna with Citizens JMP.

Appreciate all the detail this morning. I just had a quick question on the trajectory of earnings over the next 12 to 18 months. So you're on track to generate about $5 of adjusted EPS in 2025. That implies about 40% earnings growth in '26 to get to the low end of your target. So can you just help us bridge the gap here and what some of the bigger drivers will be for this earnings growth over the next 4 to 6 quarters?

Brian, thanks a lot for the question. Maybe just to unpack a bit of the P&L. You're seeing, obviously, a lot of momentum on the management fee line item. A lot of ways, I think this speaks maybe best to the financial health of our firm and where we're going. We feel like we got a lot of momentum in our capital markets franchise, especially as the capital markets continue to open up, feel really well positioned to be able to grow. You're starting to see some fee-related performance revenue now flow into our P&L, which we think can scale really nicely. We've talked about a lot of the things that we're doing across the insurance space, including a much more meaningful contribution of third-party capital. And then one of the things that's really important to think about over the next 12 to 18 months as we look at how our earnings can scale. Today, we have roughly $17.1 billion of embedded gains that sit on our balance sheet. That's the record high for us. So that's an aggregation of our gross unrealized carried interest as well as the differential between the fair value and the cost of both our asset management investment portfolio and what sits in strategic holdings. So when you add all those things together, and we look forward, not just in '26, but importantly, over the long term, we feel like we're in a really good position to be able to scale the firm and its earnings trajectory. In addition to that, what we're doing in strategic holdings, we think will further benefit the overall growth of our platform is just this new segment that today is still not generating a lot of operating earnings. But as you look at 2026, as a management team, we look at that portfolio, we look at our $350 million of operating earnings guidance for next year, and we feel really good in our ability to beat that. So those are a bunch of the pieces to the puzzle as we look over the course of the next 12 months. But importantly, as a management team, we're looking long term as well. And so we not only feel good about what we're going to be able to achieve in '26, but also feel like we're really very much on track for some of our longer-term goals, which, as you know, is to grow to $15-plus per share of earnings and think that we've got the business model to be able to do that without creating anything new. And we do see some new things on the horizon that we think we can add to our platform.

Our next question comes from the line of Kyle Voigt with KBW.

So Rob, you just mentioned management fee growth as a kind of key part of the algorithm to how to get to your targets for 2026. I'm just wondering if I can get some clarity on 2025. I know you previously outlined that you could see a bit of an acceleration in '25 versus the 14% realized in 2024. I think you posted 15% in the first half of the year, but that accelerated to 18% in 2Q with NA XIV turning on. So just wondering if we can get an update on how to think about second half management fee growth. Is that 18% year-on-year growth rate the right jumping off point for the second half of the year? And then any other notable activations or final closes to call out for 2H? I know Infra V is still in the market. So anything to call out there from a timing perspective.

Yes. Thanks a lot for the question, Kyle. When we continue to raise capital across the platform. I think it's worth noting as you look at that 18% growth rate we had in the quarter, talked about $30 million having come from Next IV. So our largest product only contributed $30 million of growth in the quarter, a fairly immaterial number as you think about our roughly $1 billion of management fee in the quarter. So I don't have any specificity for you around the back half of the year, management fee other than to say, we feel good about the capital raising momentum we have across all of KKR, not just in our big flagship products. And our expectation is that we'll continue to post solid results as we go through the end of the year.

And Kyle, it's Craig. I wanted to highlight something Rob mentioned at our firm meeting regarding fundraising statistics. Over the last 12 months, we've raised $110 billion, which includes $50 billion in credit, $30 billion in private equity, and $30 billion in real assets. Historically, we've noted the diversification in management fees during these calls. Over the past year, management fees have ranged between $1.1 billion and $1.4 billion across our three businesses. The breadth and diversification we have in our strategies and geographies provide us with multiple ways to succeed.

We have no further questions at this time. Mr. Larson, I'd like to turn the floor back over to you for closing comments.

Elizabeth just thank you for your help this morning, and everybody who joined. Thank you for your interest in KKR. We look forward to following up further with those of you who have more specific questions. And otherwise, we'll be back chatting with everybody in 90 days. Thank you so much.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.