Earnings Call Transcript - KKR Q1 2021

Operator, Operator

Ladies and gentlemen, thank you for being with us. Welcome to KKR’s First Quarter 2021 Earnings Conference Call. During today’s presentation, all participants will be in listen-only mode. After management’s prepared comments, we will open the floor for questions. I’ll now turn the call over to Craig Larson, Head of Investor Relations for KKR. Craig, please proceed.

Craig Larson, Head of Investor Relations

Thank you, Operator. Good morning, everyone. Welcome to our first quarter 2021 earnings call. I’m joined this morning by Scott Nuttall, our Co-President and Co-COO; and by Rob Lewin, our CFO. 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. This call will contain forward-looking statements, which do not guarantee future events or performance. Please refer to our press release and our SEC filings for cautionary factors related to these statements. Earlier this morning, we posted our earnings release presentation. You’ll likely have noticed a few changes. First, recognizing this is the first quarter post the closing of the Global Atlantic acquisition, we’re now reporting our results with two segments, our Asset Management segment, in addition to a new Insurance segment, which reflects our approximate 60% interest in GA’s financial results. In addition, given the changes we made to our compensation framework that we introduced last quarter, a number of the line items on our segment income statement have changed. We ran through this on our Q4 call, as well as at Investor Day. Now, to help with comparability, we posted a presentation on our website in early April with three years of recast financial information on a quarterly basis. That presentation, of course, is still available on the Investor Center section of our website and it could be helpful for you to refer to that as you consider our results compared to prior periods. And finally, we’ve changed the framework of the earnings release itself to make results easier to digest, while improving our disclosure and transparency at the same time. We trust that you will find the new framework, as well as the additional disclosure to be helpful. Now, I expect many of you joined us at our Investor Day only three weeks ago. For those of you that didn’t have the opportunity, we would encourage you to watch a replay of the event and review the accompanying presentation, both of which can be found on our website. We really feel that the event helps everyone gain a better understanding of where we are now with the firm. And importantly, all of the opportunities we have to continue to grow and scale from here. And right on the heels of this event, we’re pleased to be reporting an excellent quarter. After-tax distributable earnings came in at $0.75 per share. Fee related earnings are $0.41 per share. Management fees increased 31% year-over-year, driving the 36% increase in our FRE per share compared to the first quarter of 2020. Our assets under management are now $367 billion. This reflects the closing of Global Atlantic, strong investment performance, in addition to continued fundraising momentum. And our book value per share, which is marked-to-market every quarter, is now $25.84. This is up over 50% from the $16.52 we reported one year ago and is 12% ahead of the figure we reported just last quarter. The continued growth in our book value was really a testament to the strong investment performance we’re seeing across the firm. And finally, as we announced last quarter, we increased our dividends beginning with this quarter. So our annualized dividend per share is now $0.58. In terms of today’s call, I will kick things off with an overview of investment performance and fundraising before turning it over to Rob to walk through this quarter’s financials, and at the end, Scott will provide a few closing remarks, and we’ll head into Q&A. So to begin, we’ve continued to have very strong investment performance. Beginning first with private equity, the portfolios as a whole appreciated 19% in the quarter and are up 56% over the last 12 months. And the performance in our flagship fund has been even stronger, up 28% for the quarter and up almost 80% over the last 12 months. At our Investor Day, one of the themes we discussed was the importance of winning in tech and the significance of the investments we’ve made in tech. Remember that 38% of our private equity deployment over 2018 to 2020 was in companies with a tech and digital theme. And you’re seeing the impact of these investments within our performance figures. AppLovin, our mobile technology investment in North America’s Wealth Fund, went public earlier this quarter and is currently trading at about 15 times our costs. Darktrace and KnowBe4, two cybersecurity businesses, also both went public over the last couple of weeks and are trading well north of costs. These were three of our six portfolio companies that went public in April. And alongside this IPO activity, we see strong performance at private tech-oriented investments like Internet Brands, OneStream Software, Byte Dance, RB Media, Kokusai Electric, and Calabrio, a software business that we exited earlier in Q2. We’ve seen continued performance across our real asset strategies. Over the past 12 months, our opportunistic real estate funds withstood all the market volatility, appreciating 13%, while in infrastructure, the portfolio appreciated 18%. Turning to credit, our alternative credit composite appreciated 7% in the quarter and 19% over the last 12 months. We’ve seen differentiated investment performance within our dislocation strategy, and performance in the quarter and LTV periods were strong within Lending Partners III and Special Sits II. And our leverage credit composite appreciated 2% in the quarter and 25% over the last 12 months. Looking at our performance here over a broader timeframe, both our standalone high-yield and bank loan track records continue to rank as top quartile over one-year, three-year, five-year, and seven-year timeframes. Reflecting the strong investment performance across strategies, our balance sheet investment portfolio appreciated 12% in the quarter, and is up 52% on a trailing 12-month basis. Now, on the heels of strong investment performance, we’re seeing continued momentum in fundraising with $15 billion of new capital raised in Q1 and $51 billion over the trailing 12 months. Notably, in the first quarter, we held the final close on our Asia IV Fund raise at $15 billion. Building on our differentiated investment track record, Asia IV is the largest private equity fund dedicated to investing in the Asia-Pacific region. Asia IV continues the momentum across our Asia-Pacific platform, given the final closings held just last quarter for our inaugural Asia infrastructure and real estate funds. Fundraising activity in the quarter also included new capital raised in our healthcare strategic growth strategy, core infrastructure, and our opportunistic America’s real estate strategy. We also raised our first SPAC and we’re active in the CLO markets, raising new CLOs in the quarter both in the U.S. as well as Europe. Our fundraising was not only strong for the core itself, but also diversified across many strategies. We have a lot of conviction in our fundraising momentum going forward as we remain focused on over 20 strategies that we expect to come to market. And with that, let me turn it over to Rob.

Rob Lewin, CFO

Thanks a lot, Craig. I’m going to begin this morning by reviewing our segment's financial results for the quarter. Our fee revenues totaled $586 million in Q1. Of particular note here, our management fees continued their robust growth and came in at $440 million, which is 31% ahead of last year. Adding to our strong management fee quarter, our Capital Markets business generated $112 million of transaction fees, which saw nice contributions across the board. We remain very encouraged by the forward pipeline in our Capital Markets business, as well as opportunities here for continued growth. Fee related compensation came in at $132 million or 22.5% of fee related revenues, right in the midpoint of that 20% to 25% annual range we introduced last quarter. Our other operating expenses totaled $19 million. Putting those pieces together, our fee related earnings were $364 million or $0.41 per share, and our FRE margin was 62% for the quarter. We continue to be very confident that our FRE will comfortably exceed $2 per share next year. Our fundraising momentum is as good as it has ever been. The asset base of Global Atlantic continues to grow and we have very good line of sight to larger pools of capital during their investment periods. Moving to our realized performance income, we generated $170 million of revenue for the quarter, and our realized investment income was $460 million, which is a high point for us as a firm. The total for these revenue line items is approximately $630 million for the quarter. Our only cost associated with our realized performance and investment income is compensation, which came in right at the respective annual ranges we indicated earlier this year. In total, our Asset Management operating earnings came in at $817 million for the quarter. Our share of Global Atlantic’s earnings added an incremental $63 million for the months of February and March, bringing total distributable operating earnings to $880 million, which is up 68% year-on-year. Finally, our after-tax distributable earnings came in at $660 million or $0.75 per share. One additional note here, our tax rate in the quarter was a bit elevated. The driver of this was a large accident that was structured in a way that resulted in the recognition of 100% of our tax expense while only realizing approximately 50% of the investment income. Absent this, our after-tax DE would have been $0.81 for the quarter versus the $0.75 we reported this morning. Looking forward, we do expect to benefit from the reverse of this, as that investment is monetized and those gains become realized without the burden of tax expense. Turning to deployment, coming off a record year in 2020, our total capital investment came in at $7 billion for the quarter, and $31 billion over the last 12 months, which is up over 30% from the prior period. When you dig a little deeper, our private markets deployment, which is generally longer-dated and has higher profit potential, was up 77% versus the prior LTM period, which is really the best representation for how we lean in as an organization over the last 12 months. With much of that capital having been deployed or committed during the market downturn earlier in 2020. We think our activity levels here are relatively distinguished across our many peers, where deployment across private market strategies tended to be flat to down year-over-year. At the same time, we’ve never deployed more capital in our 45-year history. We are very confident that this elevated level of deployment will serve us well for years to come as those investments mature. Finally, turning to our balance sheet, our book value per share is currently $25.84, which is up 12% from last quarter and up more than 50% versus March of 2020. Even if you compare this performance to pre-pandemic levels, our book value per share is up almost 35% in a little bit over a year, and it’s another tangible example of our business model's ability to compound capital. Moving away from the specifics of the quarter, as I look at our overall performance, I think there are really four things worth noting. First, we had a really strong quarter. We reported $0.41 of FRE per share and $0.75 of after-tax DE per share. As you know from our guidance, we expect an acceleration in both of these figures. The second relates to the strong investment performance we’ve continued to deliver on behalf of our limited partners. Craig ran you through the performance statistics for the quarter, as well as the last 12 months, which really do stand out. I think even more telling and differentiating our platform versus others is our investment performance over a multi-year period of time. As just one example, our current flagship Americas, Europe, and Asia PE fund had gross returns of 49%, 26%, and 44% from inception. This has directly led to the high levels of fundraising momentum that we are currently benefiting from. This framework is not limited to private equity. At our Investor Day, we detailed the strength of our investment performance across our four growth and real asset and credit platforms. As a firm, we have a 45-year history of investment excellence and we’re continuing to build on this long track record of success. The third point is the significant amount of related earnings inside of the firm that we expect to flow through our operating earnings over the next number of years. At our Investor Day, we discussed that $9.1 billion of total unrealized gains in our balance sheet at the end of 2020. Those are embedded gains from our investments, as well as gross unrealized carry. That $9.1 billion increased to $12.3 billion as of the end of March. That number can obviously move around a bit and will partly be driven by the overall tone in the markets. However, the $3 plus billion move in only three months—in a quarter with a heavy level of realized activity—illustrates the strength of the underlying investments and also what it means for our ability to generate realized profitability over the next number of years. Finally, we’re off to a great start with GA. We really just began to see the impact of how Global Atlantic can flow through our financial results. There’s a lot more for us to do here, and we’ll keep you abreast of our progress in the quarters ahead. All of this really does support why we expect significant acceleration of after-tax DE to the $4 to $5 range by the 2023, 2024 timeframe. This earnings power is largely already in our firm. We have a lot of conviction that we’ll be able to execute on our strategy and continue to deliver meaningful results for our LPs, shareholders, employees, and all the communities that we operate in. With that, let me hand it off to Scott for some closing thoughts.

Scott Nuttall, Co-President and Co-COO

Thank you, Rob, and thank you everyone for joining our call today. Given the recent Investor Day, I’m going to be very brief. As a firm, we have never had a stronger team, better connectivity, stronger investment results, higher unrealized gains and carry, more businesses scaling and reaching their inflection points, and more capital in and coming in. As a result, we have never had more ways to grow, more visibility on that growth, and we’re confident in our future. And all of that is before Global Atlantic, which gives us even more perpetual capital, even more visibility, even more ways to grow, and a fantastic management team that will make us even stronger and faster. We are hopeful all that came through during the Investor Day, and we are looking forward to keeping you updated on our progress. With that, we’re happy to take your questions.

Operator, Operator

Thank you. Our first question will come from Glenn Schorr with Evercore ISI. Please proceed with your question.

Glenn Schorr, Analyst

Hi, I appreciate the opportunity to ask a question. I wanted to follow up on a few topics that we didn't completely address during Investor Day or today. Are you still pursuing long-term partnerships related to the 10% that you mentioned? Also, could you share your thoughts on your progress in developing the various platforms? Thank you.

Scott Nuttall, Co-President and Co-COO

Hey, Glenn. Thanks for the questions. First, with respect to long-dated partnerships, we are still pursuing those. So these, for everybody’s benefit, are oftentimes multi-decade recycling strategic partnerships that we create with institutional investors largely, and they’re invested across asset classes and have some component of recycling to them. We continue to pursue those. They take a long time to structure, but we continue to have an active pipeline. So don’t take any message from the Investor Day lack of commentary—just continue to focus on it. We’ll have an update for you over time, because there are a couple that are getting close. On the secondary side, as we’ve mentioned in the past, we continue to look at the space. We’re analyzing whether we want to build or whether there’s something that might make sense to buy—really hard to buy work from a cultural fit standpoint at times, but we are looking, and we’ll have more to share with you over time. But nothing more to share today except that we continue to pursue it.

Operator, Operator

Our next question is coming from the line of Alex Blostein with Goldman Sachs. Please proceed with your question.

Alex Blostein, Analyst

Great. Good morning, everybody. Thanks for taking the question. So clearly, looks like momentum in the business is very strong, lots of LP demand, and you guys’ performance continues to be really good. Has this backdrop changed the capacity for some of the flagship funds that you’re currently in the market with? And if the demand sort of exceeds the capacity appetite you have in those flagship vehicles? Any other ways you’re thinking you could sort of monetize on that demand? Thanks.

Scott Nuttall, Co-President and Co-COO

Thanks for the question, Alex. As you know, it’s really been a great fundraising environment, by the best we’ve seen in a long time. We’re seeing increased engagement from investors across the board, across different asset classes, and we do find ourselves in some situations in the happy circumstance where a fund might be a capacity constraint and we’re able to talk to them about different things that we’re doing. For example, as you know, we raise our private equity flagship funds in a bit of a different way than others. We have three regional funds, instead of one global fund, and we just closed Asia; we’re in the market right now with Americas, and Europe will come relatively quickly on the back of the Americas fundraise. There’s core, there’s growth, there are a lot of different ways we can talk to investors across just private equity before you get to real assets and credit. For that incremental potential demand that we oftentimes see, especially lately, we’re able to pivot some of that unmet demand into some of these other asset classes and strategies that are adjacent—and that’s the focus right now.

Operator, Operator

Next question will be coming from the line of Craig Siegenthaler with Credit Suisse. Please proceed with your questions.

Craig Siegenthaler, Analyst

Thank you. Good morning, everyone. My question is on Global Atlantic; I noticed on slide were actually page 17 of the press release had $12 billion of Global Atlantic AUM sits in private markets, while the rest is in public markets. What strategies or assets does the $12 billion private markets invest in, and are these KKR strategies today, or is there an opportunity to rotate this AUM into KKR strategies in the future?

Rob Lewin, CFO

Hey, Craig. It’s Rob. Really good question, and so a couple things. As we thought about our IMA and how to approach it across our strategy, we really looked at where the underlying investments were at Global Atlantic. Most of those are credit-oriented and will fit in our public markets business, but there are a number that are in the real estate space, principally real estate credit, and so we’ve put those across our real estate business. As it relates to rotating the Global Atlantic balance sheet to take their products, we are in the very early innings of that. We think there’s a lot of opportunity for the Global Atlantic balance sheet, as well as our Asset Management businesses being able to get that rotation done. We’re just a couple of months in here, and that’s going to take some time to make sure that we get ramped up. We’ll provide additional updates over time, but we’re not really seeing the benefit of the Global Atlantic had, nor the KKR.

Operator, Operator

Our next question will be coming from the line of Devin Ryan with JMP Securities. Please proceed with your questions.

Devin Ryan, Analyst

Great. Good morning, everyone. Question just on the outlook for monetizing some of the embedded gains on the balance sheet just given recent performance. And I guess I want to maybe tie it into proposals around capital gains rates potentially changing and if that might accelerate definitely the thought around some of the balance sheet gains? And just bigger picture kind of any views around potential tax changes on the portfolio? I appreciate it we don’t have too much detail yet. But any color would be helpful. Thanks.

Scott Nuttall, Co-President and Co-COO

Thank you, Devin. I’ll address the second part of your question first. The potential upcoming tax legislation will not affect how we monetize our portfolio. Our focus is on serving our clients responsibly and timing our exits appropriately. Regarding our outlook for monetizing the portfolio, as you mentioned, there are substantial embedded gains. We believe we have several core assets that can compound capital for years, but we also have a more mature portfolio that we expect to realize in the upcoming quarters. One common question we receive in these discussions is about our visibility on future monetization of revenue from both investment and performance perspectives. Specifically for Q2, we currently have visibility on a significant amount of revenue, projected to exceed $700 million from performance and investment income. This revenue is from deals that have already closed or are expected to close in Q2. In terms of the revenue split, especially as we discuss compensation, I would estimate around 60 to 66 percent will be from carried interest, while the rest will come from investment income.

Operator, Operator

Next question is coming from the line of Mike Carrier with Bank of America. Please proceed with your question.

Mike Carrier, Analyst

Good morning. Thanks for taking the question. You guys mentioned being very active in deploying capital over the last year, which is positioning you well, and we’re seeing it in the performance. But just maybe, how are you thinking about deployment at this point, given on one hand, you got rising valuations, you got the outlook for economic growth is fairly robust. So just an update there?

Craig Larson, Head of Investor Relations

Hey, Mike. It’s Craig. Why don’t I start there? I think you’re right; the first part of the answer relates to the overall market where you’re seeing tremendous activity, and you really do see this in broad M&A stats. Global announced M&A volumes in Q1 were two excellent they were last year, and it’s actually been the most active start to the year in terms of broad M&A. Now, in terms of us, in a market like this where you have a lot of activity and a lot of interested sellers, discipline is critical. Alongside that, we think a strong thematic approach is also critical, and so it is important to really pick your spots, where to lean in and you want to really need to have deep expertise, in addition to real conviction. You’ve heard us talk about our focus for some time now, for instance, on some of the tech and digital themes. Joe ran through that at Investor Day; almost 40% of our deployment in private markets, again, were investments with tech and digital themes over the last three years. I think we’re still very busy and have opportunities that fit this framework. The ones that we’re attracted to are going to be companies that need capital for primary growth, and we do view that a little differently versus someone who’s simply looking to monetize an asset or an asset, if you will. But again, discipline is an important part of the equation. There’s no question about it.

Operator, Operator

Our next question will be coming from the line of Chris Harris with Wells Fargo. Please proceed with your question.

Chris Harris, Analyst

Great. Thanks. There’s a little bit of moving parts with a P&L; you got G&A coming in for a partial quarter at the beginning of the second quarter, guys. How should we be thinking about the weighted average blended fee rate for KKR as an organization?

Rob Lewin, CFO

Yeah. That’s a good question. Obviously, you’re right; you’ve got two months of GA, as opposed to a full three months. I think on that basis you’d certainly be able to look at it in a cleaner way on the quarter. Of course, given where our IMA is, and we talked at the last call that that’s maximum of 30 basis points; that’s going to have downward pressure on overall fee margins. But I think Q1 could be a good indication, probably with a little bit more downward pressure, because you have the extra month, offset by the fact that we’ve got a really good and healthy outlook in fundraising across a number of our private strategies that have higher fee rates associated with them. So a bit of a challenging question to fully answer, Chris, but hopefully, that gives you a little bit of a flavor around where blended fee rates can go across the enterprise.

Operator, Operator

Our next question will be coming from the line of Gerry O’Hara with Jefferies. Please proceed with your question.

Gerry O’Hara, Analyst

Great. Thanks. I was hoping we might be able to get a little bit more color as it relates to the performance fee revenue line item that I think is new this quarter. But is there any sort of seasonality to that line item, anniversaries perhaps of products, and what products in particular, we might be tracking or looking at to get a sense of how that line item might grow? Thank you.

Rob Lewin, CFO

Yeah. Thanks for your question, Gerry. It is new this quarter and really reflects how we’ve tried to revamp our P&L to make it easier to understand and also more comparable with a number of our peers. You’d expect to see in that line item, really our incentive fees more from our perpetual capital vehicles, where the incentive fees that we generate are based on the underlying yield of the portfolio as opposed to mark-to-market. So, things that are more stable in nature, the types of products that you’re going to see in there are going to be Type 1 incentive fees across our BDC platform, some of the core vehicles that we’re raising across infrastructure and credit. We’ve got a couple of SMEs that have comparable types of fee arrangements. So, those are the types of fees you’re going to see. We see a big opportunity over the next number of years to really scale that line item up for the firm, and we thought it made sense to break it out as distinct from incentive fees based off of mark-to-market performance, like a number of our peers have done in the past.

Operator, Operator

The next question today will come from Michael Cyprus with Morgan Stanley. Please proceed with your question.

Michael Cyprus, Analyst

Good morning. Thank you for taking my question. I have a follow-up from Investor Day regarding the origination platforms. Could you provide more details on the origination platforms that you’ve been developing in collaboration with various specialty finance companies? I understand these are primarily partnerships. How do you view the trade-offs between partnering and owning these origination platforms? In what scenarios might it be beneficial to own them, and what capabilities do you envision adding over the next few years?

Scott Nuttall, Co-President and Co-COO

Thanks. Very good question, Michael. It’s Scott. As we mentioned at Investor Day, we have created or have been partnered with others on about 16 or so origination platforms. They’re getting to be quite substantial, 4,000 employees, $100+ billion of AUM or balance sheet across the entire group. Just by way of background, these were largely created out of our private credit business, in particular, private credit opportunities vehicles, where we saw an opportunity in asset-based finance on the back of banks pulling back from a number of different asset classes, where we thought the risk-reward was really pretty interesting. That effort was started clearly before the Global Atlantic transaction. What we’re doing right now is we’re in the process of thinking about how we want to pivot this strategy and how we want to evolve what we’re doing there in light of the significant demand that Global Atlantic has for those underlying asset classes and that origination. Think of it this way: we started really just funding entirely out of the funds, and then we started to move a little bit more of a hybrid approach. We created an aircraft leasing business as an example called Altavair, which was created as almost like a joint venture between our infrastructure business, our private credit business, and our balance sheet. We’ve been moving in the direction of actually trying to think about the answer to your question—this own versus partner. What you’ll find, and we’ll share this in our thinking with you going forward, is that we are going to have some of these that will be more transitory and we owned for a while and then move on and sell as fiduciaries for our funds. We may have some that over time move into more of the Altavair type approach, which is a bit of a hybrid. With the addition of Global Atlantic, it really broadens how we can think about investing in this space, and some of this stuff, it might make sense to make more permanent either on the KKR balance sheet or the Global Atlantic balance sheet, or both.

Operator, Operator

Our next question will be coming from the line of Robert Lee with KBW. Please proceed with your questions.

Robert Lee, Analyst

Hi. Great. Thanks. Good morning. Thanks for taking my questions. While this has come on Investor Day, but I think it would be just a helpful refresher on Global Atlantic really maybe a two-parter, if you just refresh us on the amount of capital available for their growth right now. I mean, I know you injected when you bought it. I think something $250 million. There’s a sidecar vehicle, I believe, too, but updating—maybe an update on their growth capacity as it stands today would be helpful? And then also maybe GA kind of standalone, what was its organic growth in the quarter, kind of separate from how it appears being added to your income statement balance sheet?

Rob Lewin, CFO

Hi, Rob. I will take the first shot at that. That’s a good question, and obviously, one of the big opportunities for us is to really be able to work with the GA management to go get the scale, which they believe is out there in the industry, and Alan, at our Investor Day, as you noted, did a really good job articulating the different $1 billion plus growth opportunities that are available. We’ve got a couple of different ways to be able to go after that, and we do feel like we’re well set up. One, we raised $250 million of primary capital at the time of closing a couple of months ago, the first primary capital raise that the company has done. This is very meaningful in terms of our ability to scale up the platform. Number two, you noted the sidecar, and we think there’s a real opportunity from the sidecar finance perspective going forward that can start to be able to go after these growth opportunities. The last and I’d say, Rob, is one of the big strategic attractions of this transaction, I think, both for the GA management team and also as we evaluated this deal was our ability to help them access capital when really meaningful growth opportunities became available. We’re very focused on that, and I do think that there’s a real opportunity here for us to be able to obtain additional capital if it’s required for things that make a ton of sense from a growth perspective for GA.

Operator, Operator

Our next question will be coming from the line of Chris Harris, Wells Fargo. Please proceed with your question.

Chris Harris, Analyst

Thanks. Hey, Rob. I know this is really tough to estimate, but how should we be thinking about a, quote-unquote, normalized tax rate for KKR now going forward? I know there was some noise in the first quarter? And then, related to that, I just want to confirm that the insurance earnings are coming in to P&L post-tax?

Rob Lewin, CFO

Yeah. Thanks, Chris. Good question. So, yes, our Insurance segment, we thought the right way to illustrate that was on a post-tax basis, and so that’s a fully taxed number that you’re seeing for our Insurance segment. As it relates to our blended tax rate, and I would say, our guidance here really hasn’t changed since we became a C-Corp, and we benefit from a step up in basis that we had at the time of the C-Corp conversion. That’s why you see our tax rate at the time being tread below the statutory rate. Obviously, this quarter, in particular, you had some upward noise that I mentioned. But I think a mid-to-high teens type tax rate that’s going up over time and landing in the low 20s at the statutory rate over time, as our step-up comes down over time is the right way to think about taxes at KKR. So, not too dissimilar from what you’ve heard from us over the years, other than the fact that the step-up will continue to come down over time, and our tax rate will slowly migrate up.

Operator, Operator

At this time, I’ll turn the floor back to management for any additional comments.

Craig Larson, Head of Investor Relations

Okay. Great. Well, thank you very much, and thank you, everybody, for your continued interest in KKR. We know that with the Investor Day and our earnings, the amount of time that you’ve spent focused on us has been considerable this quarter. We’re, of course, available for any additional follow-up questions. Otherwise, we’ll look forward to reviewing our Q2 results in three months. Thank you so much.

Operator, Operator

Thank you, everyone. This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.