Earnings Call Transcript
KKR & Co. Inc. (KKR)
Earnings Call Transcript - KKR Q3 2021
Operator, Operator
Ladies and gentlemen, thank you for standing by. Welcome to KKR's Third Quarter 2021 Earnings Conference Call. Please note, this conference is being recorded. I will now hand the call over to Craig Larson, Head of Investor Relations for KKR. Craig, please go ahead.
Craig Larson, Head of Investor Relations
Thank you, operator. Good morning, everyone. Welcome to our third quarter 2021 earnings call. I'm joined this morning by Scott Nuttall, our co-CEO; 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. 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. Please refer to our SEC filings and our earnings release for cautionary factors related to these statements. Now turning to our results. We're pleased to be reporting another very strong quarter with fee-related earnings per share of $0.60 and after-tax distributable earnings of $1.05 per share. Both of these figures are as high as we've ever reported. Building on the success we've had in fundraising, management fees increased 16% from just last quarter, and management fees are up over 50% since the third quarter of 2020 to $559 million. This growth is the key driver behind the 60% increase in our fee-related earnings per share that you see on a year-over-year basis. Book value per share for the quarter came in at $28.06, up 38% from 1 year ago. And turning to fundraising. We continue to have a great deal of momentum. New capital raised in the quarter totaled $28 billion organically, bringing the year-to-date figure to $102 billion. Last year, in 2020, for the full year, we raised $44 billion, and that was a record year for KKR. So over the first 9 months of 2021, we've raised over 2x what we raised for all of last year, and that's with an active pipeline of fundraising initiatives as we look forward. Focusing on the $28 billion raised in the third quarter, we'd highlight 2 things. First, in private markets, 40% of the capital raised in the quarter came from our real estate business. We held the final close of our Americas Real Estate Fund. REPA III is more than 2x larger than its predecessor, and total AUM across the real estate platform now totals $36 billion. And Global Atlantic was particularly active with block activity helping add $14 million of new capital, largely in public markets. And alongside all of this fundraising, we're finding interesting opportunities to invest. We deployed a record $15 billion into private market strategies in the quarter, as well as $10 billion in public markets. This brings our total deployment for the quarter to a record $24 billion and on a year-to-date basis to $50 billion. One of the key drivers here is the continued scaling of our infrastructure and real estate platforms. Year-to-date, real assets deployment is a little more than half of total deployment in private markets. If we look back in 2020, real assets comprised 25% of private markets deployment. So as real assets deployment is scaling, private markets deployment is increasing and is becoming more diversified. In public markets, the scale of our credit platform grew meaningfully before the Global Atlantic acquisition, and that growth has continued after GA. So similarly, you're seeing a step-up in deployment here with the increase driven by both direct corporate origination as well as in asset-based finance. To give you a sense, last year, total private and opportunistic credit deployment was a little over $10 billion. Through the first 9 months of 2021, that has increased to $23 billion. So deployment has more than doubled, and we're only 9 months into the year. Now I'll turn the call over to Rob to walk you through some additional details. Rob?
Robert Lewin, CFO
Thanks a lot, Craig. Just as we continue to see strength in the fundraising and deployment front, our funds continue to generate really strong relative investment performance. Our flagship private equity funds increased by 11% in the quarter and 79% over the LTM period, while the entire PE portfolio appreciated 9% and 52%, respectively. In real assets, our opportunistic real estate state funds increased by 14% in the quarter and 29% over the LTM. Infrastructure continues to perform really well, up 4% in the quarter and 19% over the last 12 months. And on the public markets side, our leverage and alternative credit funds increased by 1% and 2% in the quarter, respectively, with continued performance over the LTM, up 11% and 26%. The combination of strong investment performance, as well as the capital raising that Craig just went through, has yielded a really robust acceleration of our AUM, which now totals $459 billion, and our fee-paying AUM is $349 billion. That's up 7% and 9%, respectively, versus just last quarter. When comparing our AUM and fee-paying AUM relative to this time last year, they're both up close to 100%. And importantly, much of this AUM is now either perpetual capital or in long-dated partnerships. Just 9 months ago, this number was $55 billion. It's now $205 billion out of our almost $460 billion of AUM. You can see this growth and the transformational change in the composition of our AUM on Page 16 of the earnings release. And finally, as it relates to our capital base, we currently have $38 billion of committed capital that comes online and becomes fee paying at a weighted average rate of over 100 basis points when the capital is either invested or enters its investment period. Now turning to our quarterly P&L. Our management fees increased over 50% this quarter versus the same time last year. As we signaled on last quarter's call, management fee growth was driven by a combination of new capital raised and various newer funds hitting their run rate. Net transaction monitoring fees were primarily driven by our capital markets franchise, which saw continued strength this quarter and were up 24% versus the same quarter in 2020. And over the last 12 months, our capital markets transaction fees have totaled $720 million, which is 42% higher than the average during the 2018 to 2020 time period. The growth in the platform is stemming from many of the expansion areas that we touched on at our April Investor Day, including our build-out of real asset, core PE and third-party coverage, which have all generated meaningful market share gains. We remain really constructive around the future growth of this business. This all brings us to fee-related earnings of $530 million for the quarter, which is up 63% versus Q3 2020. On a per-share basis, our FRE is $2.02 over the last 12 months. Moving on to realizations. Realized performance income came in at $433 million for the quarter driven by exits in Bountiful, Ingersoll-Rand and Academy. Realized investment income totaled $448 million for the quarter driven by additional exits in Mr. Cooper and Flutter. Even with these very strong monetization figures, we have still seen healthy gains in both our unrealized carried interest and the embedded gains from our balance sheet investments. Gross unrealized carried interest increased to $8.5 billion, while our embedded gains on investments increased to $7.1 billion. That's almost $16 billion of embedded revenue, which has grown over 70% since the start of the year, and that's all happened while we've been generating record levels of realizations. Coming back to our P&L. Our asset management operating earnings were a bit north of $1 billion for the quarter, which is up 80% from the same quarter last year. And our insurance segment operating earnings totaled $115 million, largely driven by strong core operating performance at Global Atlantic, together with the sale of 2 strategic investments that helped bolster net investment income. In total, our after-tax distributable earnings per share came in at $1.05 for the quarter and $3.47 for the LTM period. Both numbers are up 100% and 79%, respectively, versus the prior period. Turning to our balance sheet. Book value per share came in at $28.06, which was up 38% year-over-year, driven primarily by strong investment performance. It's worth noting that our result for this quarter includes an $0.80 increase to our deferred tax liability associated with the corporate reorganization that we announced last month and that we expect to close next year. In summary, we are really doing all the things that matter most for our business to perform at a high level and to ensure that we're set up well for the future. We keep coming back to these 5 things and really do believe we are optimizing for outcomes across the board. Number one, we are sourcing unique investment opportunities in which to put our capital to work. Our year-to-date deployment is up 2.5x. Our investment performance has been exceptionally strong, both on an absolute basis and relative to many of our peers. Because of this performance, our monetization opportunities have been abundant, and we have delivered substantial distributions to our clients and record levels of monetization for our shareholders. And these first 3 points all enable us to have the fundraising successes we have achieved. $100-plus billion of year-to-date flows is the proof point, and this sets us up incredibly well for the future. And finally, we have conviction that our business model allows us to generate greater financial outcomes. And I think you're clearly seeing that flow through our P&L. We have also talked on these calls and on Investor Days about inflection points. Our overall business has seen a fundamental shift, an inflection point, in its operating level. Beyond our distributable earnings being up approximately 2x since this time last year, all of our forward indicators are in the best shape they've ever been in. AUM is up 2x. Year-to-date fundraising is up 3x, and the embedded gains in our balance sheet have increased by approximately 300% in just the last year. We really couldn't be any more excited about the future. And with that, let me turn it over to Scott.
Scott Nuttall, Co-CEO
Thank you, Rob, and thank you, everyone, for joining our call today. Craig and Rob did a nice job walking through our numbers, which were strong again this quarter. So I'm going to spend my time on a few strategic areas of focus and give you our sense for how we're progressing. The first is perpetual and long-dated strategic capital. As you know, we are big believers in the power of compounding in all aspects of our business, including AUM. The more capital we can attract, that is perpetual or recycles, the faster we expect our AUM will scale and compound over the long term. A year ago, perpetual and strategic capital was $49 billion, 21% of our total AUM. Today, that number is $205 billion or 45%, $49 billion to $205 billion in 1 year. So we've seen over a 4x increase in 12 months, and we are nowhere near done. We have a lot of new ideas and efforts to generate even more perpetual capital going forward. The second big strategic focus area is insurance. As you know, Global Atlantic advance materially in this area. GA assets have grown from $75 billion a year ago to $120 billion at the end of Q3, a 60% increase. In addition, we have seen our AUM from third-party insurance clients increased from $33 billion a year ago to $48 billion today, an increase of 45%. Putting GA and third party together, our insurance AUM has grown from $108 billion pro forma for GA to $167 billion in a year or an increase of 55%. While we're pleased with the progress, keep in mind, we only closed the GA deal in February of this year and see a lot more opportunity for significant growth in insurance. The third area of focus is private wealth. As you know, individual investors have been 10% to 20% of the capital we've raised the last few years. We believe that with the investments we're making, combined with our brand and performance, that number will ramp to 30% to 50% of the capital we raised over the next several years. We are investing in sales, marketing, data and digital talent, and we are creating more democratized products that are relevant for a wide number of individual investors. This is a big opportunity for us, and we think we're incredibly well positioned. So long story short, the Q3 numbers are strong, but they tell only a small part of the story of what's happening at the firm. These initiatives and others give us confidence we can more than double KKR again over the next 5-or-so years, including our fee-related earnings, where we see a clear path from the $2 of FRE per share we've achieved over the last 12 months to an excess of $4 over that time frame. So while recent growth has been exciting, we see a lot more ahead. And with that, we're happy to take your questions.
Operator, Operator
Our first question comes from Alex Blostein with Goldman Sachs.
Alexander Blostein, Analyst
Great. So maybe we'll pick up, Scott, on where you left off with doubling the business again and growing FRE to north of $4 a share. As you go through the kind of key initiatives that you outlined, whether it's perpetual capital insurance or private wealth, can we zone in on private wealth just maybe a little bit more? As you think about the ramp to 30% to 50% of kind of flows from that channel, what is sort of the key product and maybe key distribution partnerships that you're considering? Obviously, we have KREST out there, so would be good to get an update on that. But how else are you thinking about tackling this part of the market?
Craig Larson, Head of Investor Relations
Alex, it's Craig. Thanks for your question. If we take a step back, the opportunity in private wealth to offer tailored democratized products is substantial, and we believe we are very well positioned to capitalize on it. To summarize, we have three broad solutions across various platforms, as well as customized solutions for specific platforms. So far, we have raised around $2 billion this year, which averages a couple of hundred million monthly. We are quite pleased with our initial progress here. As you know, we're just getting started and are focused on ramping up. I thought it might be helpful to initially discuss the democratized aspects in relation to our ramping efforts and the momentum we are experiencing. Scott or Rob, would you like to add anything?
Robert Lewin, CFO
Yes, I would like to add a couple of points, Alex. Thank you for your question. As Craig mentioned, the products we categorize as democratized currently focus on credit, real estate, and private equity, among others we are developing across various asset classes. In addition to these, we have several funds that we distribute through private wealth platforms, which significantly contributes to our efforts. Historically, this individual investor channel has accounted for about 10% to 20% of the total capital we've raised. Craig's insights are crucial; while it is still early, we see a lot of potential for growth here. Therefore, we believe that the current 10% to 20% figure could increase to 30% to 50% over time, indicating a substantial opportunity for us moving forward. In addition to expanding our own team, which we continue to develop and invest in, we are forming partnerships with external managers. We will provide more updates on this as we progress, but we are actively creating collaborations with wealth platforms globally while enhancing our own team.
Operator, Operator
The next question comes from the line of Bill Katz with Citigroup.
William Katz, Analyst
Okay. Congrats, Scott, on promotion. Just coming back to maybe your commentary and I think embedded in part of Alex's question. But can you expand a little bit on a lot more to do like yet on perpetual capital? Is that just retail? Are there other opportunities out there to continue to scale that more annuitized business opportunity?
Scott Nuttall, Co-CEO
Thank you, Bill, I appreciate your kind words. We see growth across various aspects of our business. While there has been significant focus on private wealth, we are also investing in our institutional capabilities. For instance, we've seen a 40% increase in headcount dedicated to institutional fundraising. You'll notice continued engagement with partners for long-term partnerships, some of which involve recycling. Additionally, growth in insurance presents opportunities globally, and we're developing new structures and designs to extend the duration of our capital base across various channels. There are numerous opportunities worldwide, and we plan to keep discussing these advancements. The increase from $49 billion to $205 billion marks significant progress, and we anticipate continued progress moving forward.
William Katz, Analyst
Okay. I appreciate the guidance on doubling FRE over the next few years, but it seems your management fees are increasing even faster than previously indicated. Can you clarify how we are progressing towards the earlier goal? Additionally, how will ongoing capital raising impact 2022?
Robert Lewin, CFO
Yes, sure. Bill, thanks for the question. I think, in retrospect, I think it's fair that some of the historical guidance we gave over the last 6 to 12 months is on the conservative side. But at the same time, if you look, our business has so much more momentum today than it did, even 6 or 12 months ago. And you could look at how we're performing in our different fundraises globally, all or pretty much all well ahead of expectations. The assets we have from Global Atlantic are far ahead of where we expected them to be. The momentum in our capital markets business is as good as it's ever been. And the last piece of it, less on fees, but I think also really pertinent to the discussion of growth going forward is we now have $16 billion of unrealized revenue or close to that on our balance sheet. And so if you come back to your question around where growth can go from here, I think we should pause on the $100 billion of capital that we've raised year-to-date. If you think about it, only a very small percentage of the revenue and economics that we expect from this capital has hit our P&L so far in 2021. The vast majority of it is going to be in 2022 and beyond. And the other neat point on the $100 billion of AUM that we've raised is that 50% of it has come from strategies that we weren't even in 5 years ago. So the ability to scale from there on that piece of the capital base, we think, is very real as well. So maybe bringing that back full circle to where you were going and what we expect of ourselves, while our earnings base today is at a higher level than we expected 6, 12 months ago, as Scott mentioned earlier, we still have every expectation that if we execute really well going forward that we can more than double our FRE off of this higher base. And likewise, looking at the full picture of our P&L, even off the higher distributable earnings number, the $3.50 or so that we've delivered over the LTM period, I also think we've got clear line of sight in that same period of time, the strong execution to double that to $7 plus. And so hopefully, that gives you a broader picture for how we're thinking about growth across the platform, Bill.
Operator, Operator
Our next question is from the line of Glenn Schorr with Evercore.
Glenn Schorr, Analyst
One quick one. There's a transaction or 2 in the secondary space lately. It feels like a strategic need. For as great as you're doing, you can do greater. Curious on what your plans are at this point for organic versus inorganic build in that area.
Scott Nuttall, Co-CEO
Thanks for the question, Glenn. Nothing new to report today. We continue to assess whether there's someone that we could partner with or buy all or a meaningful portion of or whether we should build our own. As we've talked about in the past, the secondary and co-invest space is adjacent to a lot of what we do. It's something we think we could be a value-added partner to somebody or build something truly distinctive. So it's not a have to do, but it is something that we continue to spend time on. Nothing new to share with you today, however, but we're continuing to spend time there.
Glenn Schorr, Analyst
Could you provide more details about the Asia franchise and its potential growth? Specifically, could you break down the expectations for retail, institutional, and various asset classes over the next couple of years compared to the long-term outlook?
Robert Lewin, CFO
Yes. Glenn, it's Rob. Clearly, we've got a first-rate private equity franchise in Asia, a $15 billion fund, probably somewhere around close to double the size of our next biggest competitor in the region. The growth opportunity from here continues to be in private equity. We think it's still very much an under-addressed private equity alternatives market. But really, it's the marriage between the best-in-class teams we have across 8 offices in Asia and what we do in the private equity side with the global capabilities that we're building up in areas like real estate, infrastructure, credit, growth equity, what we're doing in capital markets. We think the marriage of those 2 things with our market-leading position will create a bunch of growth going forward for us in that part of the world where we've got a real competitive advantage and think a real moat around the business franchise that we've built so far. And for our competitors to catch up requires a lot of investment. So we feel really good about how we're situated. And we continue to believe that, over time, our Asia Pac business can be as big as our U.S. business one day.
Operator, Operator
Our next question is from the line of Robert Lee with KBW.
Robert Lee, Analyst
Great. Scott, also, congrats on the promotion. Just really maybe is a little bit of a riff on Glenn's question. But as he mentioned, there's a lot of action in the secondaries market, like M&A, but you've talked about your CPS business as being a replacement for that. Could you maybe update us on that initiative and how you see that kind of progressing as maybe a replacement for secondaries or fund to funds business?
Scott Nuttall, Co-CEO
Sure. Happy to take it, Rob, and thanks for the congrats. Yes. So CPS, and we haven't talked about it in a while, but it stands for customized portfolio solutions. So this is a team and a business that we built on the back of the observation that a number of institutional investors were trying to get exposure to private equity, in particular, but did not have a big team to get after that and wanted a bit of an outsourced solution and partner to try to build a more diversified pool of private equity exposures. And so the team has built a business which has a combination of KKR funds and co-invest. And third party, we think best-in-class private equity partners also investing in their funds and looking at their co-investment. And so the business has continued to perform really quite nicely. It's now about $6 billion of AUM and has been quietly a top quartile performer. And we'll continue to scale that business, and we're getting more traction with investors around the world. So it's an opportunity for upside and a real nice performer for us that we think will continue to get bigger over time, and we'll keep you posted.
Robert Lee, Analyst
Great. As a follow-up, I want to address the important topic of capital management. You have significant embedded gains on your balance sheet from your investments, and your businesses are growing at a higher rate. Do you foresee a point where your cash generation will sufficiently meet your capital needs and growth objectives, allowing you to consider increasing your capital returns, such as a higher dividend payout or share buybacks? Do you think this tipping point might be reached in the next few years?
Robert Lewin, CFO
Yes. I'll begin, and I'm sure Scott will add in as well. The key to any capital allocation strategy is consistency. Our approach has always been based on return on equity. We prioritize an appropriate level of capital return to our shareholders while balancing that with investments in KKR's growth, provided those investments yield attractive returns. We will continue to assess our dividend policy annually, with a review planned for the first quarter of next year, aiming for consistent growth over time. We want to keep buying back KKR stock and are pleased with our efforts over the past five to six years, during which we've repurchased or retired nearly 80 million shares, representing almost 10% of our outstanding shares and close to 15% of our free float. We plan to maintain this strategy and reinvest in KKR for growth. One of our core strengths is our ability to allocate capital to the highest return opportunities. If we cannot identify such opportunities within KKR, we will consider returning more capital to shareholders through dividends or buybacks. It's essential to note that we approach this with a high level of alignment, as KKR employees collectively hold the largest share of the company, which influences our capital allocation mindset.
Scott Nuttall, Co-CEO
Yes. I would like to highlight how our balance sheet has significantly contributed to accelerating the growth of our fee-related earnings, particularly in seeding new businesses. Ten years ago, we operated in six investment businesses, and now we are involved in 28. The balance sheet has clearly facilitated our organic growth efforts. In our capital markets business, which operates under a capital-light model, we have utilized the balance sheet to effectively scale growth in a substantial way, especially in M&A activities. For instance, our partnership with Marshall Wace and Global Atlantic showcases how we've leveraged the balance sheet to transform balance sheet earnings into fee-related earnings and Total Distributable Earnings. We consider the balance sheet to be a strategic asset and will continue to utilize it in this manner. We will also keep reassessing our dividend levels and share buybacks to strike the right balance while keeping in mind our position as the largest shareholder.
Operator, Operator
Our next question is from the line of Brian Bedell with Deutsche Bank.
Brian Bedell, Analyst
Great. Congrats, Scott. Just to revisit the fundraising, you're obviously ahead of schedule compared to your Investor Day. I wanted to understand if it is feasible for 2022 to match the fundraising success of 2021, excluding insurance blocks. What factors might contribute to that, especially since you've already achieved a few of your flagship goals?
Craig Larson, Head of Investor Relations
Brian, it's Craig. Why don't I start? Thanks for the question. We don't have any updated fundraising guidance for 2022, but let me try and help frame things. I think really what you're seeing in this quarter is kind of interesting in this way is what you're seeing is the continued scaling of businesses and the increased diversification across the firm. 7 or 8 years ago, if we reported one of the strongest fundraising quarters in our history, it would have meant we had a big fundraising event in private equity. And so today, we're reporting an excellent new capital raise figure. New capital raised in Q3 is the second highest quarterly figure we reported in our history, and over 90% of that is coming from strategies outside of traditional private equity. So in private markets, half the capital was raised in infrastructure and real estate, as we talked about it. We have all these new initiatives. As Rob had mentioned, 50% of the capital year-to-date being raised from areas that didn't even exist within the framework of the firm 5 years ago. In Global Atlantic, as you mentioned, again, AUM meaningfully above where we would have ever expected it would have been at the time of announcement. And when you think of huge addressable market opportunities like we've touched on with these democratized products, that's all on the come. So we don't have an updated figure for next year, but it just continues to feel like there's real momentum, and we're really well positioned, which is exciting.
Scott Nuttall, Co-CEO
Yes. The only thing I'd add, Brian, is, look, as Craig said, we got a lot of ways to win now. The firm is really scaling and diversifying. Last time I counted out what we have coming to market in the next 12 to 18 months, it's something like 27 different line items. So there's lots of different products in the market, and that's away from Global Atlantic.
Brian Bedell, Analyst
It's incredibly powerful. As we consider the progress towards $4 of FRE, could you share your thoughts on a couple of additional areas besides the traditional ones, particularly on the retail side, which has increased to 30% to 50%? Do you view this as a positively contributing growth driver for the FRE target, beyond what you have planned for the institutional channels? Similarly, regarding the capital markets business, which has experienced fluctuations but also some significant long-term growth, is that expected to be a major contributor to reaching the $4 target?
Scott Nuttall, Co-CEO
I think it's any more substantial than it would be today, on the second question. And on the first question, look, I think the opportunities we see in private wealth give us that much more confidence that it's in excess of $4 in 5-or-so years. And I think the in excess of is something you should focus on, and we'll try to do better than $4. But I think retail, private wealth opportunity gives us more confidence we have an opportunity to continue to outperform expectations.
Operator, Operator
Our next question is from the line of Gerry O'Hara with Jefferies.
Gerald O'Hara, Analyst
Great. Seeing obviously the three block transactions in the quarter is encouraging, but perhaps you could give us just a bit of sense on what the kind of competitive dynamics are within that insurance and annuity business from your end.
Scott Nuttall, Co-CEO
Thank you, Gerry. It's Scott. The environment is competitive, and we encounter competition in all our areas. There are several capable competitors who operate responsibly and intelligently. This allows us to identify opportunities where we believe we have a distinct competitive edge. We are pleased with the progress we've made. One major reason for forming the partnership with Global Atlantic was the strength of their management team. They have established strong relationships globally with various counterparties, which has enabled us to engage effectively with these blocks. There has been significant activity in block transactions, and we anticipate it will continue. We expect it to remain competitive, and we believe we will continue to capture our share.
Gerald O'Hara, Analyst
Fair enough. And perhaps one for Rob. I know we're still kind of early days here in the fourth quarter. But if you might be able to give us any sort of update or line of sight into 4Q monetization activity, that would, as always, be appreciated.
Robert Lewin, CFO
Yes. No problem, Gerry. You're right. We're early in the quarter, but we already have really good visibility into Q4 and into record levels, I think, of monetization activity, and we will turn into revenue. Size of now, that figure is north of $1 billion. So that's collectively across both our performance and investment income. As a reminder, this is going to be from deals that are either already closed today or have been signed up and we expect to close in Q4. I'd also note that for this quarter, for Q4, this figure also includes revenue from incentive fees that have already been booked through our hedge fund partnerships. In terms of how that breaks down from a split perspective, so you could think about flow-through to profitability, I would say it's probably slightly weighted towards carried interest right now relative to both investment income as well as the performance income that comes from our hedge fund partnerships. If you recall, the latter has the same 10% to 20% comp load as our investment income. So hopefully, that gives you a flavor of what's ahead in Q4. But again, another strong monetization quarter for us.
Operator, Operator
The next question is coming from the line of Devin Ryan with JMP Securities.
Brian McKenna, Analyst
This is Brian McKenna for Devin. So just to follow up on realization activity, so you have about $5 billion of net unrealized carried interest and $7 billion of embedded gains on the balance sheet. So assuming the capital markets remain open and business trends continue to be healthy, how quickly do you think you can work through this pipeline of realizations over time?
Robert Lewin, CFO
Yes, Brian, that's a good question. We plan to be balanced. What we've experienced so far in 2021 shows that our monetizations and revenue from those monetizations are at record levels year-to-date, better than any previous full year. During this time, our embedded and unrealized gains have also increased on our balance sheet, which is a result of strong investment performance. We're optimistic that we can maintain that performance moving forward, especially with our current portfolio construction. We believe we can continue to generate healthy monetizations and maintain a pipeline for future years. However, execution will be key, and forecasting is challenging. Looking back at 2020 and even the volatile times of 2021, we've observed a consistent level of monetizations alongside growth in our unrealized and embedded gains.
Scott Nuttall, Co-CEO
Yes. The only thing I would add, Brian, as you heard Rob referenced before, that, in addition to kind of having confidence, we can at least double fee-related earnings in the next 5-or-so years. We think we can do the same with distributable earnings per share. And obviously, having a line of sight that we do in terms of embedded value in both carry and balance sheet gains is part of the reason we have that confidence. But to Rob's point, we'll continue to monetize. And hopefully, we'll continue to replenish with other unrealized gains and other investments perform.
Brian McKenna, Analyst
Great. And then just on the FRE margin, that stepped up nicely in the quarter to about 65% from 62% in the first half of 2021. So how should we think about the FRE margin moving forward? Is that 65% a good place to be?
Robert Lewin, CFO
Brian, what we've talked about historically is probably a low 60s FRE margin. We were 61% last year. Year-to-date, even with a solid Q3, we're about 63%, so kind of in line where we thought we'd be. What we've also flagged is we intend to continue to invest across technology, distribution and marketing. And so you could see our OpEx line ticking up a bit. But the goal going forward over the next number of years is to be at a place where we're sustainably generating mid-60s types of FRE margins. But I think the guidance going forward will continue to be in that low 60% range. And hopefully, there will be periods of time where that can go up and ultimately be in a place where we're more sustainably generating those types of margins that are in the mid-60s.
Operator, Operator
Our next question comes from the line of Mark Cyprys from Morgan Stanley.
Michael Cyprys, Analyst
It's Mike Cyprys from Morgan Stanley. Just wanted to follow up on the private wealth opportunity. I was just hoping you could elaborate a little bit on the investments you're making in sales, marketing, distribution, digital distribution, if you could just elaborate a little bit on that. How large is the sales team today? Where do you think that can be over the next couple of years? And how do you think about buy versus build versus rent?
Scott Nuttall, Co-CEO
Thanks, Michael. It's Scott. I'll take that. In terms of the investment that we're making, first, the investment we're making is in headcount. So the team, kind of probably 18-plus months ago, it was probably around 10 people. It's now pushing 40. I would expect that number will likely triple or so again from here over the relatively near term. So we'll continue to build the focused private wealth team out, including marketing. That's kind of investment 1. Investment 2 will be in all things tech and operations, around making sure that we're able to service the private wealth client in a best-in-class way. So we're continuing to make investments there. You heard Rob reference some investments we're going to continue to make in technology. Some of that will be around the space. But those are the 2 predominant, in addition to what I talked about before, which is product development. In terms of buy versus build versus rent, we are clearly building, and we're doing some renting as we sit here today. And we are, as part of our corporate development efforts, assessing whether there's anything that could make sense to buy. But right now, it is build and rent and create partnerships, and we'll let you know if we find anything that we think is interesting enough to move into the buy category.
Robert Lewin, CFO
Yes. Mike, just one quick thing to add on. As we think about headcount growth in SaaS space or really across the firm, it's important to note that we would expect to be able to operate within our stated comp range on fees in the 20% to 25% range. And so even with increased heads, I wouldn't expect that to impact our margins.
Michael Cyprys, Analyst
Great. And just a follow-up, if I could, just around capital deployment. Clearly, a very strong quarter, $8 billion deployed across infrastructure and real estate. In particular, I thought stood out, that's $24 billion or so annualized pace there. Just can you talk a little bit about the actions that you're taking to increase deployment capacity within your real assets business in terms of the actions you've taken to get to this level? And as you look out over the next couple of years, where would you like to see that deployment pace and capacity be in, say, 3 or 5 years? And what are the actions you need to take in order for that to be materially higher from where it is today?
Craig Larson, Head of Investor Relations
Mike, it's Craig. Let me start by providing some details about our deployment activities, and I expect Scott will share insights on our investments for tomorrow. I'm glad you raised this point, as we haven’t discussed deployment in as much detail as we should. As you've noted, we have remained quite active. For the quarter, we're at $15 billion, and year-to-date, we are nearing $30 billion. Looking at the deployment figures over the first nine months, we are already significantly surpassing our record year in 2020. Our deployments are strong. One key aspect is diversification, especially considering the balance we've achieved between our real estate and infrastructure businesses this quarter. In contrast to 2019 and 2020, these areas constituted about 60% of our deployment in private markets this quarter, while they accounted for just 25% in those earlier years. As these segments grow and we explore new asset classes like core real estate and core infrastructure, we see that the addressable market is expanding, contributing to increased deployment. Another noteworthy point regarding private equity is that while activity levels are exceptionally high, we are being discerning in our approach. You can see in the numbers that we are drawing lines and choosing our investments carefully. Consequently, our year-to-date private equity deployment is actually on track to be lower than in 2020. In public markets, our credit platform has continued to expand significantly, particularly post-GA, driving a notable increase in deployment both in corporate origination and asset-based finance.
Scott Nuttall, Co-CEO
Yes, it's a great question, Mike. We see a significant opportunity to expand our real estate and infrastructure platforms. Both have been developed over the last 10 to 12 years and represent large markets with considerable client interest in real assets. Investors are drawn to these asset classes due to their yield and inflation protection. There are several key points to highlight. First, we are scaling our more opportunistic strategies. Not long ago, the infrastructure platform grew from $1 billion to significantly more per fund, indicating great potential as we continue to scale. The same applies to real estate, with notable developments from REPA I to REPA III, alongside our European and Asian real estate opportunistic strategies. Second, we have raised substantial capital this year for core infrastructure and core plus real estate, both of which are performing well in large end markets. Third, we are expanding internationally. What began in the U.S. is now reaching Europe and Asia, where we plan to introduce a Europe and Asia core plus real estate strategy. Fourth, we are focusing on individual investors. In addition to KREST, we are developing various products aimed at democratizing real assets for individual investors. Lastly, there's a significant opportunity to scale our real estate credit efforts. Global Atlantic has helped us expand this area, and we see further opportunities globally, including in Europe, where we plan to establish a real estate credit platform. In summary, we agree there is substantial growth potential.
Operator, Operator
At this time, we've reached the end of the question-and-answer session. I'll turn the call back to management for closing remarks.
Craig Larson, Head of Investor Relations
Rob, thank you for your help. And everybody, thank you for joining us. Please follow up with us directly with any follow-ups. Otherwise, we look forward to speaking with you next quarter. Thanks again.
Operator, Operator
This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation.