Kohlberg Kravis Roberts said on Thursday that its fourth-quarter earnings more than doubled, as rising markets helped deliver big gains on its investments.
The firm said its quarterly profit, measured as economic net income, which includes unrealized investment gains, rose to $789.6 million from $347.7 million in the period a year earlier. After taxes, economic net income amounted to $1.08 a unit, handily beating the average analyst expectation of 89 cents a unit, as compiled by Standard & Poor’s Capital IQ.
K.K.R. sold some of its holdings in the quarter and achieved an 8.4 percent appreciation in its private equity portfolio. That helped the firm’s net carried interest, a measure of realized and unrealized profit from investments, more than double, rising to $347.8 million from $152.7 million in the period a year earlier.
According to generally accepted accounting principles, K.K.R.’s profit was $277.9 million in the quarter, 187 percent higher than in the fourth quarter of 2012. By that measure, the firm made $691.2 million for all of 2013, an increase of 23 percent from the previous year.
K.K.R. announced a fourth-quarter dividend of 48 cents a unit, bringing its dividends for 2013 to $1.40, the highest in its life as a public company.
Still, K.K.R. reported that distributable earnings, a measure of the cash generated by the firm, declined 6.6 percent, to $510.4 million, compared with a record period in the fourth quarter of 2012.
“We continued to see progress across our capital raising, investment performance, monetization and strategic initiatives,” Henry R. Kravis and George R. Roberts, the co-chief executives and co-founders of K.K.R., said in a statement.
For the private equity industry, 2013 presented plenty of opportunities to harvest investment gains by selling companies to stock market investors or other buyers. One of K.K.R.’s main rivals, the Blackstone Group, also reported strong results in the fourth quarter, saying its profit more than doubled.
K.K.R., for its part, was able to attract more money from investors, closing a North American private equity fund with $9 billion in commitments. The firm raised its first real estate fund in December with $1.5 billion of commitments.
Over all, K.K.R.’s assets under management rose to $94.3 billion as of Dec. 31, compared with $75.5 billion a the end of 2012.
Though K.K.R. is best known for its leveraged buyouts, it showed strength across all its businesses in the fourth quarter.
In its public markets business, which includes hedge funds and specialty finance, economic net income nearly doubled, to $73.3 million. The capital markets and principal investments business reported economic net income of $347.8 million, an increase of 162 percent from the period a year earlier.
The firm announced a structural change in December, saying it would buy its publicly traded credit investment affiliate, KKR Financial Holdings, for about $2.6 billion. That deal is expected to close in the first half of this year.