Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Oct. 29, 2013 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'KKR & Co. L.P. | ' |
Entity Central Index Key | '0001404912 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 288,143,327 |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Assets | ' | ' |
Cash and Cash Equivalents | $1,112,316 | $1,230,464 |
Cash and Cash Equivalents Held at Consolidated Entities | 436,777 | 587,174 |
Restricted Cash and Cash Equivalents | 45,490 | 87,627 |
Investments | 44,263,123 | 40,697,848 |
Due from Affiliates | 133,746 | 122,185 |
Other Assets | 2,168,599 | 1,701,055 |
Total Assets | 48,160,051 | 44,426,353 |
Liabilities and Equity | ' | ' |
Debt Obligations | 2,027,116 | 1,123,414 |
Due to Affiliates | 96,772 | 72,830 |
Accounts Payable, Accrued Expenses and Other Liabilities | 2,527,876 | 1,824,655 |
Total Liabilities | 4,651,764 | 3,020,899 |
Commitments and Contingencies | ' | ' |
Redeemable Noncontrolling Interests | 574,065 | 462,564 |
Equity | ' | ' |
KKR & Co. L.P. Partners' Capital (285,051,256 and 253,363,691 common units issued and outstanding as of September 30, 2013 and December 31, 2012, respectively) | 2,501,518 | 2,008,965 |
Accumulated Other Comprehensive Income (Loss) | -6,425 | -4,606 |
Total KKR & Co. L.P. Partners' Capital | 2,495,093 | 2,004,359 |
Noncontrolling Interests | 40,439,129 | 38,938,531 |
Total Equity | 42,934,222 | 40,942,890 |
Total Liabilities and Equity | $48,160,051 | $44,426,353 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) | Sep. 30, 2013 | Dec. 31, 2012 |
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | ' | ' |
Common units issued | 285,051,256 | 253,363,691 |
Common units outstanding | 285,051,256 | 253,363,691 |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Revenues | ' | ' | ' | ' |
Fees | $220,028 | $162,154 | $537,644 | $390,821 |
Expenses | ' | ' | ' | ' |
Compensation and Benefits | 329,182 | 366,350 | 860,905 | 1,019,400 |
Occupancy and Related Charges | 17,637 | 14,344 | 46,036 | 43,636 |
General, Administrative and Other | 108,676 | 65,825 | 279,906 | 177,480 |
Total Expenses | 455,495 | 446,519 | 1,186,847 | 1,240,516 |
Investment Income (Loss) | ' | ' | ' | ' |
Net Gains (Losses) from Investment Activities | 2,230,401 | 2,308,613 | 4,598,755 | 6,997,166 |
Dividend Income | 121,059 | 10,440 | 370,014 | 263,298 |
Interest Income | 114,861 | 95,578 | 352,250 | 259,669 |
Interest Expense | -25,056 | -17,868 | -72,693 | -52,757 |
Total Investment Income (Loss) | 2,441,265 | 2,396,763 | 5,248,326 | 7,467,376 |
Income (Loss) Before Taxes | 2,205,798 | 2,112,398 | 4,599,123 | 6,617,681 |
Income Taxes | 7,644 | 9,612 | 25,525 | 37,777 |
Net Income (Loss) | 2,198,154 | 2,102,786 | 4,573,598 | 6,579,904 |
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests | 9,169 | 9,994 | 25,992 | 18,551 |
Net Income (Loss) Attributable to Noncontrolling Interests | 1,984,245 | 1,965,381 | 4,134,293 | 6,097,245 |
Net Income (Loss) Attributable to KKR & Co. L.P. | $204,740 | $127,411 | $413,313 | $464,108 |
Distributions Declared per KKR & Co. L.P. Common Unit (in dollars per unit) | $0.23 | $0.24 | $0.92 | $0.52 |
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit | ' | ' | ' | ' |
Basic (in dollars per unit) | $0.73 | $0.53 | $1.53 | $1.98 |
Diluted (in dollars per unit) | $0.66 | $0.49 | $1.40 | $1.86 |
Weighted Average Common Units Outstanding | ' | ' | ' | ' |
Basic (in units) | 282,148,802 | 239,696,358 | 270,484,224 | 234,876,879 |
Diluted (in units) | 308,135,191 | 257,646,622 | 296,181,070 | 249,359,200 |
CONDENSED_CONSOLIDATED_STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ' | ' | ' | ' |
Net Income (Loss) | $2,198,154 | $2,102,786 | $4,573,598 | $6,579,904 |
Other Comprehensive Income (Loss), Net of Tax: | ' | ' | ' | ' |
Foreign Currency Translation Adjustments | -1,362 | 5,768 | -7,534 | 362 |
Comprehensive Income (Loss) | 2,196,792 | 2,108,554 | 4,566,064 | 6,580,266 |
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests | 9,169 | 9,994 | 25,992 | 18,551 |
Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests | 1,983,004 | 1,968,908 | 4,128,068 | 6,096,686 |
Comprehensive Income (Loss) Attributable to KKR & Co. L.P. | $204,619 | $129,652 | $412,004 | $465,029 |
CONDENSED_CONSOLIDATED_STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $) | Total | Common Units | Partners' Capital | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Redeemable Noncontrolling Interests |
In Thousands, except Share data, unless otherwise specified | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | |
Balance at Dec. 31, 2011 | $37,409,143 | ' | $1,330,887 | ($2,189) | $36,080,445 | $275,507 |
Balance (in units) at Dec. 31, 2011 | ' | 227,150,182 | ' | ' | ' | ' |
Increase (Decrease) in Partners' Capital | ' | ' | ' | ' | ' | ' |
Net Income (Loss) | 6,561,353 | ' | 464,108 | ' | 6,097,245 | ' |
Net Income (Loss) | 18,551 | ' | ' | ' | ' | 18,551 |
Other Comprehensive Income (Loss)- | ' | ' | ' | ' | ' | ' |
Foreign Currency Translation (Net of Tax) | 362 | ' | ' | 921 | -559 | ' |
Exchange of KKR Holdings L.P. Units to KKR & Co. L.P. Common Units | ' | ' | 138,280 | -161 | -138,119 | ' |
Exchange of KKR Holdings L.P. Units to KKR & Co. L.P. Common Units (in units) | 13,151,729 | 13,151,729 | ' | ' | ' | ' |
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of KKR & Co. L.P. Common Units | 1,223 | ' | 1,320 | -97 | ' | ' |
Net Delivery of Common Units-Equity Incentive Plan (in units) | ' | 1,105,894 | ' | ' | ' | ' |
Equity Based Compensation | 330,037 | ' | 47,679 | ' | 282,358 | ' |
Capital Contributions | 2,276,163 | ' | ' | ' | 2,276,163 | 179,767 |
Capital Distributions | -6,410,418 | ' | -138,217 | ' | -6,272,201 | -988 |
Balance at Sep. 30, 2012 | 40,167,863 | ' | 1,844,057 | -1,526 | 38,325,332 | 472,837 |
Balance (in units) at Sep. 30, 2012 | ' | 241,407,805 | ' | ' | ' | ' |
Balance at Dec. 31, 2012 | 40,942,890 | ' | 2,008,965 | -4,606 | 38,938,531 | 462,564 |
Balance (in units) at Dec. 31, 2012 | ' | 253,363,691 | ' | ' | ' | ' |
Increase (Decrease) in Partners' Capital | ' | ' | ' | ' | ' | ' |
Net Income (Loss) | 4,547,606 | ' | 413,313 | ' | 4,134,293 | ' |
Net Income (Loss) | 25,992 | ' | ' | ' | ' | 25,992 |
Other Comprehensive Income (Loss)- | ' | ' | ' | ' | ' | ' |
Foreign Currency Translation (Net of Tax) | -7,534 | ' | ' | -1,309 | -6,225 | ' |
Exchange of KKR Holdings L.P. Units to KKR & Co. L.P. Common Units | ' | ' | 329,245 | -764 | -328,481 | ' |
Exchange of KKR Holdings L.P. Units to KKR & Co. L.P. Common Units (in units) | 27,809,258 | 27,809,258 | ' | ' | ' | ' |
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of KKR & Co. L.P. Common Units | 14,415 | ' | 14,161 | 254 | ' | ' |
Net Delivery of Common Units-Equity Incentive Plan | 16,563 | ' | 16,563 | ' | ' | ' |
Net Delivery of Common Units-Equity Incentive Plan (in units) | ' | 3,878,307 | ' | ' | ' | ' |
Equity Based Compensation | 247,183 | ' | 84,581 | ' | 162,602 | ' |
Capital Contributions | 4,615,392 | ' | ' | ' | 4,615,392 | 138,063 |
Capital Distributions | -7,442,293 | ' | -365,310 | ' | -7,076,983 | -52,554 |
Balance at Sep. 30, 2013 | $42,934,222 | ' | $2,501,518 | ($6,425) | $40,439,129 | $574,065 |
Balance (in units) at Sep. 30, 2013 | ' | 285,051,256 | ' | ' | ' | ' |
CONDENSED_CONSOLIDATED_STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Operating Activities | ' | ' |
Net Income (Loss) | $4,573,598 | $6,579,904 |
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities: | ' | ' |
Equity Based Compensation | 247,183 | 330,037 |
Net Realized (Gains) Losses on Investments | -2,356,388 | -3,240,874 |
Change in Unrealized (Gains) Losses on Investments | -2,242,367 | -3,756,292 |
Other Non-Cash Amounts | -48,142 | -35,113 |
Cash Flows Due to Changes in Operating Assets and Liabilities: | ' | ' |
Change in Cash and Cash Equivalents Held at Consolidated Entities | 150,960 | 605,227 |
Change in Due from / to Affiliates | -14,661 | -31,536 |
Change in Other Assets | 86,997 | 48,239 |
Change in Accounts Payable, Accrued Expenses and Other Liabilities | 475,596 | 372,000 |
Investments Purchased | -23,712,434 | -8,006,391 |
Cash Proceeds from Sale of Investments | 24,635,228 | 11,754,084 |
Net Cash Provided (Used) by Operating Activities | 1,795,570 | 4,619,285 |
Investing Activities | ' | ' |
Change in Restricted Cash and Cash Equivalents | 42,137 | 20,246 |
Purchase of Furniture, Computer Hardware and Leasehold Improvements | -7,967 | -28,627 |
Net Cash Provided (Used) by Investing Activities | 34,170 | -8,381 |
Financing Activities | ' | ' |
Distributions to Partners | -365,310 | -138,217 |
Distributions to Redeemable Noncontrolling Interests | -52,554 | -988 |
Contributions from Redeemable Noncontrolling Interests | 138,063 | 179,767 |
Distributions to Noncontrolling Interests | -7,076,983 | -6,233,832 |
Contributions from Noncontrolling Interests | 4,496,197 | 2,276,163 |
Net Delivery of Common Units - Equity Incentive Plan | 16,563 | ' |
Proceeds from Debt Obligations | 1,188,729 | 519,996 |
Repayment of Debt Obligations | -287,633 | -770,924 |
Financing Costs Paid | -4,960 | -7,776 |
Net Cash Provided (Used) by Financing Activities | -1,947,888 | -4,175,811 |
Net Increase/(Decrease) in Cash and Cash Equivalents | -118,148 | 435,093 |
Cash and Cash Equivalents, Beginning of Period | 1,230,464 | 843,261 |
Cash and Cash Equivalents, End of Period | 1,112,316 | 1,278,354 |
Supplemental Disclosures of Cash Flow Information | ' | ' |
Payments for Interest | 68,809 | 124,522 |
Payments for Income Taxes | 74,217 | 59,041 |
Supplemental Disclosures of Non-Cash Investing and Financing Activities | ' | ' |
Non-Cash Contributions of Equity Based Compensation | 247,183 | 330,037 |
Non-Cash Distributions to Noncontrolling Interests | ' | 38,369 |
Non-Cash Contributions from Noncontrolling Interests | 119,195 | ' |
Foreign Exchange Gains (Losses) on Debt Obligations | -2,322 | -901 |
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of KKR & Co. L.P. Common Units | $14,415 | $1,223 |
ORGANIZATION
ORGANIZATION | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
ORGANIZATION | ' | |||||||||||||
ORGANIZATION | ' | |||||||||||||
1. ORGANIZATION | ||||||||||||||
KKR & Co. L.P. (NYSE:KKR), together with its consolidated subsidiaries (“KKR”), is a leading global investment firm that offers a broad range of investment management services to fund investors and provides capital markets services for the firm, its portfolio companies and third parties. Led by Henry Kravis and George Roberts, KKR conducts business with offices around the world, which provides a global platform for sourcing transactions, raising capital and carrying out capital markets activities. KKR operates as a single professional services firm and generally carries out its investment activities under the KKR brand name. | ||||||||||||||
KKR & Co. L.P. was formed as a Delaware limited partnership on June 25, 2007 and its general partner is KKR Management LLC (the “Managing Partner”). KKR & Co. L.P. is the parent company of KKR Group Limited, which is the non-economic general partner of KKR Group Holdings L.P. (“Group Holdings”), and KKR & Co. L.P. is the sole limited partner of Group Holdings. Group Holdings holds a controlling economic interest in each of (i) KKR Management Holdings L.P. (“Management Holdings”) through KKR Management Holdings Corp., a Delaware corporation which is a domestic corporation for U.S. federal income tax purposes, and (ii) KKR Fund Holdings L.P. (“Fund Holdings” and together with Management Holdings, the “KKR Group Partnerships”) directly and through KKR Fund Holdings GP Limited, a Cayman Island limited company which is a disregarded entity for U.S. federal income tax purposes. Group Holdings also owns certain economic interests in Management Holdings through a wholly owned Delaware corporate subsidiary of KKR Management Holdings Corp. and certain economic interests in Fund Holdings through a Delaware partnership of which Group Holdings is the general partner with a 99% economic interest and KKR Management Holdings Corp. is a limited partner with a 1% economic interest. KKR & Co. L.P., through its indirect controlling economic interests in the KKR Group Partnerships, is the holding partnership for the KKR business. | ||||||||||||||
KKR & Co. L.P. both indirectly controls the KKR Group Partnerships and indirectly holds equity units in each KKR Group Partnership (collectively, “KKR Group Partnership Units”) representing economic interests in KKR’s business. The remaining KKR Group Partnership Units are held by KKR’s principals through KKR Holdings L.P. (“KKR Holdings”), which is not a subsidiary of KKR. As of September 30, 2013, KKR & Co. L.P. held 41.3% of the KKR Group Partnership Units and KKR’s principals held 58.7% of the KKR Group Partnership Units through KKR Holdings. The percentage ownership in the KKR Group Partnerships will continue to change as KKR Holdings and/or KKR’s principals exchange units in the KKR Group Partnerships for KKR & Co. L.P. common units. | ||||||||||||||
The following table presents the effect of changes in the ownership interest in the KKR Group Partnerships on KKR & Co. L.P.’s equity: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 204,740 | $ | 127,411 | $ | 413,313 | $ | 464,108 | ||||||
Transfers from noncontrolling interests: | ||||||||||||||
Exchange of KKR Group Partnership units held by KKR Holdings L.P. (a) | 87,431 | 31,308 | 337,054 | 139,342 | ||||||||||
Change from net income (loss) attributable to KKR & Co. L.P. and transfers from noncontrolling interests held by KKR Holdings | $ | 292,171 | $ | 158,719 | $ | 750,367 | $ | 603,450 | ||||||
(a) Increase in KKR & Co. L.P. partners’ capital for exchange of 7,216,913 and 2,784,209 for the three months ended September 30, 2013 and 2012, respectively, and 27,809,258 and 13,151,729 for the nine months ended September 30, 2013 and 2012, respectively, KKR Group Partnership units held by KKR Holdings L.P., inclusive of deferred taxes. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||||||||
Basis of Presentation | ||||||||||||||
The accompanying unaudited condensed consolidated financial statements of KKR & Co. L.P. have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) such that the condensed consolidated financial statements are presented fairly and that estimates made in preparing the condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The December 31, 2012 condensed consolidated balance sheet data was derived from audited consolidated financial statements included in KKR’s Annual Report on Form 10-K for the year ended December 31, 2012, which include all disclosures required by GAAP. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in KKR & Co. L.P.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). | ||||||||||||||
The condensed consolidated financial statements (referred to hereafter as the “financial statements”) include the accounts of KKR’s management and capital markets companies, the general partners of certain unconsolidated funds and vehicles, general partners of consolidated funds and their respective consolidated funds and certain other entities. | ||||||||||||||
KKR & Co. L.P. consolidates the financial results of the KKR Group Partnerships and their consolidated subsidiaries. KKR Holdings’ ownership interest in the KKR Group Partnerships is reflected as noncontrolling interests in the accompanying financial statements. | ||||||||||||||
References in the accompanying financial statements to KKR’s “principals” are to KKR’s senior employees and non-employee operating consultants who hold interests in KKR’s business through KKR Holdings, including those principals who also hold interests in the Managing Partner entitling those principals to vote for the election of the Managing Partners’ directors (the “Senior Principals”). | ||||||||||||||
Use of Estimates | ||||||||||||||
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of fees, expenses and investment income (loss) during the reporting periods. Such estimates include but are not limited to the valuation of investments and financial instruments. Actual results could differ from those estimates, and such differences could be material to the financial statements. | ||||||||||||||
Consolidation | ||||||||||||||
General | ||||||||||||||
KKR consolidates (i) those entities in which it holds a majority voting interest or has majority ownership and control over significant operating, financial and investing decisions of the entity, including the KKR funds and vehicles in which KKR, as general partner, is presumed to have control, or (ii) entities determined to be variable interest entities (“VIEs”) for which KKR is considered the primary beneficiary. | ||||||||||||||
With respect to KKR’s consolidated funds and vehicles, KKR generally has operational discretion and control, and fund investors have no substantive rights to impact ongoing governance and operating activities of the fund, including the ability to remove the general partner, also known as kick-out rights. As a result, a fund should be consolidated unless KKR has a nominal level of equity at risk. To the extent that KKR commits a nominal amount of equity to a given fund and has no obligation to fund any future losses, the equity at risk to KKR is not considered substantive and the fund is typically considered a VIE as described below. In these cases, the fund investors are generally deemed to be the primary beneficiaries and KKR does not consolidate the fund. In cases when KKR’s equity at risk is deemed to be substantive, the fund is generally not considered to be a VIE and KKR generally consolidates the fund. | ||||||||||||||
KKR’s funds and vehicles are consolidated by KKR notwithstanding the fact that KKR has only a minority economic interest in those funds. KKR’s financial statements reflect the assets, liabilities, fees, expenses, investment income (loss) and cash flows of the consolidated KKR funds and vehicles on a gross basis, and the majority of the economic interests in those funds, which are held by third party fund investors, are attributed to noncontrolling interests in the accompanying financial statements. All of the management fees and certain other amounts earned by KKR from those funds are eliminated in consolidation. However, because the eliminated amounts are earned from, and funded by, noncontrolling interests, KKR’s attributable share of the net income (loss) from those funds is increased by the amounts eliminated. Accordingly, the elimination in consolidation of such amounts has no effect on net income (loss) attributable to KKR or KKR partners’ capital. | ||||||||||||||
KKR’s funds and vehicles are, for GAAP purposes, investment companies and therefore are not required to consolidate their investments, including investments in portfolio companies, even if majority-owned and controlled. Rather, the KKR funds and vehicles reflect their investments at fair value as described in the Fair Value Measurements section. All intercompany transactions and balances have been eliminated. | ||||||||||||||
Variable Interest Entities | ||||||||||||||
KKR consolidates all VIEs in which it is considered the primary beneficiary. An enterprise is determined to be the primary beneficiary if it has a controlling financial interest under GAAP. A controlling financial interest is defined as (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s business and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. The consolidation rules which were revised effective January 1, 2010, require an analysis to determine (a) whether an entity in which KKR has a variable interest is a VIE and (b) whether KKR’s involvement, through the holding of equity interests directly or indirectly in the entity or contractually through other variable interests unrelated to the holding of equity interests, would give it a controlling financial interest under GAAP. Performance of that analysis requires the exercise of judgment. Where KKR has an interest in an entity that has qualified for the deferral of the consolidation rules, the analysis is based on consolidation rules prior to January 1, 2010. These rules require an analysis to determine (a) whether an entity in which KKR has a variable interest is a VIE and (b) whether KKR’s involvement, through the holding of equity interests directly or indirectly in the entity or contractually through other variable interests would be expected to absorb a majority of the variability of the entity. Under both guidelines, KKR determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. In evaluating whether KKR is the primary beneficiary, KKR evaluates its economic interests in the entity held either directly by KKR or indirectly through related parties. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that KKR is not the primary beneficiary, a quantitative analysis may also be performed. Investments and redemptions (either by KKR, affiliates of KKR or third parties) or amendments to the governing documents of the respective entities could affect an entity’s status as a VIE or the determination of the primary beneficiary. At each reporting date, KKR assesses whether it is the primary beneficiary and will consolidate or not consolidate accordingly. | ||||||||||||||
As of September 30, 2013 and December 31, 2012, the maximum exposure to loss, before allocations to the carry pool, if any, for those VIEs in which KKR is determined not to be the primary beneficiary but in which it has a variable interest is as follows: | ||||||||||||||
September 30, | December 31, | |||||||||||||
2013 | 2012 | |||||||||||||
Investments | $ | 201,197 | $ | 188,408 | ||||||||||
Due from Affiliates, net | 5,209 | 2,266 | ||||||||||||
Maximum Exposure to Loss | $ | 206,406 | $ | 190,674 | ||||||||||
For those unconsolidated VIEs in which KKR is the sponsor, KKR may have an obligation as general partner to provide commitments to such funds. As of September 30, 2013 and December 31, 2012, KKR did not provide any support other than its obligated amount. | ||||||||||||||
KKR’s investment strategies differ by investment fund; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of management fees and carried interests. Accordingly, disaggregation of KKR’s involvement by type of VIE would not provide more useful information. | ||||||||||||||
Business Combinations | ||||||||||||||
Acquisitions are accounted for using the acquisition method of accounting. The purchase price of an acquisition is allocated to the assets acquired and liabilities assumed using the estimated fair values at the acquisition date. Transaction costs are expensed as incurred. | ||||||||||||||
Intangible Assets | ||||||||||||||
Intangible assets consist primarily of contractual rights to earn future fee income, including management and incentive fees, and are included in Other Assets within the statements of financial condition. Identifiable finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives and amortization expense is included within General, Administrative and Other in the accompanying condensed consolidated statements of operations. Intangible assets are reviewed for impairment when circumstances indicate an impairment may exist. KKR does not have any indefinite-lived intangible assets. | ||||||||||||||
Goodwill | ||||||||||||||
Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in connection with an acquisition. Goodwill will be assessed for impairment annually or more frequently if circumstances indicate impairment may have occurred. Goodwill is recorded in Other Assets within the condensed consolidated statements of financial condition. | ||||||||||||||
Redeemable Noncontrolling Interests | ||||||||||||||
Redeemable Noncontrolling Interests represent noncontrolling interests of certain investment vehicles and funds that are subject to periodic redemption by fund investors following the expiration of a specified period of time (typically between one and three years), or may be withdrawn subject to a redemption fee during the period when capital may not be otherwise withdrawn. Limited partner interests subject to redemption as described above are presented as Redeemable Noncontrolling Interests within the condensed consolidated statements of financial condition and presented as Net Income (Loss) attributable to Redeemable Noncontrolling Interests within the condensed consolidated statements of operations. When redeemable amounts become legally payable to fund investors, they are classified as a liability and included in Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated statements of financial condition. For all consolidated investment vehicles and funds in which redemption rights have not been granted, noncontrolling interests are presented within Equity in the condensed consolidated statements of financial condition as Noncontrolling Interests. | ||||||||||||||
Noncontrolling Interests | ||||||||||||||
Noncontrolling interests represent (i) noncontrolling interests in consolidated entities and (ii) noncontrolling interests held by KKR Holdings. | ||||||||||||||
Noncontrolling Interests in Consolidated Entities | ||||||||||||||
Noncontrolling interests in consolidated entities represent the non-redeemable ownership interests in KKR that are held primarily by: | ||||||||||||||
(i) | third party fund investors in KKR’s funds; | |||||||||||||
(ii) | a former principal and such person’s designees representing an aggregate of 1% of the carried interest received by the general partners of KKR’s funds and 1% of KKR’s other profits (losses) until a future date; | |||||||||||||
(iii) | certain of KKR’s former principals and their designees representing a portion of the carried interest received by the general partners of KKR’s private equity funds that was allocated to them with respect to private equity investments made during such former principals’ previous tenure with KKR; | |||||||||||||
(iv) | certain of KKR’s current and former principals representing all of the capital invested by or on behalf of the general partners of KKR’s private equity funds prior to October 1, 2009 and any returns thereon; and | |||||||||||||
(v) | third parties in KKR’s capital markets business. | |||||||||||||
Noncontrolling Interests held by KKR Holdings | ||||||||||||||
Noncontrolling interests held by KKR Holdings include economic interests held by KKR’s principals in the KKR Group Partnerships. KKR’s principals receive financial benefits from KKR’s business in the form of distributions received from KKR Holdings and through their direct and indirect participation in the value of KKR Group Partnership Units held by KKR Holdings. These financial benefits are not paid by KKR and are borne by KKR Holdings. | ||||||||||||||
The following table presents the calculation of noncontrolling interests held by KKR Holdings: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Balance at the beginning of the period | $ | 4,699,114 | $ | 4,795,697 | $ | 4,981,864 | $ | 4,342,157 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings (a) | 300,169 | 249,460 | 662,387 | 946,484 | ||||||||||
Other comprehensive income (loss), net of tax (b) | (96 | ) | 3,396 | (4,846 | ) | (797 | ) | |||||||
Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units (c) | (84,838 | ) | (31,203 | ) | (328,481 | ) | (138,119 | ) | ||||||
Equity based compensation | 53,988 | 104,792 | 162,602 | 282,358 | ||||||||||
Capital contributions | 600 | 437 | 1,399 | 1,658 | ||||||||||
Capital distributions | (172,719 | ) | (78,106 | ) | (678,707 | ) | (389,268 | ) | ||||||
Balance at the end of the period | $ | 4,796,218 | $ | 5,044,473 | $ | 4,796,218 | $ | 5,044,473 | ||||||
(a) Refer to the table below for calculation of Net income (loss) attributable to noncontrolling interests held by KKR Holdings. | ||||||||||||||
(b) Calculated on a pro rata basis based on the weighted average KKR Group Partnership Units held by KKR Holdings during the reporting period. | ||||||||||||||
(c) Calculated based on the proportion of KKR Holdings units exchanged for KKR & Co. L.P. common units pursuant to the exchange agreement during the reporting period. The exchange agreement provides for the exchange of KKR Group Partnership Units held by KKR Holdings for KKR & Co. L.P. common units. | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. after allocation to noncontrolling interests held by KKR Holdings, with the exception of certain tax assets and liabilities that are directly allocable to KKR Management Holdings Corp., is attributed based on the percentage of the weighted average KKR Group Partnership Units held by KKR and KKR Holdings, each of which hold equity of the KKR Group Partnerships. However, primarily because of the (i) contribution of certain expenses borne entirely by KKR Holdings, (ii) the periodic exchange of KKR Holdings units for KKR & Co. L.P. common units pursuant to the exchange agreement and (iii) the contribution of certain expenses borne entirely by KKR associated with the KKR & Co. L.P. 2010 Equity Plan (“Equity Incentive Plan”), equity allocations shown in the condensed consolidated statement of changes in equity differ from their respective pro-rata ownership interests in KKR’s net assets. | ||||||||||||||
The following table presents Net income (loss) attributable to noncontrolling interests held by KKR Holdings: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Net income (loss) | $ | 2,198,154 | $ | 2,102,786 | $ | 4,573,598 | $ | 6,579,904 | ||||||
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | 9,169 | 9,994 | 25,992 | 18,551 | ||||||||||
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities | 1,684,076 | 1,715,921 | 3,471,906 | 5,150,761 | ||||||||||
Plus: Income taxes attributable to KKR Management Holdings Corp. | 3,020 | 7,070 | 12,894 | 28,187 | ||||||||||
Net income (loss) attributable to KKR & Co. L.P. and KKR Holdings | $ | 507,929 | $ | 383,941 | $ | 1,088,594 | $ | 1,438,779 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | $ | 300,169 | $ | 249,460 | $ | 662,387 | $ | 946,484 | ||||||
Investments | ||||||||||||||
Investments consist primarily of private equity, real assets, fixed income, equity method and other investments. Investments are carried at their estimated fair values, with unrealized gains or losses resulting from changes in fair value reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Investments denominated in currencies other than the U.S. dollar are valued based on the spot rate of the respective currency at the end of the reporting period with changes related to exchange rate movements reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Security and loan transactions are recorded on a trade date basis. Further disclosure on investments is presented in Note 4, “Investments.” | ||||||||||||||
The following describes the types of securities held within each investment class. | ||||||||||||||
Private Equity - Consists primarily of investments in companies with operating businesses. | ||||||||||||||
Real Assets - Consists primarily of investments in (i) oil and natural gas properties (“natural resources”), (ii) infrastructure assets, and (iii) residential and commercial real estate assets and businesses (“real estate”). | ||||||||||||||
Fixed Income - Consists primarily of investments in below investment grade corporate debt securities (primarily high yield bonds and syndicated bank loans), distressed and opportunistic debt and interests in collateralized loan obligations. | ||||||||||||||
Equity Method - Consists primarily of investments in unconsolidated investment funds and vehicles that are accounted for using the equity method of accounting. Under the equity method of accounting, KKR’s share of earnings (losses) from equity method investments is reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Because the underlying investments of unconsolidated investment funds and vehicles are reported at fair value, the carrying value of KKR’s equity method investments approximates fair value. | ||||||||||||||
Other - Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets or fixed income investments. | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Investments and other financial instruments are measured and carried at fair value. The majority of investments and other financial instruments are held by the consolidated funds and vehicles. KKR’s funds and vehicles are, for GAAP purposes, investment companies and reflect their investments and other financial instruments at fair value. KKR has retained the specialized accounting for the consolidated funds and vehicles in consolidation. Accordingly, the unrealized gains and losses resulting from changes in fair value of the investments held by KKR’s funds and vehicles are reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. | ||||||||||||||
For investments and other financial instruments that are not held in a consolidated fund or vehicle, KKR has elected the fair value option since these investments and other financial instruments are similar to those in the consolidated funds and vehicles. Such election is irrevocable and is applied on an investment by investment basis at initial recognition. Unrealized gains and losses resulting from changes in fair value are reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. The methodology for measuring the fair value of such investments and other financial instruments is consistent with the methodologies applied to investments and other financial instruments that are held in consolidated funds and vehicles. | ||||||||||||||
The carrying amounts of Other Assets, Accounts Payable, Accrued Expenses and Other Liabilities recognized on the statements of financial condition (excluding Fixed Assets, Goodwill, Intangible Assets, contingent consideration and certain debt obligations) approximate fair value due to their short term maturities. Further information on Fixed Assets is presented in Note 7, “Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities”. Further information on Goodwill and Intangible Assets is presented in Note 14 “Goodwill and Intangible Assets.” Further information on contingent consideration is presented in Note 13 “Acquisitions.” KKR’s debt obligations, except for KKR’s 2020 and 2043 Senior Notes, bear interest at floating rates and therefore fair value approximates carrying value. Further information on KKR’s 2020 and 2043 Senior Notes are presented in Note 8, “Debt Obligations.” The fair value for KKR’s 2020 and 2043 Senior Notes were derived using Level II inputs similar to those utilized in valuing fixed income investments. | ||||||||||||||
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation techniques are applied. These valuation techniques involve varying levels of management estimation and judgment, the degree of which is dependent on a variety of factors. See Note 5, “Fair Value Measurements” for further information on KKR’s valuation techniques that involve unobservable inputs. Assets and liabilities recorded at fair value in the statements of financial condition are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined under GAAP, are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets and liabilities. The hierarchical levels defined under GAAP are as follows: | ||||||||||||||
Level I | ||||||||||||||
Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The type of investments and other financial instruments included in this category are publicly-listed equities and debt and securities sold short. | ||||||||||||||
Level II | ||||||||||||||
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level II inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability. The type of investments and other financial instruments included in this category are fixed income investments, convertible debt securities indexed to publicly-listed securities, and certain over-the-counter derivatives. | ||||||||||||||
Level III | ||||||||||||||
Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The types of assets and liabilities generally included in this category are private portfolio companies, real assets investments and fixed income investments for which a sufficiently liquid trading market does not exist. | ||||||||||||||
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. KKR’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset. | ||||||||||||||
A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representative of fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value. | ||||||||||||||
The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, and current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by KKR in determining fair value is greatest for instruments categorized in Level III. The variability and availability of the observable inputs affected by the factors described above may cause transfers between Levels I, II, and III, which KKR recognizes at the beginning of the reporting period. | ||||||||||||||
Investments and other financial instruments that have readily observable market prices (such as those traded on a securities exchange) are stated at the last quoted sales price as of the reporting date. KKR does not adjust the quoted price for these investments, even in situations where KKR holds a large position and a sale could reasonably affect the quoted price. | ||||||||||||||
Level II Valuation Methodologies | ||||||||||||||
Financial assets and liabilities categorized as Level II consist primarily of securities indexed to publicly-listed securities and fixed income and other investments. Fixed income investments generally have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that KKR and others are willing to pay for an asset. Ask prices represent the lowest price that KKR and others are willing to accept for an asset. For financial assets and liabilities whose inputs are based on bid-ask prices obtained from third party pricing services, fair value may not always be a predetermined point in the bid-ask range. KKR’s policy is generally to allow for mid-market pricing and adjusting to the point within the bid-ask range that meets KKR’s best estimate of fair value. For securities indexed to publicly listed securities, such as convertible debt, the securities are typically valued using standard convertible security pricing models. The key inputs into these models that require some amount of judgment are the credit spreads utilized and the volatility assumed. To the extent the company being valued has other outstanding debt securities that are publicly-traded, the implied credit spread on the company’s other outstanding debt securities would be utilized in the valuation. To the extent the company being valued does not have other outstanding debt securities that are publicly-traded, the credit spread will be estimated based on the implied credit spreads observed in comparable publicly-traded debt securities. In certain cases, an additional spread will be added to reflect an illiquidity discount due to the fact that the security being valued is not publicly-traded. The volatility assumption is based upon the historically observed volatility of the underlying equity security into which the convertible debt security is convertible and/or the volatility implied by the prices of options on the underlying equity security. | ||||||||||||||
Level III Valuation Methodologies | ||||||||||||||
Financial assets and liabilities categorized as Level III consist primarily of the following: | ||||||||||||||
Private Equity Investments: KKR generally employs two valuation methodologies when determining the fair value of a private equity investment. The first methodology is typically a market comparables analysis that considers key financial inputs and recent public and private transactions and other available measures. The second methodology utilized is typically a discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputs used in this methodology include the weighted average cost of capital for the investment and assumed inputs used to calculate terminal values, such as exit EBITDA multiples. Other inputs are also used. | ||||||||||||||
Upon completion of the valuations conducted using these methodologies, a weighting is ascribed to each method, and an illiquidity discount is typically applied where appropriate. The ultimate fair value recorded for a particular investment will generally be within a range suggested by the two methodologies. | ||||||||||||||
When determining the weighting ascribed to each valuation methodology, KKR considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among investments in the portfolio and in certain instances may result in up to a 100% weighting to a single methodology. Across the Level III private equity investment portfolio, approximately 93% of the fair value is derived from investments that are valued based exactly 50% on market comparables and 50% on a discounted cash flow analysis. Less than 5% of the fair value of the Level III private equity investment portfolio is derived from investments that are valued either based 100% on market comparables or 100% on a discounted cash flow analysis. | ||||||||||||||
When determining the illiquidity discount to be applied, KKR seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments. KKR then evaluates such private equity investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include (i) whether KKR is unable to sell the portfolio company or conduct an initial public offering of the portfolio company due to the consent rights of a third party or similar factors, (ii) whether the portfolio company is undergoing significant restructuring activity or similar factors and (iii) characteristics about the portfolio company regarding its size and/or whether the portfolio company is experiencing, or expected to experience, a significant decline in earnings. These factors generally make it less likely that a portfolio company would be sold or publicly offered in the near term at a price indicated by using just a market multiples and/or discounted cash flow analysis, and these factors tend to reduce the number of opportunities to sell an investment and/or increase the time horizon over which an investment may be monetized. Depending on the applicability of these factors, KKR determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time KKR holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by KKR in its valuations. | ||||||||||||||
Real Assets Investments: For natural resources and infrastructure investments, KKR generally utilizes a discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputs used in this methodology include the weighted average cost of capital for the investment and assumed inputs used to calculate terminal values, such as exit EBITDA multiples. For real estate investments, KKR generally utilizes a combination of direct income capitalization and discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputs used in these methodologies include an unlevered discount rate and terminal capitalization rate. The valuations of real assets investments also use other inputs. Certain investments in real estate and natural resources generally do not include a minimum illiquidity discount. | ||||||||||||||
Fixed Income Investments: Fixed income investments are valued using values obtained from dealers or market makers, and where these values are not available, fixed income investments are valued by KKR using internally developed valuation models. Valuation models are based on discounted cash flow analyses, for which the key inputs are determined based on market comparables, which incorporate similar instruments from similar issuers. | ||||||||||||||
Other Investments: KKR generally employs the same valuation methodologies as described above for private equity investments when valuing these other investments. | ||||||||||||||
Key unobservable inputs that have a significant impact on KKR’s Level III investment valuations as described above are included in Note 5 “Fair Value Measurements.” KKR utilizes several unobservable pricing inputs and assumptions in determining the fair value of its Level III investments. These unobservable pricing inputs and assumptions may differ by investment and in the application of KKR’s valuation methodologies. KKR’s reported fair value estimates could vary materially if KKR had chosen to incorporate different unobservable pricing inputs and other assumptions or, for applicable investments, if KKR only used either the discounted cash flow methodology or the market comparables methodology instead of assigning a weighting to both methodologies. | ||||||||||||||
Level III Valuation Process | ||||||||||||||
The valuation process involved for Level III measurements for private equity, real assets, fixed income, and other investments is completed on a quarterly basis and is designed to subject the valuation of Level III investments to an appropriate level of consistency, oversight, and review. KKR has a Private Markets valuation committee for private equity and real assets investments and a valuation committee for fixed income and other investments. The Private Markets valuation committee may be assisted by subcommittees for example in the valuation of real estate investments. Each of the Private Markets valuation committee and the fixed income valuation committee is assisted by a valuation team, which, except as noted below, is comprised only of employees who are not investment professionals responsible for preparing preliminary valuations or for oversight of any of the investments being valued. The valuation teams for natural resources, infrastructure and real estate investments contain investment professionals who participate in the preparation of preliminary valuations and oversight for those investments. The valuation committees and teams are responsible for coordinating and consistently implementing KKR’s quarterly valuation policies, guidelines and processes. For investments classified as Level III, investment professionals prepare preliminary valuations based on their evaluation of financial and operating data, company specific developments, market valuations of comparable companies and other factors. These preliminary valuations are reviewed with the investment professionals by the applicable valuation team and are also reviewed by an independent valuation firm engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR’s valuations for all Level III investments, except for certain investments other than KKR private equity investments. All preliminary valuations are then reviewed by the applicable valuation committee, and after reflecting any input by their respective valuation committees, the preliminary valuations are presented to a single committee consisting of Senior Principals involved in various aspects of the KKR business. When these valuations are approved by this committee after reflecting any input from it, the valuations of Level III investments, as well as the valuations of Level I and Level II investments, are presented to the audit committee of KKR’s board of directors and are then reported on to the board of directors. | ||||||||||||||
Derivatives | ||||||||||||||
Derivative contracts include forward, swap and option contracts related to foreign currencies and credit standing of reference entities to manage foreign exchange risk and credit risk arising from certain assets and liabilities. All derivatives are recognized in Other Assets or Accounts Payable, Accrued Expenses and Other Liabilities and are presented gross in the condensed consolidated statements of financial condition and measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. KKR’s derivative financial instruments contain credit risk to the extent that its counterparties may be unable to meet the terms of the agreements. KKR attempts to minimize this risk by limiting its counterparties to major financial institutions with strong credit ratings. | ||||||||||||||
Fees | ||||||||||||||
Fees consist primarily of (i) monitoring fees from providing services to portfolio companies, (ii) consulting and other fees earned by consolidated entities from providing advisory and other services, (iii) management and incentive fees from providing investment management services to unconsolidated funds, a specialty finance company, structured finance and other vehicles, and separately managed accounts, and (iv) transaction fees earned in connection with successful investment transactions and from capital markets activities. These fees are based on the contractual terms of the governing agreements and are recognized when earned, which coincides with the period during which the related services are performed. | ||||||||||||||
For the three and nine months ended September 30, 2013 and 2012, fees consisted of the following: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Transaction Fees | $ | 105,387 | $ | 74,168 | $ | 202,107 | $ | 161,290 | ||||||
Management Fees | 45,787 | 21,070 | 130,402 | 61,841 | ||||||||||
Monitoring Fees | 43,155 | 38,752 | 119,571 | 100,946 | ||||||||||
Consulting and Other Fees | 25,261 | 10,396 | 50,873 | 35,249 | ||||||||||
Incentive Fees | 438 | 17,768 | 34,691 | 31,495 | ||||||||||
Total Fees | $ | 220,028 | $ | 162,154 | $ | 537,644 | $ | 390,821 | ||||||
Substantially all fees presented in the table above are earned from affiliates. | ||||||||||||||
Recently Issued Accounting Pronouncements | ||||||||||||||
Disclosures About Offsetting Assets and Liabilities | ||||||||||||||
In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-11, “Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”), which requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments. In February 2013, the FASB issued ASU 2013-01, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements established by ASU 2011-11. ASU 2011-11 was effective for KKR’s fiscal year beginning January 1, 2013 and was applied retrospectively. The adoption of this guidance did not have a material impact on KKR’s financial statements. | ||||||||||||||
Disclosures About Reclassification Adjustments Out of Accumulated Other Comprehensive Income | ||||||||||||||
In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“AOCI”),” which requires entities to disclose additional information about reclassification adjustments, including: (i) changes in AOCI balances by component and (ii) significant items reclassified out of AOCI. ASU 2013-02 was effective for KKR’s fiscal year beginning January 1, 2013. The adoption of this guidance, which is related to disclosure only, did not have a material impact on KKR’s financial statements. With respect to KKR, AOCI is comprised of only one component, foreign currency translation adjustments and for the three and nine months ended September 30, 2013 and 2012, there were no items reclassified out of AOCI. See KKR’s condensed consolidated statements of comprehensive income and changes in equity. | ||||||||||||||
Foreign Currency Matters | ||||||||||||||
In March 2013, the FASB issued ASU 2013-05, “Foreign Currency Matters,” which indicates that the entire amount of a cumulative translation adjustment (“CTA”) related to an entity’s investment in a foreign entity should be released when there has been a (i) sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity, (ii) loss of a controlling financial interest in an investment in a foreign entity, or (iii) step acquisition for a foreign entity. This guidance is effective for KKR’s fiscal year beginning January 1, 2014, and is to be applied prospectively. The adoption of this guidance is not expected to have a material impact on KKR’s financial statements. | ||||||||||||||
Amendments to Investment Company Scope, Measurement, and Disclosures | ||||||||||||||
In June 2013, the FASB issued ASU 2013-08, Financial Services — Investment Companies Topic 946 (“ASU 2013-08”) which amends the scope, measurement, and disclosure requirements for investment companies. ASU 2013-08 (i) amends the criteria for an entity to qualify as an investment company, (ii) requires an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting, and (iii) introduces new disclosures. This guidance is effective for KKR’s fiscal year beginning January 1, 2014. Earlier application is prohibited. The adoption of this guidance is not expected to have a material impact on KKR’s financial results and consolidated financial statements. |
NET_GAINS_LOSSES_FROM_INVESTME
NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||||||
NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES | ' | |||||||||||||||||||||||||
NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES | ' | |||||||||||||||||||||||||
3. NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES | ||||||||||||||||||||||||||
Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations consist primarily of the realized and unrealized gains and losses on investments (including foreign exchange gains and losses attributable to foreign denominated investments and related activities) and other financial instruments, including those for which the fair value option has been elected. Unrealized gains or losses result from changes in the fair value of these investments and other financial instruments during a period. Upon disposition of an investment or financial instrument, previously recognized unrealized gains or losses are reversed and an offsetting realized gain or loss is recognized in the current period. | ||||||||||||||||||||||||||
The following table summarizes total Net Gains (Losses) from Investment Activities for the three and nine months ended September 30, 2013 and 2012, respectively: | ||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | |||||||||||||||||||||||
Net Realized | Net Unrealized | Net Realized | Net Unrealized | Net Realized | Net Unrealized | Net Realized | Net Unrealized | |||||||||||||||||||
Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | |||||||||||||||||||
Private Equity (a) | $ | 692,932 | $ | 1,626,536 | $ | 1,204,668 | $ | 1,301,670 | $ | 2,180,059 | $ | 2,140,102 | $ | 3,066,087 | $ | 4,022,193 | ||||||||||
Fixed Income and Other (a) | 63,032 | 72,901 | 8,694 | 153,260 | 202,623 | 20,638 | 65,780 | 198,803 | ||||||||||||||||||
Real Assets (a) | — | 47,053 | — | (180,288 | ) | 14,855 | 133,610 | 54,419 | (325,545 | ) | ||||||||||||||||
Equity Method (a) | 10,016 | 13,123 | 46,028 | (11,383 | ) | 35,532 | 27,863 | 80,439 | 55,865 | |||||||||||||||||
Foreign Exchange Forward Contracts (b) | (528 | ) | (235,792 | ) | 5,736 | (174,299 | ) | 24,408 | (77,043 | ) | 21,891 | (129,679 | ) | |||||||||||||
Foreign Currency Options (b) | — | (11,636 | ) | — | (2,597 | ) | — | 198 | (10,740 | ) | 3,939 | |||||||||||||||
Securities Sold Short (b) | (29,652 | ) | (16,241 | ) | (21,083 | ) | (3,226 | ) | (71,459 | ) | (14,115 | ) | (26,527 | ) | (6,836 | ) | ||||||||||
Other Derivatives | (2,056 | ) | 1,229 | (11,577 | ) | (2,756 | ) | (20,454 | ) | 4,907 | (10,538 | ) | (4,972 | ) | ||||||||||||
Contingent Carried Interest Repayment Guarantee (c) | — | — | — | — | — | — | — | (55,937 | ) | |||||||||||||||||
Foreign Exchange Gains (Losses) (d) | (2,849 | ) | 2,333 | 248 | (4,482 | ) | (9,176 | ) | 6,207 | 63 | (1,539 | ) | ||||||||||||||
Total Net Gains (Losses) from Investment Activities | $ | 730,895 | $ | 1,499,506 | $ | 1,232,714 | $ | 1,075,899 | $ | 2,356,388 | $ | 2,242,367 | $ | 3,240,874 | $ | 3,756,292 | ||||||||||
(a) See Note 4 “Investments.” | ||||||||||||||||||||||||||
(b) See Note 7 “Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities.” | ||||||||||||||||||||||||||
(c) See Note 15 “Commitments and Contingencies.” | ||||||||||||||||||||||||||
(d) Foreign Exchange Gains (Losses) includes foreign exchange gains (losses) on debt obligations, cash and cash equivalents, and cash and cash equivalents held at consolidated entities. |
INVESTMENTS
INVESTMENTS | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
INVESTMENTS | ' | |||||||||||||
INVESTMENTS | ' | |||||||||||||
4. INVESTMENTS | ||||||||||||||
Investments consist of the following: | ||||||||||||||
Fair Value | Cost | |||||||||||||
September 30, 2013 | December 31, 2012 | September 30, 2013 | December 31, 2012 | |||||||||||
Private Equity | $ | 35,268,074 | $ | 34,114,623 | $ | 27,354,669 | $ | 28,336,315 | ||||||
Fixed Income | 4,846,730 | 3,396,067 | 4,732,436 | 3,266,846 | ||||||||||
Real Assets | 2,434,733 | 1,775,683 | 4,388,965 | 3,861,792 | ||||||||||
Equity Method | 533,677 | 200,831 | 325,282 | 20,847 | ||||||||||
Other | 1,179,909 | 1,210,644 | 1,113,136 | 1,161,569 | ||||||||||
Total Investments | $ | 44,263,123 | $ | 40,697,848 | $ | 37,914,488 | $ | 36,647,369 | ||||||
As of September 30, 2013, investments which represented greater than 5% of total investments consisted of Alliance Boots GmbH of $4.1 billion. As of December 31, 2012, investments which represented greater than 5% of the total investments consisted of Alliance Boots GmbH of $3.5 billion and HCA, Inc. of $2.1 billion. In addition, as of September 30, 2013 and December 31, 2012, investments totaling $2.9 billion and $2.1 billion, respectively, were pledged as direct collateral against various financing arrangements. See Note 8 “Debt Obligations.” | ||||||||||||||
The following table represents private equity investments by industry as of September 30, 2013 and December 31, 2012, respectively: | ||||||||||||||
Fair Value | ||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||
Health Care | $ | 8,509,698 | $ | 7,708,080 | ||||||||||
Technology | 4,770,255 | 4,566,236 | ||||||||||||
Manufacturing | 4,492,445 | 3,240,474 | ||||||||||||
Retail | 4,410,526 | 4,970,092 | ||||||||||||
Other | 13,085,150 | 13,629,741 | ||||||||||||
$ | 35,268,074 | $ | 34,114,623 | |||||||||||
In the table above, other investments represents private equity investments in the following industries: Education, Financial Services, Forestry, Consumer Products, Media, Services, Telecommunications, Transportation and Recycling. None of these industries represents more than 10% of total private equity investments as of September 30, 2013. | ||||||||||||||
The majority of the securities underlying private equity investments represent equity securities. As of September 30, 2013 and December 31, 2012, the fair value of investments that were other than equity securities amounted to $547.6 million and $364.5 million, respectively. | ||||||||||||||
Equity Method | ||||||||||||||
Equity method investments include certain investments in private equity and real assets funds, funds of hedge funds, and alternative credit funds, which are not consolidated, but in which KKR is deemed to exert significant influence for accounting purposes. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these investments. | ||||||||||||||
KKR evaluates each of its equity method investments to determine if any were significant as defined by guidance from the SEC. As of and for the three and nine months ended September 30, 2013 and 2012, KKR’s equity method investments did not meet the significance criteria either on an individual or group basis. As such, presentation of separate financial statements for any of its equity method investments or summarized financial information on an individual or group basis is not required. |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | ||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | ||||||||||||||||
5. FAIR VALUE MEASUREMENTS | |||||||||||||||||
The following tables summarize the valuation of KKR’s investments and other financial instruments measured and reported at fair value by the fair value hierarchy levels described in Note 2 “Summary of Significant Accounting Policies” as of September 30, 2013 and December 31, 2012 including those investments and other financial instruments for which the fair value option has been elected. Equity Method Investments have been excluded from the tables below. | |||||||||||||||||
Assets, at fair value: | |||||||||||||||||
September 30, 2013 | |||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | ||||||||||||||
Active Markets for | Observable Inputs | Unobservable Inputs | |||||||||||||||
Identical Assets | (Level II) | (Level III) | |||||||||||||||
(Level I) | |||||||||||||||||
Private Equity | $ | 6,326,503 | $ | 1,830,426 | $ | 27,111,145 | $ | 35,268,074 | |||||||||
Fixed Income | — | 2,990,184 | 1,856,546 | 4,846,730 | |||||||||||||
Real Assets | 21,286 | — | 2,413,447 | 2,434,733 | |||||||||||||
Other | 739,702 | 197,182 | 243,025 | 1,179,909 | |||||||||||||
Total | 7,087,491 | 5,017,792 | 31,624,163 | 43,729,446 | |||||||||||||
Foreign Exchange Forward Contracts | — | 95,526 | — | 95,526 | |||||||||||||
Foreign Currency Options | — | 6,741 | — | 6,741 | |||||||||||||
Other Derivatives | — | 5,160 | — | 5,160 | |||||||||||||
Total Assets | $ | 7,087,491 | $ | 5,125,219 | $ | 31,624,163 | $ | 43,836,873 | |||||||||
December 31, 2012 | |||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | ||||||||||||||
Active Markets for | Observable Inputs | Unobservable Inputs | |||||||||||||||
Identical Assets | (Level II) | (Level III) | |||||||||||||||
(Level I) | |||||||||||||||||
Private Equity | $ | 8,015,680 | $ | 364,543 | $ | 25,734,400 | $ | 34,114,623 | |||||||||
Fixed Income | — | 1,809,021 | 1,587,046 | 3,396,067 | |||||||||||||
Real Assets | — | — | 1,775,683 | 1,775,683 | |||||||||||||
Other | 648,108 | 323,306 | 239,230 | 1,210,644 | |||||||||||||
Total | 8,663,788 | 2,496,870 | 29,336,359 | 40,497,017 | |||||||||||||
Foreign Exchange Forward Contracts | — | 137,786 | — | 137,786 | |||||||||||||
Foreign Currency Options | — | 4,992 | — | 4,992 | |||||||||||||
Other Derivatives | — | 882 | — | 882 | |||||||||||||
Total Assets | $ | 8,663,788 | $ | 2,640,530 | $ | 29,336,359 | $ | 40,640,677 | |||||||||
Liabilities, at fair value: | |||||||||||||||||
September 30, 2013 | |||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | ||||||||||||||
Active Markets for | Observable Inputs | Unobservable | |||||||||||||||
Identical Assets | (Level II) | Inputs | |||||||||||||||
(Level I) | (Level III) | ||||||||||||||||
Securities Sold Short | $ | 564,963 | $ | 47,137 | $ | — | $ | 612,100 | |||||||||
Foreign Currency Options | — | 4,913 | — | 4,913 | |||||||||||||
Foreign Exchange Forward Contracts | — | 264,097 | — | 264,097 | |||||||||||||
Unfunded Revolver Commitments | — | 368 | — | 368 | |||||||||||||
Other Derivatives | — | 5,208 | — | 5,208 | |||||||||||||
Total Liabilities | $ | 564,963 | $ | 321,723 | $ | — | $ | 886,686 | |||||||||
December 31, 2012 | |||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | ||||||||||||||
Active Markets for | Observable Inputs | Unobservable | |||||||||||||||
Identical Assets | (Level II) | Inputs | |||||||||||||||
(Level I) | (Level III) | ||||||||||||||||
Securities Sold Short | $ | 321,977 | $ | 28,376 | $ | — | $ | 350,353 | |||||||||
Foreign Currency Options | — | 3,362 | — | 3,362 | |||||||||||||
Foreign Exchange Forward Contracts | — | 229,314 | — | 229,314 | |||||||||||||
Unfunded Revolver Commitments | — | 2,568 | — | 2,568 | |||||||||||||
Other Derivatives | — | 3,751 | — | 3,751 | |||||||||||||
Total Liabilities | $ | 321,977 | $ | 267,371 | $ | — | $ | 589,348 | |||||||||
The following tables summarize changes in private equity, fixed income, real assets and other investments measured and reported at fair value for which Level III inputs have been used to determine fair value for the three and nine months ended September 30, 2013 and 2012, respectively: | |||||||||||||||||
Three Months Ended | |||||||||||||||||
September 30, 2013 | |||||||||||||||||
Private | Fixed | Real Assets | Other | Total Level III | |||||||||||||
Equity | Income | Investments | |||||||||||||||
Balance, Beginning of Period | $ | 25,992,622 | $ | 1,416,016 | $ | 2,198,427 | $ | 184,213 | $ | 29,791,278 | |||||||
Transfers In (1) | — | 44,503 | — | 34,978 | 79,481 | ||||||||||||
Transfers Out (2) | (904,039 | ) | (17,594 | ) | — | (4,040 | ) | (925,673 | ) | ||||||||
Purchases | 1,071,808 | 503,140 | 167,967 | 35,922 | 1,778,837 | ||||||||||||
Sales | (15,945 | ) | (117,103 | ) | — | (5,064 | ) | (138,112 | ) | ||||||||
Settlements | — | 16,002 | — | — | 16,002 | ||||||||||||
Net Realized Gains (Losses) | 15,945 | 2,240 | — | (557 | ) | 17,628 | |||||||||||
Net Unrealized Gains (Losses) | 950,754 | 9,342 | 47,053 | (2,427 | ) | 1,004,722 | |||||||||||
Balance, End of Period | $ | 27,111,145 | $ | 1,856,546 | $ | 2,413,447 | $ | 243,025 | $ | 31,624,163 | |||||||
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date | $ | 966,779 | $ | 9,547 | $ | 47,053 | $ | (2,427 | ) | $ | 1,020,952 | ||||||
Three Months Ended | |||||||||||||||||
September 30, 2012 | |||||||||||||||||
Private | Fixed | Real Assets | Other | Total Level III | |||||||||||||
Equity | Income | Investments | |||||||||||||||
Balance, Beginning of Period | $ | 23,683,081 | $ | 1,136,459 | $ | 1,561,661 | $ | 140,019 | $ | 26,521,220 | |||||||
Transfers In (1) | — | 32,076 | — | — | 32,076 | ||||||||||||
Transfers Out (2) | — | (22,839 | ) | — | — | (22,839 | ) | ||||||||||
Purchases | 395,953 | 319,180 | 215,997 | 30,137 | 961,267 | ||||||||||||
Sales | (2,383,412 | ) | (63,797 | ) | — | (191 | ) | (2,447,400 | ) | ||||||||
Settlements | — | 12,031 | — | — | 12,031 | ||||||||||||
Net Realized Gains (Losses) | 1,204,668 | 2,075 | — | (1,081 | ) | 1,205,662 | |||||||||||
Net Unrealized Gains (Losses) | 845,128 | 40,040 | (180,268 | ) | 12,847 | 717,747 | |||||||||||
Balance, End of Period | $ | 23,745,418 | $ | 1,455,225 | $ | 1,597,390 | $ | 181,731 | $ | 26,979,764 | |||||||
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date | $ | 1,806,675 | $ | 42,141 | $ | (180,268 | ) | $ | 12,847 | $ | 1,681,395 | ||||||
(1) The Transfers In noted in the tables above for fixed income and other investments are principally attributable to certain investments that experienced an insignificant level of market activity during the period and thus were valued in the absence of observable inputs. | |||||||||||||||||
(2) The Transfers Out noted in the tables above for private equity investments are attributable to portfolio companies that are now valued using their publicly traded market price. The Transfers Out noted above for fixed income and other investments are principally attributable to certain investments that experienced a higher level of market activity during the period and thus were valued using observable inputs. | |||||||||||||||||
Nine Months Ended | |||||||||||||||||
September 30, 2013 | |||||||||||||||||
Private | Fixed | Real Assets | Other | Total Level III | |||||||||||||
Equity | Income | Investments | |||||||||||||||
Balance, Beginning of Period | $ | 25,734,400 | $ | 1,587,046 | $ | 1,775,683 | $ | 239,230 | $ | 29,336,359 | |||||||
Transfers In (1) | — | 53,439 | — | 34,978 | 88,417 | ||||||||||||
Transfers Out (2) | (1,819,651 | ) | (252,323 | ) | — | (23,304 | ) | (2,095,278 | ) | ||||||||
Purchases | 2,346,126 | 954,462 | 545,424 | 46,574 | 3,892,586 | ||||||||||||
Sales | (1,042,698 | ) | (534,852 | ) | (56,275 | ) | (59,730 | ) | (1,693,555 | ) | |||||||
Settlements | — | 59,043 | — | — | 59,043 | ||||||||||||
Net Realized Gains (Losses) | 649,534 | (2,683 | ) | 14,930 | 1,797 | 663,578 | |||||||||||
Net Unrealized Gains (Losses) | 1,243,434 | (7,586 | ) | 133,685 | 3,480 | 1,373,013 | |||||||||||
Balance, End of Period | $ | 27,111,145 | $ | 1,856,546 | $ | 2,413,447 | $ | 243,025 | $ | 31,624,163 | |||||||
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date | $ | 1,817,352 | $ | 980 | $ | 169,051 | $ | 3,480 | $ | 1,990,863 | |||||||
Nine Months Ended | |||||||||||||||||
September 30, 2012 | |||||||||||||||||
Private | Fixed | Real Assets | Other | Total Level III | |||||||||||||
Equity | Income | Investments | |||||||||||||||
Balance, Beginning of Period | $ | 20,384,253 | $ | 1,016,759 | $ | 1,526,732 | $ | 96,179 | $ | 23,023,923 | |||||||
Transfers In (1) | — | 32,387 | — | 1,061 | 33,448 | ||||||||||||
Transfers Out (2) | — | (35,466 | ) | — | (613 | ) | (36,079 | ) | |||||||||
Purchases | 1,011,162 | 538,043 | 396,184 | 46,363 | 1,991,752 | ||||||||||||
Sales | (2,630,914 | ) | (146,288 | ) | (54,419 | ) | (2,852 | ) | (2,834,473 | ) | |||||||
Settlements | — | 13,439 | — | — | 13,439 | ||||||||||||
Net Realized Gains (Losses) | 1,318,993 | 10,326 | 54,419 | 98 | 1,383,836 | ||||||||||||
Net Unrealized Gains (Losses) | 3,661,924 | 26,025 | (325,526 | ) | 41,495 | 3,403,918 | |||||||||||
Balance, End of Period | $ | 23,745,418 | $ | 1,455,225 | $ | 1,597,390 | $ | 181,731 | $ | 26,979,764 | |||||||
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date | $ | 4,740,397 | $ | 32,058 | $ | (284,410 | ) | $ | 41,711 | $ | 4,529,756 | ||||||
(1) The Transfers In noted in the tables above for fixed income and other investments are principally attributable to certain investments that experienced an insignificant level of market activity during the period and thus were valued in the absence of observable inputs. | |||||||||||||||||
(2) The Transfers Out noted in the tables above for private equity investments are attributable to portfolio companies that are now valued using their publicly traded market price. The Transfers Out noted above for fixed income and other investments are principally attributable to certain investments that experienced a higher level of market activity during the period and thus were valued using observable inputs. | |||||||||||||||||
Total realized and unrealized gains and losses recorded for Level III investments are reported in Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. There were no transfers between Level I and Level II during the three and nine months ended September 30, 2013 and 2012, respectively. | |||||||||||||||||
The following table presents additional information about valuation methodologies and inputs used for investments that are measured at fair value and categorized within Level III as of September 30, 2013: | |||||||||||||||||
Impact to Valuation | |||||||||||||||||
Fair Value | Valuation | Weighted | from an | ||||||||||||||
September 30, 2013 | Methodologies | Unobservable Input(s) (1) | Average (2) | Range | Increase in Input (3) | ||||||||||||
Private Equity Investments | $ | 27,111,145 | |||||||||||||||
Healthcare | $ | 6,040,325 | Inputs to both market comparable | Illiquidity Discount | 7 | % | 5% - 15% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 50% - 50% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 50% - 50% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 10x | 9x - 12x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 9x - 11x | Increase | ||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 9 | % | 8% - 13% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 11x | 9x - 12x | Increase | ||||||||||||||
Retail | $ | 4,256,587 | Inputs to both market comparable | Illiquidity Discount | 8 | % | 5% - 20% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 0% - 50% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 50% - 100% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 10x | 7x - 12x (6) | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 9x | 7x - 10x (6) | Increase | ||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 11 | % | 8% - 27% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 8x | 6x - 9x | Increase | ||||||||||||||
Technology | $ | 3,490,811 | Inputs to both market comparable | Illiquidity Discount | 10 | % | 5% - 15% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 50% - 50% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 50% - 50% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 11x | 5x - 13x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 4x - 12x | Increase | ||||||||||||||
Control Premium | 2 | % | 0% - 20% (7) | Increase | |||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 11 | % | 8% - 14% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 6x - 10x | Increase | ||||||||||||||
Manufacturing | $ | 3,488,553 | Inputs to both market comparable | Illiquidity Discount | 9 | % | 5% - 15% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 46 | % | 33% - 67% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 54 | % | 33% - 67% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 6x - 14x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 6x - 12x | Increase | ||||||||||||||
Control Premium | 2 | % | 0% - 20% (7) | Increase | |||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 13 | % | 9% - 19% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 6x - 11x | Increase | ||||||||||||||
Consumer Products | $ | 3,339,902 | Inputs to both market comparable | Illiquidity Discount | 11 | % | 10% - 15% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 50% - 50% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 50% - 50% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 11x | 8x - 17x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 7x - 14x | Increase | ||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 10 | % | 8% - 18% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 6x - 11x | Increase | ||||||||||||||
Other | $ | 6,494,967 | Inputs to both market comparable | Illiquidity Discount | 11 | % | 10% - 20% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 0% - 100% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 0% - 100% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 6x - 16x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 11x | 6x - 13x | Increase | ||||||||||||||
Control Premium | 2 | % | 0% - 20% (7) | Increase | |||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 11 | % | 9% - 20% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 5x - 12x | Increase | ||||||||||||||
Real Assets | $ | 2,413,447 | |||||||||||||||
Natural Resources/Infrastructure | $ | 1,965,734 | Discounted cash flow | Weighted Average Cost of Capital | 11 | % | 6% - 21% | Decrease | |||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 8x | 7x - 11x | Increase | ||||||||||||||
Real Estate | $ | 447,713 | Inputs to direct income capitalization | Weight Ascribed to Direct Income Capitalization | 18 | % | 0% - 50% | -9 | |||||||||
and discounted cash flow | Weight Ascribed to Discounted Cash Flow | 82 | % | 50% - 100% | -5 | ||||||||||||
Direct Income Capitalization | Current Capitalization Rate | 7 | % | 6% - 8% | Decrease | ||||||||||||
Discounted cash flow | Unlevered Discount Rate | 12 | % | 9% - 23% | Decrease | ||||||||||||
Fixed Income Investments | $ | 1,856,546 | -8 | Yield Analysis | Discount Margin | 1407 | bps | 640 - 1471 bps | Decrease | ||||||||
Yield | 12 | % | 8% - 24% | Decrease | |||||||||||||
Net Leverage | 5x | 1x - 15x | Decrease | ||||||||||||||
Illiquidity Discount | 8 | % | 5% - 10% | Decrease | |||||||||||||
In the table above, other investments, within private equity investments, represents the following industries: Education, Financial Services, Forestry, Media, Services, Telecommunications, Transportation and Recycling. None of these industries represents more than 10% of total Level III private equity investments as of September 30, 2013. | |||||||||||||||||
(1) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputs into account when valuing the investments. LTM means Last Twelve Months and EBITDA means Earnings Before Interest Taxes Depreciation and Amortization. | |||||||||||||||||
(2) Inputs were weighted based on the fair value of the investments included in the range. | |||||||||||||||||
(3) Unless otherwise noted, this column represents the directional change in the fair value of the Level III investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements. | |||||||||||||||||
(4) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level III investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach. | |||||||||||||||||
(5) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level III investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach. | |||||||||||||||||
(6) Ranges shown exclude inputs relating to a single portfolio company that was determined to lack comparability with other investments in KKR’s private equity portfolio. This portfolio company had a fair value representing less than 0.5% of the total fair value of Private Equity Investments and had an Enterprise Value/LTM EBITDA Multiple and Enterprise Value/Forward EBITDA Multiple of 24x and 18x, respectively. The exclusion of this investment does not impact the weighted average. | |||||||||||||||||
(7) Level III private equity investments whose valuations include a control premium represent less than 5% of total Level III private equity investments. The valuations for the remaining investments do not include a control premium. | |||||||||||||||||
(8) Amounts include $529.7 million of investments that were valued using dealer quotes or third party valuation firms. | |||||||||||||||||
(9) The directional change from an increase in the weight ascribed to the direct income capitalization approach would increase the fair value of the Level III investments if the direct income capitalization approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the direct income capitalization approach results in a lower valuation than the discounted cash flow approach. | |||||||||||||||||
The table above excludes Other Investments in the amount of $243.0 million comprised primarily of privately-held equity and equity-like securities (e.g. warrants) in companies that are neither private equity, real assets nor fixed income investments. These investments were valued using Level III valuation methodologies that are generally the same as those shown for private equity investments. | |||||||||||||||||
The various unobservable inputs used to determine the Level III valuations may have similar or diverging impacts on valuation. Significant increases and decreases in these inputs in isolation and interrelationships between those inputs could result in significantly higher or lower fair value measurements as noted in the table above. |
NET_INCOME_LOSS_ATTRIBUTABLE_T
NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT | ' | |||||||||||||||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT | ' | |||||||||||||||||||||||||
6. NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT | ||||||||||||||||||||||||||
For the three and nine months ended September 30, 2013 and 2012, basic and diluted Net Income (Loss) attributable to KKR & Co. L.P. per common unit were calculated as follows: | ||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | |||||||||||||||||||||||
Basic | Diluted | Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. | $ | 204,740 | $ | 204,740 | $ | 127,411 | $ | 127,411 | $ | 413,313 | $ | 413,313 | $ | 464,108 | $ | 464,108 | ||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit | $ | 0.73 | $ | 0.66 | $ | 0.53 | $ | 0.49 | $ | 1.53 | $ | 1.4 | $ | 1.98 | $ | 1.86 | ||||||||||
Weighted-Average Common Units Outstanding | 282,148,802 | 308,135,191 | 239,696,358 | 257,646,622 | 270,484,224 | 296,181,070 | 234,876,879 | 249,359,200 | ||||||||||||||||||
For the three and nine months ended September 30, 2013 and 2012, KKR Holdings units have been excluded from the calculation of diluted Net Income (Loss) attributable to KKR & Co. L.P. per common unit since the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in the KKR Group Partnerships and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange. | ||||||||||||||||||||||||||
Diluted Net Income (Loss) attributable to KKR & Co. L.P. per common unit includes unvested equity awards that have been granted under the Equity Incentive Plan since these equity awards dilute KKR and KKR Holdings pro rata in accordance with their respective ownership interests in the KKR Group Partnerships. |
OTHER_ASSETS_AND_ACCOUNTS_PAYA
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES | ' | |||||||
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES | ' | |||||||
7. OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES | ||||||||
Other assets consist of the following: | ||||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Due from Broker (a) | $ | 572,551 | $ | 189,202 | ||||
Interest and Notes Receivable (b) | 410,786 | 469,456 | ||||||
Unsettled Investment Sales (c) | 267,397 | 90,666 | ||||||
Intangible Assets, net (d) | 182,529 | 197,484 | ||||||
Deferred Tax Assets, net | 172,680 | 105,654 | ||||||
Oil & Gas Assets, net | 151,526 | — | ||||||
Foreign Exchange Forward Contracts (e) | 95,526 | 137,786 | ||||||
Goodwill (f) | 89,000 | 89,000 | ||||||
Fixed Assets, net (g) | 77,842 | 79,570 | ||||||
Receivables | 31,457 | 267,126 | ||||||
Deferred Financing Costs | 23,179 | 20,918 | ||||||
Prepaid Taxes | 20,595 | 706 | ||||||
Deferred Transaction Costs | 18,540 | 14,633 | ||||||
Prepaid Expenses | 11,279 | 11,373 | ||||||
Refundable Security Deposits | 7,046 | 7,428 | ||||||
Foreign Currency Options (h) | 6,741 | 4,992 | ||||||
Other | 29,925 | 15,061 | ||||||
$ | 2,168,599 | $ | 1,701,055 | |||||
(a) Represents amounts held at clearing brokers resulting from securities transactions. | ||||||||
(b) Represents interest receivable and promissory notes due from third parties. The promissory notes bear interest at rates ranging from 1.5% - 3.0% per annum and mature between 2015 and 2016. | ||||||||
(c) Represents amounts due from third parties for investments sold for which cash settlement has not occurred. | ||||||||
(d) Net of accumulated amortization of $36,357 and $21,402 as of September 30, 2013 and December 31, 2012, respectively. Amortization expense totaled $4,985 and $947 for the three months ended September 30, 2013 and 2012, respectively, and $14,955 and $2,841 for the nine months ended September 30, 2013 and 2012, respectively. | ||||||||
(e) Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign denominated investments. Such instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. | ||||||||
(f) See Note 14 “Goodwill and Intangible Assets.” | ||||||||
(g) Net of accumulated depreciation and amortization of $102,995 and $92,467 as of September 30, 2013 and December 31, 2012, respectively. Depreciation and amortization expense totaled $3,619 and $3,157 for the three months ended September 30, 2013 and 2012, respectively, and $11,042 and $8,987 for the nine months ended September 30, 2013 and 2012, respectively. | ||||||||
(h) Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign denominated investments. The instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. The cost bases for these instruments at September 30, 2013 and December 31, 2012 was $2,332. | ||||||||
Accounts Payable, Accrued Expenses and Other Liabilities consist of the following: | ||||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Amounts Payable to Carry Pool (a) | $ | 927,082 | $ | 776,750 | ||||
Securities Sold Short (b) | 612,100 | 350,353 | ||||||
Foreign Exchange Forward Contracts (c) | 264,097 | 229,314 | ||||||
Unsettled Investment Purchases (d) | 227,191 | 172,583 | ||||||
Accounts Payable and Accrued Expenses | 156,493 | 97,389 | ||||||
Accrued Compensation and Benefits | 154,249 | 17,265 | ||||||
Contingent Consideration Obligation (e) | 93,400 | 71,300 | ||||||
Due to Broker (f) | 39,601 | 49,204 | ||||||
Deferred Rent and Income | 28,247 | 19,228 | ||||||
Interest Payable | 8,189 | 11,746 | ||||||
Foreign Currency Options (g) | 4,913 | 3,362 | ||||||
Taxes Payable | 3,965 | 9,250 | ||||||
Other Liabilities | 8,349 | 16,911 | ||||||
$ | 2,527,876 | $ | 1,824,655 | |||||
(a) Represents the amount of carried interest payable to KKR’s principals, professionals and other individuals with respect to KKR’s active funds and co-investment vehicles that provide for carried interest. | ||||||||
(b) Represents the obligations of KKR to deliver a specified security at a future point in time. Such securities are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. The cost bases for these instruments at September 30, 2013 and December 31, 2012 were $591,072 and $343,440, respectively. | ||||||||
(c) Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign denominated investments. Such instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. | ||||||||
(d) Represents amounts owed to third parties for investment purchases for which cash settlement has not occurred. | ||||||||
(e) See Note 13 “Acquisitions.” | ||||||||
(f) Represents amounts owed for securities transactions initiated at clearing brokers. | ||||||||
(g) Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign denominated investments. The instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. The cost bases for these instruments at September 30, 2013 and December 31, 2012 was $0. |
DEBT_OBLIGATIONS
DEBT OBLIGATIONS | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
DEBT OBLIGATIONS | ' | |||||||||||||
DEBT OBLIGATIONS | ' | |||||||||||||
8. DEBT OBLIGATIONS | ||||||||||||||
KKR borrows and enters into credit agreements for its general operating and investment purposes and certain of its investment vehicles borrow to meet financing needs of their operating and investing activities. | ||||||||||||||
Debt obligations as of September 30, 2013 and December 31, 2012 were $2,027,116 and $1,123,414, respectively, which consist of the following: | ||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||
Carrying Value | Fair Value (a) | Carrying Value | Fair Value (a) | |||||||||||
Senior Notes | ||||||||||||||
2020 Senior Notes - KKR Issued 6.375% Notes Due 9/29/2020, $500 Million Principal Amount | $ | 498,544 | $ | 575,000 | $ | 498,388 | $ | 579,200 | ||||||
2043 Senior Notes - KKR Issued 5.500% Notes Due 2/1/2043, $500 Million Principal Amount | 494,407 | 422,550 | — | — | ||||||||||
$ | 992,951 | $ | 997,550 | $ | 498,388 | $ | 579,200 | |||||||
(a) Fair value is determined by third party broker quotes and these notes are classified as Level II within the fair value hierarchy. | ||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||
Outstanding | Available | Outstanding | Available | |||||||||||
Investment Financing Arrangements (a) | ||||||||||||||
Investment Financing Arrangements (b) (c) | $ | 1,034,165 | $ | 353,640 | $ | 625,026 | $ | 377,055 | ||||||
(a) Certain of KKR’s investment vehicles have entered into financing arrangements with major financial institutions, generally in connection with specific investments with the objective of enhancing returns or to provide liquidity to such vehicles. These financing arrangements are generally not direct obligations of the general partners of KKR’s investment vehicles or its management companies. | ||||||||||||||
(b) Weighted average interest rate is 2.80% and 3.09% as of September 30, 2013 and December 31, 2012. | ||||||||||||||
(c) Weighted average years to maturity is 2.0 years and 3.2 years as of September 30, 2013 and December 31, 2012. | ||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||
Outstanding | Available | Outstanding | Available | |||||||||||
Revolving Credit Arrangements | ||||||||||||||
Revolving Credit Arrangements | $ | — | $ | 1,250,000 | $ | — | $ | 1,250,000 | ||||||
2043 Senior Notes | ||||||||||||||
On February 1, 2013, KKR Group Finance Co. II LLC, a subsidiary of KKR Management Holdings Corp., issued $500 million aggregate principal amount of 5.50% Senior Notes (the “2043 Senior Notes”), which were issued at a price of 98.856%. The 2043 Senior Notes are unsecured and unsubordinated obligations of KKR Group Finance Co. II LLC and will mature on February 1, 2043, unless earlier redeemed or repurchased. The 2043 Senior Notes are fully and unconditionally guaranteed, jointly and severally, by KKR & Co. L.P. and the KKR Group Partnerships. The guarantees are unsecured and unsubordinated obligations of the guarantors. | ||||||||||||||
The 2043 Senior Notes bear interest at a rate of 5.50% per annum, accruing from February 1, 2013. Interest is payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2013. | ||||||||||||||
The indenture, as supplemented by a first supplemental indenture, relating to the 2043 Senior Notes includes covenants, including limitations on KKR Group Finance Co. II LLC and the guarantors’ ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or lease assets. The indenture, as supplemented, also provides for events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding 2043 Senior Notes may declare the 2043 Senior Notes immediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the 2043 Senior Notes and any accrued and unpaid interest on the 2043 Senior Notes automatically becomes due and payable. All or a portion of the 2043 Senior Notes may be redeemed at the issuer’s option in whole or in part, at any time, and from time to time, prior to their stated maturity, at the make-whole redemption price set forth in the 2043 Senior Notes. If a change of control repurchase event occurs, the 2043 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to 101% of the aggregate principal amount of the 2043 Senior Notes repurchased plus any accrued and unpaid interest on the 2043 Senior Notes repurchased to, but not including, the date of repurchase. | ||||||||||||||
Investment Financing Arrangements | ||||||||||||||
Special Situations Credit Agreement | ||||||||||||||
In March 2013, a KKR investment vehicle entered into a $75.0 million multi-currency three-year borrowing base revolving credit facility that bears interest at LIBOR plus 1.60% (the “Special Situations Investment Credit Agreement”). During the year, KKR increased the credit facility to $175.0 million. As of September 30, 2013, there were $97.6 million of borrowings outstanding and the interest rate on the borrowings outstanding was 1.8% under the Special Situations Investment Credit Agreement. This financing arrangement is non-recourse to KKR beyond the specific capital commitments pledged as collateral. | ||||||||||||||
Real Estate Partners Americas Credit Agreement | ||||||||||||||
In July 2013, KKR investment vehicles entered into a $150.0 million multi-currency four-year borrowing base revolving credit facility (the “Real Estate Partners Credit Agreement”). KKR may request to increase the borrowing capacity of the credit facility up to $300.0 million subject to availability of sufficient capital commitments of the investment vehicles. The per annum rate of interest for each borrowing under the Real Estate Partners Credit Agreement is LIBOR plus 1.60%. As of September 30, 2013, there were $58.2 million of borrowings outstanding and the interest rate on the borrowings outstanding was 1.8%. This financing arrangement is non-recourse to KKR beyond the specific assets and capital commitments pledged as collateral. |
INCOME_TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2013 | |
INCOME TAXES | ' |
INCOME TAXES | ' |
9. INCOME TAXES | |
The consolidated entities of KKR are generally treated as partnerships or disregarded entities for U.S. and non-U.S. tax purposes. However, certain consolidated subsidiaries are treated as corporations for U.S. and non-U.S tax purposes and are therefore subject to U.S. federal, state and/or local income taxes and/or non- U.S. taxes at the entity-level. In addition, certain consolidated entities which are treated as partnerships for U.S. tax purposes are subject to the New York City Unincorporated Business Tax or other local taxes. | |
The effective tax rate was 0.35% and 0.46% for the three months ended September 30, 2013 and 2012, respectively and 0.55% and 0.57% for the nine months ended September 30, 2013 and 2012. The effective tax rate differs from the statutory rate for the three and nine months ended September 30, 2013 and 2012, primarily due to the following: (a) a substantial portion of the reported net income (loss) before taxes is attributable to noncontrolling interests held in consolidated entities or KKR Holdings, (b) a significant portion of the amount of the reported net income (loss) before taxes attributable to KKR is from certain subsidiaries that are not subject to U.S. federal, state or local income taxes and/or non- U.S. taxes, and (c) certain compensation charges attributable to KKR are not deductible for tax purposes. | |
During the three and nine month period ending September 30, 2013, there were no material changes to KKR’s uncertain tax positions and KKR believes there will be no significant increase or decrease to the uncertain tax positions within 12 months of the reporting date. |
EQUITY_BASED_COMPENSATION
EQUITY BASED COMPENSATION | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
EQUITY BASED COMPENSATION | ' | |||||||||||||
EQUITY BASED COMPENSATION | ' | |||||||||||||
10. EQUITY BASED COMPENSATION | ||||||||||||||
The following table summarizes the expense associated with equity based compensation for the three and nine months ended September 30, 2013 and 2012, respectively. | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
KKR Holdings Principal Awards | $ | 33,740 | $ | 68,309 | $ | 85,309 | $ | 202,977 | ||||||
KKR Holdings Restricted Equity Units | 765 | 4,346 | 3,173 | 8,650 | ||||||||||
Equity Incentive Plan Units | 31,227 | 17,366 | 84,581 | 47,678 | ||||||||||
Discretionary Compensation | 19,483 | 32,136 | 74,120 | 70,732 | ||||||||||
Total | $ | 85,215 | $ | 122,157 | $ | 247,183 | $ | 330,037 | ||||||
KKR Holdings Equity Awards—Principal Awards | ||||||||||||||
KKR principals and certain non-employee consultants and service providers received grants of KKR Holdings units (“Principal Awards”) which are exchangeable for KKR Group Partnership Units. These units are generally subject to minimum retained ownership requirements and in certain cases, transfer restrictions, and allow for their exchange into common units of KKR & Co. L.P. on a one-for-one basis. As of September 30, 2013, KKR Holdings owned approximately 58.7%, or 404,744,018, of the outstanding KKR Group Partnership Units. | ||||||||||||||
Except for any Principal Awards that vested on the date of grant, Principal Awards are subject to service based vesting, generally over a three to five year period from the date of grant. The transfer restriction period will generally last for a minimum of (i) one year with respect to one-half of the interests vesting on any vesting date and (ii) two years with respect to the other one-half of the interests vesting on such vesting date. While providing services to KKR, these individuals may also be subject to minimum retained ownership rules requiring them to continuously hold 25% of their vested interests. Upon separation from KKR, certain individuals will be subject to the terms of a non-compete agreement that may require the forfeiture of certain vested and unvested units should the terms of the non-compete agreement be violated. Holders of KKR Group Partnership Units held through KKR Holdings are not entitled to participate in distributions made on KKR Group Partnership Units until such units are vested. | ||||||||||||||
Because KKR Holdings is a partnership, all of the 404,744,018 KKR Holdings units have been legally allocated, but the allocation of 30,556,806 of these units has not been communicated to each respective principal. The units that have not been communicated are subject to performance based vesting conditions, which include profitability and other similar criteria. These criteria are not sufficiently specific to constitute performance conditions for accounting purposes, and the achievement, or lack thereof, will be determined based upon the exercise of judgment by the general partner of KKR Holdings. Each principal will ultimately receive between zero and 100% of the units initially allocated. The allocation of these units has not yet been communicated to the award recipients as this was management’s decision on how to best incentivize its principals. It is anticipated that additional service-based vesting conditions will be imposed at the time the allocation is initially communicated to the respective principals. KKR applied the guidance of Accounting Standards Code (“ASC”) 718 and concluded that these KKR Holdings units do not yet meet the criteria for recognition of compensation cost because neither the grant date nor the service inception date has occurred. In reaching a conclusion that the service inception date has not occurred, KKR considered (a) the fact that the vesting conditions are not sufficiently specific to constitute performance conditions for accounting purposes, (b) the significant judgment that can be exercised by the general partner of KKR Holdings in determining whether the vesting conditions are ultimately achieved, and (c) the absence of communication to the principals of any information related to the number of units they were initially allocated. The allocation of these units will be communicated to the award recipients when the performance-based vesting conditions have been met, and currently there is no plan as to when the communication will occur. The determination as to whether the award recipients have satisfied the performance-based vesting conditions is made by the general partner of KKR Holdings, and is based on multiple factors primarily related to the award recipients’ individual performance. | ||||||||||||||
The fair value of Principal Awards is based on the closing price of KKR & Co. L.P. common units on the date of grant. KKR determined this to be the best evidence of fair value as a KKR & Co. L.P. common unit is traded in an active market and has an observable market price. Additionally, a KKR Holdings unit is an instrument with terms and conditions similar to those of a KKR & Co. L.P. common unit. Specifically, units in both KKR Holdings and KKR & Co. L.P. represent ownership interests in KKR Group Partnership Units and, subject to any vesting, minimum retained ownership requirements and transfer restrictions referenced above, each KKR Holdings unit is exchangeable into a KKR Group Partnership Unit and then into a KKR & Co. L.P. common unit on a one-for-one basis. | ||||||||||||||
Principal Awards give rise to equity-based payment charges in the condensed consolidated statements of operations based on the grant-date fair value of the award. For units vesting on the grant date, expense is recognized on the date of grant based on the fair value of a KKR & Co. L.P. common unit on the grant date multiplied by the number of vested units. Equity-based payment expense on unvested units is calculated based on the fair value of a KKR & Co. L.P. common unit at the time of grant, discounted for the lack of participation rights in the expected distributions on unvested units which currently ranges from 7% to 52%, multiplied by the number of unvested units on the grant date. The grant date fair value of a KKR & Co. L.P. common unit reflects a discount for lack of distribution participation rights because equity awards are not entitled to receive distributions while unvested. The discount range was based on management’s estimates of future distributions that unvested equity awards will not be entitled to receive between the grant date and the vesting date. Therefore, units that vest in the earlier periods have a lower discount as compared to units that vest in later periods, which have a higher discount. The discount range will generally increase when the level of expected annual distributions increases relative to the grant date fair value of a KKR & Co. L.P. common unit. A decrease in expected annual distributions relative to the grant date fair value of a KKR & Co. L.P. common unit would generally have the opposite effect. | ||||||||||||||
Principal Awards granted to certain non-employee consultants and service providers give rise to general, administrative and other charges in the condensed consolidated statements of operations. For units vesting on the grant date, expense is recognized on the date of grant based on the fair value of a KKR & Co. L.P. common unit on the grant date multiplied by the number of vested units. General, administrative and other expense recognized on unvested units is calculated based on the fair value of a KKR & Co. L.P. common unit on each reporting date and subsequently adjusted for the actual fair value of the award at each vesting date. Accordingly, the measured value of these units will not be finalized until each vesting date. | ||||||||||||||
The calculation of equity-based payment expense and general administrative and other expense on unvested Principal Awards assumes forfeiture rates of up to 4% annually based upon expected turnover by class of principal, consultant, or service provider. | ||||||||||||||
As of September 30, 2013, there was approximately $66.7 million of estimated unrecognized equity-based payment and general administrative and other expense related to unvested Principal Awards. That cost is expected to be recognized over a weighted-average period of 0.7 years, using the graded attribution method, which treats each vesting portion as a separate award. | ||||||||||||||
A summary of the status of unvested Principal Awards from January 1, 2013 through September 30, 2013 is presented below: | ||||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2013 | 64,569,667 | $ | 7.42 | |||||||||||
Granted | 1,761,382 | 12.07 | ||||||||||||
Vested | (1,302,727 | ) | 11.5 | |||||||||||
Forfeited | (2,809,918 | ) | 7.18 | |||||||||||
Balance, September 30, 2013 | 62,218,404 | $ | 7.48 | |||||||||||
The weighted average remaining vesting period over which unvested units are expected to vest is 0.6 years. | ||||||||||||||
The following table summarizes the remaining vesting tranches of Principal Awards: | ||||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2013 | 27,928,684 | |||||||||||||
April 1, 2014 | 1,244,528 | |||||||||||||
October 1, 2014 | 27,959,323 | |||||||||||||
April 1, 2015 | 1,244,581 | |||||||||||||
October 1, 2015 | 2,281,657 | |||||||||||||
April 1, 2016 | 82,429 | |||||||||||||
October 1, 2016 | 1,320,909 | |||||||||||||
April 1, 2017 | 30,000 | |||||||||||||
October 1, 2017 | 111,293 | |||||||||||||
April 1, 2018 | 15,000 | |||||||||||||
62,218,404 | ||||||||||||||
KKR Holdings Equity Awards—Restricted Equity Units | ||||||||||||||
Grants of restricted equity units based on KKR Group Partnership Units held by KKR Holdings were made to professionals, support staff, and other personnel (“Holdings REU Awards”). These grants will be funded by KKR Holdings and will not dilute KKR’s interests in the KKR Group Partnerships. The vesting of these Holdings REU Awards occur in installments, generally over a three to five year period from the date of grant. Holdings REU Awards are measured and recognized on a basis similar to Principal Awards except that the fair value of a KKR & Co. L.P. common unit at the time of grant is not discounted for the lack of distribution participation rights since unvested units are entitled to distributions. The calculation assumes a forfeiture rate of up to 4% annually based upon expected turnover by class of professionals, support staff, and other personnel. | ||||||||||||||
As of September 30, 2013, there was approximately $1.8 million of estimated unrecognized expense related to unvested awards. That cost is expected to be recognized over a weighted average period of 0.6 years, using the graded attribution method, which treats each vesting portion as a separate award. | ||||||||||||||
A summary of the status of unvested Holdings REU Awards from January 1, 2013 through September 30, 2013 is presented below: | ||||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2013 | 1,064,712 | $ | 12.03 | |||||||||||
Granted | — | — | ||||||||||||
Vested | (200,341 | ) | 13.72 | |||||||||||
Forfeited | (23,578 | ) | 14.2 | |||||||||||
Balance, September 30, 2013 | 840,793 | $ | 11.57 | |||||||||||
The weighted average remaining vesting period over which unvested units are expected to vest is 0.7 years. | ||||||||||||||
A summary of the remaining vesting tranches of Holdings REU Awards is presented below: | ||||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2013 | 259,411 | |||||||||||||
April 1, 2014 | 164,579 | |||||||||||||
October 1, 2014 | 252,751 | |||||||||||||
April 1, 2015 | 138,521 | |||||||||||||
October 1, 2015 | 25,531 | |||||||||||||
840,793 | ||||||||||||||
KKR & Co. L.P. 2010 Equity Incentive Plan | ||||||||||||||
Under the Equity Incentive Plan, KKR is permitted to grant equity awards representing ownership interests in KKR & Co. L.P. common units. Vested awards under the Equity Incentive Plan dilute KKR & Co. L.P. common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR Group Partnerships. | ||||||||||||||
The total number of common units that may be issued under the Equity Incentive Plan is equivalent to 15% of the number of fully diluted common units outstanding, subject to annual adjustment. As of September 30, 2013, equity awards relating to 33,625,057 KKR & Co. L.P. common units have been granted under the Equity Incentive Plan and are subject to service based vesting, which vest generally over a three to five year period from the date of grant. In certain cases, these awards are subject to transfer restrictions and minimum retained ownership requirements. The transfer restriction period, if applicable, lasts for (i) one year with respect to one-half of the interests vesting on any vesting date and (ii) two years with respect to the other one-half of the interests vesting on such vesting date. While providing services to KKR, if applicable, certain of these recipients are also subject to minimum retained ownership rules requiring them to continuously hold common unit equivalents equal to at least 15% of their cumulatively vested interests. | ||||||||||||||
Expense associated with the vesting of these awards is based on the closing price of the KKR & Co. L.P. common units on the date of grant, discounted for the lack of participation rights in the expected distributions on unvested units, which currently ranges from 7% to 52% multiplied by the number of unvested units on the grant date. The grant date fair value of a KKR & Co. L.P. common unit reflects a discount for lack of distribution participation rights because equity awards are not entitled to receive distributions while unvested. The discount range was based on management’s estimates of future distributions that unvested equity awards will not be entitled to receive between the grant date and the vesting date. Therefore, units that vest in earlier periods have a lower discount as compared to units that vest in later periods, which have a higher discount. The discount range will generally increase when the level of expected annual distributions increases relative to the grant date fair value of a KKR & Co. L.P. common unit. A decrease in expected annual distributions relative to the grant date fair value of a KKR & Co. L.P. common unit would generally have the opposite effect. Expense is recognized on a straight line basis over the life of the award and assumes a forfeiture rate of up to 4% annually based upon expected turnover by class of recipient. | ||||||||||||||
As of September 30, 2013, there was approximately $184.3 million of estimated unrecognized expense related to unvested awards. That cost is expected to be recognized over a weighted average period of 1.3 years, using the straight line method. | ||||||||||||||
A summary of the status of awards granted under the Equity Incentive Plan from January 1, 2013 through September 30, 2013 is presented below: | ||||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2013 | 17,920,926 | $ | 9.11 | |||||||||||
Granted | 11,646,952 | 12.08 | ||||||||||||
Vested | (2,953,853 | ) | 11.32 | |||||||||||
Forfeited | (671,715 | ) | 9.61 | |||||||||||
Balance, September 30, 2013 | 25,942,310 | $ | 10.18 | |||||||||||
The weighted average remaining vesting period over which unvested awards are expected to vest is 1.5 years. | ||||||||||||||
A summary of the remaining vesting tranches of awards granted under the Equity Incentive Plan is presented below: | ||||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2013 | 3,759,732 | |||||||||||||
April 1, 2014 | 4,550,214 | |||||||||||||
October 1, 2014 | 4,324,538 | |||||||||||||
April 1, 2015 | 4,381,402 | |||||||||||||
October 1, 2015 | 3,347,091 | |||||||||||||
April 1, 2016 | 2,160,645 | |||||||||||||
October 1, 2016 | 2,121,415 | |||||||||||||
April 1, 2017 | 84,189 | |||||||||||||
October 1, 2017 | 480,987 | |||||||||||||
April 1, 2018 | 6,917 | |||||||||||||
October 1, 2018 | 725,180 | |||||||||||||
25,942,310 | ||||||||||||||
Discretionary Compensation | ||||||||||||||
All KKR principals and other employees of certain consolidated entities are eligible to receive discretionary cash bonuses. While cash bonuses paid to most employees are borne by KKR and certain consolidated entities and result in customary compensation and benefits expense, cash bonuses that are paid to certain of KKR’s principals are currently borne by KKR Holdings. These bonuses are funded with distributions that KKR Holdings receives on KKR Group Partnership Units held by KKR Holdings but are not then passed on to holders of unvested units of KKR Holdings. Because KKR principals are not entitled to receive distributions on units that are unvested, any amounts allocated to principals in excess of a principal’s vested equity interests are reflected as employee compensation and benefits expense. These compensation charges are recorded based on the unvested portion of quarterly earnings distributions received by KKR Holdings at the time of the distribution. |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
RELATED PARTY TRANSACTIONS | ' | |||||||
RELATED PARTY TRANSACTIONS | ' | |||||||
11. RELATED PARTY TRANSACTIONS | ||||||||
Due from and to Affiliates consists of: | ||||||||
September 30, 2013 | December 31, 2012 | |||||||
Due from Related Entities | $ | 67,444 | $ | 73,357 | ||||
Due from Portfolio Companies | 66,302 | 48,828 | ||||||
Due from Affiliates | $ | 133,746 | $ | 122,185 | ||||
September 30, 2013 | December 31, 2012 | |||||||
Due to KKR Holdings in Connection with the Tax Receivable Agreement | $ | 96,772 | $ | 70,375 | ||||
Due to Related Entities | — | 2,455 | ||||||
Due to Affiliates | $ | 96,772 | $ | 72,830 | ||||
KFN | ||||||||
KFN is a publicly traded specialty finance company whose limited liability company interests are listed on the NYSE under the symbol “KFN.” KFN is managed by KKR but is not consolidated by KKR. KFN was organized in August 2004 and completed its initial public offering on June 24, 2005. As of September 30, 2013 and December 31, 2012, KFN had consolidated assets of $8.5 billion and $8.4 billion, respectively, and shareholders’ equity of $2.5 billion and $1.8 billion, respectively. There were no shares of KFN held by KKR as of September 30, 2013. Shares of KFN held by KKR represented less than 0.1% of KFN’s outstanding shares as of December 31, 2012. If KKR were to exercise all of its outstanding vested options, KKR’s ownership interest in KFN would be 0.30% and 0.35% of KFN’s outstanding shares as of September 30, 2013 and December 31, 2012, respectively. | ||||||||
Discretionary Investments | ||||||||
Certain of KKR’s investment professionals, including its principals and other qualifying personnel, are permitted to invest, and have invested, their own capital in side-by-side investments with KKR’s investment vehicles. Side-by-side investments are made on the same terms and conditions as those acquired by the applicable investment vehicle, except that the side-by-side investments are not subject to management fees, incentive fees or a carried interest. The cash invested by these individuals aggregated $96.0 million and $16.5 million for the three months ended September 30, 2013 and 2012, respectively and $226.4 million and $71.1 million for the nine months ended September 30, 2013 and 2012, respectively. | ||||||||
Aircraft and Other Services | ||||||||
Certain of the Senior Principals own aircraft that KKR uses for business purposes in the ordinary course of its operations. These Senior Principals paid for the purchase of these aircraft with personal funds and bear all operating, personnel and maintenance costs associated with their operation. The hourly rates that KKR pays for the use of these aircraft are based on current market rates for chartering private aircraft of the same type. KKR incurred $0.9 million and $0.7 million for the use of these aircraft for the three months ended September 30, 2013 and 2012, respectively and $2.3 million and $3.2 million for the nine months ended September 30, 2013 and 2012, respectively. | ||||||||
Facilities | ||||||||
Certain trusts, whose beneficiaries include children of Mr. Kravis and Mr. Roberts, and certain other Senior Principals who are not executive officers of KKR, are partners in a real-estate based partnership that maintains an ownership interest in KKR’s Menlo Park location. Payments made to this partnership were $1.8 million and $1.7 million for the three months ended September 30, 2013 and 2012, respectively and $5.4 million and $5.1 million for the nine months ended September 30, 2013 and 2012, respectively. |
SEGMENT_REPORTING
SEGMENT REPORTING | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
SEGMENT REPORTING | ' | |||||||||||||
SEGMENT REPORTING | ' | |||||||||||||
12. SEGMENT REPORTING | ||||||||||||||
KKR operates through three reportable business segments. These segments, which are differentiated primarily by their investment objectives and strategies, consist of the following: | ||||||||||||||
Private Markets | ||||||||||||||
Through the Private Markets segment, KKR manages and sponsors a group of private equity funds and co-investment vehicles that invest capital for long-term appreciation, either through controlling ownership of a company or strategic minority positions. KKR also manages and sources investments in real assets like infrastructure, natural resources and real estate. These investment funds, vehicles and accounts are managed by Kohlberg Kravis Roberts & Co. L.P., an SEC registered investment adviser. | ||||||||||||||
Public Markets | ||||||||||||||
Through the Public Markets segment, KKR manages KKR Financial Holdings LLC, or KFN, which is a specialty finance company, as well as a number of investment funds, structured finance vehicles and separately managed accounts that invest capital in (i) leveraged credit strategies, such as leveraged loans and high yield bonds, (ii) liquid long/short equity strategies, (iii) alternative credit strategies such as mezzanine investments, special situations investments and direct senior lending and (iv) hedge funds solutions. These funds, vehicles and accounts, including four investment companies registered under the 1940 Act, are managed by KKR Asset Management LLC, or KAM, and Prisma Capital Partners LP, or Prisma. Both KAM and Prisma are SEC registered investment advisers. | ||||||||||||||
Capital Markets and Principal Activities | ||||||||||||||
The Capital Markets and Principal Activities segment combines KKR’s principal assets with its global capital markets business. KKR’s capital markets business supports the firm, its portfolio companies and select third parties by providing tailored capital markets advice and by developing and implementing both traditional and non-traditional capital solutions for investments and companies seeking financing. KKR’s capital markets services include arranging debt and equity financing for transactions, placing and underwriting securities offerings, structuring new investment products and providing capital markets services. KKR’s principal asset base primarily includes investments in its private equity and real asset funds, co-investments in certain portfolio companies of such private equity funds, general partner interests in various KKR-sponsored investment funds, and other principal assets. | ||||||||||||||
Key Performance Measures | ||||||||||||||
The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR’s reportable business segments. The reportable segments for KKR’s business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings and as such represents the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of the funds that KKR manages. | ||||||||||||||
FRE | ||||||||||||||
FRE is comprised of segment operating revenues less segment operating expenses (other than certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income). This measure is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items. | ||||||||||||||
ENI | ||||||||||||||
ENI is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. ENI is comprised of: (i) FRE plus (ii) segment investment income (loss), which is reduced for carry pool allocations, management fee refunds, interest expense and certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income; less (iii) certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the exclusion of the items referred to in FRE above; (ii) the exclusion of investment income (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes. | ||||||||||||||
Book Value | ||||||||||||||
Book Value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of KKR’s investment portfolio, including carried interest, as well as KKR’s overall liquidity position. Book value differs from KKR & Co. L.P. Partners’ Capital on a GAAP basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings. | ||||||||||||||
The following table presents the financial data for KKR’s reportable segments as of and for the three months ended September 30, 2013: | ||||||||||||||
As of and for the | ||||||||||||||
Three Months Ended September 30, 2013 | ||||||||||||||
Private | Public | Capital Markets | Total | |||||||||||
Markets | Markets | and Principal | Reportable | |||||||||||
Activities | Segments | |||||||||||||
Fees | ||||||||||||||
Management and incentive fees: | ||||||||||||||
Management fees | $ | 119,410 | $ | 53,835 | $ | — | $ | 173,245 | ||||||
Incentive fees | — | 1,225 | — | 1,225 | ||||||||||
Management and incentive fees | 119,410 | 55,060 | — | 174,470 | ||||||||||
Monitoring and transaction fees: | ||||||||||||||
Monitoring fees | 33,010 | — | — | 33,010 | ||||||||||
Transaction fees | 54,968 | 20,534 | 53,625 | 129,127 | ||||||||||
Fee credits (1) | (46,597 | ) | (15,185 | ) | — | (61,782 | ) | |||||||
Net monitoring and transaction fees | 41,381 | 5,349 | 53,625 | 100,355 | ||||||||||
Total fees | 160,791 | 60,409 | 53,625 | 274,825 | ||||||||||
Expenses | ||||||||||||||
Compensation and benefits | 65,400 | 18,606 | 8,223 | 92,229 | ||||||||||
Occupancy and related charges | 13,367 | 1,906 | 401 | 15,674 | ||||||||||
Other operating expenses | 37,586 | 19,670 | 3,628 | 60,884 | ||||||||||
Total expenses | 116,353 | 40,182 | 12,252 | 168,787 | ||||||||||
Fee related earnings | 44,438 | 20,227 | 41,373 | 106,038 | ||||||||||
Investment income (loss) | ||||||||||||||
Realized carried interest | 81,532 | — | — | 81,532 | ||||||||||
Unrealized carried interest | 263,982 | 14,022 | — | 278,004 | ||||||||||
Gross carried interest | 345,514 | 14,022 | — | 359,536 | ||||||||||
Less: Allocation to KKR carry pool (2) | (139,903 | ) | (5,609 | ) | — | (145,512 | ) | |||||||
Less: Management fee refunds (3) | (7,767 | ) | — | — | (7,767 | ) | ||||||||
Net carried interest | 197,844 | 8,413 | — | 206,257 | ||||||||||
Other investment income (loss) | 3,357 | (4 | ) | 300,119 | 303,472 | |||||||||
Total investment income (loss) | 201,201 | 8,409 | 300,119 | 509,729 | ||||||||||
Income (loss) before noncontrolling interests in income of consolidated entities | 245,639 | 28,636 | 341,492 | 615,767 | ||||||||||
Income (loss) attributable to noncontrolling interests (4) | 433 | 202 | 1,385 | 2,020 | ||||||||||
Economic net income (loss) | $ | 245,206 | $ | 28,434 | $ | 340,107 | $ | 613,747 | ||||||
Total Assets | $ | 1,456,008 | $ | 382,423 | $ | 6,676,613 | $ | 8,515,044 | ||||||
Book Value | $ | 1,311,513 | $ | 330,073 | $ | 5,566,162 | $ | 7,207,748 | ||||||
(1) KKR’s agreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of monitoring and transaction fees received from portfolio companies (“Fee Credits”). Fund investors receive Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fund as well as among different classes of investors within a fund. | ||||||||||||||
(2) With respect to KKR’s active and future investment funds and co-investment vehicles that provide for carried interest, KKR will allocate to its principals, other professionals and selected other individuals a portion of the carried interest earned in relation to these funds as part of its carry pool. | ||||||||||||||
(3) Certain of KKR’s private equity funds require the management company to refund up to 20% of any cash management fees earned from fund investors in the event that the funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the cash management fees earned or a portion thereof, a liability to the fund investors is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the cash management fees earned. As of September 30, 2013, carried interest earned was sufficient to cover 20% of the cash management fees earned. The refunds to the fund investors are paid, and the liabilities relieved, at such time that the underlying investments are sold and the associated carried interests are realized. In the event that a fund’s carried interest is not sufficient to cover any of the amount that represents 20% of the cash management fees earned, these fees would not be returned to the fund investors, in accordance with the respective fund agreements. | ||||||||||||||
(4) Represents economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of KKR’s management companies until a future date and (ii) allocate to third party investors certain profits and losses in KKR’s capital markets and principal activities segment. | ||||||||||||||
The following table reconciles KKR’s total reportable segments to the financial statements as of and for the three months ended September 30, 2013: | ||||||||||||||
As of and for the | ||||||||||||||
Three Months Ended September 30, 2013 | ||||||||||||||
Total | Adjustments | Consolidated | ||||||||||||
Reportable | ||||||||||||||
Segments | ||||||||||||||
Fees(a) | $ | 274,825 | $ | (54,797 | ) | $ | 220,028 | |||||||
Expenses(b) | $ | 168,787 | $ | 286,708 | $ | 455,495 | ||||||||
Investment income (loss)(c) | $ | 509,729 | $ | 1,931,536 | $ | 2,441,265 | ||||||||
Income (loss) before taxes | $ | 615,767 | $ | 1,590,031 | $ | 2,205,798 | ||||||||
Income (loss) attributable to redeemable noncontrolling interests | $ | — | $ | 9,169 | $ | 9,169 | ||||||||
Income (loss) attributable to noncontrolling interests | $ | 2,020 | $ | 1,982,225 | $ | 1,984,245 | ||||||||
Total Assets(d) | $ | 8,515,044 | $ | 39,645,007 | $ | 48,160,051 | ||||||||
Book Value (e) | $ | 7,207,748 | $ | (4,712,655 | ) | $ | 2,495,093 | |||||||
(a) The fees adjustment primarily represents (i) the elimination of management fees of $127,458 upon consolidation of KKR’s funds and vehicles, (ii) the elimination of Fee Credits of $48,641 upon consolidation of the KKR funds and vehicles, (iii) inclusion of reimbursable expenses of $10,145 and (iv) other adjustments of $13,875. | ||||||||||||||
(b) The expenses adjustment primarily represents (i) the inclusion of non-cash equity based charges borne by KKR Holdings or granted under the Equity Incentive Plan, which amounted to $85,215, (ii) allocations to the carry pool of $145,512, (iii) a gross up of reimbursable expenses of $15,516, (iv) operating expenses of $22,706 primarily associated with the inclusion of operating expenses upon consolidation of KKR’s funds and vehicles and other entities, (v) inclusion of certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income of $2,807 and (vi) other adjustments of $14,952. | ||||||||||||||
(c) The investment income (loss) adjustment primarily represents (i) the inclusion of net investment income of $1,775,450 attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles, (ii) exclusion of allocations to the carry pool of $145,512, (iii) exclusion of management fee refunds of $7,767 and (iv) exclusion of certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income of $2,807. | ||||||||||||||
(d) Substantially all of the total assets adjustment represents the inclusion of investments that are attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles. | ||||||||||||||
(e) The book value adjustment represents the exclusion of noncontrolling interests held by KKR Holdings of $4,796,218 and the equity impact of KKR Management Holdings Corp. equity and other of $83,563. | ||||||||||||||
The reconciliation of net income (loss) attributable to KKR & Co. L.P. as reported in the condensed consolidated statements of operations to economic net income (loss) and fee related earnings consists of the following: | ||||||||||||||
Three Months Ended | ||||||||||||||
September 30, 2013 | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 204,740 | ||||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 300,169 | |||||||||||||
Plus: Equity based compensation | 85,215 | |||||||||||||
Plus: Amortization of intangibles and other, net | 15,979 | |||||||||||||
Plus: Income taxes | 7,644 | |||||||||||||
Economic net income (loss) | 613,747 | |||||||||||||
Plus: Income attributable to segment noncontrolling interests | 2,020 | |||||||||||||
Less: Investment income (loss) | 509,729 | |||||||||||||
Fee related earnings | $ | 106,038 | ||||||||||||
The following table presents the financial data for KKR’s reportable segments as of and for the three months ended September 30, 2012: | ||||||||||||||
As of and for the | ||||||||||||||
Three Months Ended September 30, 2012 | ||||||||||||||
Private | Public | Capital Markets | Total | |||||||||||
Markets | Markets | and Principal | Reportable | |||||||||||
Activities | Segments | |||||||||||||
Fees | ||||||||||||||
Management and incentive fees: | ||||||||||||||
Management fees | $ | 105,035 | $ | 21,448 | $ | — | $ | 126,483 | ||||||
Incentive fees | — | 17,768 | — | 17,768 | ||||||||||
Management and incentive fees | 105,035 | 39,216 | — | 144,251 | ||||||||||
Monitoring and transaction fees: | ||||||||||||||
Monitoring fees | 29,969 | — | — | 29,969 | ||||||||||
Transaction fees | 32,788 | 8,780 | 33,696 | 75,264 | ||||||||||
Fee credits (1) | (26,293 | ) | (5,414 | ) | — | (31,707 | ) | |||||||
Net monitoring and transaction fees | 36,464 | 3,366 | 33,696 | 73,526 | ||||||||||
Total fees | 141,499 | 42,582 | 33,696 | 217,777 | ||||||||||
Expenses | ||||||||||||||
Compensation and benefits | 48,905 | 13,997 | 8,438 | 71,340 | ||||||||||
Occupancy and related charges | 12,049 | 1,343 | 213 | 13,605 | ||||||||||
Other operating expenses | 35,885 | 3,897 | 2,346 | 42,128 | ||||||||||
Total expenses | 96,839 | 19,237 | 10,997 | 127,073 | ||||||||||
Fee related earnings | 44,660 | 23,345 | 22,699 | 90,704 | ||||||||||
Investment income (loss) | ||||||||||||||
Realized carried interest | 166,908 | — | — | 166,908 | ||||||||||
Unrealized carried interest | 224,260 | 19,568 | — | 243,828 | ||||||||||
Gross carried interest | 391,168 | 19,568 | — | 410,736 | ||||||||||
Less: Allocation to KKR carry pool (2) | (161,805 | ) | (7,828 | ) | — | (169,633 | ) | |||||||
Less: Management fee refunds (3) | (61,499 | ) | — | — | (61,499 | ) | ||||||||
Net carried interest | 167,864 | 11,740 | — | 179,604 | ||||||||||
Other investment income (loss) | 1,779 | 25 | 239,072 | 240,876 | ||||||||||
Total investment income (loss) | 169,643 | 11,765 | 239,072 | 420,480 | ||||||||||
Income (loss) before noncontrolling interests in income of consolidated entities | 214,303 | 35,110 | 261,771 | 511,184 | ||||||||||
Income (loss) attributable to noncontrolling interests (4) | 444 | 233 | 633 | 1,310 | ||||||||||
Economic net income (loss) | $ | 213,859 | $ | 34,877 | $ | 261,138 | $ | 509,874 | ||||||
Total Assets | $ | 1,228,471 | $ | 112,664 | $ | 6,246,123 | $ | 7,587,258 | ||||||
Book Value | $ | 1,104,611 | $ | 82,820 | $ | 5,707,350 | $ | 6,894,781 | ||||||
(1) KKR’s agreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of monitoring and transaction fees received from portfolio companies. Fund investors receive Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fund as well as among different classes of investors within a fund. | ||||||||||||||
(2) With respect to KKR’s active and future investment funds and co-investment vehicles that provide for carried interest, KKR will allocate to its principals, other professionals and selected other individuals a portion of the carried interest earned in relation to these funds as part of its carry pool. | ||||||||||||||
(3) Certain of KKR’s private equity funds require the management company to refund up to 20% of any cash management fees earned from fund investors in the event that the funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the cash management fees earned or a portion thereof, a liability to the fund’s fund investors is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the cash management fees earned. As of September 30, 2012, carried interest earned was sufficient to cover 20% of the cash management fees earned. The refunds to the fund investors are paid, and the liabilities relieved, at such time that the underlying investments are sold and the associated carried interests are realized. In the event that a fund’s carried interest is not sufficient to cover any of the amount that represents 20% of the cash management fees earned, these fees would not be returned to the fund investors, in accordance with the respective fund agreements. | ||||||||||||||
(4) Represents economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of KKR’s management companies until a future date and (ii) allocate to third party investors certain profits and losses in KKR’s capital markets and principal activities segment. | ||||||||||||||
The following table reconciles KKR’s total reportable segments to the financial statements as of and for the three months ended September 30, 2012: | ||||||||||||||
As of and for the | ||||||||||||||
Three Months Ended September 30, 2012 | ||||||||||||||
Total | Adjustments | Consolidated | ||||||||||||
Reportable | ||||||||||||||
Segments | ||||||||||||||
Fees(a) | $ | 217,777 | $ | (55,623 | ) | $ | 162,154 | |||||||
Expenses(b) | $ | 127,073 | $ | 319,446 | $ | 446,519 | ||||||||
Investment income (loss)(c) | $ | 420,480 | $ | 1,976,283 | $ | 2,396,763 | ||||||||
Income (loss) before taxes | $ | 511,184 | $ | 1,601,214 | $ | 2,112,398 | ||||||||
Income (loss) attributable to redeemable noncontrolling interests | $ | — | $ | 9,994 | $ | 9,994 | ||||||||
Income (loss) attributable to noncontrolling interests | $ | 1,310 | $ | 1,964,071 | $ | 1,965,381 | ||||||||
Total Assets(d) | $ | 7,587,258 | $ | 36,061,362 | $ | 43,648,620 | ||||||||
Book Value (e) | $ | 6,894,781 | $ | (5,052,250 | ) | $ | 1,842,531 | |||||||
(a) The fees adjustment primarily represents (i) the elimination of management fees of $105,413 upon consolidation of KKR’s funds and vehicles, (ii) the elimination of Fee Credits of $30,611 upon consolidation of KKR’s funds and vehicles, (iii) inclusion of reimbursable expenses of $8,783 and (iv) other adjustments of $10,396. | ||||||||||||||
(b) The expenses adjustment primarily represents (i) the inclusion of non-cash equity based charges borne by KKR Holdings or granted under the Equity Incentive Plan, which amounted to $122,157, (ii) allocations to the carry pool of $169,633, (iii) a gross up of reimbursable expenses of $11,221, (iv) operating expenses of $13,492 primarily associated with the inclusion of operating expenses upon consolidation of KKR’s funds and vehicles and other entities and (v) other adjustments of $2,943. | ||||||||||||||
(c) The investment income (loss) adjustment primarily represents (i) the inclusion of a net investment income of $1,745,151 attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles, (ii) exclusion of allocations to the carry pool of $169,633, and (iii) exclusion of management fee refunds of $61,499. | ||||||||||||||
(d) Substantially all of the total assets adjustment represents the inclusion of investments that are attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles. | ||||||||||||||
(e) The book value adjustment represents the exclusion of noncontrolling interests held by KKR Holdings of $5,044,473 and the equity impact of KKR Management Holdings Corp. equity and other of $7,777. | ||||||||||||||
The reconciliation of net income (loss) attributable to KKR & Co. L.P. as reported in the condensed consolidated statements of operations to economic net income (loss) and fee related earnings consists of the following: | ||||||||||||||
Three Months Ended | ||||||||||||||
September 30, 2012 | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 127,411 | ||||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 249,460 | |||||||||||||
Plus: Equity based compensation | 122,157 | |||||||||||||
Plus: Amortization of intangibles and other, net | 1,234 | |||||||||||||
Plus: Income taxes | 9,612 | |||||||||||||
Economic net income (loss) | 509,874 | |||||||||||||
Plus: Income attributable to segment noncontrolling interests | 1,310 | |||||||||||||
Less: Investment income (loss) | 420,480 | |||||||||||||
Fee related earnings | $ | 90,704 | ||||||||||||
The following table presents the financial data for KKR’s reportable segments as of and for the nine months ended September 30, 2013: | ||||||||||||||
As of and for the | ||||||||||||||
Nine Months Ended September 30, 2013 | ||||||||||||||
Private | Public | Capital Markets | Total | |||||||||||
Markets | Markets | and Principal | Reportable | |||||||||||
Activities | Segments | |||||||||||||
Fees | ||||||||||||||
Management and incentive fees: | ||||||||||||||
Management fees | $ | 340,715 | $ | 149,669 | $ | — | $ | 490,384 | ||||||
Incentive fees | — | 35,664 | — | 35,664 | ||||||||||
Management and incentive fees | 340,715 | 185,333 | — | 526,048 | ||||||||||
Monitoring and transaction fees: | ||||||||||||||
Monitoring fees | 93,985 | — | — | 93,985 | ||||||||||
Transaction fees | 96,611 | 30,883 | 104,717 | 232,211 | ||||||||||
Fee credits (1) | (97,153 | ) | (22,445 | ) | — | (119,598 | ) | |||||||
Net monitoring and transaction fees | 93,443 | 8,438 | 104,717 | 206,598 | ||||||||||
Total fees | 434,158 | 193,771 | 104,717 | 732,646 | ||||||||||
Expenses | ||||||||||||||
Compensation and benefits | 164,917 | 60,296 | 22,614 | 247,827 | ||||||||||
Occupancy and related charges | 35,935 | 5,063 | 1,065 | 42,063 | ||||||||||
Other operating expenses | 105,516 | 36,643 | 8,382 | 150,541 | ||||||||||
Total expenses | 306,368 | 102,002 | 32,061 | 440,431 | ||||||||||
Fee related earnings | 127,790 | 91,769 | 72,656 | 292,215 | ||||||||||
Investment income (loss) | ||||||||||||||
Realized carried interest | 439,527 | — | — | 439,527 | ||||||||||
Unrealized carried interest | 361,972 | 45,212 | — | 407,184 | ||||||||||
Gross carried interest | 801,499 | 45,212 | — | 846,711 | ||||||||||
Less: Allocation to KKR carry pool (2) | (323,467 | ) | (18,085 | ) | — | (341,552 | ) | |||||||
Less: Management fee refunds (3) | (21,718 | ) | — | — | (21,718 | ) | ||||||||
Net carried interest | 456,314 | 27,127 | — | 483,441 | ||||||||||
Other investment income (loss) | 1,073 | 80 | 633,567 | 634,720 | ||||||||||
Total investment income (loss) | 457,387 | 27,207 | 633,567 | 1,118,161 | ||||||||||
Income (loss) before noncontrolling interests in income of consolidated entities | 585,177 | 118,976 | 706,223 | 1,410,376 | ||||||||||
Income (loss) attributable to noncontrolling interests (4) | 1,242 | 935 | 2,267 | 4,444 | ||||||||||
Economic net income (loss) | $ | 583,935 | $ | 118,041 | $ | 703,956 | $ | 1,405,932 | ||||||
Total Assets | $ | 1,456,008 | $ | 382,423 | $ | 6,676,613 | $ | 8,515,044 | ||||||
Book Value | $ | 1,311,513 | $ | 330,073 | $ | 5,566,162 | $ | 7,207,748 | ||||||
(1) KKR’s agreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of monitoring and transaction fees received from portfolio companies. Fund investors receive Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fund as well as among different classes of investors within a fund. | ||||||||||||||
(2) With respect to KKR’s active and future investment funds and co-investment vehicles that provide for carried interest, KKR will allocate to its principals, other professionals and selected other individuals a portion of the carried interest earned in relation to these funds as part of its carry pool. | ||||||||||||||
(3) Certain of KKR’s private equity funds require the management company to refund up to 20% of any cash management fees earned from fund investors in the event that the funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the cash management fees earned or a portion thereof, a liability to the fund’s fund investors is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the cash management fees earned. As of September 30, 2013, carried interest earned was sufficient to cover 20% of the cash management fees earned. The refunds to the fund investors are paid, and the liabilities relieved, at such time that the underlying investments are sold and the associated carried interests are realized. In the event that a fund’s carried interest is not sufficient to cover any of the amount that represents 20% of the cash management fees earned, these fees would not be returned to the fund investors, in accordance with the respective fund agreements. | ||||||||||||||
(4) Represents economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of KKR’s management companies until a future date and (ii) allocate to third party investors certain profits and losses in KKR’s capital markets and principal activities segment. | ||||||||||||||
The following table reconciles KKR’s total reportable segments to the financial statements as of and for the nine months ended September 30, 2013: | ||||||||||||||
As of and for the | ||||||||||||||
Nine Months Ended September 30, 2013 | ||||||||||||||
Total | Adjustments | Consolidated | ||||||||||||
Reportable | ||||||||||||||
Segments | ||||||||||||||
Fees(a) | $ | 732,646 | $ | (195,002 | ) | $ | 537,644 | |||||||
Expenses(b) | $ | 440,431 | $ | 746,416 | $ | 1,186,847 | ||||||||
Investment income (loss)(c) | $ | 1,118,161 | $ | 4,130,165 | $ | 5,248,326 | ||||||||
Income (loss) before taxes | $ | 1,410,376 | $ | 3,188,747 | $ | 4,599,123 | ||||||||
Income (loss) attributable to redeemable noncontrolling interests | $ | — | $ | 25,992 | $ | 25,992 | ||||||||
Income (loss) attributable to noncontrolling interests | $ | 4,444 | $ | 4,129,849 | $ | 4,134,293 | ||||||||
Total Assets(d) | $ | 8,515,044 | $ | 39,645,007 | $ | 48,160,051 | ||||||||
Book Value (e) | $ | 7,207,748 | $ | (4,712,655 | ) | $ | 2,495,093 | |||||||
(a) The fees adjustment primarily represents (i) the elimination of management fees of $357,607 upon consolidation of KKR’s funds and vehicles, (ii) the elimination of Fee Credits of $103,070 upon consolidation of KKR’s funds and vehicles, (iii) inclusion of reimbursable expenses of $25,586 and (iv) other adjustments of $33,949. | ||||||||||||||
(b) The expenses adjustment primarily represents (i) the inclusion of non-cash equity based charges borne by KKR Holdings or granted under the Equity Incentive Plan, which amounted to $247,183, (ii) allocations to the carry pool of $341,552, (iii) a gross up of reimbursable expenses of $35,029 (iv) operating expenses of $57,997 primarily associated with the inclusion of operating expenses upon consolidation of KKR’s funds and vehicles and other entities, (v) inclusion of certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income of $5,512 and (vi) other adjustments of $59,143. | ||||||||||||||
(c) The investment income (loss) adjustment primarily represents (i) the inclusion of a net investment income of $3,761,383 attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles, (ii) exclusion of allocations to the carry pool of $341,552, (iii) exclusion of management fee refunds of $21,718 and (iv) exclusion of certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income of $5,512. | ||||||||||||||
(d) Substantially all of the total assets adjustment represents the inclusion of investments that are attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles. | ||||||||||||||
(e) The book value adjustment represents the exclusion of noncontrolling interests held by KKR Holdings of $4,796,218 and the equity impact of KKR Management Holdings Corp. equity and other of $83,563. | ||||||||||||||
The reconciliation of net income (loss) attributable to KKR & Co. L.P. as reported in the condensed consolidated statements of operations to economic net income (loss) and fee related earnings consists of the following: | ||||||||||||||
Nine Months Ended | ||||||||||||||
September 30, 2013 | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 413,313 | ||||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 662,387 | |||||||||||||
Plus: Equity based compensation | 247,183 | |||||||||||||
Plus: Amortization of intangibles and other, net | 57,524 | |||||||||||||
Plus: Income taxes | 25,525 | |||||||||||||
Economic net income (loss) | 1,405,932 | |||||||||||||
Plus: Income attributable to segment noncontrolling interests | 4,444 | |||||||||||||
Less: Investment income (loss) | 1,118,161 | |||||||||||||
Fee related earnings | $ | 292,215 | ||||||||||||
The following table presents the financial data for KKR’s reportable segments as of and for the nine months ended September 30, 2012: | ||||||||||||||
As of and for the | ||||||||||||||
Nine Months Ended September 30, 2012 | ||||||||||||||
Private | Public | Capital Markets | Total | |||||||||||
Markets | Markets | and Principal | Reportable | |||||||||||
Activities | Segments | |||||||||||||
Fees | ||||||||||||||
Management and incentive fees: | ||||||||||||||
Management fees | $ | 319,117 | $ | 65,635 | $ | — | $ | 384,752 | ||||||
Incentive fees | — | 31,495 | — | 31,495 | ||||||||||
Management and incentive fees | 319,117 | 97,130 | — | 416,247 | ||||||||||
Monitoring and transaction fees: | ||||||||||||||
Monitoring fees | 83,577 | — | — | 83,577 | ||||||||||
Transaction fees | 55,223 | 12,521 | 95,524 | 163,268 | ||||||||||
Fee credits (1) | (59,641 | ) | (8,098 | ) | — | (67,739 | ) | |||||||
Net monitoring and transaction fees | 79,159 | 4,423 | 95,524 | 179,106 | ||||||||||
Total fees | 398,276 | 101,553 | 95,524 | 595,353 | ||||||||||
Expenses | ||||||||||||||
Compensation and benefits | 139,382 | 34,608 | 22,820 | 196,810 | ||||||||||
Occupancy and related charges | 36,487 | 4,127 | 691 | 41,305 | ||||||||||
Other operating expenses | 103,790 | 11,754 | 7,862 | 123,406 | ||||||||||
Total expenses | 279,659 | 50,489 | 31,373 | 361,521 | ||||||||||
Fee related earnings | 118,617 | 51,064 | 64,151 | 233,832 | ||||||||||
Investment income (loss) | ||||||||||||||
Realized carried interest | 307,387 | — | — | 307,387 | ||||||||||
Unrealized carried interest | 830,072 | 25,515 | — | 855,587 | ||||||||||
Gross carried interest | 1,137,459 | 25,515 | — | 1,162,974 | ||||||||||
Less: Allocation to KKR carry pool (2) | (463,485 | ) | (10,207 | ) | — | (473,692 | ) | |||||||
Less: Management fee refunds (3) | (135,011 | ) | — | — | (135,011 | ) | ||||||||
Net carried interest | 538,963 | 15,308 | — | 554,271 | ||||||||||
Other investment income (loss) | (559 | ) | (10 | ) | 1,001,455 | 1,000,886 | ||||||||
Total investment income (loss) | 538,404 | 15,298 | 1,001,455 | 1,555,157 | ||||||||||
Income (loss) before noncontrolling interests in income of consolidated entities | 657,021 | 66,362 | 1,065,606 | 1,788,989 | ||||||||||
Income (loss) attributable to noncontrolling interests (4) | 3,098 | 787 | 1,913 | 5,798 | ||||||||||
Economic net income (loss) | $ | 653,923 | $ | 65,575 | $ | 1,063,693 | $ | 1,783,191 | ||||||
Total Assets | $ | 1,228,471 | $ | 112,664 | $ | 6,246,123 | $ | 7,587,258 | ||||||
Book Value | $ | 1,104,611 | $ | 82,820 | $ | 5,707,350 | $ | 6,894,781 | ||||||
(1) KKR’s agreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of monitoring and transaction fees received from portfolio companies. Fund investors receive Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fund as well as among different classes of investors within a fund. | ||||||||||||||
(2) With respect to KKR’s active and future investment funds and co-investment vehicles that provide for carried interest, KKR will allocate to its principals, other professionals and selected other individuals a portion of the carried interest earned in relation to these funds as part of its carry pool. | ||||||||||||||
(3) Certain of KKR’s private equity funds require the management company to refund up to 20% of any cash management fees earned from fund investors in the event that the funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the cash management fees earned or a portion thereof, a liability to the fund’s fund investors is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the cash management fees earned. As of September 30, 2012, carried interest earned was sufficient to cover 20% of the cash management fees earned. The refunds to the fund investors are paid, and the liabilities relieved, at such time that the underlying investments are sold and the associated carried interests are realized. In the event that a fund’s carried interest is not sufficient to cover any of the amount that represents 20% of the cash management fees earned, these fees would not be returned to the fund investors, in accordance with the respective fund agreements. | ||||||||||||||
(4) Represents economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of KKR’s management companies until a future date and (ii) allocate to third party investors certain profits and losses in KKR’s capital markets and principal activities segment. | ||||||||||||||
The following table reconciles KKR’s total reportable segments to the financial statements as of and for the nine months ended September 30, 2012: | ||||||||||||||
As of and for the | ||||||||||||||
Nine Months Ended September 30, 2012 | ||||||||||||||
Total | Adjustments | Consolidated | ||||||||||||
Reportable | ||||||||||||||
Segments | ||||||||||||||
Fees(a) | $ | 595,353 | $ | (204,532 | ) | $ | 390,821 | |||||||
Expenses(b) | $ | 361,521 | $ | 878,995 | $ | 1,240,516 | ||||||||
Investment income (loss)(c) | $ | 1,555,157 | $ | 5,912,219 | $ | 7,467,376 | ||||||||
Income (loss) before taxes | $ | 1,788,989 | $ | 4,828,692 | $ | 6,617,681 | ||||||||
Income (loss) attributable to redeemable noncontrolling interests | $ | — | $ | 18,551 | $ | 18,551 | ||||||||
Income (loss) attributable to noncontrolling interests | $ | 5,798 | $ | 6,091,447 | $ | 6,097,245 | ||||||||
Total Assets(d) | $ | 7,587,258 | $ | 36,061,362 | $ | 43,648,620 | ||||||||
Book Value (e) | $ | 6,894,781 | $ | (5,052,250 | ) | $ | 1,842,531 | |||||||
(a) The fees adjustment primarily represents (i) the elimination of management fees of $322,911 upon consolidation of KKR’s funds and vehicles, (ii) the elimination of Fee Credits of $65,761 upon consolidation of KKR’s funds and vehicles, (iii) inclusion of reimbursable expenses of $17,369 and (iv) other adjustments of $35,249. | ||||||||||||||
(b) The expenses adjustment primarily represents (i) the inclusion of non-cash equity based charges borne by KKR Holdings or granted under the Equity Incentive Plan, which amounted to $330,037, (ii) allocations to the carry pool of $473,692, (iii) a gross up of reimbursable expenses of $25,096, (iv) operating expenses of $39,102 primarily associated with the inclusion of operating expenses upon consolidation of KKR’s funds and vehicles and other entities and (v) other adjustments of $11,068. | ||||||||||||||
(c) The investment income (loss) adjustment primarily represents (i) the inclusion of a net investment income of $5,303,516 attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles, (ii) exclusion of allocations to the carry pool of $473,692, and (iii) exclusion of management fee refunds of $135,011. | ||||||||||||||
(d) Substantially all of the total assets adjustment represents the inclusion of investments that are attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles. | ||||||||||||||
(e) The book value adjustment represents the exclusion of noncontrolling interests held by KKR Holdings of $5,044,473 and the equity impact of KKR Management Holdings Corp. equity and other of $7,777. | ||||||||||||||
The reconciliation of net income (loss) attributable to KKR & Co. L.P. as reported in the condensed consolidated statements of operations to economic net income (loss) and fee related earnings consists of the following: | ||||||||||||||
Nine Months Ended | ||||||||||||||
September 30, 2012 | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 464,108 | ||||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 946,484 | |||||||||||||
Plus: Equity based compensation | 330,037 | |||||||||||||
Plus: Amortization of intangibles and other, net | 4,785 | |||||||||||||
Plus: Income taxes | 37,777 | |||||||||||||
Economic net income (loss) | 1,783,191 | |||||||||||||
Plus: Income attributable to segment noncontrolling interests | 5,798 | |||||||||||||
Less: Investment income (loss) | 1,555,157 | |||||||||||||
Fee related earnings | $ | 233,832 |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 2013 | |
ACQUISITIONS | ' |
ACQUISITIONS | ' |
13. ACQUISITIONS | |
Prisma Capital Partners | |
On October 1, 2012, KKR acquired all of the equity interests of Prisma Capital Partners LP and its affiliates (“Prisma”). Prisma is a provider of customized hedge fund solutions mainly through the management of funds of hedge fund portfolios. The addition of Prisma provides KKR with a funds of hedge fund strategy and a greater presence in the hedge funds space, from which KKR can create and offer more liquid products for KKR’s fund investors. | |
Initial consideration transferred was $200.0 million in cash, and KKR may become obligated to make future additional payments (referred to hereafter as “contingent consideration”) to the sellers (certain of whom became employees of KKR) in years 2014 and 2017 based on the Prisma business achieving certain performance metrics when measured in such years. KKR has the right in its sole discretion to pay a portion of the contingent consideration, if any, in KKR & Co. L.P. common units rather than in cash. Changes in the fair value of the contingent consideration subsequent to the acquisition date are recognized within General, Administrative and Other in the condensed consolidated statements of operations. | |
As of September 30, 2013, the fair value of the contingent consideration was estimated to be $93.4 million and is recorded as a liability within Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated statements of financial condition. The fair value of the contingent consideration was derived using Level III inputs. This amount was determined based on the present value of a range of undiscounted cash flows of $0 to $155.0 million in each of 2014 and 2017, using a discount rate ranging from 2.1% to 3.1%, after applying probability, risk-weighting, and other adjustments that KKR has determined to be applicable. |
GOODWILL_AND_INTANGIBLE_ASSETS
GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
GOODWILL AND INTANGIBLE ASSETS | ' | |||||||
GOODWILL AND INTANGIBLE ASSETS | ' | |||||||
14. GOODWILL AND INTANGIBLE ASSETS | ||||||||
Goodwill | ||||||||
Goodwill from the acquisition of Prisma represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired and is primarily attributed to synergies expected to arise after the acquisition. The carrying value of goodwill was $89.0 million as of September 30, 2013 and December 31, 2012 and is recorded within Other Assets on the condensed consolidated statements of financial condition. This goodwill has been allocated entirely to the Public Markets segment. As of September 30, 2013, the fair value of KKR’s reporting units substantially exceeded their respective carrying values. All of the goodwill is currently expected to be deductible for tax purposes. See Note 7 “Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities.” | ||||||||
Intangible Assets | ||||||||
Intangible Assets, Net consists of the following: | ||||||||
September 30, 2013 | December 31, 2012 | |||||||
Finite — Lived Intangible Assets | $ | 218,886 | $ | 218,886 | ||||
Accumulated Amortization | (36,357 | ) | (21,402 | ) | ||||
Intangible Assets, Net | $ | 182,529 | $ | 197,484 | ||||
Changes in Intangible Assets, Net consists of the following: | ||||||||
September 30, 2013 | December 31, 2012 | |||||||
Balance, Beginning of Year | $ | 197,484 | $ | 24,310 | ||||
Acquisitions | — | 181,000 | ||||||
Amortization Expense | (14,955 | ) | (7,826 | ) | ||||
Intangible Assets, Net | $ | 182,529 | $ | 197,484 |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2013 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
15. COMMITMENTS AND CONTINGENCIES | |
Debt Covenants | |
Borrowings of KKR contain various debt covenants. These covenants do not, in management’s opinion, materially restrict KKR’s investment or financing strategies. KKR is in compliance with its debt covenants in all material respects. | |
Investment Commitments | |
As of September 30, 2013, KKR had unfunded commitments consisting of (i) $1,164.5 million to its active private equity and other investment vehicles, and (ii) $478.0 million in connection with commitments by KKR’s capital markets business and certain other investment commitments. Whether these amounts are actually funded, in whole or in part depends on the terms of such commitments, including the satisfaction or waiver of any conditions to funding. | |
Contingent Repayment Guarantees | |
The partnership documents governing KKR’s carry - paying funds, including funds and vehicles relating to private equity, mezzanine, infrastructure, natural resources, direct lending and special situations investments, generally include a “clawback” provision that, if triggered, may give rise to a contingent obligation requiring the general partner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund. Under a clawback obligation, upon the liquidation of a fund, the general partner is required to return, typically on an after-tax basis, previously distributed carry to the extent that, due to the diminished performance of later investments, the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, including the effects of any performance thresholds. Excluding carried interest received by the general partners of funds that were not contributed to KKR in the acquisition of the assets and liabilities of KKR & Co. (Guernsey) L.P. (formerly known as KKR Private Equity Investors, L.P.) on October 1, 2009 (the “KPE Transaction”), as of September 30, 2013, no carried interest was subject to this clawback obligation, assuming that all applicable carry paying funds were liquidated at their September 30, 2013 fair values. Had the investments in such funds been liquidated at zero value, the clawback obligation would have been $1,241.5 million. Carried interest is recognized in the statement of operations based on the contractual conditions set forth in the agreements governing the fund as if the fund were terminated and liquidated at the reporting date and the fund’s investments were realized at the then estimated fair values. Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns are positive and where applicable, preferred return thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods, recognized carried interest will be reversed and to the extent that the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, a clawback obligation would be recorded. For funds that are consolidated, this clawback obligation, if any, is reflected as an increase in noncontrolling interests in the consolidated statements of financial condition. For funds that are not consolidated, this clawback obligation, if any, is reflected as a reduction of KKR’s investment balance as this is where carried interest is initially recorded. | |
Certain private equity funds that were contributed to KKR in the KPE Transaction also include a “net loss sharing provision.” Upon the liquidation of an investment vehicle to which a net loss sharing obligation applies, the general partner is required to contribute capital to the vehicle, to fund 20% of the net losses on investments. In these vehicles, such losses would be required to be paid by KKR to the fund investors in those vehicles in the event of a liquidation of the fund regardless of whether any carried interest had previously been distributed, and a greater share of investment losses would be allocable to KKR relative to the capital that KKR contributed to it as general partner. Based on the fair market values as of September 30, 2013, there would have been no net loss sharing obligation. If the vehicles were liquidated at zero value, the net loss sharing obligation would have been approximately $574.8 million as of September 30, 2013. | |
Prior to the KPE Transaction, certain KKR principals who received carried interest distributions with respect to certain private equity funds contributed to KKR had personally guaranteed, on a several basis and subject to a cap, the contingent obligations of the general partners of such private equity funds to repay amounts to fund investors pursuant to the general partners’ clawback obligations. The terms of the KPE Transaction require that KKR principals remain responsible for any clawback obligations relating to carry distributions received prior to the KPE Transaction, up to a maximum of $223.6 million. As of September 30, 2013, no amounts are due with respect to the clawback obligation required to be funded by KKR principals who do not hold direct controlling economic interests in the KKR Group Partnerships. Carry distributions arising subsequent to the KPE Transaction may give rise to clawback obligations that may be allocated generally to KKR and KKR’s principals who participate in the carry pool. Unlike the clawback obligation, KKR will be responsible for amounts due under a net loss sharing obligation and will indemnify KKR’s principals for any personal guarantees that they have provided with respect to such amounts. In addition, guarantees of or similar arrangements relating to clawback or net loss sharing obligations in favor of third party investors in an individual investment partnership by entities KKR owns may limit distributions of carried interest more generally. | |
Indemnifications | |
In the normal course of business, KKR enters into contracts that contain a variety of representations and warranties that provide general indemnifications. In addition, certain of KKR’s consolidated funds have provided certain indemnities relating to environmental and other matters and has provided nonrecourse carve-out guarantees for fraud, willful misconduct and other customary wrongful acts, each in connection with the financing of certain real estate investments that KKR has made. KKR’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against KKR that have not yet occurred. However, based on experience, KKR expects the risk of material loss to be low. | |
Litigation | |
From time to time, KKR is involved in various legal proceedings, lawsuits and claims incidental to the conduct of KKR’s business. KKR’s business is also subject to extensive regulation, which may result in regulatory proceedings against it. | |
On May 23, 2011, KKR, certain KKR affiliates and the board of directors of Primedia Inc. (a former KKR portfolio company whose directors at that time included certain KKR personnel) were named as defendants, along with others, in two shareholder class action complaints filed in the Court of Chancery of the State of Delaware challenging the sale of Primedia in a merger transaction that was completed on July 13, 2011. These actions allege, among other things, that Primedia board members, KKR, and certain KKR affiliates, breached their fiduciary duties by entering into the merger agreement at an unfair price and failing to disclose all material information about the merger. Plaintiffs also allege that the merger price was unfair in light of the value of certain shareholder derivative claims, which were dismissed on August 8, 2011, based on a stipulation by the parties that the derivative plaintiffs and any other former Primedia shareholders lost standing to prosecute the derivative claims on behalf of Primedia when the Primedia merger was completed. The dismissed shareholder derivative claims included allegations concerning open market purchases of certain shares of Primedia’s preferred stock by KKR affiliates in 2002 and allegations concerning Primedia’s redemption of certain shares of Primedia’s preferred stock in 2004 and 2005, some of which were owned by KKR affiliates. With respect to the pending shareholder class actions challenging the Primedia merger, on June 7, 2011, the Court of Chancery denied a motion to preliminarily enjoin the merger. On July 18, 2011, the Court of Chancery consolidated the two pending shareholder class actions and appointed lead counsel for plaintiffs. On October 7, 2011, defendants moved to dismiss the operative complaint in the consolidated shareholder class action. The operative complaint seeks, in relevant part, unspecified monetary damages and rescission of the merger. On December 2, 2011, plaintiffs filed a consolidated amended complaint, which similarly alleges that the Primedia board members, KKR, and certain KKR affiliates breached their respective fiduciary duties by entering into the merger agreement at an unfair price in light of the value of the dismissed shareholder derivative claims. That amended complaint seeks an unspecified amount of monetary damages. On January 31, 2012, defendants moved to dismiss the amended complaint. On May 10, 2013, the Court of Chancery denied the motion to dismiss the complaint as it relates to the Primedia board members, KKR and certain KKR affiliates. On July 1, 2013, KKR and other defendants filed a motion for judgment on the pleadings. | |
Additionally, in May 2011, two shareholder class actions challenging the Primedia merger were filed in Georgia state courts, asserting similar allegations and seeking similar relief as initially sought by the Delaware shareholder class actions above. Both Georgia actions have been stayed in favor of the Delaware action. | |
In December 2007, KKR, along with 15 other private equity firms and investment banks, were named as defendants in a purported class action complaint filed in the United States District Court for the District of Massachusetts by shareholders in certain public companies acquired by private equity firms since 2003. In August 2008, KKR, along with 16 other private equity firms and investment banks, were named as defendants in a purported consolidated amended class action complaint. The suit alleges that from mid-2003 defendants have violated antitrust laws by allegedly conspiring to rig bids, restrict the supply of private equity financing, fix the prices for target companies at artificially low levels, and divide up an alleged market for private equity services for leveraged buyouts. The amended complaint seeks injunctive relief on behalf of all persons who sold securities to any of the defendants in leveraged buyout transactions and specifically challenges nine transactions. The first stage of discovery concluded on or about April 15, 2010. On August 18, 2010, the court granted plaintiffs’ motion to proceed to a second stage of discovery in part and denied it in part. Specifically, the court granted a second stage of discovery as to eight additional transactions but denied a second stage of discovery as to any transactions beyond the additional eight specified transactions. On October 7, 2010, the plaintiffs filed under seal a fourth amended complaint that includes new factual allegations concerning the additional eight transactions and the original nine transactions. The fourth amended complaint also includes eight purported sub-classes of plaintiffs seeking unspecified monetary damages and/or restitution with respect to eight of the original nine challenged transactions and new separate claims against two of the original nine challenged transactions. On January 13, 2011, the court granted a motion filed by KKR and certain other defendants to dismiss all claims alleged by a putative damages sub-class in connection with the acquisition of PanAmSat Corp. and separate claims for relief related to the PanAmSat transaction. The second phase of discovery permitted by the court is completed. On July 11, 2011, plaintiffs filed a motion seeking leave to file a proposed fifth amended complaint that seeks to challenge ten additional transactions in addition to the transactions identified in the previous complaints. Defendants opposed plaintiffs’ motion. On September 7, 2011, the court granted plaintiffs’ motion in part and denied it in part. Specifically, the court granted a third stage of limited discovery as to the ten additional transactions identified in plaintiffs’ proposed fifth amended complaint but denied plaintiffs’ motion seeking leave to file a proposed fifth amended complaint. On June 14, 2012, following the completion of the third phase of discovery, plaintiffs filed a fifth amended complaint which, like their proposed fifth amended complaint, seeks to challenge ten additional transactions in addition to the transactions identified in the previous complaints. On June 22, 2012, defendants filed a motion to dismiss certain claims asserted in the fifth amended complaint. On July 18, 2012, the court granted in part and denied in part defendants’ motion to dismiss, dismissing certain previously released claims against certain defendants. On March 13, 2013, the United States District Court denied defendants’ motion for summary judgment on the count involving KKR. However, the court narrowed plaintiffs’ claim to an alleged overarching agreement to refrain from jumping other defendants’ announced proprietary transactions, thereby limiting the case to a smaller number of transactions subject to plaintiffs’ claim. Pursuant to the court’s grant of permission to re-file, KKR filed a renewed motion for summary judgment on April 16, 2013, which the court denied on July 18, 2013. | |
On March 4, 2011, KKR received a request from the SEC for information relating to the acquisition of Del Monte Foods Company by private equity funds affiliated with KKR and two other private equity firms, which was announced on November 25, 2010 and completed on March 8, 2011. On May 20, 2011 the SEC issued a subpoena to KKR seeking substantially the same documents and information as the March 4, 2011 request for information. On December 16, 2011, the SEC issued another subpoena to KKR seeking documents and information regarding the period prior to the announcement of the acquisition of Del Monte Foods Company. KKR is cooperating with the SEC’s investigations. | |
In September 2006 and March 2009, KKR received requests for certain documents and other information from the Antitrust Division of the U.S. Department of Justice (“DOJ”) in connection with the DOJ’s investigation of private equity firms to determine whether they have engaged in conduct prohibited by United States antitrust laws. KKR is cooperating with the DOJ’s investigation. | |
In January 2011, KKR received a request from the SEC for information regarding KKR’s investors and clients that the SEC defines as sovereign wealth funds and certain services provided by KKR. On December 19, 2011, the SEC issued a subpoena to KKR seeking additional documents and information involving certain sovereign wealth funds specified by the SEC, and on December 6, 2012 and February 15, 2013, the SEC requested additional documents and information pursuant to such subpoena. KKR is cooperating with the SEC’s investigation. | |
In July 2012, KKR received a subpoena from the New York State Attorney General’s Office seeking information and documents concerning the waiver or deferral of management fees with respect to funds where KKR or its affiliate serves or served as such a fund’s general partner. KKR is cooperating with the New York State Attorney General in its investigation. | |
Moreover, in the ordinary course of business KKR is subject to governmental and regulatory examinations or investigations and also is and can be both the defendant and the plaintiff in numerous actions with respect to acquisitions, bankruptcy, insolvency and other types of proceedings. Such lawsuits may involve claims that adversely affect the value of certain investments owned by KKR’s funds. | |
KKR establishes an accrued liability for litigation, regulatory and other matters only when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. No loss contingency is recorded for matters where such losses are either not probable or reasonably estimable (or both) at the time of determination. Such matters are subject to many uncertainties, including among others (i) the proceedings are in early stages; (ii) damages sought are unspecified, unsupportable, unexplained or uncertain; (iii) discovery has not been started or is incomplete; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties. Consequently, management is unable to estimate a range of potential loss, if any, related to these matters. For one or more of the matters described above for which a loss is both probable and reasonably estimable, KKR has estimated the aggregate amount of losses attributable to KKR to be approximately $32.5 million. KKR believes such losses may be, in part, subject to insurance and/or indemnity, which KKR believes may reduce any ultimate loss. This estimate is subject to significant judgment and a variety of assumptions and uncertainties. Actual outcomes may vary significantly from this estimate. | |
It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings, and some of the matters discussed above seek potentially large and/or indeterminate amounts. As of such date, based on information known by management, management has not concluded that the final resolutions of the matters above will have a material effect upon the consolidated financial statements. However, given the potentially large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of investigations and litigations, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on KKR’s financial results in any particular period. |
REGULATORY_CAPITAL_REQUIREMENT
REGULATORY CAPITAL REQUIREMENTS | 9 Months Ended |
Sep. 30, 2013 | |
REGULATORY CAPITAL REQUIREMENTS | ' |
REGULATORY CAPITAL REQUIREMENTS | ' |
16. REGULATORY CAPITAL REQUIREMENTS | |
KKR has a registered broker-dealer subsidiary which is subject to the minimum net capital requirements of the SEC and the Financial Industry Regulatory Authority (“FINRA”). Additionally, KKR has an entity based in London which is subject to the capital requirements of the U.K. Financial Conduct Authority, another entity based in Hong Kong which is subject to the capital requirements of the Hong Kong Securities and Futures Ordinance, an entity based in Japan subject to the capital requirements of Financial Services Authority of Japan, and two entities based in Mumbai which are subject to capital requirements of the Reserve Bank of India (“RBI”) and Securities and Exchange Board of India (“SEBI”). All of these broker dealer entities have continuously operated in excess of their respective minimum regulatory capital requirements. | |
The regulatory capital requirements referred to above may restrict KKR’s ability to withdraw capital from its registered broker-dealer entities. At September 30, 2013, approximately $89.9 million of cash at KKR’s registered broker-dealer entities may be restricted as to the payment of cash dividends and advances to KKR. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2013 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
17. SUBSEQUENT EVENTS | |
Distribution | |
A distribution of $0.23 per KKR & Co. L.P. common unit was announced on October 24, 2013, and will be paid on November 19, 2013 to unitholders of record as of the close of business on November 4, 2013. KKR Holdings will receive its pro rata share of the distribution from the KKR Group Partnerships. | |
Acquisition | |
On October 18, 2013, KKR announced a transaction to acquire Avoca Capital (Unlimited) and its affiliates (“Avoca”), a European credit investment manager with approximately $8 billion in assets under management as of September 30, 2013. The transaction, which is subject to customary regulatory approvals, is expected to close in the first quarter of 2014. The purchase price payable by KKR at closing will include cash and KKR & Co. L.P. common units and/or securities or other obligations representing the right to receive KKR & Co. L.P. common units. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||
Basis of Presentation | ' | |||||||||||||
Basis of Presentation | ||||||||||||||
The accompanying unaudited condensed consolidated financial statements of KKR & Co. L.P. have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) such that the condensed consolidated financial statements are presented fairly and that estimates made in preparing the condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The December 31, 2012 condensed consolidated balance sheet data was derived from audited consolidated financial statements included in KKR’s Annual Report on Form 10-K for the year ended December 31, 2012, which include all disclosures required by GAAP. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in KKR & Co. L.P.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). | ||||||||||||||
The condensed consolidated financial statements (referred to hereafter as the “financial statements”) include the accounts of KKR’s management and capital markets companies, the general partners of certain unconsolidated funds and vehicles, general partners of consolidated funds and their respective consolidated funds and certain other entities. | ||||||||||||||
KKR & Co. L.P. consolidates the financial results of the KKR Group Partnerships and their consolidated subsidiaries. KKR Holdings’ ownership interest in the KKR Group Partnerships is reflected as noncontrolling interests in the accompanying financial statements. | ||||||||||||||
References in the accompanying financial statements to KKR’s “principals” are to KKR’s senior employees and non-employee operating consultants who hold interests in KKR’s business through KKR Holdings, including those principals who also hold interests in the Managing Partner entitling those principals to vote for the election of the Managing Partners’ directors (the “Senior Principals”). | ||||||||||||||
Use of Estimates | ' | |||||||||||||
Use of Estimates | ||||||||||||||
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of fees, expenses and investment income (loss) during the reporting periods. Such estimates include but are not limited to the valuation of investments and financial instruments. Actual results could differ from those estimates, and such differences could be material to the financial statements. | ||||||||||||||
Consolidation | ' | |||||||||||||
Consolidation | ||||||||||||||
General | ||||||||||||||
KKR consolidates (i) those entities in which it holds a majority voting interest or has majority ownership and control over significant operating, financial and investing decisions of the entity, including the KKR funds and vehicles in which KKR, as general partner, is presumed to have control, or (ii) entities determined to be variable interest entities (“VIEs”) for which KKR is considered the primary beneficiary. | ||||||||||||||
With respect to KKR’s consolidated funds and vehicles, KKR generally has operational discretion and control, and fund investors have no substantive rights to impact ongoing governance and operating activities of the fund, including the ability to remove the general partner, also known as kick-out rights. As a result, a fund should be consolidated unless KKR has a nominal level of equity at risk. To the extent that KKR commits a nominal amount of equity to a given fund and has no obligation to fund any future losses, the equity at risk to KKR is not considered substantive and the fund is typically considered a VIE as described below. In these cases, the fund investors are generally deemed to be the primary beneficiaries and KKR does not consolidate the fund. In cases when KKR’s equity at risk is deemed to be substantive, the fund is generally not considered to be a VIE and KKR generally consolidates the fund. | ||||||||||||||
KKR’s funds and vehicles are consolidated by KKR notwithstanding the fact that KKR has only a minority economic interest in those funds. KKR’s financial statements reflect the assets, liabilities, fees, expenses, investment income (loss) and cash flows of the consolidated KKR funds and vehicles on a gross basis, and the majority of the economic interests in those funds, which are held by third party fund investors, are attributed to noncontrolling interests in the accompanying financial statements. All of the management fees and certain other amounts earned by KKR from those funds are eliminated in consolidation. However, because the eliminated amounts are earned from, and funded by, noncontrolling interests, KKR’s attributable share of the net income (loss) from those funds is increased by the amounts eliminated. Accordingly, the elimination in consolidation of such amounts has no effect on net income (loss) attributable to KKR or KKR partners’ capital. | ||||||||||||||
KKR’s funds and vehicles are, for GAAP purposes, investment companies and therefore are not required to consolidate their investments, including investments in portfolio companies, even if majority-owned and controlled. Rather, the KKR funds and vehicles reflect their investments at fair value as described in the Fair Value Measurements section. All intercompany transactions and balances have been eliminated. | ||||||||||||||
Variable Interest Entities | ' | |||||||||||||
Variable Interest Entities | ||||||||||||||
KKR consolidates all VIEs in which it is considered the primary beneficiary. An enterprise is determined to be the primary beneficiary if it has a controlling financial interest under GAAP. A controlling financial interest is defined as (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s business and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. The consolidation rules which were revised effective January 1, 2010, require an analysis to determine (a) whether an entity in which KKR has a variable interest is a VIE and (b) whether KKR’s involvement, through the holding of equity interests directly or indirectly in the entity or contractually through other variable interests unrelated to the holding of equity interests, would give it a controlling financial interest under GAAP. Performance of that analysis requires the exercise of judgment. Where KKR has an interest in an entity that has qualified for the deferral of the consolidation rules, the analysis is based on consolidation rules prior to January 1, 2010. These rules require an analysis to determine (a) whether an entity in which KKR has a variable interest is a VIE and (b) whether KKR’s involvement, through the holding of equity interests directly or indirectly in the entity or contractually through other variable interests would be expected to absorb a majority of the variability of the entity. Under both guidelines, KKR determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. In evaluating whether KKR is the primary beneficiary, KKR evaluates its economic interests in the entity held either directly by KKR or indirectly through related parties. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that KKR is not the primary beneficiary, a quantitative analysis may also be performed. Investments and redemptions (either by KKR, affiliates of KKR or third parties) or amendments to the governing documents of the respective entities could affect an entity’s status as a VIE or the determination of the primary beneficiary. At each reporting date, KKR assesses whether it is the primary beneficiary and will consolidate or not consolidate accordingly. | ||||||||||||||
As of September 30, 2013 and December 31, 2012, the maximum exposure to loss, before allocations to the carry pool, if any, for those VIEs in which KKR is determined not to be the primary beneficiary but in which it has a variable interest is as follows: | ||||||||||||||
September 30, | December 31, | |||||||||||||
2013 | 2012 | |||||||||||||
Investments | $ | 201,197 | $ | 188,408 | ||||||||||
Due from Affiliates, net | 5,209 | 2,266 | ||||||||||||
Maximum Exposure to Loss | $ | 206,406 | $ | 190,674 | ||||||||||
For those unconsolidated VIEs in which KKR is the sponsor, KKR may have an obligation as general partner to provide commitments to such funds. As of September 30, 2013 and December 31, 2012, KKR did not provide any support other than its obligated amount. | ||||||||||||||
KKR’s investment strategies differ by investment fund; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of management fees and carried interests. Accordingly, disaggregation of KKR’s involvement by type of VIE would not provide more useful information. | ||||||||||||||
Business Combinations | ' | |||||||||||||
Business Combinations | ||||||||||||||
Acquisitions are accounted for using the acquisition method of accounting. The purchase price of an acquisition is allocated to the assets acquired and liabilities assumed using the estimated fair values at the acquisition date. Transaction costs are expensed as incurred. | ||||||||||||||
Intangible Assets | ' | |||||||||||||
Intangible Assets | ||||||||||||||
Intangible assets consist primarily of contractual rights to earn future fee income, including management and incentive fees, and are included in Other Assets within the statements of financial condition. Identifiable finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives and amortization expense is included within General, Administrative and Other in the accompanying condensed consolidated statements of operations. Intangible assets are reviewed for impairment when circumstances indicate an impairment may exist. KKR does not have any indefinite-lived intangible assets. | ||||||||||||||
Goodwill | ' | |||||||||||||
Goodwill | ||||||||||||||
Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in connection with an acquisition. Goodwill will be assessed for impairment annually or more frequently if circumstances indicate impairment may have occurred. Goodwill is recorded in Other Assets within the condensed consolidated statements of financial condition. | ||||||||||||||
Redeemable Noncontrolling Interests | ' | |||||||||||||
Redeemable Noncontrolling Interests | ||||||||||||||
Redeemable Noncontrolling Interests represent noncontrolling interests of certain investment vehicles and funds that are subject to periodic redemption by fund investors following the expiration of a specified period of time (typically between one and three years), or may be withdrawn subject to a redemption fee during the period when capital may not be otherwise withdrawn. Limited partner interests subject to redemption as described above are presented as Redeemable Noncontrolling Interests within the condensed consolidated statements of financial condition and presented as Net Income (Loss) attributable to Redeemable Noncontrolling Interests within the condensed consolidated statements of operations. When redeemable amounts become legally payable to fund investors, they are classified as a liability and included in Accounts Payable, Accrued Expenses and Other Liabilities in the condensed consolidated statements of financial condition. For all consolidated investment vehicles and funds in which redemption rights have not been granted, noncontrolling interests are presented within Equity in the condensed consolidated statements of financial condition as Noncontrolling Interests. | ||||||||||||||
Noncontrolling Interests | ' | |||||||||||||
Noncontrolling Interests | ||||||||||||||
Noncontrolling interests represent (i) noncontrolling interests in consolidated entities and (ii) noncontrolling interests held by KKR Holdings. | ||||||||||||||
Noncontrolling Interests in Consolidated Entities | ||||||||||||||
Noncontrolling interests in consolidated entities represent the non-redeemable ownership interests in KKR that are held primarily by: | ||||||||||||||
(i) | third party fund investors in KKR’s funds; | |||||||||||||
(ii) | a former principal and such person’s designees representing an aggregate of 1% of the carried interest received by the general partners of KKR’s funds and 1% of KKR’s other profits (losses) until a future date; | |||||||||||||
(iii) | certain of KKR’s former principals and their designees representing a portion of the carried interest received by the general partners of KKR’s private equity funds that was allocated to them with respect to private equity investments made during such former principals’ previous tenure with KKR; | |||||||||||||
(iv) | certain of KKR’s current and former principals representing all of the capital invested by or on behalf of the general partners of KKR’s private equity funds prior to October 1, 2009 and any returns thereon; and | |||||||||||||
(v) | third parties in KKR’s capital markets business. | |||||||||||||
Noncontrolling Interests held by KKR Holdings | ||||||||||||||
Noncontrolling interests held by KKR Holdings include economic interests held by KKR’s principals in the KKR Group Partnerships. KKR’s principals receive financial benefits from KKR’s business in the form of distributions received from KKR Holdings and through their direct and indirect participation in the value of KKR Group Partnership Units held by KKR Holdings. These financial benefits are not paid by KKR and are borne by KKR Holdings. | ||||||||||||||
The following table presents the calculation of noncontrolling interests held by KKR Holdings: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Balance at the beginning of the period | $ | 4,699,114 | $ | 4,795,697 | $ | 4,981,864 | $ | 4,342,157 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings (a) | 300,169 | 249,460 | 662,387 | 946,484 | ||||||||||
Other comprehensive income (loss), net of tax (b) | (96 | ) | 3,396 | (4,846 | ) | (797 | ) | |||||||
Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units (c) | (84,838 | ) | (31,203 | ) | (328,481 | ) | (138,119 | ) | ||||||
Equity based compensation | 53,988 | 104,792 | 162,602 | 282,358 | ||||||||||
Capital contributions | 600 | 437 | 1,399 | 1,658 | ||||||||||
Capital distributions | (172,719 | ) | (78,106 | ) | (678,707 | ) | (389,268 | ) | ||||||
Balance at the end of the period | $ | 4,796,218 | $ | 5,044,473 | $ | 4,796,218 | $ | 5,044,473 | ||||||
(a) Refer to the table below for calculation of Net income (loss) attributable to noncontrolling interests held by KKR Holdings. | ||||||||||||||
(b) Calculated on a pro rata basis based on the weighted average KKR Group Partnership Units held by KKR Holdings during the reporting period. | ||||||||||||||
(c) Calculated based on the proportion of KKR Holdings units exchanged for KKR & Co. L.P. common units pursuant to the exchange agreement during the reporting period. The exchange agreement provides for the exchange of KKR Group Partnership Units held by KKR Holdings for KKR & Co. L.P. common units. | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. after allocation to noncontrolling interests held by KKR Holdings, with the exception of certain tax assets and liabilities that are directly allocable to KKR Management Holdings Corp., is attributed based on the percentage of the weighted average KKR Group Partnership Units held by KKR and KKR Holdings, each of which hold equity of the KKR Group Partnerships. However, primarily because of the (i) contribution of certain expenses borne entirely by KKR Holdings, (ii) the periodic exchange of KKR Holdings units for KKR & Co. L.P. common units pursuant to the exchange agreement and (iii) the contribution of certain expenses borne entirely by KKR associated with the KKR & Co. L.P. 2010 Equity Plan (“Equity Incentive Plan”), equity allocations shown in the condensed consolidated statement of changes in equity differ from their respective pro-rata ownership interests in KKR’s net assets. | ||||||||||||||
The following table presents Net income (loss) attributable to noncontrolling interests held by KKR Holdings: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Net income (loss) | $ | 2,198,154 | $ | 2,102,786 | $ | 4,573,598 | $ | 6,579,904 | ||||||
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | 9,169 | 9,994 | 25,992 | 18,551 | ||||||||||
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities | 1,684,076 | 1,715,921 | 3,471,906 | 5,150,761 | ||||||||||
Plus: Income taxes attributable to KKR Management Holdings Corp. | 3,020 | 7,070 | 12,894 | 28,187 | ||||||||||
Net income (loss) attributable to KKR & Co. L.P. and KKR Holdings | $ | 507,929 | $ | 383,941 | $ | 1,088,594 | $ | 1,438,779 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | $ | 300,169 | $ | 249,460 | $ | 662,387 | $ | 946,484 | ||||||
Investments | ' | |||||||||||||
Investments | ||||||||||||||
Investments consist primarily of private equity, real assets, fixed income, equity method and other investments. Investments are carried at their estimated fair values, with unrealized gains or losses resulting from changes in fair value reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Investments denominated in currencies other than the U.S. dollar are valued based on the spot rate of the respective currency at the end of the reporting period with changes related to exchange rate movements reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Security and loan transactions are recorded on a trade date basis. Further disclosure on investments is presented in Note 4, “Investments.” | ||||||||||||||
The following describes the types of securities held within each investment class. | ||||||||||||||
Private Equity - Consists primarily of investments in companies with operating businesses. | ||||||||||||||
Real Assets - Consists primarily of investments in (i) oil and natural gas properties (“natural resources”), (ii) infrastructure assets, and (iii) residential and commercial real estate assets and businesses (“real estate”). | ||||||||||||||
Fixed Income - Consists primarily of investments in below investment grade corporate debt securities (primarily high yield bonds and syndicated bank loans), distressed and opportunistic debt and interests in collateralized loan obligations. | ||||||||||||||
Equity Method - Consists primarily of investments in unconsolidated investment funds and vehicles that are accounted for using the equity method of accounting. Under the equity method of accounting, KKR’s share of earnings (losses) from equity method investments is reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Because the underlying investments of unconsolidated investment funds and vehicles are reported at fair value, the carrying value of KKR’s equity method investments approximates fair value. | ||||||||||||||
Other - Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets or fixed income investments. | ||||||||||||||
Fair Value Measurements | ' | |||||||||||||
Fair Value Measurements | ||||||||||||||
Investments and other financial instruments are measured and carried at fair value. The majority of investments and other financial instruments are held by the consolidated funds and vehicles. KKR’s funds and vehicles are, for GAAP purposes, investment companies and reflect their investments and other financial instruments at fair value. KKR has retained the specialized accounting for the consolidated funds and vehicles in consolidation. Accordingly, the unrealized gains and losses resulting from changes in fair value of the investments held by KKR’s funds and vehicles are reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. | ||||||||||||||
For investments and other financial instruments that are not held in a consolidated fund or vehicle, KKR has elected the fair value option since these investments and other financial instruments are similar to those in the consolidated funds and vehicles. Such election is irrevocable and is applied on an investment by investment basis at initial recognition. Unrealized gains and losses resulting from changes in fair value are reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. The methodology for measuring the fair value of such investments and other financial instruments is consistent with the methodologies applied to investments and other financial instruments that are held in consolidated funds and vehicles. | ||||||||||||||
The carrying amounts of Other Assets, Accounts Payable, Accrued Expenses and Other Liabilities recognized on the statements of financial condition (excluding Fixed Assets, Goodwill, Intangible Assets, contingent consideration and certain debt obligations) approximate fair value due to their short term maturities. Further information on Fixed Assets is presented in Note 7, “Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities”. Further information on Goodwill and Intangible Assets is presented in Note 14 “Goodwill and Intangible Assets.” Further information on contingent consideration is presented in Note 13 “Acquisitions.” KKR’s debt obligations, except for KKR’s 2020 and 2043 Senior Notes, bear interest at floating rates and therefore fair value approximates carrying value. Further information on KKR’s 2020 and 2043 Senior Notes are presented in Note 8, “Debt Obligations.” The fair value for KKR’s 2020 and 2043 Senior Notes were derived using Level II inputs similar to those utilized in valuing fixed income investments. | ||||||||||||||
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation techniques are applied. These valuation techniques involve varying levels of management estimation and judgment, the degree of which is dependent on a variety of factors. See Note 5, “Fair Value Measurements” for further information on KKR’s valuation techniques that involve unobservable inputs. Assets and liabilities recorded at fair value in the statements of financial condition are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined under GAAP, are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets and liabilities. The hierarchical levels defined under GAAP are as follows: | ||||||||||||||
Level I | ||||||||||||||
Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The type of investments and other financial instruments included in this category are publicly-listed equities and debt and securities sold short. | ||||||||||||||
Level II | ||||||||||||||
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level II inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability. The type of investments and other financial instruments included in this category are fixed income investments, convertible debt securities indexed to publicly-listed securities, and certain over-the-counter derivatives. | ||||||||||||||
Level III | ||||||||||||||
Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The types of assets and liabilities generally included in this category are private portfolio companies, real assets investments and fixed income investments for which a sufficiently liquid trading market does not exist. | ||||||||||||||
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. KKR’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset. | ||||||||||||||
A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representative of fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value. | ||||||||||||||
The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, and current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by KKR in determining fair value is greatest for instruments categorized in Level III. The variability and availability of the observable inputs affected by the factors described above may cause transfers between Levels I, II, and III, which KKR recognizes at the beginning of the reporting period. | ||||||||||||||
Investments and other financial instruments that have readily observable market prices (such as those traded on a securities exchange) are stated at the last quoted sales price as of the reporting date. KKR does not adjust the quoted price for these investments, even in situations where KKR holds a large position and a sale could reasonably affect the quoted price. | ||||||||||||||
Level II Valuation Methodologies | ||||||||||||||
Financial assets and liabilities categorized as Level II consist primarily of securities indexed to publicly-listed securities and fixed income and other investments. Fixed income investments generally have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that KKR and others are willing to pay for an asset. Ask prices represent the lowest price that KKR and others are willing to accept for an asset. For financial assets and liabilities whose inputs are based on bid-ask prices obtained from third party pricing services, fair value may not always be a predetermined point in the bid-ask range. KKR’s policy is generally to allow for mid-market pricing and adjusting to the point within the bid-ask range that meets KKR’s best estimate of fair value. For securities indexed to publicly listed securities, such as convertible debt, the securities are typically valued using standard convertible security pricing models. The key inputs into these models that require some amount of judgment are the credit spreads utilized and the volatility assumed. To the extent the company being valued has other outstanding debt securities that are publicly-traded, the implied credit spread on the company’s other outstanding debt securities would be utilized in the valuation. To the extent the company being valued does not have other outstanding debt securities that are publicly-traded, the credit spread will be estimated based on the implied credit spreads observed in comparable publicly-traded debt securities. In certain cases, an additional spread will be added to reflect an illiquidity discount due to the fact that the security being valued is not publicly-traded. The volatility assumption is based upon the historically observed volatility of the underlying equity security into which the convertible debt security is convertible and/or the volatility implied by the prices of options on the underlying equity security. | ||||||||||||||
Level III Valuation Methodologies | ||||||||||||||
Financial assets and liabilities categorized as Level III consist primarily of the following: | ||||||||||||||
Private Equity Investments: KKR generally employs two valuation methodologies when determining the fair value of a private equity investment. The first methodology is typically a market comparables analysis that considers key financial inputs and recent public and private transactions and other available measures. The second methodology utilized is typically a discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputs used in this methodology include the weighted average cost of capital for the investment and assumed inputs used to calculate terminal values, such as exit EBITDA multiples. Other inputs are also used. | ||||||||||||||
Upon completion of the valuations conducted using these methodologies, a weighting is ascribed to each method, and an illiquidity discount is typically applied where appropriate. The ultimate fair value recorded for a particular investment will generally be within a range suggested by the two methodologies. | ||||||||||||||
When determining the weighting ascribed to each valuation methodology, KKR considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among investments in the portfolio and in certain instances may result in up to a 100% weighting to a single methodology. Across the Level III private equity investment portfolio, approximately 93% of the fair value is derived from investments that are valued based exactly 50% on market comparables and 50% on a discounted cash flow analysis. Less than 5% of the fair value of the Level III private equity investment portfolio is derived from investments that are valued either based 100% on market comparables or 100% on a discounted cash flow analysis. | ||||||||||||||
When determining the illiquidity discount to be applied, KKR seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments. KKR then evaluates such private equity investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include (i) whether KKR is unable to sell the portfolio company or conduct an initial public offering of the portfolio company due to the consent rights of a third party or similar factors, (ii) whether the portfolio company is undergoing significant restructuring activity or similar factors and (iii) characteristics about the portfolio company regarding its size and/or whether the portfolio company is experiencing, or expected to experience, a significant decline in earnings. These factors generally make it less likely that a portfolio company would be sold or publicly offered in the near term at a price indicated by using just a market multiples and/or discounted cash flow analysis, and these factors tend to reduce the number of opportunities to sell an investment and/or increase the time horizon over which an investment may be monetized. Depending on the applicability of these factors, KKR determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time KKR holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by KKR in its valuations. | ||||||||||||||
Real Assets Investments: For natural resources and infrastructure investments, KKR generally utilizes a discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputs used in this methodology include the weighted average cost of capital for the investment and assumed inputs used to calculate terminal values, such as exit EBITDA multiples. For real estate investments, KKR generally utilizes a combination of direct income capitalization and discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputs used in these methodologies include an unlevered discount rate and terminal capitalization rate. The valuations of real assets investments also use other inputs. Certain investments in real estate and natural resources generally do not include a minimum illiquidity discount. | ||||||||||||||
Fixed Income Investments: Fixed income investments are valued using values obtained from dealers or market makers, and where these values are not available, fixed income investments are valued by KKR using internally developed valuation models. Valuation models are based on discounted cash flow analyses, for which the key inputs are determined based on market comparables, which incorporate similar instruments from similar issuers. | ||||||||||||||
Other Investments: KKR generally employs the same valuation methodologies as described above for private equity investments when valuing these other investments. | ||||||||||||||
Key unobservable inputs that have a significant impact on KKR’s Level III investment valuations as described above are included in Note 5 “Fair Value Measurements.” KKR utilizes several unobservable pricing inputs and assumptions in determining the fair value of its Level III investments. These unobservable pricing inputs and assumptions may differ by investment and in the application of KKR’s valuation methodologies. KKR’s reported fair value estimates could vary materially if KKR had chosen to incorporate different unobservable pricing inputs and other assumptions or, for applicable investments, if KKR only used either the discounted cash flow methodology or the market comparables methodology instead of assigning a weighting to both methodologies. | ||||||||||||||
Level III Valuation Process | ||||||||||||||
The valuation process involved for Level III measurements for private equity, real assets, fixed income, and other investments is completed on a quarterly basis and is designed to subject the valuation of Level III investments to an appropriate level of consistency, oversight, and review. KKR has a Private Markets valuation committee for private equity and real assets investments and a valuation committee for fixed income and other investments. The Private Markets valuation committee may be assisted by subcommittees for example in the valuation of real estate investments. Each of the Private Markets valuation committee and the fixed income valuation committee is assisted by a valuation team, which, except as noted below, is comprised only of employees who are not investment professionals responsible for preparing preliminary valuations or for oversight of any of the investments being valued. The valuation teams for natural resources, infrastructure and real estate investments contain investment professionals who participate in the preparation of preliminary valuations and oversight for those investments. The valuation committees and teams are responsible for coordinating and consistently implementing KKR’s quarterly valuation policies, guidelines and processes. For investments classified as Level III, investment professionals prepare preliminary valuations based on their evaluation of financial and operating data, company specific developments, market valuations of comparable companies and other factors. These preliminary valuations are reviewed with the investment professionals by the applicable valuation team and are also reviewed by an independent valuation firm engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR’s valuations for all Level III investments, except for certain investments other than KKR private equity investments. All preliminary valuations are then reviewed by the applicable valuation committee, and after reflecting any input by their respective valuation committees, the preliminary valuations are presented to a single committee consisting of Senior Principals involved in various aspects of the KKR business. When these valuations are approved by this committee after reflecting any input from it, the valuations of Level III investments, as well as the valuations of Level I and Level II investments, are presented to the audit committee of KKR’s board of directors and are then reported on to the board of directors. | ||||||||||||||
Derivatives | ' | |||||||||||||
Derivatives | ||||||||||||||
Derivative contracts include forward, swap and option contracts related to foreign currencies and credit standing of reference entities to manage foreign exchange risk and credit risk arising from certain assets and liabilities. All derivatives are recognized in Other Assets or Accounts Payable, Accrued Expenses and Other Liabilities and are presented gross in the condensed consolidated statements of financial condition and measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. KKR’s derivative financial instruments contain credit risk to the extent that its counterparties may be unable to meet the terms of the agreements. KKR attempts to minimize this risk by limiting its counterparties to major financial institutions with strong credit ratings. | ||||||||||||||
Fees | ' | |||||||||||||
Fees | ||||||||||||||
Fees consist primarily of (i) monitoring fees from providing services to portfolio companies, (ii) consulting and other fees earned by consolidated entities from providing advisory and other services, (iii) management and incentive fees from providing investment management services to unconsolidated funds, a specialty finance company, structured finance and other vehicles, and separately managed accounts, and (iv) transaction fees earned in connection with successful investment transactions and from capital markets activities. These fees are based on the contractual terms of the governing agreements and are recognized when earned, which coincides with the period during which the related services are performed. | ||||||||||||||
For the three and nine months ended September 30, 2013 and 2012, fees consisted of the following: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Transaction Fees | $ | 105,387 | $ | 74,168 | $ | 202,107 | $ | 161,290 | ||||||
Management Fees | 45,787 | 21,070 | 130,402 | 61,841 | ||||||||||
Monitoring Fees | 43,155 | 38,752 | 119,571 | 100,946 | ||||||||||
Consulting and Other Fees | 25,261 | 10,396 | 50,873 | 35,249 | ||||||||||
Incentive Fees | 438 | 17,768 | 34,691 | 31,495 | ||||||||||
Total Fees | $ | 220,028 | $ | 162,154 | $ | 537,644 | $ | 390,821 | ||||||
Substantially all fees presented in the table above are earned from affiliates. | ||||||||||||||
Recently Issued Accounting Pronouncements | ' | |||||||||||||
Recently Issued Accounting Pronouncements | ||||||||||||||
Disclosures About Offsetting Assets and Liabilities | ||||||||||||||
In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-11, “Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”), which requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments. In February 2013, the FASB issued ASU 2013-01, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements established by ASU 2011-11. ASU 2011-11 was effective for KKR’s fiscal year beginning January 1, 2013 and was applied retrospectively. The adoption of this guidance did not have a material impact on KKR’s financial statements. | ||||||||||||||
Disclosures About Reclassification Adjustments Out of Accumulated Other Comprehensive Income | ||||||||||||||
In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“AOCI”),” which requires entities to disclose additional information about reclassification adjustments, including: (i) changes in AOCI balances by component and (ii) significant items reclassified out of AOCI. ASU 2013-02 was effective for KKR’s fiscal year beginning January 1, 2013. The adoption of this guidance, which is related to disclosure only, did not have a material impact on KKR’s financial statements. With respect to KKR, AOCI is comprised of only one component, foreign currency translation adjustments and for the three and nine months ended September 30, 2013 and 2012, there were no items reclassified out of AOCI. See KKR’s condensed consolidated statements of comprehensive income and changes in equity. | ||||||||||||||
Foreign Currency Matters | ||||||||||||||
In March 2013, the FASB issued ASU 2013-05, “Foreign Currency Matters,” which indicates that the entire amount of a cumulative translation adjustment (“CTA”) related to an entity’s investment in a foreign entity should be released when there has been a (i) sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity, (ii) loss of a controlling financial interest in an investment in a foreign entity, or (iii) step acquisition for a foreign entity. This guidance is effective for KKR’s fiscal year beginning January 1, 2014, and is to be applied prospectively. The adoption of this guidance is not expected to have a material impact on KKR’s financial statements. | ||||||||||||||
Amendments to Investment Company Scope, Measurement, and Disclosures | ||||||||||||||
In June 2013, the FASB issued ASU 2013-08, Financial Services — Investment Companies Topic 946 (“ASU 2013-08”) which amends the scope, measurement, and disclosure requirements for investment companies. ASU 2013-08 (i) amends the criteria for an entity to qualify as an investment company, (ii) requires an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting, and (iii) introduces new disclosures. This guidance is effective for KKR’s fiscal year beginning January 1, 2014. Earlier application is prohibited. The adoption of this guidance is not expected to have a material impact on KKR’s financial results and consolidated financial statements. |
ORGANIZATION_Tables
ORGANIZATION (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
ORGANIZATION | ' | |||||||||||||
Schedule of effect of changes in ownership interest in the KKR Group Partnerships on KKR & Co. L.P.'s equity | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 204,740 | $ | 127,411 | $ | 413,313 | $ | 464,108 | ||||||
Transfers from noncontrolling interests: | ||||||||||||||
Exchange of KKR Group Partnership units held by KKR Holdings L.P. (a) | 87,431 | 31,308 | 337,054 | 139,342 | ||||||||||
Change from net income (loss) attributable to KKR & Co. L.P. and transfers from noncontrolling interests held by KKR Holdings | $ | 292,171 | $ | 158,719 | $ | 750,367 | $ | 603,450 | ||||||
(a) Increase in KKR & Co. L.P. partners’ capital for exchange of 7,216,913 and 2,784,209 for the three months ended September 30, 2013 and 2012, respectively, and 27,809,258 and 13,151,729 for the nine months ended September 30, 2013 and 2012, respectively, KKR Group Partnership units held by KKR Holdings L.P., inclusive of deferred taxes. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||
Schedule of maximum exposure to loss, before allocations to the carry pool for VIEs in which the entity is not determined to be the primary beneficiary | ' | |||||||||||||
September 30, | December 31, | |||||||||||||
2013 | 2012 | |||||||||||||
Investments | $ | 201,197 | $ | 188,408 | ||||||||||
Due from Affiliates, net | 5,209 | 2,266 | ||||||||||||
Maximum Exposure to Loss | $ | 206,406 | $ | 190,674 | ||||||||||
Schedule of calculation of noncontrolling interests held by KKR Holdings | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Balance at the beginning of the period | $ | 4,699,114 | $ | 4,795,697 | $ | 4,981,864 | $ | 4,342,157 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings (a) | 300,169 | 249,460 | 662,387 | 946,484 | ||||||||||
Other comprehensive income (loss), net of tax (b) | (96 | ) | 3,396 | (4,846 | ) | (797 | ) | |||||||
Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units (c) | (84,838 | ) | (31,203 | ) | (328,481 | ) | (138,119 | ) | ||||||
Equity based compensation | 53,988 | 104,792 | 162,602 | 282,358 | ||||||||||
Capital contributions | 600 | 437 | 1,399 | 1,658 | ||||||||||
Capital distributions | (172,719 | ) | (78,106 | ) | (678,707 | ) | (389,268 | ) | ||||||
Balance at the end of the period | $ | 4,796,218 | $ | 5,044,473 | $ | 4,796,218 | $ | 5,044,473 | ||||||
(a) Refer to the table below for calculation of Net income (loss) attributable to noncontrolling interests held by KKR Holdings. | ||||||||||||||
(b) Calculated on a pro rata basis based on the weighted average KKR Group Partnership Units held by KKR Holdings during the reporting period. | ||||||||||||||
(c) Calculated based on the proportion of KKR Holdings units exchanged for KKR & Co. L.P. common units pursuant to the exchange agreement during the reporting period. The exchange agreement provides for the exchange of KKR Group Partnership Units held by KKR Holdings for KKR & Co. L.P. common units. | ||||||||||||||
Schedule of net income (loss) attributable to noncontrolling interests held by KKR Holdings | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Net income (loss) | $ | 2,198,154 | $ | 2,102,786 | $ | 4,573,598 | $ | 6,579,904 | ||||||
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | 9,169 | 9,994 | 25,992 | 18,551 | ||||||||||
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities | 1,684,076 | 1,715,921 | 3,471,906 | 5,150,761 | ||||||||||
Plus: Income taxes attributable to KKR Management Holdings Corp. | 3,020 | 7,070 | 12,894 | 28,187 | ||||||||||
Net income (loss) attributable to KKR & Co. L.P. and KKR Holdings | $ | 507,929 | $ | 383,941 | $ | 1,088,594 | $ | 1,438,779 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | $ | 300,169 | $ | 249,460 | $ | 662,387 | $ | 946,484 | ||||||
Schedule of fees | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Transaction Fees | $ | 105,387 | $ | 74,168 | $ | 202,107 | $ | 161,290 | ||||||
Management Fees | 45,787 | 21,070 | 130,402 | 61,841 | ||||||||||
Monitoring Fees | 43,155 | 38,752 | 119,571 | 100,946 | ||||||||||
Consulting and Other Fees | 25,261 | 10,396 | 50,873 | 35,249 | ||||||||||
Incentive Fees | 438 | 17,768 | 34,691 | 31,495 | ||||||||||
Total Fees | $ | 220,028 | $ | 162,154 | $ | 537,644 | $ | 390,821 |
NET_GAINS_LOSSES_FROM_INVESTME1
NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES (Tables) | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||||||
NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES | ' | |||||||||||||||||||||||||
Schedule of total net gains (losses) from investment activities | ' | |||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | |||||||||||||||||||||||
Net Realized | Net Unrealized | Net Realized | Net Unrealized | Net Realized | Net Unrealized | Net Realized | Net Unrealized | |||||||||||||||||||
Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | Gains (Losses) | |||||||||||||||||||
Private Equity (a) | $ | 692,932 | $ | 1,626,536 | $ | 1,204,668 | $ | 1,301,670 | $ | 2,180,059 | $ | 2,140,102 | $ | 3,066,087 | $ | 4,022,193 | ||||||||||
Fixed Income and Other (a) | 63,032 | 72,901 | 8,694 | 153,260 | 202,623 | 20,638 | 65,780 | 198,803 | ||||||||||||||||||
Real Assets (a) | — | 47,053 | — | (180,288 | ) | 14,855 | 133,610 | 54,419 | (325,545 | ) | ||||||||||||||||
Equity Method (a) | 10,016 | 13,123 | 46,028 | (11,383 | ) | 35,532 | 27,863 | 80,439 | 55,865 | |||||||||||||||||
Foreign Exchange Forward Contracts (b) | (528 | ) | (235,792 | ) | 5,736 | (174,299 | ) | 24,408 | (77,043 | ) | 21,891 | (129,679 | ) | |||||||||||||
Foreign Currency Options (b) | — | (11,636 | ) | — | (2,597 | ) | — | 198 | (10,740 | ) | 3,939 | |||||||||||||||
Securities Sold Short (b) | (29,652 | ) | (16,241 | ) | (21,083 | ) | (3,226 | ) | (71,459 | ) | (14,115 | ) | (26,527 | ) | (6,836 | ) | ||||||||||
Other Derivatives | (2,056 | ) | 1,229 | (11,577 | ) | (2,756 | ) | (20,454 | ) | 4,907 | (10,538 | ) | (4,972 | ) | ||||||||||||
Contingent Carried Interest Repayment Guarantee (c) | — | — | — | — | — | — | — | (55,937 | ) | |||||||||||||||||
Foreign Exchange Gains (Losses) (d) | (2,849 | ) | 2,333 | 248 | (4,482 | ) | (9,176 | ) | 6,207 | 63 | (1,539 | ) | ||||||||||||||
Total Net Gains (Losses) from Investment Activities | $ | 730,895 | $ | 1,499,506 | $ | 1,232,714 | $ | 1,075,899 | $ | 2,356,388 | $ | 2,242,367 | $ | 3,240,874 | $ | 3,756,292 | ||||||||||
(a) See Note 4 “Investments.” | ||||||||||||||||||||||||||
(b) See Note 7 “Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities.” | ||||||||||||||||||||||||||
(c) See Note 15 “Commitments and Contingencies.” | ||||||||||||||||||||||||||
(d) Foreign Exchange Gains (Losses) includes foreign exchange gains (losses) on debt obligations, cash and cash equivalents, and cash and cash equivalents held at consolidated entities. |
INVESTMENTS_Tables
INVESTMENTS (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
INVESTMENTS | ' | |||||||||||||
Summary of investments | ' | |||||||||||||
Fair Value | Cost | |||||||||||||
September 30, 2013 | December 31, 2012 | September 30, 2013 | December 31, 2012 | |||||||||||
Private Equity | $ | 35,268,074 | $ | 34,114,623 | $ | 27,354,669 | $ | 28,336,315 | ||||||
Fixed Income | 4,846,730 | 3,396,067 | 4,732,436 | 3,266,846 | ||||||||||
Real Assets | 2,434,733 | 1,775,683 | 4,388,965 | 3,861,792 | ||||||||||
Equity Method | 533,677 | 200,831 | 325,282 | 20,847 | ||||||||||
Other | 1,179,909 | 1,210,644 | 1,113,136 | 1,161,569 | ||||||||||
Total Investments | $ | 44,263,123 | $ | 40,697,848 | $ | 37,914,488 | $ | 36,647,369 | ||||||
Schedule of information about the private equity investments balance, categorized by industry | ' | |||||||||||||
Fair Value | ||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||
Health Care | $ | 8,509,698 | $ | 7,708,080 | ||||||||||
Technology | 4,770,255 | 4,566,236 | ||||||||||||
Manufacturing | 4,492,445 | 3,240,474 | ||||||||||||
Retail | 4,410,526 | 4,970,092 | ||||||||||||
Other | 13,085,150 | 13,629,741 | ||||||||||||
$ | 35,268,074 | $ | 34,114,623 |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | ||||||||||||||||
Schedule of investments and other financial instruments measured at fair value | ' | ||||||||||||||||
Assets, at fair value: | |||||||||||||||||
September 30, 2013 | |||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | ||||||||||||||
Active Markets for | Observable Inputs | Unobservable Inputs | |||||||||||||||
Identical Assets | (Level II) | (Level III) | |||||||||||||||
(Level I) | |||||||||||||||||
Private Equity | $ | 6,326,503 | $ | 1,830,426 | $ | 27,111,145 | $ | 35,268,074 | |||||||||
Fixed Income | — | 2,990,184 | 1,856,546 | 4,846,730 | |||||||||||||
Real Assets | 21,286 | — | 2,413,447 | 2,434,733 | |||||||||||||
Other | 739,702 | 197,182 | 243,025 | 1,179,909 | |||||||||||||
Total | 7,087,491 | 5,017,792 | 31,624,163 | 43,729,446 | |||||||||||||
Foreign Exchange Forward Contracts | — | 95,526 | — | 95,526 | |||||||||||||
Foreign Currency Options | — | 6,741 | — | 6,741 | |||||||||||||
Other Derivatives | — | 5,160 | — | 5,160 | |||||||||||||
Total Assets | $ | 7,087,491 | $ | 5,125,219 | $ | 31,624,163 | $ | 43,836,873 | |||||||||
December 31, 2012 | |||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | ||||||||||||||
Active Markets for | Observable Inputs | Unobservable Inputs | |||||||||||||||
Identical Assets | (Level II) | (Level III) | |||||||||||||||
(Level I) | |||||||||||||||||
Private Equity | $ | 8,015,680 | $ | 364,543 | $ | 25,734,400 | $ | 34,114,623 | |||||||||
Fixed Income | — | 1,809,021 | 1,587,046 | 3,396,067 | |||||||||||||
Real Assets | — | — | 1,775,683 | 1,775,683 | |||||||||||||
Other | 648,108 | 323,306 | 239,230 | 1,210,644 | |||||||||||||
Total | 8,663,788 | 2,496,870 | 29,336,359 | 40,497,017 | |||||||||||||
Foreign Exchange Forward Contracts | — | 137,786 | — | 137,786 | |||||||||||||
Foreign Currency Options | — | 4,992 | — | 4,992 | |||||||||||||
Other Derivatives | — | 882 | — | 882 | |||||||||||||
Total Assets | $ | 8,663,788 | $ | 2,640,530 | $ | 29,336,359 | $ | 40,640,677 | |||||||||
Liabilities, at fair value: | |||||||||||||||||
September 30, 2013 | |||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | ||||||||||||||
Active Markets for | Observable Inputs | Unobservable | |||||||||||||||
Identical Assets | (Level II) | Inputs | |||||||||||||||
(Level I) | (Level III) | ||||||||||||||||
Securities Sold Short | $ | 564,963 | $ | 47,137 | $ | — | $ | 612,100 | |||||||||
Foreign Currency Options | — | 4,913 | — | 4,913 | |||||||||||||
Foreign Exchange Forward Contracts | — | 264,097 | — | 264,097 | |||||||||||||
Unfunded Revolver Commitments | — | 368 | — | 368 | |||||||||||||
Other Derivatives | — | 5,208 | — | 5,208 | |||||||||||||
Total Liabilities | $ | 564,963 | $ | 321,723 | $ | — | $ | 886,686 | |||||||||
December 31, 2012 | |||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | ||||||||||||||
Active Markets for | Observable Inputs | Unobservable | |||||||||||||||
Identical Assets | (Level II) | Inputs | |||||||||||||||
(Level I) | (Level III) | ||||||||||||||||
Securities Sold Short | $ | 321,977 | $ | 28,376 | $ | — | $ | 350,353 | |||||||||
Foreign Currency Options | — | 3,362 | — | 3,362 | |||||||||||||
Foreign Exchange Forward Contracts | — | 229,314 | — | 229,314 | |||||||||||||
Unfunded Revolver Commitments | — | 2,568 | — | 2,568 | |||||||||||||
Other Derivatives | — | 3,751 | — | 3,751 | |||||||||||||
Total Liabilities | $ | 321,977 | $ | 267,371 | $ | — | $ | 589,348 | |||||||||
Schedule of changes in private equity, fixed income, real assets and other investments measured and reported at fair value for which Level III inputs have been used to determine fair value | ' | ||||||||||||||||
Three Months Ended | |||||||||||||||||
September 30, 2013 | |||||||||||||||||
Private | Fixed | Real Assets | Other | Total Level III | |||||||||||||
Equity | Income | Investments | |||||||||||||||
Balance, Beginning of Period | $ | 25,992,622 | $ | 1,416,016 | $ | 2,198,427 | $ | 184,213 | $ | 29,791,278 | |||||||
Transfers In (1) | — | 44,503 | — | 34,978 | 79,481 | ||||||||||||
Transfers Out (2) | (904,039 | ) | (17,594 | ) | — | (4,040 | ) | (925,673 | ) | ||||||||
Purchases | 1,071,808 | 503,140 | 167,967 | 35,922 | 1,778,837 | ||||||||||||
Sales | (15,945 | ) | (117,103 | ) | — | (5,064 | ) | (138,112 | ) | ||||||||
Settlements | — | 16,002 | — | — | 16,002 | ||||||||||||
Net Realized Gains (Losses) | 15,945 | 2,240 | — | (557 | ) | 17,628 | |||||||||||
Net Unrealized Gains (Losses) | 950,754 | 9,342 | 47,053 | (2,427 | ) | 1,004,722 | |||||||||||
Balance, End of Period | $ | 27,111,145 | $ | 1,856,546 | $ | 2,413,447 | $ | 243,025 | $ | 31,624,163 | |||||||
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date | $ | 966,779 | $ | 9,547 | $ | 47,053 | $ | (2,427 | ) | $ | 1,020,952 | ||||||
Three Months Ended | |||||||||||||||||
September 30, 2012 | |||||||||||||||||
Private | Fixed | Real Assets | Other | Total Level III | |||||||||||||
Equity | Income | Investments | |||||||||||||||
Balance, Beginning of Period | $ | 23,683,081 | $ | 1,136,459 | $ | 1,561,661 | $ | 140,019 | $ | 26,521,220 | |||||||
Transfers In (1) | — | 32,076 | — | — | 32,076 | ||||||||||||
Transfers Out (2) | — | (22,839 | ) | — | — | (22,839 | ) | ||||||||||
Purchases | 395,953 | 319,180 | 215,997 | 30,137 | 961,267 | ||||||||||||
Sales | (2,383,412 | ) | (63,797 | ) | — | (191 | ) | (2,447,400 | ) | ||||||||
Settlements | — | 12,031 | — | — | 12,031 | ||||||||||||
Net Realized Gains (Losses) | 1,204,668 | 2,075 | — | (1,081 | ) | 1,205,662 | |||||||||||
Net Unrealized Gains (Losses) | 845,128 | 40,040 | (180,268 | ) | 12,847 | 717,747 | |||||||||||
Balance, End of Period | $ | 23,745,418 | $ | 1,455,225 | $ | 1,597,390 | $ | 181,731 | $ | 26,979,764 | |||||||
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date | $ | 1,806,675 | $ | 42,141 | $ | (180,268 | ) | $ | 12,847 | $ | 1,681,395 | ||||||
(1) The Transfers In noted in the tables above for fixed income and other investments are principally attributable to certain investments that experienced an insignificant level of market activity during the period and thus were valued in the absence of observable inputs. | |||||||||||||||||
(2) The Transfers Out noted in the tables above for private equity investments are attributable to portfolio companies that are now valued using their publicly traded market price. The Transfers Out noted above for fixed income and other investments are principally attributable to certain investments that experienced a higher level of market activity during the period and thus were valued using observable inputs. | |||||||||||||||||
Nine Months Ended | |||||||||||||||||
September 30, 2013 | |||||||||||||||||
Private | Fixed | Real Assets | Other | Total Level III | |||||||||||||
Equity | Income | Investments | |||||||||||||||
Balance, Beginning of Period | $ | 25,734,400 | $ | 1,587,046 | $ | 1,775,683 | $ | 239,230 | $ | 29,336,359 | |||||||
Transfers In (1) | — | 53,439 | — | 34,978 | 88,417 | ||||||||||||
Transfers Out (2) | (1,819,651 | ) | (252,323 | ) | — | (23,304 | ) | (2,095,278 | ) | ||||||||
Purchases | 2,346,126 | 954,462 | 545,424 | 46,574 | 3,892,586 | ||||||||||||
Sales | (1,042,698 | ) | (534,852 | ) | (56,275 | ) | (59,730 | ) | (1,693,555 | ) | |||||||
Settlements | — | 59,043 | — | — | 59,043 | ||||||||||||
Net Realized Gains (Losses) | 649,534 | (2,683 | ) | 14,930 | 1,797 | 663,578 | |||||||||||
Net Unrealized Gains (Losses) | 1,243,434 | (7,586 | ) | 133,685 | 3,480 | 1,373,013 | |||||||||||
Balance, End of Period | $ | 27,111,145 | $ | 1,856,546 | $ | 2,413,447 | $ | 243,025 | $ | 31,624,163 | |||||||
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date | $ | 1,817,352 | $ | 980 | $ | 169,051 | $ | 3,480 | $ | 1,990,863 | |||||||
Nine Months Ended | |||||||||||||||||
September 30, 2012 | |||||||||||||||||
Private | Fixed | Real Assets | Other | Total Level III | |||||||||||||
Equity | Income | Investments | |||||||||||||||
Balance, Beginning of Period | $ | 20,384,253 | $ | 1,016,759 | $ | 1,526,732 | $ | 96,179 | $ | 23,023,923 | |||||||
Transfers In (1) | — | 32,387 | — | 1,061 | 33,448 | ||||||||||||
Transfers Out (2) | — | (35,466 | ) | — | (613 | ) | (36,079 | ) | |||||||||
Purchases | 1,011,162 | 538,043 | 396,184 | 46,363 | 1,991,752 | ||||||||||||
Sales | (2,630,914 | ) | (146,288 | ) | (54,419 | ) | (2,852 | ) | (2,834,473 | ) | |||||||
Settlements | — | 13,439 | — | — | 13,439 | ||||||||||||
Net Realized Gains (Losses) | 1,318,993 | 10,326 | 54,419 | 98 | 1,383,836 | ||||||||||||
Net Unrealized Gains (Losses) | 3,661,924 | 26,025 | (325,526 | ) | 41,495 | 3,403,918 | |||||||||||
Balance, End of Period | $ | 23,745,418 | $ | 1,455,225 | $ | 1,597,390 | $ | 181,731 | $ | 26,979,764 | |||||||
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date | $ | 4,740,397 | $ | 32,058 | $ | (284,410 | ) | $ | 41,711 | $ | 4,529,756 | ||||||
(1) The Transfers In noted in the tables above for fixed income and other investments are principally attributable to certain investments that experienced an insignificant level of market activity during the period and thus were valued in the absence of observable inputs. | |||||||||||||||||
(2) The Transfers Out noted in the tables above for private equity investments are attributable to portfolio companies that are now valued using their publicly traded market price. The Transfers Out noted above for fixed income and other investments are principally attributable to certain investments that experienced a higher level of market activity during the period and thus were valued using observable inputs. | |||||||||||||||||
Summary of valuation methodologies used for assets, measured at fair value and categorized within Level III | ' | ||||||||||||||||
Impact to Valuation | |||||||||||||||||
Fair Value | Valuation | Weighted | from an | ||||||||||||||
September 30, 2013 | Methodologies | Unobservable Input(s) (1) | Average (2) | Range | Increase in Input (3) | ||||||||||||
Private Equity Investments | $ | 27,111,145 | |||||||||||||||
Healthcare | $ | 6,040,325 | Inputs to both market comparable | Illiquidity Discount | 7 | % | 5% - 15% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 50% - 50% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 50% - 50% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 10x | 9x - 12x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 9x - 11x | Increase | ||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 9 | % | 8% - 13% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 11x | 9x - 12x | Increase | ||||||||||||||
Retail | $ | 4,256,587 | Inputs to both market comparable | Illiquidity Discount | 8 | % | 5% - 20% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 0% - 50% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 50% - 100% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 10x | 7x - 12x (6) | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 9x | 7x - 10x (6) | Increase | ||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 11 | % | 8% - 27% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 8x | 6x - 9x | Increase | ||||||||||||||
Technology | $ | 3,490,811 | Inputs to both market comparable | Illiquidity Discount | 10 | % | 5% - 15% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 50% - 50% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 50% - 50% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 11x | 5x - 13x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 4x - 12x | Increase | ||||||||||||||
Control Premium | 2 | % | 0% - 20% (7) | Increase | |||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 11 | % | 8% - 14% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 6x - 10x | Increase | ||||||||||||||
Manufacturing | $ | 3,488,553 | Inputs to both market comparable | Illiquidity Discount | 9 | % | 5% - 15% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 46 | % | 33% - 67% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 54 | % | 33% - 67% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 6x - 14x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 6x - 12x | Increase | ||||||||||||||
Control Premium | 2 | % | 0% - 20% (7) | Increase | |||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 13 | % | 9% - 19% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 6x - 11x | Increase | ||||||||||||||
Consumer Products | $ | 3,339,902 | Inputs to both market comparable | Illiquidity Discount | 11 | % | 10% - 15% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 50% - 50% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 50% - 50% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 11x | 8x - 17x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 7x - 14x | Increase | ||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 10 | % | 8% - 18% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 6x - 11x | Increase | ||||||||||||||
Other | $ | 6,494,967 | Inputs to both market comparable | Illiquidity Discount | 11 | % | 10% - 20% | Decrease | |||||||||
and discounted cash flow | Weight Ascribed to Market Comparables | 50 | % | 0% - 100% | -4 | ||||||||||||
Weight Ascribed to Discounted Cash Flow | 50 | % | 0% - 100% | -5 | |||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 6x - 16x | Increase | |||||||||||||
Enterprise Value/Forward EBITDA Multiple | 11x | 6x - 13x | Increase | ||||||||||||||
Control Premium | 2 | % | 0% - 20% (7) | Increase | |||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 11 | % | 9% - 20% | Decrease | ||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 5x - 12x | Increase | ||||||||||||||
Real Assets | $ | 2,413,447 | |||||||||||||||
Natural Resources/Infrastructure | $ | 1,965,734 | Discounted cash flow | Weighted Average Cost of Capital | 11 | % | 6% - 21% | Decrease | |||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 8x | 7x - 11x | Increase | ||||||||||||||
Real Estate | $ | 447,713 | Inputs to direct income capitalization | Weight Ascribed to Direct Income Capitalization | 18 | % | 0% - 50% | -9 | |||||||||
and discounted cash flow | Weight Ascribed to Discounted Cash Flow | 82 | % | 50% - 100% | -5 | ||||||||||||
Direct Income Capitalization | Current Capitalization Rate | 7 | % | 6% - 8% | Decrease | ||||||||||||
Discounted cash flow | Unlevered Discount Rate | 12 | % | 9% - 23% | Decrease | ||||||||||||
Fixed Income Investments | $ | 1,856,546 | -8 | Yield Analysis | Discount Margin | 1407 | bps | 640 - 1471 bps | Decrease | ||||||||
Yield | 12 | % | 8% - 24% | Decrease | |||||||||||||
Net Leverage | 5x | 1x - 15x | Decrease | ||||||||||||||
Illiquidity Discount | 8 | % | 5% - 10% | Decrease | |||||||||||||
In the table above, other investments, within private equity investments, represents the following industries: Education, Financial Services, Forestry, Media, Services, Telecommunications, Transportation and Recycling. None of these industries represents more than 10% of total Level III private equity investments as of September 30, 2013. | |||||||||||||||||
(1) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputs into account when valuing the investments. LTM means Last Twelve Months and EBITDA means Earnings Before Interest Taxes Depreciation and Amortization. | |||||||||||||||||
(2) Inputs were weighted based on the fair value of the investments included in the range. | |||||||||||||||||
(3) Unless otherwise noted, this column represents the directional change in the fair value of the Level III investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements. | |||||||||||||||||
(4) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level III investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach. | |||||||||||||||||
(5) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level III investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach. | |||||||||||||||||
(6) Ranges shown exclude inputs relating to a single portfolio company that was determined to lack comparability with other investments in KKR’s private equity portfolio. This portfolio company had a fair value representing less than 0.5% of the total fair value of Private Equity Investments and had an Enterprise Value/LTM EBITDA Multiple and Enterprise Value/Forward EBITDA Multiple of 24x and 18x, respectively. The exclusion of this investment does not impact the weighted average. | |||||||||||||||||
(7) Level III private equity investments whose valuations include a control premium represent less than 5% of total Level III private equity investments. The valuations for the remaining investments do not include a control premium. | |||||||||||||||||
(8) Amounts include $529.7 million of investments that were valued using dealer quotes or third party valuation firms. | |||||||||||||||||
(9) The directional change from an increase in the weight ascribed to the direct income capitalization approach would increase the fair value of the Level III investments if the direct income capitalization approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the direct income capitalization approach results in a lower valuation than the discounted cash flow approach. |
NET_INCOME_LOSS_ATTRIBUTABLE_T1
NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (Tables) | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT | ' | |||||||||||||||||||||||||
Schedule of basic and diluted Net Income (Loss) attributable to KKR & Co. earnings per common unit | ' | |||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | |||||||||||||||||||||||
Basic | Diluted | Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. | $ | 204,740 | $ | 204,740 | $ | 127,411 | $ | 127,411 | $ | 413,313 | $ | 413,313 | $ | 464,108 | $ | 464,108 | ||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit | $ | 0.73 | $ | 0.66 | $ | 0.53 | $ | 0.49 | $ | 1.53 | $ | 1.4 | $ | 1.98 | $ | 1.86 | ||||||||||
Weighted-Average Common Units Outstanding | 282,148,802 | 308,135,191 | 239,696,358 | 257,646,622 | 270,484,224 | 296,181,070 | 234,876,879 | 249,359,200 |
OTHER_ASSETS_AND_ACCOUNTS_PAYA1
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES | ' | |||||||
Schedule of other assets | ' | |||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Due from Broker (a) | $ | 572,551 | $ | 189,202 | ||||
Interest and Notes Receivable (b) | 410,786 | 469,456 | ||||||
Unsettled Investment Sales (c) | 267,397 | 90,666 | ||||||
Intangible Assets, net (d) | 182,529 | 197,484 | ||||||
Deferred Tax Assets, net | 172,680 | 105,654 | ||||||
Oil & Gas Assets, net | 151,526 | — | ||||||
Foreign Exchange Forward Contracts (e) | 95,526 | 137,786 | ||||||
Goodwill (f) | 89,000 | 89,000 | ||||||
Fixed Assets, net (g) | 77,842 | 79,570 | ||||||
Receivables | 31,457 | 267,126 | ||||||
Deferred Financing Costs | 23,179 | 20,918 | ||||||
Prepaid Taxes | 20,595 | 706 | ||||||
Deferred Transaction Costs | 18,540 | 14,633 | ||||||
Prepaid Expenses | 11,279 | 11,373 | ||||||
Refundable Security Deposits | 7,046 | 7,428 | ||||||
Foreign Currency Options (h) | 6,741 | 4,992 | ||||||
Other | 29,925 | 15,061 | ||||||
$ | 2,168,599 | $ | 1,701,055 | |||||
(a) Represents amounts held at clearing brokers resulting from securities transactions. | ||||||||
(b) Represents interest receivable and promissory notes due from third parties. The promissory notes bear interest at rates ranging from 1.5% - 3.0% per annum and mature between 2015 and 2016. | ||||||||
(c) Represents amounts due from third parties for investments sold for which cash settlement has not occurred. | ||||||||
(d) Net of accumulated amortization of $36,357 and $21,402 as of September 30, 2013 and December 31, 2012, respectively. Amortization expense totaled $4,985 and $947 for the three months ended September 30, 2013 and 2012, respectively, and $14,955 and $2,841 for the nine months ended September 30, 2013 and 2012, respectively. | ||||||||
(e) Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign denominated investments. Such instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. | ||||||||
(f) See Note 14 “Goodwill and Intangible Assets.” | ||||||||
(g) Net of accumulated depreciation and amortization of $102,995 and $92,467 as of September 30, 2013 and December 31, 2012, respectively. Depreciation and amortization expense totaled $3,619 and $3,157 for the three months ended September 30, 2013 and 2012, respectively, and $11,042 and $8,987 for the nine months ended September 30, 2013 and 2012, respectively. | ||||||||
(h) Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign denominated investments. The instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. The cost bases for these instruments at September 30, 2013 and December 31, 2012 was $2,332. | ||||||||
Schedule of accounts payable, accrued expenses and other liabilities | ' | |||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Amounts Payable to Carry Pool (a) | $ | 927,082 | $ | 776,750 | ||||
Securities Sold Short (b) | 612,100 | 350,353 | ||||||
Foreign Exchange Forward Contracts (c) | 264,097 | 229,314 | ||||||
Unsettled Investment Purchases (d) | 227,191 | 172,583 | ||||||
Accounts Payable and Accrued Expenses | 156,493 | 97,389 | ||||||
Accrued Compensation and Benefits | 154,249 | 17,265 | ||||||
Contingent Consideration Obligation (e) | 93,400 | 71,300 | ||||||
Due to Broker (f) | 39,601 | 49,204 | ||||||
Deferred Rent and Income | 28,247 | 19,228 | ||||||
Interest Payable | 8,189 | 11,746 | ||||||
Foreign Currency Options (g) | 4,913 | 3,362 | ||||||
Taxes Payable | 3,965 | 9,250 | ||||||
Other Liabilities | 8,349 | 16,911 | ||||||
$ | 2,527,876 | $ | 1,824,655 | |||||
(a) Represents the amount of carried interest payable to KKR’s principals, professionals and other individuals with respect to KKR’s active funds and co-investment vehicles that provide for carried interest. | ||||||||
(b) Represents the obligations of KKR to deliver a specified security at a future point in time. Such securities are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. The cost bases for these instruments at September 30, 2013 and December 31, 2012 were $591,072 and $343,440, respectively. | ||||||||
(c) Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign denominated investments. Such instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. | ||||||||
(d) Represents amounts owed to third parties for investment purchases for which cash settlement has not occurred. | ||||||||
(e) See Note 13 “Acquisitions.” | ||||||||
(f) Represents amounts owed for securities transactions initiated at clearing brokers. | ||||||||
(g) Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign denominated investments. The instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments. The cost bases for these instruments at September 30, 2013 and December 31, 2012 was $0. |
DEBT_OBLIGATIONS_Tables
DEBT OBLIGATIONS (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
DEBT OBLIGATIONS | ' | |||||||||||||
Schedule of debt obligations | ' | |||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||
Carrying Value | Fair Value (a) | Carrying Value | Fair Value (a) | |||||||||||
Senior Notes | ||||||||||||||
2020 Senior Notes - KKR Issued 6.375% Notes Due 9/29/2020, $500 Million Principal Amount | $ | 498,544 | $ | 575,000 | $ | 498,388 | $ | 579,200 | ||||||
2043 Senior Notes - KKR Issued 5.500% Notes Due 2/1/2043, $500 Million Principal Amount | 494,407 | 422,550 | — | — | ||||||||||
$ | 992,951 | $ | 997,550 | $ | 498,388 | $ | 579,200 | |||||||
(a) Fair value is determined by third party broker quotes and these notes are classified as Level II within the fair value hierarchy. | ||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||
Outstanding | Available | Outstanding | Available | |||||||||||
Investment Financing Arrangements (a) | ||||||||||||||
Investment Financing Arrangements (b) (c) | $ | 1,034,165 | $ | 353,640 | $ | 625,026 | $ | 377,055 | ||||||
(a) Certain of KKR’s investment vehicles have entered into financing arrangements with major financial institutions, generally in connection with specific investments with the objective of enhancing returns or to provide liquidity to such vehicles. These financing arrangements are generally not direct obligations of the general partners of KKR’s investment vehicles or its management companies. | ||||||||||||||
(b) Weighted average interest rate is 2.80% and 3.09% as of September 30, 2013 and December 31, 2012. | ||||||||||||||
(c) Weighted average years to maturity is 2.0 years and 3.2 years as of September 30, 2013 and December 31, 2012. | ||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||
Outstanding | Available | Outstanding | Available | |||||||||||
Revolving Credit Arrangements | ||||||||||||||
Revolving Credit Arrangements | $ | — | $ | 1,250,000 | $ | — | $ | 1,250,000 | ||||||
EQUITY_BASED_COMPENSATION_Tabl
EQUITY BASED COMPENSATION (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
EQUITY BASED COMPENSATION | ' | |||||||||||||
Schedule of expense associated with equity based compensation | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
KKR Holdings Principal Awards | $ | 33,740 | $ | 68,309 | $ | 85,309 | $ | 202,977 | ||||||
KKR Holdings Restricted Equity Units | 765 | 4,346 | 3,173 | 8,650 | ||||||||||
Equity Incentive Plan Units | 31,227 | 17,366 | 84,581 | 47,678 | ||||||||||
Discretionary Compensation | 19,483 | 32,136 | 74,120 | 70,732 | ||||||||||
Total | $ | 85,215 | $ | 122,157 | $ | 247,183 | $ | 330,037 | ||||||
Schedule of KKR Holdings awards granted to principals and certain non-employee consultant and service providers | ' | |||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2013 | 64,569,667 | $ | 7.42 | |||||||||||
Granted | 1,761,382 | 12.07 | ||||||||||||
Vested | (1,302,727 | ) | 11.5 | |||||||||||
Forfeited | (2,809,918 | ) | 7.18 | |||||||||||
Balance, September 30, 2013 | 62,218,404 | $ | 7.48 | |||||||||||
Schedule of remaining vesting tranches for principals and certain non-employee consultant and service providers | ' | |||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2013 | 27,928,684 | |||||||||||||
April 1, 2014 | 1,244,528 | |||||||||||||
October 1, 2014 | 27,959,323 | |||||||||||||
April 1, 2015 | 1,244,581 | |||||||||||||
October 1, 2015 | 2,281,657 | |||||||||||||
April 1, 2016 | 82,429 | |||||||||||||
October 1, 2016 | 1,320,909 | |||||||||||||
April 1, 2017 | 30,000 | |||||||||||||
October 1, 2017 | 111,293 | |||||||||||||
April 1, 2018 | 15,000 | |||||||||||||
62,218,404 | ||||||||||||||
Schedule of KKR Holdings unvested restricted equity units granted to professionals, support staff and other personnel | ' | |||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2013 | 1,064,712 | $ | 12.03 | |||||||||||
Granted | — | — | ||||||||||||
Vested | (200,341 | ) | 13.72 | |||||||||||
Forfeited | (23,578 | ) | 14.2 | |||||||||||
Balance, September 30, 2013 | 840,793 | $ | 11.57 | |||||||||||
Schedule of remaining vesting tranches of restricted equity awards granted to professionals, support staff, and other personnel | ' | |||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2013 | 259,411 | |||||||||||||
April 1, 2014 | 164,579 | |||||||||||||
October 1, 2014 | 252,751 | |||||||||||||
April 1, 2015 | 138,521 | |||||||||||||
October 1, 2015 | 25,531 | |||||||||||||
840,793 | ||||||||||||||
Schedule of awards granted under Equity Incentive Plan | ' | |||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2013 | 17,920,926 | $ | 9.11 | |||||||||||
Granted | 11,646,952 | 12.08 | ||||||||||||
Vested | (2,953,853 | ) | 11.32 | |||||||||||
Forfeited | (671,715 | ) | 9.61 | |||||||||||
Balance, September 30, 2013 | 25,942,310 | $ | 10.18 | |||||||||||
Schedule of remaining vesting tranches of awards granted under the Equity Incentive Plan | ' | |||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2013 | 3,759,732 | |||||||||||||
April 1, 2014 | 4,550,214 | |||||||||||||
October 1, 2014 | 4,324,538 | |||||||||||||
April 1, 2015 | 4,381,402 | |||||||||||||
October 1, 2015 | 3,347,091 | |||||||||||||
April 1, 2016 | 2,160,645 | |||||||||||||
October 1, 2016 | 2,121,415 | |||||||||||||
April 1, 2017 | 84,189 | |||||||||||||
October 1, 2017 | 480,987 | |||||||||||||
April 1, 2018 | 6,917 | |||||||||||||
October 1, 2018 | 725,180 | |||||||||||||
25,942,310 |
RELATED_PARTY_TRANSACTIONS_Tab
RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
RELATED PARTY TRANSACTIONS | ' | |||||||
Schedule of due from and to affiliates | ' | |||||||
September 30, 2013 | December 31, 2012 | |||||||
Due from Related Entities | $ | 67,444 | $ | 73,357 | ||||
Due from Portfolio Companies | 66,302 | 48,828 | ||||||
Due from Affiliates | $ | 133,746 | $ | 122,185 | ||||
September 30, 2013 | December 31, 2012 | |||||||
Due to KKR Holdings in Connection with the Tax Receivable Agreement | $ | 96,772 | $ | 70,375 | ||||
Due to Related Entities | — | 2,455 | ||||||
Due to Affiliates | $ | 96,772 | $ | 72,830 |
SEGMENT_REPORTING_Tables
SEGMENT REPORTING (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
SEGMENT REPORTING | ' | |||||||||||||
Schedule of financial data of the entity's reportable segments | ' | |||||||||||||
As of and for the | ||||||||||||||
Three Months Ended September 30, 2013 | ||||||||||||||
Private | Public | Capital Markets | Total | |||||||||||
Markets | Markets | and Principal | Reportable | |||||||||||
Activities | Segments | |||||||||||||
Fees | ||||||||||||||
Management and incentive fees: | ||||||||||||||
Management fees | $ | 119,410 | $ | 53,835 | $ | — | $ | 173,245 | ||||||
Incentive fees | — | 1,225 | — | 1,225 | ||||||||||
Management and incentive fees | 119,410 | 55,060 | — | 174,470 | ||||||||||
Monitoring and transaction fees: | ||||||||||||||
Monitoring fees | 33,010 | — | — | 33,010 | ||||||||||
Transaction fees | 54,968 | 20,534 | 53,625 | 129,127 | ||||||||||
Fee credits (1) | (46,597 | ) | (15,185 | ) | — | (61,782 | ) | |||||||
Net monitoring and transaction fees | 41,381 | 5,349 | 53,625 | 100,355 | ||||||||||
Total fees | 160,791 | 60,409 | 53,625 | 274,825 | ||||||||||
Expenses | ||||||||||||||
Compensation and benefits | 65,400 | 18,606 | 8,223 | 92,229 | ||||||||||
Occupancy and related charges | 13,367 | 1,906 | 401 | 15,674 | ||||||||||
Other operating expenses | 37,586 | 19,670 | 3,628 | 60,884 | ||||||||||
Total expenses | 116,353 | 40,182 | 12,252 | 168,787 | ||||||||||
Fee related earnings | 44,438 | 20,227 | 41,373 | 106,038 | ||||||||||
Investment income (loss) | ||||||||||||||
Realized carried interest | 81,532 | — | — | 81,532 | ||||||||||
Unrealized carried interest | 263,982 | 14,022 | — | 278,004 | ||||||||||
Gross carried interest | 345,514 | 14,022 | — | 359,536 | ||||||||||
Less: Allocation to KKR carry pool (2) | (139,903 | ) | (5,609 | ) | — | (145,512 | ) | |||||||
Less: Management fee refunds (3) | (7,767 | ) | — | — | (7,767 | ) | ||||||||
Net carried interest | 197,844 | 8,413 | — | 206,257 | ||||||||||
Other investment income (loss) | 3,357 | (4 | ) | 300,119 | 303,472 | |||||||||
Total investment income (loss) | 201,201 | 8,409 | 300,119 | 509,729 | ||||||||||
Income (loss) before noncontrolling interests in income of consolidated entities | 245,639 | 28,636 | 341,492 | 615,767 | ||||||||||
Income (loss) attributable to noncontrolling interests (4) | 433 | 202 | 1,385 | 2,020 | ||||||||||
Economic net income (loss) | $ | 245,206 | $ | 28,434 | $ | 340,107 | $ | 613,747 | ||||||
Total Assets | $ | 1,456,008 | $ | 382,423 | $ | 6,676,613 | $ | 8,515,044 | ||||||
Book Value | $ | 1,311,513 | $ | 330,073 | $ | 5,566,162 | $ | 7,207,748 | ||||||
(1) KKR’s agreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of monitoring and transaction fees received from portfolio companies (“Fee Credits”). Fund investors receive Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fund as well as among different classes of investors within a fund. | ||||||||||||||
(2) With respect to KKR’s active and future investment funds and co-investment vehicles that provide for carried interest, KKR will allocate to its principals, other professionals and selected other individuals a portion of the carried interest earned in relation to these funds as part of its carry pool. | ||||||||||||||
(3) Certain of KKR’s private equity funds require the management company to refund up to 20% of any cash management fees earned from fund investors in the event that the funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the cash management fees earned or a portion thereof, a liability to the fund investors is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the cash management fees earned. As of September 30, 2013, carried interest earned was sufficient to cover 20% of the cash management fees earned. The refunds to the fund investors are paid, and the liabilities relieved, at such time that the underlying investments are sold and the associated carried interests are realized. In the event that a fund’s carried interest is not sufficient to cover any of the amount that represents 20% of the cash management fees earned, these fees would not be returned to the fund investors, in accordance with the respective fund agreements. | ||||||||||||||
(4) Represents economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of KKR’s management companies until a future date and (ii) allocate to third party investors certain profits and losses in KKR’s capital markets and principal activities segment. | ||||||||||||||
As of and for the | ||||||||||||||
Three Months Ended September 30, 2012 | ||||||||||||||
Private | Public | Capital Markets | Total | |||||||||||
Markets | Markets | and Principal | Reportable | |||||||||||
Activities | Segments | |||||||||||||
Fees | ||||||||||||||
Management and incentive fees: | ||||||||||||||
Management fees | $ | 105,035 | $ | 21,448 | $ | — | $ | 126,483 | ||||||
Incentive fees | — | 17,768 | — | 17,768 | ||||||||||
Management and incentive fees | 105,035 | 39,216 | — | 144,251 | ||||||||||
Monitoring and transaction fees: | ||||||||||||||
Monitoring fees | 29,969 | — | — | 29,969 | ||||||||||
Transaction fees | 32,788 | 8,780 | 33,696 | 75,264 | ||||||||||
Fee credits (1) | (26,293 | ) | (5,414 | ) | — | (31,707 | ) | |||||||
Net monitoring and transaction fees | 36,464 | 3,366 | 33,696 | 73,526 | ||||||||||
Total fees | 141,499 | 42,582 | 33,696 | 217,777 | ||||||||||
Expenses | ||||||||||||||
Compensation and benefits | 48,905 | 13,997 | 8,438 | 71,340 | ||||||||||
Occupancy and related charges | 12,049 | 1,343 | 213 | 13,605 | ||||||||||
Other operating expenses | 35,885 | 3,897 | 2,346 | 42,128 | ||||||||||
Total expenses | 96,839 | 19,237 | 10,997 | 127,073 | ||||||||||
Fee related earnings | 44,660 | 23,345 | 22,699 | 90,704 | ||||||||||
Investment income (loss) | ||||||||||||||
Realized carried interest | 166,908 | — | — | 166,908 | ||||||||||
Unrealized carried interest | 224,260 | 19,568 | — | 243,828 | ||||||||||
Gross carried interest | 391,168 | 19,568 | — | 410,736 | ||||||||||
Less: Allocation to KKR carry pool (2) | (161,805 | ) | (7,828 | ) | — | (169,633 | ) | |||||||
Less: Management fee refunds (3) | (61,499 | ) | — | — | (61,499 | ) | ||||||||
Net carried interest | 167,864 | 11,740 | — | 179,604 | ||||||||||
Other investment income (loss) | 1,779 | 25 | 239,072 | 240,876 | ||||||||||
Total investment income (loss) | 169,643 | 11,765 | 239,072 | 420,480 | ||||||||||
Income (loss) before noncontrolling interests in income of consolidated entities | 214,303 | 35,110 | 261,771 | 511,184 | ||||||||||
Income (loss) attributable to noncontrolling interests (4) | 444 | 233 | 633 | 1,310 | ||||||||||
Economic net income (loss) | $ | 213,859 | $ | 34,877 | $ | 261,138 | $ | 509,874 | ||||||
Total Assets | $ | 1,228,471 | $ | 112,664 | $ | 6,246,123 | $ | 7,587,258 | ||||||
Book Value | $ | 1,104,611 | $ | 82,820 | $ | 5,707,350 | $ | 6,894,781 | ||||||
(1) KKR’s agreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of monitoring and transaction fees received from portfolio companies. Fund investors receive Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fund as well as among different classes of investors within a fund. | ||||||||||||||
(2) With respect to KKR’s active and future investment funds and co-investment vehicles that provide for carried interest, KKR will allocate to its principals, other professionals and selected other individuals a portion of the carried interest earned in relation to these funds as part of its carry pool. | ||||||||||||||
(3) Certain of KKR’s private equity funds require the management company to refund up to 20% of any cash management fees earned from fund investors in the event that the funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the cash management fees earned or a portion thereof, a liability to the fund’s fund investors is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the cash management fees earned. As of September 30, 2012, carried interest earned was sufficient to cover 20% of the cash management fees earned. The refunds to the fund investors are paid, and the liabilities relieved, at such time that the underlying investments are sold and the associated carried interests are realized. In the event that a fund’s carried interest is not sufficient to cover any of the amount that represents 20% of the cash management fees earned, these fees would not be returned to the fund investors, in accordance with the respective fund agreements. | ||||||||||||||
(4) Represents economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of KKR’s management companies until a future date and (ii) allocate to third party investors certain profits and losses in KKR’s capital markets and principal activities segment. | ||||||||||||||
As of and for the | ||||||||||||||
Nine Months Ended September 30, 2013 | ||||||||||||||
Private | Public | Capital Markets | Total | |||||||||||
Markets | Markets | and Principal | Reportable | |||||||||||
Activities | Segments | |||||||||||||
Fees | ||||||||||||||
Management and incentive fees: | ||||||||||||||
Management fees | $ | 340,715 | $ | 149,669 | $ | — | $ | 490,384 | ||||||
Incentive fees | — | 35,664 | — | 35,664 | ||||||||||
Management and incentive fees | 340,715 | 185,333 | — | 526,048 | ||||||||||
Monitoring and transaction fees: | ||||||||||||||
Monitoring fees | 93,985 | — | — | 93,985 | ||||||||||
Transaction fees | 96,611 | 30,883 | 104,717 | 232,211 | ||||||||||
Fee credits (1) | (97,153 | ) | (22,445 | ) | — | (119,598 | ) | |||||||
Net monitoring and transaction fees | 93,443 | 8,438 | 104,717 | 206,598 | ||||||||||
Total fees | 434,158 | 193,771 | 104,717 | 732,646 | ||||||||||
Expenses | ||||||||||||||
Compensation and benefits | 164,917 | 60,296 | 22,614 | 247,827 | ||||||||||
Occupancy and related charges | 35,935 | 5,063 | 1,065 | 42,063 | ||||||||||
Other operating expenses | 105,516 | 36,643 | 8,382 | 150,541 | ||||||||||
Total expenses | 306,368 | 102,002 | 32,061 | 440,431 | ||||||||||
Fee related earnings | 127,790 | 91,769 | 72,656 | 292,215 | ||||||||||
Investment income (loss) | ||||||||||||||
Realized carried interest | 439,527 | — | — | 439,527 | ||||||||||
Unrealized carried interest | 361,972 | 45,212 | — | 407,184 | ||||||||||
Gross carried interest | 801,499 | 45,212 | — | 846,711 | ||||||||||
Less: Allocation to KKR carry pool (2) | (323,467 | ) | (18,085 | ) | — | (341,552 | ) | |||||||
Less: Management fee refunds (3) | (21,718 | ) | — | — | (21,718 | ) | ||||||||
Net carried interest | 456,314 | 27,127 | — | 483,441 | ||||||||||
Other investment income (loss) | 1,073 | 80 | 633,567 | 634,720 | ||||||||||
Total investment income (loss) | 457,387 | 27,207 | 633,567 | 1,118,161 | ||||||||||
Income (loss) before noncontrolling interests in income of consolidated entities | 585,177 | 118,976 | 706,223 | 1,410,376 | ||||||||||
Income (loss) attributable to noncontrolling interests (4) | 1,242 | 935 | 2,267 | 4,444 | ||||||||||
Economic net income (loss) | $ | 583,935 | $ | 118,041 | $ | 703,956 | $ | 1,405,932 | ||||||
Total Assets | $ | 1,456,008 | $ | 382,423 | $ | 6,676,613 | $ | 8,515,044 | ||||||
Book Value | $ | 1,311,513 | $ | 330,073 | $ | 5,566,162 | $ | 7,207,748 | ||||||
(1) KKR’s agreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of monitoring and transaction fees received from portfolio companies. Fund investors receive Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fund as well as among different classes of investors within a fund. | ||||||||||||||
(2) With respect to KKR’s active and future investment funds and co-investment vehicles that provide for carried interest, KKR will allocate to its principals, other professionals and selected other individuals a portion of the carried interest earned in relation to these funds as part of its carry pool. | ||||||||||||||
(3) Certain of KKR’s private equity funds require the management company to refund up to 20% of any cash management fees earned from fund investors in the event that the funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the cash management fees earned or a portion thereof, a liability to the fund’s fund investors is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the cash management fees earned. As of September 30, 2013, carried interest earned was sufficient to cover 20% of the cash management fees earned. The refunds to the fund investors are paid, and the liabilities relieved, at such time that the underlying investments are sold and the associated carried interests are realized. In the event that a fund’s carried interest is not sufficient to cover any of the amount that represents 20% of the cash management fees earned, these fees would not be returned to the fund investors, in accordance with the respective fund agreements. | ||||||||||||||
(4) Represents economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of KKR’s management companies until a future date and (ii) allocate to third party investors certain profits and losses in KKR’s capital markets and principal activities segment. | ||||||||||||||
As of and for the | ||||||||||||||
Nine Months Ended September 30, 2012 | ||||||||||||||
Private | Public | Capital Markets | Total | |||||||||||
Markets | Markets | and Principal | Reportable | |||||||||||
Activities | Segments | |||||||||||||
Fees | ||||||||||||||
Management and incentive fees: | ||||||||||||||
Management fees | $ | 319,117 | $ | 65,635 | $ | — | $ | 384,752 | ||||||
Incentive fees | — | 31,495 | — | 31,495 | ||||||||||
Management and incentive fees | 319,117 | 97,130 | — | 416,247 | ||||||||||
Monitoring and transaction fees: | ||||||||||||||
Monitoring fees | 83,577 | — | — | 83,577 | ||||||||||
Transaction fees | 55,223 | 12,521 | 95,524 | 163,268 | ||||||||||
Fee credits (1) | (59,641 | ) | (8,098 | ) | — | (67,739 | ) | |||||||
Net monitoring and transaction fees | 79,159 | 4,423 | 95,524 | 179,106 | ||||||||||
Total fees | 398,276 | 101,553 | 95,524 | 595,353 | ||||||||||
Expenses | ||||||||||||||
Compensation and benefits | 139,382 | 34,608 | 22,820 | 196,810 | ||||||||||
Occupancy and related charges | 36,487 | 4,127 | 691 | 41,305 | ||||||||||
Other operating expenses | 103,790 | 11,754 | 7,862 | 123,406 | ||||||||||
Total expenses | 279,659 | 50,489 | 31,373 | 361,521 | ||||||||||
Fee related earnings | 118,617 | 51,064 | 64,151 | 233,832 | ||||||||||
Investment income (loss) | ||||||||||||||
Realized carried interest | 307,387 | — | — | 307,387 | ||||||||||
Unrealized carried interest | 830,072 | 25,515 | — | 855,587 | ||||||||||
Gross carried interest | 1,137,459 | 25,515 | — | 1,162,974 | ||||||||||
Less: Allocation to KKR carry pool (2) | (463,485 | ) | (10,207 | ) | — | (473,692 | ) | |||||||
Less: Management fee refunds (3) | (135,011 | ) | — | — | (135,011 | ) | ||||||||
Net carried interest | 538,963 | 15,308 | — | 554,271 | ||||||||||
Other investment income (loss) | (559 | ) | (10 | ) | 1,001,455 | 1,000,886 | ||||||||
Total investment income (loss) | 538,404 | 15,298 | 1,001,455 | 1,555,157 | ||||||||||
Income (loss) before noncontrolling interests in income of consolidated entities | 657,021 | 66,362 | 1,065,606 | 1,788,989 | ||||||||||
Income (loss) attributable to noncontrolling interests (4) | 3,098 | 787 | 1,913 | 5,798 | ||||||||||
Economic net income (loss) | $ | 653,923 | $ | 65,575 | $ | 1,063,693 | $ | 1,783,191 | ||||||
Total Assets | $ | 1,228,471 | $ | 112,664 | $ | 6,246,123 | $ | 7,587,258 | ||||||
Book Value | $ | 1,104,611 | $ | 82,820 | $ | 5,707,350 | $ | 6,894,781 | ||||||
(1) KKR’s agreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of monitoring and transaction fees received from portfolio companies. Fund investors receive Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fund as well as among different classes of investors within a fund. | ||||||||||||||
(2) With respect to KKR’s active and future investment funds and co-investment vehicles that provide for carried interest, KKR will allocate to its principals, other professionals and selected other individuals a portion of the carried interest earned in relation to these funds as part of its carry pool. | ||||||||||||||
(3) Certain of KKR’s private equity funds require the management company to refund up to 20% of any cash management fees earned from fund investors in the event that the funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the cash management fees earned or a portion thereof, a liability to the fund’s fund investors is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the cash management fees earned. As of September 30, 2012, carried interest earned was sufficient to cover 20% of the cash management fees earned. The refunds to the fund investors are paid, and the liabilities relieved, at such time that the underlying investments are sold and the associated carried interests are realized. In the event that a fund’s carried interest is not sufficient to cover any of the amount that represents 20% of the cash management fees earned, these fees would not be returned to the fund investors, in accordance with the respective fund agreements. | ||||||||||||||
(4) Represents economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of KKR’s management companies until a future date and (ii) allocate to third party investors certain profits and losses in KKR’s capital markets and principal activities segment. | ||||||||||||||
Schedule of reconciliation of financial information from total reportable segments to consolidated financial statements | ' | |||||||||||||
As of and for the | ||||||||||||||
Three Months Ended September 30, 2013 | ||||||||||||||
Total | Adjustments | Consolidated | ||||||||||||
Reportable | ||||||||||||||
Segments | ||||||||||||||
Fees(a) | $ | 274,825 | $ | (54,797 | ) | $ | 220,028 | |||||||
Expenses(b) | $ | 168,787 | $ | 286,708 | $ | 455,495 | ||||||||
Investment income (loss)(c) | $ | 509,729 | $ | 1,931,536 | $ | 2,441,265 | ||||||||
Income (loss) before taxes | $ | 615,767 | $ | 1,590,031 | $ | 2,205,798 | ||||||||
Income (loss) attributable to redeemable noncontrolling interests | $ | — | $ | 9,169 | $ | 9,169 | ||||||||
Income (loss) attributable to noncontrolling interests | $ | 2,020 | $ | 1,982,225 | $ | 1,984,245 | ||||||||
Total Assets(d) | $ | 8,515,044 | $ | 39,645,007 | $ | 48,160,051 | ||||||||
Book Value (e) | $ | 7,207,748 | $ | (4,712,655 | ) | $ | 2,495,093 | |||||||
(a) The fees adjustment primarily represents (i) the elimination of management fees of $127,458 upon consolidation of KKR’s funds and vehicles, (ii) the elimination of Fee Credits of $48,641 upon consolidation of the KKR funds and vehicles, (iii) inclusion of reimbursable expenses of $10,145 and (iv) other adjustments of $13,875. | ||||||||||||||
(b) The expenses adjustment primarily represents (i) the inclusion of non-cash equity based charges borne by KKR Holdings or granted under the Equity Incentive Plan, which amounted to $85,215, (ii) allocations to the carry pool of $145,512, (iii) a gross up of reimbursable expenses of $15,516, (iv) operating expenses of $22,706 primarily associated with the inclusion of operating expenses upon consolidation of KKR’s funds and vehicles and other entities, (v) inclusion of certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income of $2,807 and (vi) other adjustments of $14,952. | ||||||||||||||
(c) The investment income (loss) adjustment primarily represents (i) the inclusion of net investment income of $1,775,450 attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles, (ii) exclusion of allocations to the carry pool of $145,512, (iii) exclusion of management fee refunds of $7,767 and (iv) exclusion of certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income of $2,807. | ||||||||||||||
(d) Substantially all of the total assets adjustment represents the inclusion of investments that are attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles. | ||||||||||||||
(e) The book value adjustment represents the exclusion of noncontrolling interests held by KKR Holdings of $4,796,218 and the equity impact of KKR Management Holdings Corp. equity and other of $83,563. | ||||||||||||||
As of and for the | ||||||||||||||
Three Months Ended September 30, 2012 | ||||||||||||||
Total | Adjustments | Consolidated | ||||||||||||
Reportable | ||||||||||||||
Segments | ||||||||||||||
Fees(a) | $ | 217,777 | $ | (55,623 | ) | $ | 162,154 | |||||||
Expenses(b) | $ | 127,073 | $ | 319,446 | $ | 446,519 | ||||||||
Investment income (loss)(c) | $ | 420,480 | $ | 1,976,283 | $ | 2,396,763 | ||||||||
Income (loss) before taxes | $ | 511,184 | $ | 1,601,214 | $ | 2,112,398 | ||||||||
Income (loss) attributable to redeemable noncontrolling interests | $ | — | $ | 9,994 | $ | 9,994 | ||||||||
Income (loss) attributable to noncontrolling interests | $ | 1,310 | $ | 1,964,071 | $ | 1,965,381 | ||||||||
Total Assets(d) | $ | 7,587,258 | $ | 36,061,362 | $ | 43,648,620 | ||||||||
Book Value (e) | $ | 6,894,781 | $ | (5,052,250 | ) | $ | 1,842,531 | |||||||
(a) The fees adjustment primarily represents (i) the elimination of management fees of $105,413 upon consolidation of KKR’s funds and vehicles, (ii) the elimination of Fee Credits of $30,611 upon consolidation of KKR’s funds and vehicles, (iii) inclusion of reimbursable expenses of $8,783 and (iv) other adjustments of $10,396. | ||||||||||||||
(b) The expenses adjustment primarily represents (i) the inclusion of non-cash equity based charges borne by KKR Holdings or granted under the Equity Incentive Plan, which amounted to $122,157, (ii) allocations to the carry pool of $169,633, (iii) a gross up of reimbursable expenses of $11,221, (iv) operating expenses of $13,492 primarily associated with the inclusion of operating expenses upon consolidation of KKR’s funds and vehicles and other entities and (v) other adjustments of $2,943. | ||||||||||||||
(c) The investment income (loss) adjustment primarily represents (i) the inclusion of a net investment income of $1,745,151 attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles, (ii) exclusion of allocations to the carry pool of $169,633, and (iii) exclusion of management fee refunds of $61,499. | ||||||||||||||
(d) Substantially all of the total assets adjustment represents the inclusion of investments that are attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles. | ||||||||||||||
(e) The book value adjustment represents the exclusion of noncontrolling interests held by KKR Holdings of $5,044,473 and the equity impact of KKR Management Holdings Corp. equity and other of $7,777. | ||||||||||||||
As of and for the | ||||||||||||||
Nine Months Ended September 30, 2013 | ||||||||||||||
Total | Adjustments | Consolidated | ||||||||||||
Reportable | ||||||||||||||
Segments | ||||||||||||||
Fees(a) | $ | 732,646 | $ | (195,002 | ) | $ | 537,644 | |||||||
Expenses(b) | $ | 440,431 | $ | 746,416 | $ | 1,186,847 | ||||||||
Investment income (loss)(c) | $ | 1,118,161 | $ | 4,130,165 | $ | 5,248,326 | ||||||||
Income (loss) before taxes | $ | 1,410,376 | $ | 3,188,747 | $ | 4,599,123 | ||||||||
Income (loss) attributable to redeemable noncontrolling interests | $ | — | $ | 25,992 | $ | 25,992 | ||||||||
Income (loss) attributable to noncontrolling interests | $ | 4,444 | $ | 4,129,849 | $ | 4,134,293 | ||||||||
Total Assets(d) | $ | 8,515,044 | $ | 39,645,007 | $ | 48,160,051 | ||||||||
Book Value (e) | $ | 7,207,748 | $ | (4,712,655 | ) | $ | 2,495,093 | |||||||
(a) The fees adjustment primarily represents (i) the elimination of management fees of $357,607 upon consolidation of KKR’s funds and vehicles, (ii) the elimination of Fee Credits of $103,070 upon consolidation of KKR’s funds and vehicles, (iii) inclusion of reimbursable expenses of $25,586 and (iv) other adjustments of $33,949. | ||||||||||||||
(b) The expenses adjustment primarily represents (i) the inclusion of non-cash equity based charges borne by KKR Holdings or granted under the Equity Incentive Plan, which amounted to $247,183, (ii) allocations to the carry pool of $341,552, (iii) a gross up of reimbursable expenses of $35,029 (iv) operating expenses of $57,997 primarily associated with the inclusion of operating expenses upon consolidation of KKR’s funds and vehicles and other entities, (v) inclusion of certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income of $5,512 and (vi) other adjustments of $59,143. | ||||||||||||||
(c) The investment income (loss) adjustment primarily represents (i) the inclusion of a net investment income of $3,761,383 attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles, (ii) exclusion of allocations to the carry pool of $341,552, (iii) exclusion of management fee refunds of $21,718 and (iv) exclusion of certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income of $5,512. | ||||||||||||||
(d) Substantially all of the total assets adjustment represents the inclusion of investments that are attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles. | ||||||||||||||
(e) The book value adjustment represents the exclusion of noncontrolling interests held by KKR Holdings of $4,796,218 and the equity impact of KKR Management Holdings Corp. equity and other of $83,563. | ||||||||||||||
As of and for the | ||||||||||||||
Nine Months Ended September 30, 2012 | ||||||||||||||
Total | Adjustments | Consolidated | ||||||||||||
Reportable | ||||||||||||||
Segments | ||||||||||||||
Fees(a) | $ | 595,353 | $ | (204,532 | ) | $ | 390,821 | |||||||
Expenses(b) | $ | 361,521 | $ | 878,995 | $ | 1,240,516 | ||||||||
Investment income (loss)(c) | $ | 1,555,157 | $ | 5,912,219 | $ | 7,467,376 | ||||||||
Income (loss) before taxes | $ | 1,788,989 | $ | 4,828,692 | $ | 6,617,681 | ||||||||
Income (loss) attributable to redeemable noncontrolling interests | $ | — | $ | 18,551 | $ | 18,551 | ||||||||
Income (loss) attributable to noncontrolling interests | $ | 5,798 | $ | 6,091,447 | $ | 6,097,245 | ||||||||
Total Assets(d) | $ | 7,587,258 | $ | 36,061,362 | $ | 43,648,620 | ||||||||
Book Value (e) | $ | 6,894,781 | $ | (5,052,250 | ) | $ | 1,842,531 | |||||||
(a) The fees adjustment primarily represents (i) the elimination of management fees of $322,911 upon consolidation of KKR’s funds and vehicles, (ii) the elimination of Fee Credits of $65,761 upon consolidation of KKR’s funds and vehicles, (iii) inclusion of reimbursable expenses of $17,369 and (iv) other adjustments of $35,249. | ||||||||||||||
(b) The expenses adjustment primarily represents (i) the inclusion of non-cash equity based charges borne by KKR Holdings or granted under the Equity Incentive Plan, which amounted to $330,037, (ii) allocations to the carry pool of $473,692, (iii) a gross up of reimbursable expenses of $25,096, (iv) operating expenses of $39,102 primarily associated with the inclusion of operating expenses upon consolidation of KKR’s funds and vehicles and other entities and (v) other adjustments of $11,068. | ||||||||||||||
(c) The investment income (loss) adjustment primarily represents (i) the inclusion of a net investment income of $5,303,516 attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles, (ii) exclusion of allocations to the carry pool of $473,692, and (iii) exclusion of management fee refunds of $135,011. | ||||||||||||||
(d) Substantially all of the total assets adjustment represents the inclusion of investments that are attributable to noncontrolling interests upon consolidation of KKR’s funds and vehicles. | ||||||||||||||
(e) The book value adjustment represents the exclusion of noncontrolling interests held by KKR Holdings of $5,044,473 and the equity impact of KKR Management Holdings Corp. equity and other of $7,777. | ||||||||||||||
Schedule of reconciliation of net income (loss) attributable to the entity to economic net income (loss) and fee related earnings | ' | |||||||||||||
Three Months Ended | ||||||||||||||
September 30, 2013 | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 204,740 | ||||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 300,169 | |||||||||||||
Plus: Equity based compensation | 85,215 | |||||||||||||
Plus: Amortization of intangibles and other, net | 15,979 | |||||||||||||
Plus: Income taxes | 7,644 | |||||||||||||
Economic net income (loss) | 613,747 | |||||||||||||
Plus: Income attributable to segment noncontrolling interests | 2,020 | |||||||||||||
Less: Investment income (loss) | 509,729 | |||||||||||||
Fee related earnings | $ | 106,038 | ||||||||||||
Three Months Ended | ||||||||||||||
September 30, 2012 | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 127,411 | ||||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 249,460 | |||||||||||||
Plus: Equity based compensation | 122,157 | |||||||||||||
Plus: Amortization of intangibles and other, net | 1,234 | |||||||||||||
Plus: Income taxes | 9,612 | |||||||||||||
Economic net income (loss) | 509,874 | |||||||||||||
Plus: Income attributable to segment noncontrolling interests | 1,310 | |||||||||||||
Less: Investment income (loss) | 420,480 | |||||||||||||
Fee related earnings | $ | 90,704 | ||||||||||||
Nine Months Ended | ||||||||||||||
September 30, 2013 | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 413,313 | ||||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 662,387 | |||||||||||||
Plus: Equity based compensation | 247,183 | |||||||||||||
Plus: Amortization of intangibles and other, net | 57,524 | |||||||||||||
Plus: Income taxes | 25,525 | |||||||||||||
Economic net income (loss) | 1,405,932 | |||||||||||||
Plus: Income attributable to segment noncontrolling interests | 4,444 | |||||||||||||
Less: Investment income (loss) | 1,118,161 | |||||||||||||
Fee related earnings | $ | 292,215 | ||||||||||||
Nine Months Ended | ||||||||||||||
September 30, 2012 | ||||||||||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 464,108 | ||||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 946,484 | |||||||||||||
Plus: Equity based compensation | 330,037 | |||||||||||||
Plus: Amortization of intangibles and other, net | 4,785 | |||||||||||||
Plus: Income taxes | 37,777 | |||||||||||||
Economic net income (loss) | 1,783,191 | |||||||||||||
Plus: Income attributable to segment noncontrolling interests | 5,798 | |||||||||||||
Less: Investment income (loss) | 1,555,157 | |||||||||||||
Fee related earnings | $ | 233,832 |
GOODWILL_AND_INTANGIBLE_ASSETS1
GOODWILL AND INTANGIBLE ASSETS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
GOODWILL AND INTANGIBLE ASSETS | ' | |||||||
Schedule of intangible assets, net | ' | |||||||
September 30, 2013 | December 31, 2012 | |||||||
Finite — Lived Intangible Assets | $ | 218,886 | $ | 218,886 | ||||
Accumulated Amortization | (36,357 | ) | (21,402 | ) | ||||
Intangible Assets, Net | $ | 182,529 | $ | 197,484 | ||||
Schedule of changes in intangible assets, net | ' | |||||||
September 30, 2013 | December 31, 2012 | |||||||
Balance, Beginning of Year | $ | 197,484 | $ | 24,310 | ||||
Acquisitions | — | 181,000 | ||||||
Amortization Expense | (14,955 | ) | (7,826 | ) | ||||
Intangible Assets, Net | $ | 182,529 | $ | 197,484 |
ORGANIZATION_Details
ORGANIZATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Effects of changes in ownership interest in Group Partnerships on KKR & Co. L.P.'s equity | ' | ' | ' | ' |
Net income (loss) attributable to KKR & Co. L.P. | $204,740 | $127,411 | $413,313 | $464,108 |
Exchange of KKR Group Partnership units held by KKR Holdings L.P. | 87,431 | 31,308 | 337,054 | 139,342 |
Change from net income (loss) attributable to KKR & Co. L.P. and transfers from noncontrolling interests held by KKR Holdings | $292,171 | $158,719 | $750,367 | $603,450 |
Shares exchanged | 7,216,913 | 2,784,209 | 27,809,258 | 13,151,729 |
Group Holdings | ' | ' | ' | ' |
ORGANIZATION AND BASIS OF PRESENTATION | ' | ' | ' | ' |
Percentage of economic interest held by parent entity | ' | ' | 99.00% | ' |
Management Holdings Corp | ' | ' | ' | ' |
ORGANIZATION AND BASIS OF PRESENTATION | ' | ' | ' | ' |
Percentage of economic interest held by parent entity | ' | ' | 1.00% | ' |
KKR Group Partnerships | ' | ' | ' | ' |
ORGANIZATION AND BASIS OF PRESENTATION | ' | ' | ' | ' |
Percentage of economic interest held by parent entity | ' | ' | 41.30% | ' |
KKR Group Partnerships | KKR Holdings L.P. | ' | ' | ' | ' |
ORGANIZATION AND BASIS OF PRESENTATION | ' | ' | ' | ' |
Percentage of economic interest held by parent entity | ' | ' | 58.70% | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 |
Variable Interest Entities | ' | ' |
Effect on net income (loss) as a result of the elimination in consolidation of management fees earned from noncontrolling interests | $0 | ' |
Due from Affiliates, net | 133,746 | 122,185 |
Deconsolidation of Consolidated Entities | ' | ' |
Variable Interest Entities | ' | ' |
Investments, at Fair Value | 201,197 | 188,408 |
Due from Affiliates, net | 5,209 | 2,266 |
Maximum Exposure to Loss | $206,406 | $190,674 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Redeemable Noncontrolling Interests | ' | ' | ' | ' |
Expiration period of redeemable noncontrolling interests, low end of range | ' | ' | '1 year | ' |
Expiration period of redeemable noncontrolling interests, high end of range | ' | ' | '3 years | ' |
Noncontrolling Interest in Consolidation Entities | ' | ' | ' | ' |
Percentage of carried interest received by general partners | ' | ' | 1.00% | ' |
Percentage of other profits (losses) received by general partners | ' | ' | 1.00% | ' |
Calculation of noncontrolling Interests held by KKR Holdings | ' | ' | ' | ' |
Equity based compensation | ' | ' | $247,183 | $330,037 |
Capital contributions | ' | ' | 4,615,392 | 2,276,163 |
Capital distributions | ' | ' | -7,442,293 | -6,410,418 |
Calculation of net income (loss) attributable to noncontrolling interests held by KKR Holdings | ' | ' | ' | ' |
Net income (loss) | 2,198,154 | 2,102,786 | 4,573,598 | 6,579,904 |
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | 9,169 | 9,994 | 25,992 | 18,551 |
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities | 1,984,245 | 1,965,381 | 4,134,293 | 6,097,245 |
Fees | ' | ' | ' | ' |
Transaction Fees | 105,387 | 74,168 | 202,107 | 161,290 |
Management Fees | 45,787 | 21,070 | 130,402 | 61,841 |
Monitoring Fees | 43,155 | 38,752 | 119,571 | 100,946 |
Consulting and Other Fees | 25,261 | 10,396 | 50,873 | 35,249 |
Incentive fees | 438 | 17,768 | 34,691 | 31,495 |
Total fees | 220,028 | 162,154 | 537,644 | 390,821 |
Noncontrolling Interests held by KKR Holdings | ' | ' | ' | ' |
Calculation of noncontrolling Interests held by KKR Holdings | ' | ' | ' | ' |
Balance at the beginning of the period | 4,699,114 | 4,795,697 | 4,981,864 | 4,342,157 |
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 300,169 | 249,460 | 662,387 | 946,484 |
Other comprehensive income (loss), net of tax | -96 | 3,396 | -4,846 | -797 |
Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units | -84,838 | -31,203 | -328,481 | -138,119 |
Equity based compensation | 53,988 | 104,792 | 162,602 | 282,358 |
Capital contributions | 600 | 437 | 1,399 | 1,658 |
Capital distributions | -172,719 | -78,106 | -678,707 | -389,268 |
Balance at the end of the period | 4,796,218 | 5,044,473 | 4,796,218 | 5,044,473 |
Calculation of net income (loss) attributable to noncontrolling interests held by KKR Holdings | ' | ' | ' | ' |
Net income (loss) | 2,198,154 | 2,102,786 | 4,573,598 | 6,579,904 |
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | 9,169 | 9,994 | 25,992 | 18,551 |
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities | 1,684,076 | 1,715,921 | 3,471,906 | 5,150,761 |
Plus: Income taxes attributable to KKR Management Holdings Corp. | 3,020 | 7,070 | 12,894 | 28,187 |
Net income (loss) attributable to KKR & Co. L.P. and KKR Holdings | 507,929 | 383,941 | 1,088,594 | 1,438,779 |
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | $300,169 | $249,460 | $662,387 | $946,484 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) | 9 Months Ended |
Sep. 30, 2013 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
Number of valuation methodologies used to determine fair value of investments | 2 |
Maximum | ' |
Level III Valuation Methodologies | ' |
Weighting percentage of methodology used to determine fair value of investments | 100.00% |
Minimum | ' |
Level III Valuation Methodologies | ' |
Illiquidity Discount (as a percent) | 5.00% |
Private equity investment portfolio with more than one methodology | Level III | ' |
Level III Valuation Methodologies | ' |
Percentage of fair value of investments which are valued on certain methodologies | 93.00% |
Private equity investment portfolio with more than one methodology | Market comparables | Level III | ' |
Level III Valuation Methodologies | ' |
Weighting percentage of methodology used to determine fair value of investments | 50.00% |
Private equity investment portfolio with more than one methodology | Discounted cash flow analysis | Level III | ' |
Level III Valuation Methodologies | ' |
Weighting percentage of methodology used to determine fair value of investments | 50.00% |
Private equity investment portfolio with single methodology | Level III | Maximum | ' |
Level III Valuation Methodologies | ' |
Percentage of fair value of investments which are valued on certain methodologies | 5.00% |
Private equity investment portfolio with single methodology | Market comparables | Level III | ' |
Level III Valuation Methodologies | ' |
Weighting percentage of methodology used to determine fair value of investments | 100.00% |
Private equity investment portfolio with single methodology | Discounted cash flow analysis | Level III | ' |
Level III Valuation Methodologies | ' |
Weighting percentage of methodology used to determine fair value of investments | 100.00% |
NET_GAINS_LOSSES_FROM_INVESTME2
NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | $730,895 | $1,232,714 | $2,356,388 | $3,240,874 |
Net Unrealized Gains (Losses) | 1,499,506 | 1,075,899 | 2,242,367 | 3,756,292 |
Real Assets | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | ' | ' | 14,855 | 54,419 |
Net Unrealized Gains (Losses) | 47,053 | -180,288 | 133,610 | -325,545 |
Equity Method | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | 10,016 | 46,028 | 35,532 | 80,439 |
Net Unrealized Gains (Losses) | 13,123 | -11,383 | 27,863 | 55,865 |
Private Equity | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | 692,932 | 1,204,668 | 2,180,059 | 3,066,087 |
Net Unrealized Gains (Losses) | 1,626,536 | 1,301,670 | 2,140,102 | 4,022,193 |
Fixed Income and Other | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | 63,032 | 8,694 | 202,623 | 65,780 |
Net Unrealized Gains (Losses) | 72,901 | 153,260 | 20,638 | 198,803 |
Foreign Exchange Forward Contracts | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | -528 | 5,736 | 24,408 | 21,891 |
Net Unrealized Gains (Losses) | -235,792 | -174,299 | -77,043 | -129,679 |
Foreign Currency Options | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | ' | ' | ' | -10,740 |
Net Unrealized Gains (Losses) | -11,636 | -2,597 | 198 | 3,939 |
Securities Sold Short | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | -29,652 | -21,083 | -71,459 | -26,527 |
Net Unrealized Gains (Losses) | -16,241 | -3,226 | -14,115 | -6,836 |
Other Derivative | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | -2,056 | -11,577 | -20,454 | -10,538 |
Net Unrealized Gains (Losses) | 1,229 | -2,756 | 4,907 | -4,972 |
Contingent Carried Interest Repayment Guarantee | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Unrealized Gains (Losses) | ' | ' | ' | -55,937 |
Foreign Exchange Gains (Losses) | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | -2,849 | 248 | -9,176 | 63 |
Net Unrealized Gains (Losses) | $2,333 | ($4,482) | $6,207 | ($1,539) |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Investments | ' | ' |
Fair Value | $44,263,123,000 | $40,697,848,000 |
Cost | 37,914,488,000 | 36,647,369,000 |
Investments pledged as direct collateral | 2,900,000,000 | 2,100,000,000 |
Private Equity | ' | ' |
Investments | ' | ' |
Fair Value | 35,268,074,000 | 34,114,623,000 |
Cost | 27,354,669,000 | 28,336,315,000 |
Fixed Income | ' | ' |
Investments | ' | ' |
Fair Value | 4,846,730,000 | 3,396,067,000 |
Cost | 4,732,436,000 | 3,266,846,000 |
Real Assets | ' | ' |
Investments | ' | ' |
Fair Value | 2,434,733,000 | 1,775,683,000 |
Cost | 4,388,965,000 | 3,861,792,000 |
Equity Method | ' | ' |
Investments | ' | ' |
Fair Value | 533,677,000 | 200,831,000 |
Cost | 325,282,000 | 20,847,000 |
Other | ' | ' |
Investments | ' | ' |
Fair Value | 1,179,909,000 | 1,210,644,000 |
Cost | $1,113,136,000 | $1,161,569,000 |
INVESTMENTS_Details_2
INVESTMENTS (Details 2) (USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Investments | ' | ' |
Fair value of investment with greater than 5% of total investments | 44,263,123,000 | 40,697,848,000 |
Aggregate investments in other than equity securities | 547,600,000 | 364,500,000 |
Investment Concentration Risk | Investments. | ' | ' |
Investments | ' | ' |
Minimum percentage of total investments | 5.00% | 5.00% |
Alliance Boots | Investment Concentration Risk | Investments. | ' | ' |
Investments | ' | ' |
Fair value of investment with greater than 5% of total investments | 4,100,000,000 | 3,500,000,000 |
HCA | Investment Concentration Risk | Investments. | ' | ' |
Investments | ' | ' |
Fair value of investment with greater than 5% of total investments | ' | 2,100,000,000 |
INVESTMENTS_Details_3
INVESTMENTS (Details 3) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Investments | ' | ' |
Fair Value | $44,263,123 | $40,697,848 |
Private Equity Investments | ' | ' |
Investments | ' | ' |
Fair Value | 35,268,074 | 34,114,623 |
Private Equity Investments | Health Care | ' | ' |
Investments | ' | ' |
Fair Value | 8,509,698 | 7,708,080 |
Private Equity Investments | Technology | ' | ' |
Investments | ' | ' |
Fair Value | 4,770,255 | 4,566,236 |
Private Equity Investments | Manufacturing | ' | ' |
Investments | ' | ' |
Fair Value | 4,492,445 | 3,240,474 |
Private Equity Investments | Retail | ' | ' |
Investments | ' | ' |
Fair Value | 4,410,526 | 4,970,092 |
Private Equity Investments | Other | ' | ' |
Investments | ' | ' |
Fair Value | $13,085,150 | $13,629,741 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Level III | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | $27,111,145 | ' |
Level III | Fixed Income | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 1,856,546 | ' |
Level III | Real Assets | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 2,413,447 | ' |
Fair value measured on recurring basis | Level I | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 7,087,491 | 8,663,788 |
Total Assets | 7,087,491 | 8,663,788 |
Liabilities, at fair value: | ' | ' |
Securities Sold Short | 564,963 | 321,977 |
Total Liabilities | 564,963 | 321,977 |
Fair value measured on recurring basis | Level I | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 6,326,503 | 8,015,680 |
Fair value measured on recurring basis | Level I | Real Assets | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 21,286 | ' |
Fair value measured on recurring basis | Level I | Other | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 739,702 | 648,108 |
Fair value measured on recurring basis | Level II | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 5,017,792 | 2,496,870 |
Total Assets | 5,125,219 | 2,640,530 |
Liabilities, at fair value: | ' | ' |
Securities Sold Short | 47,137 | 28,376 |
Unfunded Revolver Commitments | 368 | 2,568 |
Total Liabilities | 321,723 | 267,371 |
Fair value measured on recurring basis | Level II | Foreign Exchange Forward Contracts | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 95,526 | 137,786 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 264,097 | 229,314 |
Fair value measured on recurring basis | Level II | Foreign Currency Options | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 6,741 | 4,992 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 4,913 | 3,362 |
Fair value measured on recurring basis | Level II | Other Derivatives | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 5,160 | 882 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 5,208 | 3,751 |
Fair value measured on recurring basis | Level II | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 1,830,426 | 364,543 |
Fair value measured on recurring basis | Level II | Fixed Income | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 2,990,184 | 1,809,021 |
Fair value measured on recurring basis | Level II | Other | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 197,182 | 323,306 |
Fair value measured on recurring basis | Level III | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 31,624,163 | 29,336,359 |
Total Assets | 31,624,163 | 29,336,359 |
Fair value measured on recurring basis | Level III | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 27,111,145 | 25,734,400 |
Fair value measured on recurring basis | Level III | Fixed Income | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 1,856,546 | 1,587,046 |
Fair value measured on recurring basis | Level III | Real Assets | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 2,413,447 | 1,775,683 |
Fair value measured on recurring basis | Level III | Other | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 243,025 | 239,230 |
Fair value measured on recurring basis | Total | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 43,729,446 | 40,497,017 |
Total Assets | 43,836,873 | 40,640,677 |
Liabilities, at fair value: | ' | ' |
Securities Sold Short | 612,100 | 350,353 |
Unfunded Revolver Commitments | 368 | 2,568 |
Total Liabilities | 886,686 | 589,348 |
Fair value measured on recurring basis | Total | Foreign Exchange Forward Contracts | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 95,526 | 137,786 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 264,097 | 229,314 |
Fair value measured on recurring basis | Total | Foreign Currency Options | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 6,741 | 4,992 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 4,913 | 3,362 |
Fair value measured on recurring basis | Total | Other Derivatives | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 5,160 | 882 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 5,208 | 3,751 |
Fair value measured on recurring basis | Total | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 35,268,074 | 34,114,623 |
Fair value measured on recurring basis | Total | Fixed Income | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 4,846,730 | 3,396,067 |
Fair value measured on recurring basis | Total | Real Assets | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 2,434,733 | 1,775,683 |
Fair value measured on recurring basis | Total | Other | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | $1,179,909 | $1,210,644 |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (Investment, USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Transfers between Level I and Level II | $0 | $0 | $0 | $0 |
Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 29,791,278,000 | 26,521,220,000 | 29,336,359,000 | 23,023,923,000 |
Transfers In | 79,481,000 | 32,076,000 | 88,417,000 | 33,448,000 |
Transfers Out | -925,673,000 | -22,839,000 | -2,095,278,000 | -36,079,000 |
Purchases | 1,778,837,000 | 961,267,000 | 3,892,586,000 | 1,991,752,000 |
Sales | -138,112,000 | -2,447,400,000 | -1,693,555,000 | -2,834,473,000 |
Settlements | 16,002,000 | 12,031,000 | 59,043,000 | 13,439,000 |
Net Realized Gains (Losses) | 17,628,000 | 1,205,662,000 | 663,578,000 | 1,383,836,000 |
Net Unrealized Gains (Losses) | 1,004,722,000 | 717,747,000 | 1,373,013,000 | 3,403,918,000 |
Balance, End of Period | 31,624,163,000 | 26,979,764,000 | 31,624,163,000 | 26,979,764,000 |
Changes in Net Unrealized Gains (Losses) included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign-denominated investments) related to Investments still held at Reporting Date | 1,020,952,000 | 1,681,395,000 | 1,990,863,000 | 4,529,756,000 |
Private Equity | Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 25,992,622,000 | 23,683,081,000 | 25,734,400,000 | 20,384,253,000 |
Transfers Out | -904,039,000 | ' | -1,819,651,000 | ' |
Purchases | 1,071,808,000 | 395,953,000 | 2,346,126,000 | 1,011,162,000 |
Sales | -15,945,000 | -2,383,412,000 | -1,042,698,000 | -2,630,914,000 |
Net Realized Gains (Losses) | 15,945,000 | 1,204,668,000 | 649,534,000 | 1,318,993,000 |
Net Unrealized Gains (Losses) | 950,754,000 | 845,128,000 | 1,243,434,000 | 3,661,924,000 |
Balance, End of Period | 27,111,145,000 | 23,745,418,000 | 27,111,145,000 | 23,745,418,000 |
Changes in Net Unrealized Gains (Losses) included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign-denominated investments) related to Investments still held at Reporting Date | 966,779,000 | 1,806,675,000 | 1,817,352,000 | 4,740,397,000 |
Fixed Income | Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 1,416,016,000 | 1,136,459,000 | 1,587,046,000 | 1,016,759,000 |
Transfers In | 44,503,000 | 32,076,000 | 53,439,000 | 32,387,000 |
Transfers Out | -17,594,000 | -22,839,000 | -252,323,000 | -35,466,000 |
Purchases | 503,140,000 | 319,180,000 | 954,462,000 | 538,043,000 |
Sales | -117,103,000 | -63,797,000 | -534,852,000 | -146,288,000 |
Settlements | 16,002,000 | 12,031,000 | 59,043,000 | 13,439,000 |
Net Realized Gains (Losses) | 2,240,000 | 2,075,000 | -2,683,000 | 10,326,000 |
Net Unrealized Gains (Losses) | 9,342,000 | 40,040,000 | -7,586,000 | 26,025,000 |
Balance, End of Period | 1,856,546,000 | 1,455,225,000 | 1,856,546,000 | 1,455,225,000 |
Changes in Net Unrealized Gains (Losses) included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign-denominated investments) related to Investments still held at Reporting Date | 9,547,000 | 42,141,000 | 980,000 | 32,058,000 |
Real Assets | Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 2,198,427,000 | 1,561,661,000 | 1,775,683,000 | 1,526,732,000 |
Purchases | 167,967,000 | 215,997,000 | 545,424,000 | 396,184,000 |
Sales | ' | ' | -56,275,000 | -54,419,000 |
Net Realized Gains (Losses) | ' | ' | 14,930,000 | 54,419,000 |
Net Unrealized Gains (Losses) | 47,053,000 | -180,268,000 | 133,685,000 | -325,526,000 |
Balance, End of Period | 2,413,447,000 | 1,597,390,000 | 2,413,447,000 | 1,597,390,000 |
Changes in Net Unrealized Gains (Losses) included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign-denominated investments) related to Investments still held at Reporting Date | 47,053,000 | -180,268,000 | 169,051,000 | -284,410,000 |
Other | Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 184,213,000 | 140,019,000 | 239,230,000 | 96,179,000 |
Transfers In | 34,978,000 | ' | 34,978,000 | 1,061,000 |
Transfers Out | -4,040,000 | ' | -23,304,000 | -613,000 |
Purchases | 35,922,000 | 30,137,000 | 46,574,000 | 46,363,000 |
Sales | -5,064,000 | -191,000 | -59,730,000 | -2,852,000 |
Net Realized Gains (Losses) | -557,000 | -1,081,000 | 1,797,000 | 98,000 |
Net Unrealized Gains (Losses) | -2,427,000 | 12,847,000 | 3,480,000 | 41,495,000 |
Balance, End of Period | 243,025,000 | 181,731,000 | 243,025,000 | 181,731,000 |
Changes in Net Unrealized Gains (Losses) included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign-denominated investments) related to Investments still held at Reporting Date | ($2,427,000) | $12,847,000 | $3,480,000 | $41,711,000 |
FAIR_VALUE_MEASUREMENTS_Detail2
FAIR VALUE MEASUREMENTS (Details 3) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Low end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 5.00% |
Level III | Private Equity | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 27,111,145,000 |
Level III | Private Equity | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 6,040,325,000 |
Level III | Private Equity | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 4,256,587,000 |
Level III | Private Equity | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 3,490,811,000 |
Level III | Private Equity | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 3,488,553,000 |
Level III | Private Equity | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 3,339,902,000 |
Level III | Private Equity | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 6,494,967,000 |
Level III | Natural Resources/Infrastructure | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 1,965,734,000 |
Level III | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 447,713,000 |
Level III | Fixed Income | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 1,856,546,000 |
Level III | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Value of investments in real assets whose valuation inputs are not comparable to other private equity investments | 243,000,000 |
Level III | Real Assets | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 2,413,447,000 |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Weighted Average | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 7.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Weighted Average | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 8.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Weighted Average | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 10.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Weighted Average | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 9.00% |
Weight Ascribed to Market Comparables (as a percent) | 46.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 54.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Weighted Average | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 11.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Weighted Average | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 11.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Low end of range | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 5.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Low end of range | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 5.00% |
Weight Ascribed to Market Comparables (as a percent) | 0.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Low end of range | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 5.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Low end of range | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 5.00% |
Weight Ascribed to Market Comparables (as a percent) | 33.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 33.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Low end of range | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 10.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Low end of range | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 10.00% |
Weight Ascribed to Market Comparables (as a percent) | 0.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 0.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | High end of range | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 15.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | High end of range | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 20.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 100.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | High end of range | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 15.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | High end of range | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 15.00% |
Weight Ascribed to Market Comparables (as a percent) | 67.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 67.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | High end of range | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 15.00% |
Weight Ascribed to Market Comparables (as a percent) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | High end of range | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 20.00% |
Weight Ascribed to Market Comparables (as a percent) | 100.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 100.00% |
Level III | Market Comparables | Private Equity | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple, excluded investment | 24 |
Enterprise Value / Forward EBITDA Multiple, excluded investment | 18 |
Level III | Market Comparables | Private Equity | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Maximum percentage of investments that utilize some control premium as a percent of the total investments | 5.00% |
Level III | Market Comparables | Private Equity | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Maximum percentage of investments that utilize some control premium as a percent of the total investments | 5.00% |
Level III | Market Comparables | Private Equity | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Maximum percentage of investments that utilize some control premium as a percent of the total investments | 5.00% |
Level III | Market Comparables | Private Equity | Weighted Average | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 10 |
Enterprise Value / Forward EBITDA Multiple | 10 |
Level III | Market Comparables | Private Equity | Weighted Average | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 10 |
Enterprise Value / Forward EBITDA Multiple | 9 |
Level III | Market Comparables | Private Equity | Weighted Average | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 11 |
Enterprise Value / Forward EBITDA Multiple | 10 |
Control Premium (as a percent) | 2.00% |
Level III | Market Comparables | Private Equity | Weighted Average | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 12 |
Enterprise Value / Forward EBITDA Multiple | 10 |
Control Premium (as a percent) | 2.00% |
Level III | Market Comparables | Private Equity | Weighted Average | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 11 |
Enterprise Value / Forward EBITDA Multiple | 10 |
Level III | Market Comparables | Private Equity | Weighted Average | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 12 |
Enterprise Value / Forward EBITDA Multiple | 11 |
Control Premium (as a percent) | 2.00% |
Level III | Market Comparables | Private Equity | Low end of range | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 9 |
Enterprise Value / Forward EBITDA Multiple | 9 |
Level III | Market Comparables | Private Equity | Low end of range | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 7 |
Enterprise Value / Forward EBITDA Multiple | 7 |
Level III | Market Comparables | Private Equity | Low end of range | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 5 |
Enterprise Value / Forward EBITDA Multiple | 4 |
Control Premium (as a percent) | 0.00% |
Level III | Market Comparables | Private Equity | Low end of range | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 6 |
Enterprise Value / Forward EBITDA Multiple | 6 |
Control Premium (as a percent) | 0.00% |
Level III | Market Comparables | Private Equity | Low end of range | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 8 |
Enterprise Value / Forward EBITDA Multiple | 7 |
Level III | Market Comparables | Private Equity | Low end of range | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 6 |
Enterprise Value / Forward EBITDA Multiple | 6 |
Control Premium (as a percent) | 0.00% |
Level III | Market Comparables | Private Equity | High end of range | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 12 |
Enterprise Value / Forward EBITDA Multiple | 11 |
Level III | Market Comparables | Private Equity | High end of range | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 12 |
Enterprise Value / Forward EBITDA Multiple | 10 |
Portfolio company's investments as a percentage of total investments, at fair value | 0.50% |
Level III | Market Comparables | Private Equity | High end of range | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 13 |
Enterprise Value / Forward EBITDA Multiple | 12 |
Control Premium (as a percent) | 20.00% |
Level III | Market Comparables | Private Equity | High end of range | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 14 |
Enterprise Value / Forward EBITDA Multiple | 12 |
Control Premium (as a percent) | 20.00% |
Level III | Market Comparables | Private Equity | High end of range | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 17 |
Enterprise Value / Forward EBITDA Multiple | 14 |
Level III | Market Comparables | Private Equity | High end of range | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple | 16 |
Enterprise Value / Forward EBITDA Multiple | 13 |
Control Premium (as a percent) | 20.00% |
Level III | Direct Income Capitalization And Discounted Cash Flow | Real Estate | Weighted Average | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weight Ascribed to Discounted Cash Flow (as a percent) | 82.00% |
Weight Ascribed to direct income capitalization (as a percent) | 18.00% |
Level III | Direct Income Capitalization And Discounted Cash Flow | Real Estate | Low end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Weight Ascribed to direct income capitalization (as a percent) | 0.00% |
Level III | Direct Income Capitalization And Discounted Cash Flow | Real Estate | High end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weight Ascribed to Discounted Cash Flow (as a percent) | 100.00% |
Weight Ascribed to direct income capitalization (as a percent) | 50.00% |
Level III | Discounted Cash Flows | Private Equity | Weighted Average | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 9.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 11 |
Level III | Discounted Cash Flows | Private Equity | Weighted Average | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 11.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 8 |
Level III | Discounted Cash Flows | Private Equity | Weighted Average | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 11.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 9 |
Level III | Discounted Cash Flows | Private Equity | Weighted Average | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 13.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 9 |
Level III | Discounted Cash Flows | Private Equity | Weighted Average | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 10.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 10 |
Level III | Discounted Cash Flows | Private Equity | Weighted Average | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 11.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 10 |
Level III | Discounted Cash Flows | Private Equity | Low end of range | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 8.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 9 |
Level III | Discounted Cash Flows | Private Equity | Low end of range | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 8.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 6 |
Level III | Discounted Cash Flows | Private Equity | Low end of range | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 8.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 6 |
Level III | Discounted Cash Flows | Private Equity | Low end of range | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 9.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 6 |
Level III | Discounted Cash Flows | Private Equity | Low end of range | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 8.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 6 |
Level III | Discounted Cash Flows | Private Equity | Low end of range | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 9.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 5 |
Level III | Discounted Cash Flows | Private Equity | High end of range | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 13.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 12 |
Level III | Discounted Cash Flows | Private Equity | High end of range | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 27.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 9 |
Level III | Discounted Cash Flows | Private Equity | High end of range | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 14.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 10 |
Level III | Discounted Cash Flows | Private Equity | High end of range | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 19.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 11 |
Level III | Discounted Cash Flows | Private Equity | High end of range | Consumer Products | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 18.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 11 |
Level III | Discounted Cash Flows | Private Equity | High end of range | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 20.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 12 |
Level III | Discounted Cash Flows | Natural Resources/Infrastructure | Weighted Average | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 11.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 8 |
Level III | Discounted Cash Flows | Natural Resources/Infrastructure | Low end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 6.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 7 |
Level III | Discounted Cash Flows | Natural Resources/Infrastructure | High end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted average cost of capital (as a percent) | 21.00% |
Enterprise Value / Exit Multiple LTM EBITDA | 11 |
Level III | Discounted Cash Flows | Real Estate | Weighted Average | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Unlevered Discount Rate (as a percent) | 12.00% |
Level III | Discounted Cash Flows | Real Estate | Low end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Unlevered Discount Rate (as a percent) | 9.00% |
Level III | Discounted Cash Flows | Real Estate | High end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Unlevered Discount Rate (as a percent) | 23.00% |
Level III | Direct income capitalization | Real Estate | Weighted Average | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Capitalization Rate (as a percent) | 7.00% |
Level III | Direct income capitalization | Real Estate | Low end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Capitalization Rate (as a percent) | 6.00% |
Level III | Direct income capitalization | Real Estate | High end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Capitalization Rate (as a percent) | 8.00% |
Level III | Yield analysis | Fixed Income | Weighted Average | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 8.00% |
Discount Margin (as a percent) | 14.07% |
Yield to maturity (as a percent) | 12.00% |
Net Leverage | 5 |
Level III | Yield analysis | Fixed Income | Low end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 5.00% |
Discount Margin (as a percent) | 6.40% |
Yield to maturity (as a percent) | 8.00% |
Net Leverage | 1 |
Level III | Yield analysis | Fixed Income | High end of range | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 10.00% |
Discount Margin (as a percent) | 14.71% |
Yield to maturity (as a percent) | 24.00% |
Net Leverage | 15 |
Level III | Dealer quotes or third party fund managers | Fixed Income | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 529,700,000 |
NET_INCOME_LOSS_ATTRIBUTABLE_T2
NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Net Income (Loss) Attributable to KKR & Co. L.P. | ' | ' | ' | ' |
Basic | $204,740 | $127,411 | $413,313 | $464,108 |
Diluted | $204,740 | $127,411 | $413,313 | $464,108 |
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit | ' | ' | ' | ' |
Basic (in dollars per unit) | $0.73 | $0.53 | $1.53 | $1.98 |
Diluted (in dollars per unit) | $0.66 | $0.49 | $1.40 | $1.86 |
Weighted-Average Common Units Outstanding | ' | ' | ' | ' |
Basic (in units) | 282,148,802 | 239,696,358 | 270,484,224 | 234,876,879 |
Diluted (in units) | 308,135,191 | 257,646,622 | 296,181,070 | 249,359,200 |
OTHER_ASSETS_AND_ACCOUNTS_PAYA2
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 |
Other assets | ' | ' | ' | ' | ' |
Due from Broker | $572,551 | ' | $572,551 | ' | $189,202 |
Interest and Notes Receivable | 410,786 | ' | 410,786 | ' | 469,456 |
Unsettled Investment Sales | 267,397 | ' | 267,397 | ' | 90,666 |
Intangible Assets, net | 182,529 | ' | 182,529 | ' | 197,484 |
Deferred Tax Assets, net | 172,680 | ' | 172,680 | ' | 105,654 |
Oil & Gas Assets, net | 151,526 | ' | 151,526 | ' | ' |
Goodwill | 89,000 | ' | 89,000 | ' | 89,000 |
Fixed Assets, net | 77,842 | ' | 77,842 | ' | 79,570 |
Receivables | 31,457 | ' | 31,457 | ' | 267,126 |
Deferred Financing Costs | 23,179 | ' | 23,179 | ' | 20,918 |
Prepaid Taxes | 20,595 | ' | 20,595 | ' | 706 |
Deferred Transaction Costs | 18,540 | ' | 18,540 | ' | 14,633 |
Prepaid Expenses | 11,279 | ' | 11,279 | ' | 11,373 |
Refundable Security Deposits | 7,046 | ' | 7,046 | ' | 7,428 |
Other | 29,925 | ' | 29,925 | ' | 15,061 |
Total Other Assets | 2,168,599 | ' | 2,168,599 | ' | 1,701,055 |
Interest rate on promissory notes, low end of range (as a percent) | ' | ' | 1.50% | ' | ' |
Interest rate on promissory notes, high end of range (as a percent) | ' | ' | 3.00% | ' | ' |
Intangible assets, accumulated amortization | 36,357 | ' | 36,357 | ' | 21,402 |
Intangible assets, amortization expense | 4,985 | 947 | 14,955 | 2,841 | ' |
Accumulated depreciation and amortization | 102,995 | ' | 102,995 | ' | 92,467 |
Depreciation and amortization expense | 3,619 | 3,157 | 11,042 | 8,987 | ' |
Foreign currency contract cost basis | 2,332 | ' | 2,332 | ' | 2,332 |
Accounts Payable, Accrued Expenses and Other Liabilities | ' | ' | ' | ' | ' |
Amounts Payable to Carry Pool | 927,082 | ' | 927,082 | ' | 776,750 |
Securities Sold Short | 612,100 | ' | 612,100 | ' | 350,353 |
Unsettled Investment Purchases | 227,191 | ' | 227,191 | ' | 172,583 |
Accounts Payable and Accrued Expenses | 156,493 | ' | 156,493 | ' | 97,389 |
Accrued Compensation and Benefits | 154,249 | ' | 154,249 | ' | 17,265 |
Contingent Consideration Obligation | 93,400 | ' | 93,400 | ' | 71,300 |
Due to Broker | 39,601 | ' | 39,601 | ' | 49,204 |
Deferred Rent and Income | 28,247 | ' | 28,247 | ' | 19,228 |
Interest Payable | 8,189 | ' | 8,189 | ' | 11,746 |
Taxes Payable | 3,965 | ' | 3,965 | ' | 9,250 |
Other Liabilities | 8,349 | ' | 8,349 | ' | 16,911 |
Total accounts payable, accrued expenses and other liabilities | 2,527,876 | ' | 2,527,876 | ' | 1,824,655 |
Securities sold, not yet purchased, cost basis | 591,072 | ' | 591,072 | ' | 343,440 |
Cost basis for instruments | 37,914,488 | ' | 37,914,488 | ' | 36,647,369 |
Foreign Exchange Contracts | ' | ' | ' | ' | ' |
Other assets | ' | ' | ' | ' | ' |
Foreign currency contract assets | 95,526 | ' | 95,526 | ' | 137,786 |
Accounts Payable, Accrued Expenses and Other Liabilities | ' | ' | ' | ' | ' |
Foreign currency contract liabilities | 264,097 | ' | 264,097 | ' | 229,314 |
Foreign Exchange Options | ' | ' | ' | ' | ' |
Other assets | ' | ' | ' | ' | ' |
Foreign currency contract assets | 6,741 | ' | 6,741 | ' | 4,992 |
Accounts Payable, Accrued Expenses and Other Liabilities | ' | ' | ' | ' | ' |
Foreign currency contract liabilities | 4,913 | ' | 4,913 | ' | 3,362 |
Cost basis for instruments | $0 | ' | $0 | ' | $0 |
DEBT_OBLIGATIONS_Details
DEBT OBLIGATIONS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Feb. 01, 2013 | Mar. 31, 2013 | Sep. 30, 2013 | Jul. 31, 2013 | Sep. 30, 2013 |
Investment Financing Arrangements | Investment Financing Arrangements | Revolving Credit Arrangements | Revolving Credit Arrangements | Senior Notes | Senior Notes | 2020 Senior Notes | 2020 Senior Notes | 2043 Senior Notes | 2043 Senior Notes | Special Situations Investment Credit Agreement | Special Situations Investment Credit Agreement | Real Estate Partners Americas Credit Agreement | Real Estate Partners Americas Credit Agreement | |||
Debt obligations | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Carrying Value | $2,027,116,000 | $1,123,414,000 | $1,034,165,000 | $625,026,000 | ' | ' | $992,951,000 | $498,388,000 | $498,544,000 | $498,388,000 | $494,407,000 | ' | ' | ' | ' | ' |
Fair value | ' | ' | ' | ' | ' | ' | 997,550,000 | 579,200,000 | 575,000,000 | 579,200,000 | 422,550,000 | ' | ' | ' | ' | ' |
Line of credit facility available borrowing capacity | ' | ' | 353,640,000 | 377,055,000 | 1,250,000,000 | 1,250,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 97,600,000 | ' | 58,200,000 |
Principal amount | ' | ' | ' | ' | ' | ' | ' | ' | 500,000,000 | ' | 500,000,000 | 500,000,000 | ' | ' | ' | ' |
Interest rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | 6.38% | ' | 5.50% | 5.50% | ' | ' | ' | ' |
Weighted average interest rate (as a percent) | ' | ' | 2.80% | 3.09% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average maturity period | ' | ' | '2 years | '3 years 2 months 12 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of par value at which debt was issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 98.86% | ' | ' | ' | ' |
Minimum percentage of aggregate principal amount held by trustee or holders to declare notes due and payable | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 25.00% | ' | ' | ' | ' | ' |
Percentage of principal amount at which notes are subject to repurchase in event of change of control | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 101.00% | ' | ' | ' | ' | ' |
Maximum borrowing capacity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 75,000,000 | 175,000,000 | 150,000,000 | ' |
Term of revolving credit agreement | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '3 years | ' | '4 years | ' |
Optional expansion, maximum borrowing capacity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $300,000,000 | ' |
Variable interest rate base | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 'LIBOR | ' | 'LIBOR | ' |
Percentage points added to the reference rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1.60% | ' | 1.60% | ' |
Interest rate on outstanding borrowings (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1.80% | ' | 1.80% |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
INCOME TAXES | ' | ' | ' | ' |
Effective income tax rate (as a percent) | 0.35% | 0.46% | 0.55% | 0.57% |
Material changes to uncertain tax positions | $0 | ' | $0 | ' |
Material changes to uncertain tax positions within 12 months of the reporting date | $0 | ' | $0 | ' |
EQUITY_BASED_COMPENSATION_Deta
EQUITY BASED COMPENSATION (Details) (Compensation and Benefits, USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | $85,215 | $122,157 | $247,183 | $330,037 |
Equity Incentive Plan Units | ' | ' | ' | ' |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | 31,227 | 17,366 | 84,581 | 47,678 |
KKR Holdings Principal Awards | ' | ' | ' | ' |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | 33,740 | 68,309 | 85,309 | 202,977 |
KKR Holdings Restricted Equity Units | ' | ' | ' | ' |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | 765 | 4,346 | 3,173 | 8,650 |
Discretionary Compensation | ' | ' | ' | ' |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | $19,483 | $32,136 | $74,120 | $70,732 |
EQUITY_BASED_COMPENSATION_Deta1
EQUITY BASED COMPENSATION (Details 2) (USD $) | 9 Months Ended |
In Millions, except Share data, unless otherwise specified | Sep. 30, 2013 |
portionofaward | |
Equity Incentive Plan | ' |
Equity Based Payments | ' |
Minimum transfer restriction period with respect to one-half awards vested | '1 year |
Portion of awards vested having one-year transfer restriction period | 0.5 |
Minimum transfer restriction period with respect to remaining one-half awards vested | '2 years |
Portion of awards vested having two-year transfer restriction period | 0.5 |
Maximum forfeiture rate assumed (as a percent) | 4.00% |
Estimated unrecognized equity-based payment expense | $184.30 |
Weighted-average period for recognition of cost | '1 year 3 months 18 days |
Units | ' |
Balance at the beginning of the period (in units) | 17,920,926 |
Granted (in units) | 11,646,952 |
Vested (in units) | -2,953,853 |
Forfeited (in units) | -671,715 |
Balance at the end of the period (in units) | 25,942,310 |
Weighted Average Grant Date Fair Value | ' |
Balance at the beginning of the period (in dollars per unit) | $9.11 |
Granted (in dollars per unit) | $12.08 |
Vested (in dollars per unit) | $11.32 |
Forfeited (in dollars per unit) | $9.61 |
Balance at the end of the period (in dollars per unit) | $10.18 |
Weighted average remaining vesting period over which unvested units are expected to vest | '1 year 6 months |
Total awards issuable as a percentage of diluted common units outstanding | 15.00% |
Number of common units granted to date (in units) | 33,625,057 |
Minimum retained ownership required to continuously hold common unit equivalents to as percentage of cumulatively vested interests | 15.00% |
Equity Incentive Plan | Minimum | ' |
Equity Based Payments | ' |
Vesting period | '3 years |
Discount rate (as a percent) | 7.00% |
Equity Incentive Plan | Maximum | ' |
Equity Based Payments | ' |
Vesting period | '5 years |
Discount rate (as a percent) | 52.00% |
Principals' equity based awards | ' |
Units | ' |
Balance at the end of the period (in units) | 62,218,404 |
Restricted Equity Units | ' |
Units | ' |
Balance at the end of the period (in units) | 840,793 |
KKR Holdings L.P. | Principals' equity based awards | ' |
Equity Based Payments | ' |
Common units conversion basis | 1 |
Ownership percentage in KKR Group Partnership Units | 58.70% |
Number of common units owned in KKR Group Partnership Units (in units) | 404,744,018 |
Minimum transfer restriction period with respect to one-half awards vested | '1 year |
Portion of awards vested having one-year transfer restriction period | 0.5 |
Minimum transfer restriction period with respect to remaining one-half awards vested | '2 years |
Portion of awards vested having two-year transfer restriction period | 0.5 |
Minimum retained ownership requirement (as a percent) | 25.00% |
Allocation of awards not communicated to principals (in units) | 30,556,806 |
Maximum forfeiture rate assumed (as a percent) | 4.00% |
Estimated unrecognized equity-based payment expense | 66.7 |
Weighted-average period for recognition of cost | '8 months 12 days |
Units | ' |
Balance at the beginning of the period (in units) | 64,569,667 |
Granted (in units) | 1,761,382 |
Vested (in units) | -1,302,727 |
Forfeited (in units) | -2,809,918 |
Balance at the end of the period (in units) | 62,218,404 |
Weighted Average Grant Date Fair Value | ' |
Balance at the beginning of the period (in dollars per unit) | $7.42 |
Granted (in dollars per unit) | $12.07 |
Vested (in dollars per unit) | $11.50 |
Forfeited (in dollars per unit) | $7.18 |
Balance at the end of the period (in dollars per unit) | $7.48 |
Weighted average remaining vesting period over which unvested units are expected to vest | '7 months 6 days |
KKR Holdings L.P. | Principals' equity based awards | Minimum | ' |
Equity Based Payments | ' |
Vesting period | '3 years |
Percentage of units vested on fulfillment of performance-based vesting conditions | 0.00% |
Discount rate (as a percent) | 7.00% |
KKR Holdings L.P. | Principals' equity based awards | Maximum | ' |
Equity Based Payments | ' |
Vesting period | '5 years |
Percentage of units vested on fulfillment of performance-based vesting conditions | 100.00% |
Discount rate (as a percent) | 52.00% |
KKR Holdings L.P. | Restricted Equity Units | ' |
Equity Based Payments | ' |
Maximum forfeiture rate assumed (as a percent) | 4.00% |
Estimated unrecognized equity-based payment expense | $1.80 |
Weighted-average period for recognition of cost | '7 months 6 days |
Units | ' |
Balance at the beginning of the period (in units) | 1,064,712 |
Vested (in units) | -200,341 |
Forfeited (in units) | -23,578 |
Balance at the end of the period (in units) | 840,793 |
Weighted Average Grant Date Fair Value | ' |
Balance at the beginning of the period (in dollars per unit) | $12.03 |
Vested (in dollars per unit) | $13.72 |
Forfeited (in dollars per unit) | $14.20 |
Balance at the end of the period (in dollars per unit) | $11.57 |
Weighted average remaining vesting period over which unvested units are expected to vest | '8 months 12 days |
KKR Holdings L.P. | Restricted Equity Units | Minimum | ' |
Equity Based Payments | ' |
Vesting period | '3 years |
KKR Holdings L.P. | Restricted Equity Units | Maximum | ' |
Equity Based Payments | ' |
Vesting period | '5 years |
EQUITY_BASED_COMPENSATION_Deta2
EQUITY BASED COMPENSATION (Details 3) | Sep. 30, 2013 | Dec. 31, 2012 |
Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 25,942,310 | 17,920,926 |
Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 62,218,404 | ' |
Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 840,793 | ' |
October 1, 2013 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 3,759,732 | ' |
October 1, 2013 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 27,928,684 | ' |
October 1, 2013 | Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 259,411 | ' |
April 1, 2014 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 4,550,214 | ' |
April 1, 2014 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 1,244,528 | ' |
April 1, 2014 | Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 164,579 | ' |
October 1, 2014 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 4,324,538 | ' |
October 1, 2014 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 27,959,323 | ' |
October 1, 2014 | Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 252,751 | ' |
April 1, 2015 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 4,381,402 | ' |
April 1, 2015 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 1,244,581 | ' |
April 1, 2015 | Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 138,521 | ' |
October 1, 2015 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 3,347,091 | ' |
October 1, 2015 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 2,281,657 | ' |
October 1, 2015 | Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 25,531 | ' |
April 1, 2016 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 2,160,645 | ' |
April 1, 2016 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 82,429 | ' |
October 1, 2016 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 2,121,415 | ' |
October 1, 2016 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 1,320,909 | ' |
April 1, 2017 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 84,189 | ' |
April 1, 2017 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 30,000 | ' |
October 1, 2017 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 480,987 | ' |
October 1, 2017 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 111,293 | ' |
April 1, 2018 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 6,917 | ' |
April 1, 2018 | Principals' equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 15,000 | ' |
October 1, 2018 | Equity Incentive Plan | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 725,180 | ' |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
KKR Principals | KKR Principals | KKR Principals | KKR Principals | Related Entities | Related Entities | Portfolio Companies | Portfolio Companies | KKR Holdings L.P. | KKR Holdings L.P. | KFN | KFN | KFN | Professionals, including principals and other qualifying employees | Professionals, including principals and other qualifying employees | Professionals, including principals and other qualifying employees | Professionals, including principals and other qualifying employees | Real-estate based partnership | Real-estate based partnership | Real-estate based partnership | Real-estate based partnership | ||||
Maximum | ||||||||||||||||||||||||
Related Party Transactions | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Due from Affiliates | $133,746,000 | $122,185,000 | ' | ' | ' | ' | ' | $67,444,000 | $73,357,000 | $66,302,000 | $48,828,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Due to Affiliates | 96,772,000 | 72,830,000 | ' | ' | ' | ' | ' | ' | 2,455,000 | ' | ' | 96,772,000 | 70,375,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated assets | 48,160,051,000 | 44,426,353,000 | 43,648,620,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 8,500,000,000 | 8,400,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shareholders' equity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,500,000,000 | 1,800,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of shares held in affiliate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ownership percentage in affiliate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.10% | ' | ' | ' | ' | ' | ' | ' | ' |
Ownership percentage in affiliate if all vested options were exercised | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.30% | 0.35% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Discretionary Investments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash investment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 96,000,000 | 16,500,000 | 226,400,000 | 71,100,000 | ' | ' | ' | ' |
Aircraft and Other Services | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Expenses incurred for the use of aircraft | ' | ' | ' | 900,000 | 700,000 | 2,300,000 | 3,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Facilities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Payments made to partnership | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1,800,000 | $1,700,000 | $5,400,000 | $5,100,000 |
SEGMENT_REPORTING_Details
SEGMENT REPORTING (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 |
item | |||||
SEGMENT REPORTING | ' | ' | ' | ' | ' |
Number of reportable segments of the entity | ' | ' | 3 | ' | ' |
Management and incentive fees: | ' | ' | ' | ' | ' |
Incentive fees | $438 | $17,768 | $34,691 | $31,495 | ' |
Monitoring and transaction fees: | ' | ' | ' | ' | ' |
Total fees | 220,028 | 162,154 | 537,644 | 390,821 | ' |
Expenses | ' | ' | ' | ' | ' |
Compensation and benefits | 329,182 | 366,350 | 860,905 | 1,019,400 | ' |
Occupancy and related charges | 17,637 | 14,344 | 46,036 | 43,636 | ' |
Total Expenses | 455,495 | 446,519 | 1,186,847 | 1,240,516 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Total Investment Income (Loss) | 2,441,265 | 2,396,763 | 5,248,326 | 7,467,376 | ' |
Income (loss) before noncontrolling interests in income of consolidated entities | 2,205,798 | 2,112,398 | 4,599,123 | 6,617,681 | ' |
Income (loss) attributable to noncontrolling interests | 1,984,245 | 1,965,381 | 4,134,293 | 6,097,245 | ' |
Allocation of economic net income (loss) | ' | ' | ' | ' | ' |
Total Assets | 48,160,051 | 43,648,620 | 48,160,051 | 43,648,620 | 44,426,353 |
Book Value | 2,495,093 | 1,842,531 | 2,495,093 | 1,842,531 | ' |
Fee Credits as a percentage of monitoring and transaction fees net of fund-related expenses | 80.00% | 80.00% | 80.00% | 80.00% | ' |
Maximum | ' | ' | ' | ' | ' |
Allocation of economic net income (loss) | ' | ' | ' | ' | ' |
Percentage of cash management fees to be refunded if carried interest is recognized | 20.00% | 20.00% | 20.00% | 20.00% | ' |
Reduction in carried interest as percentage of cash management fees on recognition of carried interest | 20.00% | 20.00% | 20.00% | 20.00% | ' |
Reportable segments | ' | ' | ' | ' | ' |
Management and incentive fees: | ' | ' | ' | ' | ' |
Management fees | 173,245 | 126,483 | 490,384 | 384,752 | ' |
Incentive fees | 1,225 | 17,768 | 35,664 | 31,495 | ' |
Management and incentive fees | 174,470 | 144,251 | 526,048 | 416,247 | ' |
Monitoring and transaction fees: | ' | ' | ' | ' | ' |
Monitoring fees | 33,010 | 29,969 | 93,985 | 83,577 | ' |
Transaction fees | 129,127 | 75,264 | 232,211 | 163,268 | ' |
Fee credits | -61,782 | -31,707 | -119,598 | -67,739 | ' |
Net monitoring and transaction fees | 100,355 | 73,526 | 206,598 | 179,106 | ' |
Total fees | 274,825 | 217,777 | 732,646 | 595,353 | ' |
Expenses | ' | ' | ' | ' | ' |
Compensation and benefits | 92,229 | 71,340 | 247,827 | 196,810 | ' |
Occupancy and related charges | 15,674 | 13,605 | 42,063 | 41,305 | ' |
Other operating expenses | 60,884 | 42,128 | 150,541 | 123,406 | ' |
Total Expenses | 168,787 | 127,073 | 440,431 | 361,521 | ' |
Fee related earnings | 106,038 | 90,704 | 292,215 | 233,832 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Realized carried interest | 81,532 | 166,908 | 439,527 | 307,387 | ' |
Unrealized carried interest | 278,004 | 243,828 | 407,184 | 855,587 | ' |
Gross carried interest | 359,536 | 410,736 | 846,711 | 1,162,974 | ' |
Less: Allocation to KKR carry pool | -145,512 | -169,633 | -341,552 | -473,692 | ' |
Less: Management fee refunds | -7,767 | -61,499 | -21,718 | -135,011 | ' |
Net carried interest | 206,257 | 179,604 | 483,441 | 554,271 | ' |
Other investment income (loss) | 303,472 | 240,876 | 634,720 | 1,000,886 | ' |
Total Investment Income (Loss) | 509,729 | 420,480 | 1,118,161 | 1,555,157 | ' |
Income (loss) before noncontrolling interests in income of consolidated entities | 615,767 | 511,184 | 1,410,376 | 1,788,989 | ' |
Income (loss) attributable to noncontrolling interests | 2,020 | 1,310 | 4,444 | 5,798 | ' |
Economic net income (loss) | 613,747 | 509,874 | 1,405,932 | 1,783,191 | ' |
Allocation of economic net income (loss) | ' | ' | ' | ' | ' |
Total Assets | 8,515,044 | 7,587,258 | 8,515,044 | 7,587,258 | ' |
Book Value | 7,207,748 | 6,894,781 | 7,207,748 | 6,894,781 | ' |
Reportable segments | Private Markets | ' | ' | ' | ' | ' |
Management and incentive fees: | ' | ' | ' | ' | ' |
Management fees | 119,410 | 105,035 | 340,715 | 319,117 | ' |
Management and incentive fees | 119,410 | 105,035 | 340,715 | 319,117 | ' |
Monitoring and transaction fees: | ' | ' | ' | ' | ' |
Monitoring fees | 33,010 | 29,969 | 93,985 | 83,577 | ' |
Transaction fees | 54,968 | 32,788 | 96,611 | 55,223 | ' |
Fee credits | -46,597 | -26,293 | -97,153 | -59,641 | ' |
Net monitoring and transaction fees | 41,381 | 36,464 | 93,443 | 79,159 | ' |
Total fees | 160,791 | 141,499 | 434,158 | 398,276 | ' |
Expenses | ' | ' | ' | ' | ' |
Compensation and benefits | 65,400 | 48,905 | 164,917 | 139,382 | ' |
Occupancy and related charges | 13,367 | 12,049 | 35,935 | 36,487 | ' |
Other operating expenses | 37,586 | 35,885 | 105,516 | 103,790 | ' |
Total Expenses | 116,353 | 96,839 | 306,368 | 279,659 | ' |
Fee related earnings | 44,438 | 44,660 | 127,790 | 118,617 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Realized carried interest | 81,532 | 166,908 | 439,527 | 307,387 | ' |
Unrealized carried interest | 263,982 | 224,260 | 361,972 | 830,072 | ' |
Gross carried interest | 345,514 | 391,168 | 801,499 | 1,137,459 | ' |
Less: Allocation to KKR carry pool | -139,903 | -161,805 | -323,467 | -463,485 | ' |
Less: Management fee refunds | -7,767 | -61,499 | -21,718 | -135,011 | ' |
Net carried interest | 197,844 | 167,864 | 456,314 | 538,963 | ' |
Other investment income (loss) | 3,357 | 1,779 | 1,073 | -559 | ' |
Total Investment Income (Loss) | 201,201 | 169,643 | 457,387 | 538,404 | ' |
Income (loss) before noncontrolling interests in income of consolidated entities | 245,639 | 214,303 | 585,177 | 657,021 | ' |
Income (loss) attributable to noncontrolling interests | 433 | 444 | 1,242 | 3,098 | ' |
Economic net income (loss) | 245,206 | 213,859 | 583,935 | 653,923 | ' |
Allocation of economic net income (loss) | ' | ' | ' | ' | ' |
Total Assets | 1,456,008 | 1,228,471 | 1,456,008 | 1,228,471 | ' |
Book Value | 1,311,513 | 1,104,611 | 1,311,513 | 1,104,611 | ' |
Reportable segments | Public Markets | ' | ' | ' | ' | ' |
Management and incentive fees: | ' | ' | ' | ' | ' |
Management fees | 53,835 | 21,448 | 149,669 | 65,635 | ' |
Incentive fees | 1,225 | 17,768 | 35,664 | 31,495 | ' |
Management and incentive fees | 55,060 | 39,216 | 185,333 | 97,130 | ' |
Monitoring and transaction fees: | ' | ' | ' | ' | ' |
Transaction fees | 20,534 | 8,780 | 30,883 | 12,521 | ' |
Fee credits | -15,185 | -5,414 | -22,445 | -8,098 | ' |
Net monitoring and transaction fees | 5,349 | 3,366 | 8,438 | 4,423 | ' |
Total fees | 60,409 | 42,582 | 193,771 | 101,553 | ' |
Expenses | ' | ' | ' | ' | ' |
Compensation and benefits | 18,606 | 13,997 | 60,296 | 34,608 | ' |
Occupancy and related charges | 1,906 | 1,343 | 5,063 | 4,127 | ' |
Other operating expenses | 19,670 | 3,897 | 36,643 | 11,754 | ' |
Total Expenses | 40,182 | 19,237 | 102,002 | 50,489 | ' |
Fee related earnings | 20,227 | 23,345 | 91,769 | 51,064 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Unrealized carried interest | 14,022 | 19,568 | 45,212 | 25,515 | ' |
Gross carried interest | 14,022 | 19,568 | 45,212 | 25,515 | ' |
Less: Allocation to KKR carry pool | -5,609 | -7,828 | -18,085 | -10,207 | ' |
Net carried interest | 8,413 | 11,740 | 27,127 | 15,308 | ' |
Other investment income (loss) | -4 | 25 | 80 | -10 | ' |
Total Investment Income (Loss) | 8,409 | 11,765 | 27,207 | 15,298 | ' |
Income (loss) before noncontrolling interests in income of consolidated entities | 28,636 | 35,110 | 118,976 | 66,362 | ' |
Income (loss) attributable to noncontrolling interests | 202 | 233 | 935 | 787 | ' |
Economic net income (loss) | 28,434 | 34,877 | 118,041 | 65,575 | ' |
Allocation of economic net income (loss) | ' | ' | ' | ' | ' |
Total Assets | 382,423 | 112,664 | 382,423 | 112,664 | ' |
Book Value | 330,073 | 82,820 | 330,073 | 82,820 | ' |
Equity ownership in the business (as a percent) | 1.00% | 1.00% | 1.00% | 1.00% | ' |
Reportable segments | Capital Markets and Principal Activities | ' | ' | ' | ' | ' |
Monitoring and transaction fees: | ' | ' | ' | ' | ' |
Transaction fees | 53,625 | 33,696 | 104,717 | 95,524 | ' |
Net monitoring and transaction fees | 53,625 | 33,696 | 104,717 | 95,524 | ' |
Total fees | 53,625 | 33,696 | 104,717 | 95,524 | ' |
Expenses | ' | ' | ' | ' | ' |
Compensation and benefits | 8,223 | 8,438 | 22,614 | 22,820 | ' |
Occupancy and related charges | 401 | 213 | 1,065 | 691 | ' |
Other operating expenses | 3,628 | 2,346 | 8,382 | 7,862 | ' |
Total Expenses | 12,252 | 10,997 | 32,061 | 31,373 | ' |
Fee related earnings | 41,373 | 22,699 | 72,656 | 64,151 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Other investment income (loss) | 300,119 | 239,072 | 633,567 | 1,001,455 | ' |
Total Investment Income (Loss) | 300,119 | 239,072 | 633,567 | 1,001,455 | ' |
Income (loss) before noncontrolling interests in income of consolidated entities | 341,492 | 261,771 | 706,223 | 1,065,606 | ' |
Income (loss) attributable to noncontrolling interests | 1,385 | 633 | 2,267 | 1,913 | ' |
Economic net income (loss) | 340,107 | 261,138 | 703,956 | 1,063,693 | ' |
Allocation of economic net income (loss) | ' | ' | ' | ' | ' |
Total Assets | 6,676,613 | 6,246,123 | 6,676,613 | 6,246,123 | ' |
Book Value | $5,566,162 | $5,707,350 | $5,566,162 | $5,707,350 | ' |
SEGMENT_REPORTING_Details_2
SEGMENT REPORTING (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 |
Reconciliation from reportable segments to condensed consolidated financial statements | ' | ' | ' | ' | ' |
Fees | $220,028 | $162,154 | $537,644 | $390,821 | ' |
Expenses | 455,495 | 446,519 | 1,186,847 | 1,240,516 | ' |
Investment income (loss) | 2,441,265 | 2,396,763 | 5,248,326 | 7,467,376 | ' |
Income (loss) before taxes | 2,205,798 | 2,112,398 | 4,599,123 | 6,617,681 | ' |
Income (loss) attributable to redeemable noncontrolling interests | 9,169 | 9,994 | 25,992 | 18,551 | ' |
Income (loss) attributable to noncontrolling interests | 1,984,245 | 1,965,381 | 4,134,293 | 6,097,245 | ' |
Total Assets | 48,160,051 | 43,648,620 | 48,160,051 | 43,648,620 | 44,426,353 |
Book Value | 2,495,093 | 1,842,531 | 2,495,093 | 1,842,531 | ' |
Reportable segments | ' | ' | ' | ' | ' |
Reconciliation from reportable segments to condensed consolidated financial statements | ' | ' | ' | ' | ' |
Fees | 274,825 | 217,777 | 732,646 | 595,353 | ' |
Expenses | 168,787 | 127,073 | 440,431 | 361,521 | ' |
Investment income (loss) | 509,729 | 420,480 | 1,118,161 | 1,555,157 | ' |
Income (loss) before taxes | 615,767 | 511,184 | 1,410,376 | 1,788,989 | ' |
Income (loss) attributable to noncontrolling interests | 2,020 | 1,310 | 4,444 | 5,798 | ' |
Total Assets | 8,515,044 | 7,587,258 | 8,515,044 | 7,587,258 | ' |
Book Value | 7,207,748 | 6,894,781 | 7,207,748 | 6,894,781 | ' |
Adjustments | ' | ' | ' | ' | ' |
Reconciliation from reportable segments to condensed consolidated financial statements | ' | ' | ' | ' | ' |
Fees | -54,797 | -55,623 | -195,002 | -204,532 | ' |
Expenses | 286,708 | 319,446 | 746,416 | 878,995 | ' |
Investment income (loss) | 1,931,536 | 1,976,283 | 4,130,165 | 5,912,219 | ' |
Income (loss) before taxes | 1,590,031 | 1,601,214 | 3,188,747 | 4,828,692 | ' |
Income (loss) attributable to redeemable noncontrolling interests | 9,169 | 9,994 | 25,992 | 18,551 | ' |
Income (loss) attributable to noncontrolling interests | 1,982,225 | 1,964,071 | 4,129,849 | 6,091,447 | ' |
Total Assets | 39,645,007 | 36,061,362 | 39,645,007 | 36,061,362 | ' |
Book Value | -4,712,655 | -5,052,250 | -4,712,655 | -5,052,250 | ' |
Adjustments | ' | ' | ' | ' | ' |
Elimination of management fees upon consolidation of KKR funds and vehicles | 127,458 | 105,413 | 357,607 | 322,911 | ' |
Elimination of Fee Credits upon consolidation of KKR funds and vehicles | 48,641 | 30,611 | 103,070 | 65,761 | ' |
Reimbursable expenses included upon consolidation of KKR funds and vehicles | 10,145 | 8,783 | 25,586 | 17,369 | ' |
Other eliminations upon consolidation of KKR funds and vehicles | 13,875 | 10,396 | 33,949 | 35,249 | ' |
Inclusion of non-cash equity based charges | 85,215 | 122,157 | 247,183 | 330,037 | ' |
Exclusion of allocations to carry pool | 145,512 | 169,633 | 341,552 | 473,692 | ' |
Gross up of reimbursable expenses | 15,516 | 11,221 | 35,029 | 25,096 | ' |
Inclusion of operating expenses upon consolidation of KKR funds and vehicles | 22,706 | 13,492 | 57,997 | 39,102 | ' |
Inclusion of compensation | 2,807 | ' | 5,512 | ' | ' |
Other adjustments to expenses | 14,952 | 2,943 | 59,143 | 11,068 | ' |
Inclusion of investment income attributable to noncontrolling interests upon consolidation of KKR funds and vehicles | 1,775,450 | 1,745,151 | 3,761,383 | 5,303,516 | ' |
Exclusion of allocations to carry pool | 145,512 | 169,633 | 341,552 | 473,692 | ' |
Exclusion of management fee refunds | 7,767 | 61,499 | 21,718 | 135,011 | ' |
Exclusion of compensation and general and administrative expenses | 2,807 | ' | 5,512 | ' | ' |
Exclusion of noncontrolling interest held by KKR holdings | 4,796,218 | 5,044,473 | 4,796,218 | 5,044,473 | ' |
Adjustment related to equity impact of KKR Management Holding Corp. equity and other | $83,563 | $7,777 | $83,563 | $7,777 | ' |
SEGMENT_REPORTING_Details_3
SEGMENT REPORTING (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Reconciliation from reportable segments to condensed consolidated financial statements | ' | ' | ' | ' |
Net income (loss) attributable to KKR & Co. L.P. | $204,740 | $127,411 | $413,313 | $464,108 |
Plus: Equity based compensation | ' | ' | 247,183 | 330,037 |
Plus: Income taxes | 7,644 | 9,612 | 25,525 | 37,777 |
Income (loss) attributable to noncontrolling interests | 1,984,245 | 1,965,381 | 4,134,293 | 6,097,245 |
Less: Investment income (loss) | 2,441,265 | 2,396,763 | 5,248,326 | 7,467,376 |
Reportable segments | ' | ' | ' | ' |
Reconciliation from reportable segments to condensed consolidated financial statements | ' | ' | ' | ' |
Net income (loss) attributable to KKR & Co. L.P. | 204,740 | 127,411 | 413,313 | 464,108 |
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 300,169 | 249,460 | 662,387 | 946,484 |
Plus: Equity based compensation | 85,215 | 122,157 | 247,183 | 330,037 |
Plus: Amortization of intangibles and other, net | 15,979 | 1,234 | 57,524 | 4,785 |
Plus: Income taxes | 7,644 | 9,612 | 25,525 | 37,777 |
Economic net income (loss) | 613,747 | 509,874 | 1,405,932 | 1,783,191 |
Income (loss) attributable to noncontrolling interests | 2,020 | 1,310 | 4,444 | 5,798 |
Less: Investment income (loss) | 509,729 | 420,480 | 1,118,161 | 1,555,157 |
Fee related earnings | $106,038 | $90,704 | $292,215 | $233,832 |
ACQUISITIONS_Details
ACQUISITIONS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Oct. 02, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 |
Prisma | Prisma | Prisma | Prisma | |||
Minimum | Maximum | |||||
Acquisitions | ' | ' | ' | ' | ' | ' |
Initial cash consideration transferred | ' | ' | $200,000,000 | ' | ' | ' |
Fair Value of Assets Acquired and Liabilities Assumed: | ' | ' | ' | ' | ' | ' |
Fair Value of Contingent Consideration | 93,400,000 | 71,300,000 | ' | 93,400,000 | ' | ' |
Present value of undiscounted cash flows | ' | ' | ' | ' | $0 | $155,000,000 |
Discount rate (as a percent) | ' | ' | ' | ' | 2.10% | 3.10% |
GOODWILL_AND_INTANGIBLE_ASSETS2
GOODWILL AND INTANGIBLE ASSETS (Details) (USD $) | 9 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 |
GOODWILL AND INTANGIBLE ASSETS | ' | ' |
Carrying value of goodwill | $89,000 | $89,000 |
Intangible Assets, Net consists of the following: | ' | ' |
Finite - Lived Intangible Assets | 218,886 | 218,886 |
Accumulated Amortization | -36,357 | -21,402 |
Intangible Assets, Net | 182,529 | 197,484 |
Changes in Intangible Assets, Net consists of the following: | ' | ' |
Balance, Beginning of Year | 197,484 | 24,310 |
Acquisitions | ' | 181,000 |
Amortization Expense | -14,955 | -7,826 |
Balance, End of Year | $182,529 | $197,484 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Sep. 30, 2013 |
In Millions, unless otherwise specified | |
Investment Commitments | ' |
Unfunded commitments to private equity and other investment vehicles | $1,164.50 |
Unfunded commitments of capital market business | 478 |
Contingent Repayment Guarantees | ' |
Private equity fund carried interest amount subject to clawback provision assuming liquidation at fair value | 0 |
Clawback obligation amount | 1,241.50 |
Percentage of net losses on investment required capital to be contributed by general partners | 20.00% |
Private equity vehicles liquidation value for contingent repayment obligation of the general partners | 0 |
Contingent repayment obligation of the general partners if private equity vehicles liquidated at fair value | 0 |
Contingent repayment obligation of the general partners if private equity vehicles liquidated at zero value | 574.8 |
Clawback receivable maximum potential amount | 223.6 |
Clawback obligations, amount due from noncontrolling interest holders | 0 |
Private equity fund carried interest amount subject to clawback provision | $0 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details 2) (Litigation, USD $) | Sep. 30, 2013 |
In Millions, unless otherwise specified | item |
Litigation | ' |
Litigation | ' |
Estimated aggregate amount of losses | $32.50 |
Minimum number of matters in which a loss is both probable and reasonably estimable | 1 |
REGULATORY_CAPITAL_REQUIREMENT1
REGULATORY CAPITAL REQUIREMENTS (Details) (USD $) | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
item | |
REGULATORY CAPITAL REQUIREMENTS | ' |
Number of entities based in Mumbai subject to capital requirements of the RBI and SEBI | 2 |
Cash restricted for payment of cash dividend and advances | $89.90 |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (USD $) | 0 Months Ended | ||
In Billions, except Per Share data, unless otherwise specified | Nov. 19, 2013 | Oct. 24, 2013 | Sep. 30, 2013 |
Dividend declared | Dividend declared | Avoca Capital (Unlimited) and its affiliates | |
Subsequent event | |||
Subsequent Events | ' | ' | ' |
Common unit distribution announced (in dollars per share) | ' | $0.23 | ' |
Common unit distribution paid (in dollars per share) | $0.23 | ' | ' |
Assets under management | ' | ' | $8 |