Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 04, 2014 | |
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-14 | ' |
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 | ' | 428,631,716 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets | ' | ' |
Cash and Cash Equivalents | $1,472,760 | $1,306,383 |
Cash and Cash Equivalents Held at Consolidated Entities | 1,751,490 | 440,808 |
Restricted Cash and Cash Equivalents | 71,378 | 57,775 |
Investments | 59,928,242 | 47,383,697 |
Due from Affiliates | 130,999 | 143,908 |
Other Assets | 2,978,116 | 2,094,630 |
Total Assets | 66,332,985 | 51,427,201 |
Liabilities and Equity | ' | ' |
Debt Obligations | 10,306,770 | 1,908,606 |
Due to Affiliates | 133,123 | 93,851 |
Accounts Payable, Accrued Expenses and Other Liabilities | 3,779,137 | 2,839,926 |
Total Liabilities | 14,219,030 | 4,842,383 |
Commitments and Contingencies | ' | ' |
Redeemable Noncontrolling Interests | 300,957 | 627,807 |
Equity | ' | ' |
KKR & Co. L.P. Partners' Capital (424,041,543 and 288,143,327 common units issued and outstanding as of September 30, 2014 and December 31, 2013, respectively) | 5,500,280 | 2,727,909 |
Accumulated Other Comprehensive Income (Loss) | -14,101 | -5,899 |
Total KKR & Co. L.P. Partners' Capital | 5,486,179 | 2,722,010 |
Noncontrolling Interests | 46,300,976 | 43,235,001 |
Appropriated Capital | 25,843 | ' |
Total Equity | 51,812,998 | 45,957,011 |
Total Liabilities and Equity | 66,332,985 | 51,427,201 |
Consolidated VIEs | ' | ' |
Assets | ' | ' |
Cash and Cash Equivalents Held at Consolidated Entities | 1,190,553 | ' |
Investments | 8,262,658 | ' |
Other Assets | 154,438 | ' |
Total Assets | 9,607,649 | ' |
Liabilities and Equity | ' | ' |
Debt Obligations | 7,227,997 | ' |
Accounts Payable, Accrued Expenses and Other Liabilities | 870,633 | ' |
Total Liabilities | $8,098,630 | ' |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) | Sep. 30, 2014 | Dec. 31, 2013 |
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | ' | ' |
Common units issued | 424,041,543 | 288,143,327 |
Common units outstanding | 424,041,543 | 288,143,327 |
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, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Revenues | ' | ' | ' | ' |
Fees | $344,768 | $220,028 | $897,064 | $537,644 |
Expenses | ' | ' | ' | ' |
Compensation and Benefits | 320,423 | 329,182 | 1,010,191 | 860,905 |
Occupancy and Related Charges | 15,501 | 17,637 | 46,968 | 46,036 |
General, Administrative and Other | 168,486 | 108,676 | 505,747 | 279,906 |
Total Expenses | 504,410 | 455,495 | 1,562,906 | 1,186,847 |
Investment Income (Loss) | ' | ' | ' | ' |
Net Gains (Losses) from Investment Activities | 298,259 | 2,230,401 | 4,242,289 | 4,598,755 |
Dividend Income | 599,020 | 121,059 | 968,626 | 370,014 |
Interest Income | 260,292 | 114,861 | 638,124 | 352,250 |
Interest Expense | -96,618 | -25,056 | -197,346 | -72,693 |
Total Investment Income (Loss) | 1,060,953 | 2,441,265 | 5,651,693 | 5,248,326 |
Income (Loss) Before Taxes | 901,311 | 2,205,798 | 4,985,851 | 4,599,123 |
Income Taxes | 29,267 | 7,644 | 57,145 | 25,525 |
Net Income (Loss) | 872,044 | 2,198,154 | 4,928,706 | 4,573,598 |
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests | -2,462 | 9,169 | 1,366 | 25,992 |
Net Income (Loss) Attributable to Noncontrolling Interests and Appropriated Capital | 784,568 | 1,984,245 | 4,449,146 | 4,134,293 |
Net Income (Loss) Attributable to KKR & Co. L.P. | $89,938 | $204,740 | $478,194 | $413,313 |
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit | ' | ' | ' | ' |
Basic (in dollars per unit) | $0.21 | $0.73 | $1.31 | $1.53 |
Diluted (in dollars per unit) | $0.20 | $0.66 | $1.21 | $1.40 |
Weighted Average Common Units Outstanding | ' | ' | ' | ' |
Basic (in units) | 419,961,455 | 282,148,802 | 364,127,956 | 270,484,224 |
Diluted (in units) | 452,019,742 | 308,135,191 | 396,232,828 | 296,181,070 |
CONDENSED_CONSOLIDATED_STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ' | ' | ' | ' |
Net Income (Loss) | $872,044 | $2,198,154 | $4,928,706 | $4,573,598 |
Other Comprehensive Income (Loss), Net of Tax: | ' | ' | ' | ' |
Foreign Currency Translation Adjustments | -24,883 | -1,362 | -20,054 | -7,534 |
Comprehensive Income (Loss) | 847,161 | 2,196,792 | 4,908,652 | 4,566,064 |
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests | -2,462 | 9,169 | 1,366 | 25,992 |
Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests and Appropriated Capital | 768,846 | 1,983,004 | 4,437,274 | 4,128,068 |
Comprehensive Income (Loss) Attributable to KKR & Co. L.P. | $80,777 | $204,619 | $470,012 | $412,004 |
CONDENSED_CONSOLIDATED_STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $) | Common Units | Partners' Capital. | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Appropriated Capital | Redeemable Noncontrolling Interests | Total |
In Thousands, except Share data, unless otherwise specified | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | |
Balance at Dec. 31, 2012 | ' | $2,008,965 | ($4,606) | $38,938,531 | ' | $462,564 | $40,942,890 |
Balance (in units) at Dec. 31, 2012 | 253,363,691 | ' | ' | ' | ' | ' | ' |
Increase (Decrease) in Partners' Capital | ' | ' | ' | ' | ' | ' | ' |
Net Income (Loss) | ' | 413,313 | ' | 4,134,293 | ' | ' | 4,547,606 |
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests | ' | ' | ' | ' | ' | 25,992 | 25,992 |
Other Comprehensive Income (Loss)- | ' | ' | ' | ' | ' | ' | ' |
Foreign Currency Translation (Net of Tax) | ' | ' | -1,309 | -6,225 | ' | ' | -7,534 |
Exchange of KKR Holdings L.P. Units to KKR & Co. L.P. Common Units and Other Transfers | ' | 329,245 | -764 | -328,481 | ' | ' | ' |
Exchange of KKR Holdings L.P. Units to KKR & Co. L.P. Common Units and Other Transfers (in units) | 27,809,258 | ' | ' | ' | ' | ' | ' |
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of KKR & Co. L.P. Common Units | ' | 14,161 | 254 | ' | ' | ' | 14,415 |
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 | ' | 84,581 | ' | 162,602 | ' | ' | 247,183 |
Capital Contributions | ' | ' | ' | 4,615,392 | ' | 138,063 | 4,615,392 |
Capital Distributions | ' | -365,310 | ' | -7,076,983 | ' | -52,554 | -7,442,293 |
Balance at Sep. 30, 2013 | ' | 2,501,518 | -6,425 | 40,439,129 | ' | 574,065 | 42,934,222 |
Balance (in units) at Sep. 30, 2013 | 285,051,256 | ' | ' | ' | ' | ' | ' |
Balance at Dec. 31, 2013 | ' | 2,727,909 | -5,899 | 43,235,001 | 0 | 627,807 | 45,957,011 |
Balance (in units) at Dec. 31, 2013 | 288,143,327 | ' | ' | ' | ' | ' | ' |
Increase (Decrease) in Partners' Capital | ' | ' | ' | ' | ' | ' | ' |
Net Income (Loss) | ' | 478,194 | ' | 4,449,771 | -625 | ' | 4,927,340 |
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests | ' | ' | ' | ' | ' | 1,366 | 1,366 |
Other Comprehensive Income (Loss)- | ' | ' | ' | ' | ' | ' | ' |
Foreign Currency Translation (Net of Tax) | ' | ' | -8,182 | -10,664 | -1,208 | ' | -20,054 |
Exchange of KKR Holdings L.P. Units to KKR & Co. L.P. Common Units and Other Transfers | ' | 265,252 | -548 | -292,380 | 27,676 | ' | ' |
Exchange of KKR Holdings L.P. Units to KKR & Co. L.P. Common Units and Other Transfers (in units) | 22,071,419 | ' | ' | ' | ' | ' | ' |
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of KKR & Co. L.P. Common Units | ' | 16,695 | 528 | ' | ' | ' | 17,223 |
Net Delivery of Common Units-Equity Incentive Plan | ' | 28,411 | ' | ' | ' | ' | 28,411 |
Net Delivery of Common Units-Equity Incentive Plan (in units) | 5,821,209 | ' | ' | ' | ' | ' | ' |
Equity Based Compensation | ' | 122,320 | ' | 132,115 | ' | ' | 254,435 |
Acquisitions | ' | 2,453,610 | ' | 435,478 | ' | ' | 2,889,088 |
Acquisitions (in units) | 108,005,588 | ' | ' | ' | ' | ' | ' |
Capital Contributions | ' | ' | ' | 9,509,493 | ' | 116,768 | 9,509,493 |
Capital Distributions | ' | -592,111 | ' | -11,157,838 | ' | -444,984 | -11,749,949 |
Balance at Sep. 30, 2014 | ' | $5,500,280 | ($14,101) | $46,300,976 | $25,843 | $300,957 | $51,812,998 |
Balance (in units) at Sep. 30, 2014 | 424,041,543 | ' | ' | ' | ' | ' | ' |
CONDENSED_CONSOLIDATED_STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Operating Activities | ' | ' |
Net Income (Loss) | $4,928,706 | $4,573,598 |
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities: | ' | ' |
Equity Based Compensation | 254,435 | 247,183 |
Net Realized (Gains) Losses on Investments | -4,831,611 | -2,356,388 |
Change in Unrealized (Gains) Losses on Investments | 589,322 | -2,242,367 |
Other Non-Cash Amounts | -115,821 | -48,142 |
Cash Flows Due to Changes in Operating Assets and Liabilities: | ' | ' |
Change in Cash and Cash Equivalents Held at Consolidated Entities | -544,990 | 150,960 |
Change in Due from / to Affiliates | 15,508 | -14,661 |
Change in Other Assets | -427,040 | 86,997 |
Change in Accounts Payable, Accrued Expenses and Other Liabilities | 219,784 | 475,596 |
Investments Purchased | -29,843,313 | -23,712,434 |
Proceeds from Sale of Investments and Principal Payments | 31,273,024 | 24,635,228 |
Net Cash Provided (Used) by Operating Activities | 1,518,004 | 1,795,570 |
Investing Activities | ' | ' |
Change in Restricted Cash and Cash Equivalents | 20,765 | 42,137 |
Purchase of Furniture, Computer Hardware and Leasehold Improvements | -6,373 | -7,967 |
Cash Acquired, Net of Cash Paid for Acquisitions | 151,491 | ' |
Net Cash Provided (Used) by Investing Activities | 165,883 | 34,170 |
Financing Activities | ' | ' |
Distributions to Partners | -592,111 | -365,310 |
Distributions to Redeemable Noncontrolling Interests | -444,984 | -52,554 |
Contributions from Redeemable Noncontrolling Interests | 116,768 | 138,063 |
Distributions to Noncontrolling Interests | -11,157,838 | -7,076,983 |
Contributions from Noncontrolling Interests | 9,509,493 | 4,496,197 |
Net Delivery of Common Units - Equity Incentive Plan | 28,411 | 16,563 |
Proceeds from Debt Obligations | 3,699,781 | 1,188,729 |
Repayment of Debt Obligations | -2,656,017 | -287,633 |
Financing Costs Paid | -21,013 | -4,960 |
Net Cash Provided (Used) by Financing Activities | -1,517,510 | -1,947,888 |
Net Increase/(Decrease) in Cash and Cash Equivalents | 166,377 | -118,148 |
Cash and Cash Equivalents, Beginning of Period | 1,306,383 | 1,230,464 |
Cash and Cash Equivalents, End of Period | 1,472,760 | 1,112,316 |
Supplemental Disclosures of Cash Flow Information | ' | ' |
Payments for Interest | 173,212 | 68,809 |
Payments for Income Taxes | 38,988 | 74,217 |
Supplemental Disclosures of Non-Cash Investing and Financing Activities | ' | ' |
Non-Cash Contributions of Equity Based Compensation | 254,435 | 247,183 |
Non-Cash Contributions from Noncontrolling Interests | ' | 119,195 |
Debt Obligations - Foreign Exchange Gains (Losses), Translation and Other | 165,094 | -2,322 |
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of KKR & Co. L.P. Common Units | 17,223 | 14,415 |
Equity Issued in Connection With Contingent Payment Obligation | 84,051 | ' |
Net Assets Acquired | ' | ' |
Cash and Cash Equivalents Held at Consolidated Entities | 765,231 | ' |
Restricted Cash and Cash Equivalents | 35,038 | ' |
Investments | 9,225,660 | ' |
Other Assets | 885,314 | ' |
Debt Obligations | 7,538,726 | ' |
Accounts Payable, Accrued Expenses and Other Liabilities | $616,979 | ' |
ORGANIZATION
ORGANIZATION | 9 Months Ended |
Sep. 30, 2014 | |
ORGANIZATION | ' |
ORGANIZATION | ' |
1. ORGANIZATION | |
KKR & Co. L.P. (NYSE:KKR), together with its consolidated subsidiaries (“KKR”), is a leading global investment firm that manages investments across multiple asset classes including private equity, real assets, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside capital of the fund investors and brings opportunities to others through its capital markets business. | |
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, (ii) KKR Fund Holdings L.P. (“Fund Holdings”) 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, and (iii) KKR International Holdings L.P. (“International Holdings”, and together with Management Holdings and Fund Holdings, the “KKR Group Partnerships”) directly and through KKR Fund Holdings GP Limited. 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 Class A partner 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 Holdings L.P. (“KKR Holdings”), which is not a subsidiary of KKR. As of September 30, 2014, KKR & Co. L.P. held approximately 53% of the KKR Group Partnership Units and principals through KKR Holdings held approximately 47% of the KKR Group Partnership Units. The percentage ownership in the KKR Group Partnerships will continue to change as KKR Holdings and/or principals exchange units in the KKR Group Partnerships for KKR & Co. L.P. common units or when KKR & Co. L.P. otherwise issues new KKR & Co. L.P. common units. | |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | |||||||||||||
Sep. 30, 2014 | ||||||||||||||
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 (referred to hereafter as the “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, 2013 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, 2013, 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”). | ||||||||||||||
KKR & Co. L.P. consolidates the financial results of the KKR Group Partnerships and their consolidated subsidiaries, which 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 including certain CLOs. References in the accompanying financial statements to “principals” are to KKR’s senior employees and non-employee operating consultants who hold interests in KKR’s business through KKR Holdings, and references to “Senior Principals” are to KKR’s senior employees who hold interests in the Managing Partner entitling them to vote for the election of the Managing Partner’s directors. | ||||||||||||||
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. | ||||||||||||||
Principles of Consolidation | ||||||||||||||
The types of entities KKR assesses for consolidation include (i) subsidiaries, including management companies, broker-dealers and general partners of investment funds that KKR manages, (ii) entities that have all the attributes of an investment company, like investment funds, (iii) CLOs and (iv) other entities, including entities that employ non-employee operating consultants. Each of these entities is assessed for consolidation on a case by case basis depending on the specific facts and circumstances surrounding that entity. | ||||||||||||||
Pursuant to its consolidation policy, KKR first considers whether an entity is considered a VIE and therefore whether to apply the consolidation guidance under the VIE model. Entities that do not qualify as VIEs are generally assessed for consolidation as voting interest entities (“VOEs”) under the voting interest model. | ||||||||||||||
The consolidation rules were revised effective January 1, 2010 which had the effect of changing the criteria for determining whether a reporting entity is the primary beneficiary of a VIE. However, the adoption of these new consolidation rules was indefinitely deferred (the “Deferral”) for a reporting entity’s interests in certain entities. In particular, entities that have all the attributes of an investment company such as investment funds generally meet the conditions necessary for the Deferral. Entities that are securitization or asset-backed financing entities such as CLOs would generally not qualify for the Deferral. Accordingly, when making the assessment of whether an entity is a VIE, KKR considers whether the entity being assessed meets the conditions for the Deferral and therefore would be subject to the rules that existed prior to January 1, 2010. Under both sets of rules, VIEs for which KKR is determined to be the primary beneficiary are consolidated and such VIEs generally include certain CLO vehicles and entities that employ non-employee operating consultants. | ||||||||||||||
An entity in which KKR holds a variable interest is a VIE if any one of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support, (b) the holders of equity investment at risk (as a group) lack either the direct or indirect ability through voting rights or similar rights to make decisions about a legal entity’s activities that have a significant effect on the success of the legal entity or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some investors are disproportionate to their obligation to absorb the expected losses of the legal entity, their rights to receive the expected residual returns of the legal entity, or both and substantially all of the legal entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. | ||||||||||||||
With respect to VIEs such as KKR’s investment funds that qualify for the Deferral and therefore apply the previous consolidation rules, KKR is determined to be the primary beneficiary if its involvement, through holding interests directly or indirectly in the VIE or contractually through other variable interests (e.g., carried interest), would be expected to absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. In cases where two or more KKR related parties hold a variable interest in a VIE, and the aggregate variable interest held by those parties would, if held by a single party, identify that party as the primary beneficiary, then KKR is determined to be the primary beneficiary to the extent it is the party within the related party group that is most closely associated with the VIE. | ||||||||||||||
Under the voting interest model, KKR consolidates those entities it controls through a majority voting interest or through other means, including those VOEs in which the general partner is presumed to have control. KKR does not consolidate those VOEs in which the presumption of control by the general partner has been overcome through either the granting of substantive rights to the unaffiliated fund investors to either dissolve the fund or remove the general partner (“kick-out rights”) or the granting of substantive participating rights. | ||||||||||||||
The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE depends on the facts and circumstances surrounding each entity and therefore certain of KKR’s investment funds may qualify as VIEs whereas others may qualify as VOEs. | ||||||||||||||
With respect to KKR’s consolidated funds that are not CLOs, KKR meets the criteria for the Deferral and therefore applies the consolidation rules that existed prior to January 1, 2010. For these funds, 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. 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 considered to be a VOE and KKR generally consolidates the fund under the VOE model. | ||||||||||||||
With respect to CLOs, which are generally VIEs, the criteria for the Deferral are not met and therefore KKR applies the consolidation rules issued on January 1, 2010. In its role as collateral manager, KKR generally has the power to direct the activities of the CLO entities that most significantly impact the economic performance of the entity. In some, but not all cases, KKR, through both its residual interest in the CLO and the potential to earn an incentive fee, may have variable interests that represent an obligation to absorb losses of, or a right to receive benefits from, the CLO that could potentially be significant to the CLO. In cases where KKR has both (a) the power to direct the activities of the CLO that most significantly impact the CLOs economic performance and (b) the obligation to absorb losses of the CLO or the right to receive benefits from the CLO that could potentially be significant to the CLO, KKR consolidates the CLO. | ||||||||||||||
Certain of KKR’s funds and CLOs are consolidated by KKR notwithstanding the fact that KKR has only a minority economic interest in those funds and CLOs. KKR’s financial statements reflect the assets, liabilities, fees, expenses, investment income (loss) and cash flows of the consolidated KKR funds and CLOs on a gross basis, and the majority of the economic interests in those funds and CLOs, which are held by fund investors or other third parties, are attributed to noncontrolling interests or appropriated capital in the accompanying financial statements. All of the management fees and certain other amounts earned by KKR from those funds and CLOs 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 and CLOs 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 are, for GAAP purposes, investment companies and therefore are not required to consolidate their investments in portfolio companies even if majority-owned and controlled. Rather, the consolidated funds and vehicles reflect their investments at fair value as described below in “Fair Value Measurements”. | ||||||||||||||
All intercompany transactions and balances have been eliminated. | ||||||||||||||
Variable Interest Entities — Collateralized Loan Obligations | ||||||||||||||
For the assets and liabilities of the consolidated CLO vehicles, KKR has elected the fair value option. KKR accounts for the difference between the fair value of the assets and the fair value of the liabilities of the consolidated CLOs in Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. This amount is attributed to KKR and third party interest holders based on each beneficial holder’s residual interest in the consolidated CLO vehicles. The amount attributed to third party interest holders is reflected in the condensed consolidated statements of operations in Net Income (Loss) Attributable to Noncontrolling Interests and Appropriated Capital and in the condensed consolidated statements of financial condition in Appropriated Capital within Equity. The amount is recorded as appropriated capital since the other holders of the CLOs’ beneficial interests, not KKR, will receive the benefits or absorb the losses associated with their proportionate share of the CLOs’ assets and liabilities. | ||||||||||||||
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. | ||||||||||||||
Oil and Natural Gas Properties | ||||||||||||||
Primarily as a result of the KKR Financial Holdings LLC (“KFN”) acquisition on April 30, 2014, KKR consolidates working and royalty interests in oil and natural gas producing properties. | ||||||||||||||
Oil and natural gas producing activities are accounted for under the successful efforts method of accounting. Under this method, exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. Costs that are associated with the drilling of successful exploration wells are capitalized if proved reserves are found. Lease acquisition costs are capitalized when incurred. Costs associated with the drilling of exploratory wells that do not find proved reserves, geological and geophysical costs and costs of certain nonproducing leasehold costs are charged to expense as incurred. | ||||||||||||||
Expenditures for repairs and maintenance, including workovers, are charged to expense as incurred. | ||||||||||||||
The capitalized costs of producing oil and natural gas properties are depleted on a field-by-field basis using the units-of production method based on the ratio of current production to estimated total net proved oil, natural gas and natural gas liquid reserves. Proved developed reserves are used in computing depletion rates for drilling and development costs and total proved reserves are used for depletion rates of leasehold costs. | ||||||||||||||
Estimated dismantlement and abandonment costs for oil and natural gas properties, net of salvage value, are capitalized at their estimated net present value and amortized on a unit-of-production basis over the remaining life of the related proved developed reserves. | ||||||||||||||
Intangible Assets | ||||||||||||||
Intangible assets consist primarily of contractual rights to earn future fee income, including management and incentive fees, and are recorded in Other Assets in the accompanying condensed consolidated 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 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 is assessed for impairment annually or more frequently if circumstances indicate impairment may have occurred. Goodwill is recorded in Other Assets in the accompanying 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. Fund investors interests subject to redemption as described above are presented as Redeemable Noncontrolling Interests in the accompanying condensed consolidated statements of financial condition and presented as Net Income (Loss) attributable to Redeemable Noncontrolling Interests in the accompanying 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 accompanying 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 accompanying 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) | third parties holding 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 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 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; | |||||||||||||
(v) | third parties in KKR’s capital markets business; | |||||||||||||
(vi) | exchangeable equity securities representing ownership interests in a subsidiary of a KKR Group Partnership issued in connection with the acquisition of Avoca; and | |||||||||||||
(vii) | holders of the 7.375% Series A LLC Preferred Shares of KFN whose rights are limited to the assets of KFN. | |||||||||||||
Noncontrolling Interests held by KKR Holdings | ||||||||||||||
Noncontrolling interests held by KKR Holdings include economic interests held by principals in the KKR Group Partnerships. Such 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, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Balance at the beginning of the period | $ | 5,082,655 | $ | 4,699,114 | $ | 5,116,761 | $ | 4,981,864 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings (a) | 100,910 | 300,169 | 588,500 | 662,387 | ||||||||||
Other comprehensive income (loss), net of tax (b) | (11,105 | ) | (96 | ) | (7,764 | ) | (4,846 | ) | ||||||
Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units (c) | (47,858 | ) | (84,838 | ) | (292,380 | ) | (328,481 | ) | ||||||
Equity based compensation | 34,611 | 53,988 | 114,923 | 162,602 | ||||||||||
Capital contributions | 656 | 600 | 1,504 | 1,399 | ||||||||||
Capital distributions | (272,335 | ) | (172,719 | ) | (634,010 | ) | (678,707 | ) | ||||||
Balance at the end of the period | $ | 4,887,534 | $ | 4,796,218 | $ | 4,887,534 | $ | 4,796,218 | ||||||
(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, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Net income (loss) | $ | 872,044 | $ | 2,198,154 | $ | 4,928,706 | $ | 4,573,598 | ||||||
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | (2,462 | ) | 9,169 | 1,366 | 25,992 | |||||||||
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities and appropriated capital | 683,658 | 1,684,076 | 3,860,646 | 3,471,906 | ||||||||||
Plus: Income taxes attributable to KKR Management Holdings Corp. | 20,427 | 3,020 | 32,062 | 12,894 | ||||||||||
Net income (loss) attributable to KKR & Co. L.P. and KKR Holdings | $ | 211,275 | $ | 507,929 | $ | 1,098,756 | $ | 1,088,594 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | $ | 100,910 | $ | 300,169 | $ | 588,500 | $ | 662,387 | ||||||
Investments | ||||||||||||||
Investments consist primarily of private equity, real assets, credit, investments of consolidated CLOs, 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 equity investments in operating businesses. | ||||||||||||||
Real Assets —Consists primarily of investments in (i) energy related assets, principally oil and natural gas producing properties, (ii) infrastructure assets, and (iii) real estate, principally residential and commercial real estate assets and businesses. | ||||||||||||||
Credit —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 unconsolidated CLOs. | ||||||||||||||
Investments of Consolidated CLOs — Consists primarily of investments in below investment grade corporate debt securities (primarily high yield bonds and syndicated bank loans) held directly by the consolidated CLOs. | ||||||||||||||
Equity Method —Consists primarily of investments in which KKR has significant influence, including investments in unconsolidated investment funds. | ||||||||||||||
Other —Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets, credit, investments of consolidated CLOs or equity method investments. | ||||||||||||||
Equity Method | ||||||||||||||
Equity method investments include (i) certain investments in private equity funds, real assets funds, funds of hedge funds, and credit funds which are not consolidated and (ii) certain investments in less than majority owned asset management companies. 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. See Note 3 “Net Gains (Losses) from Investment Activities.” Because the underlying investments of unconsolidated investment funds are reported at fair value, the carrying value of these equity method investments representing KKR’s interests in unconsolidated funds approximates fair value. The carrying value of equity method investments in certain less than majority owned asset management companies is determined based on the amounts invested by KKR, adjusted for the equity in earnings or losses of the investee allocated based on KKR’s respective ownership percentage, less distributions. | ||||||||||||||
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 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 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. In addition, KKR has elected the fair value option for the investments and debt obligations of the consolidated CLO vehicles. | ||||||||||||||
The carrying amounts of Other Assets, Accounts Payable, Accrued Expenses and Other Liabilities recognized on the condensed consolidated 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 KKR’s debt obligations are presented in Note 9, “Debt Obligations.” | ||||||||||||||
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, debt and securities sold short. | ||||||||||||||
Level II | ||||||||||||||
Inputs are 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 credit 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 credit 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. | ||||||||||||||
Management’s determination of fair value is based upon the best information available for a given circumstance and may incorporate assumptions that are management’s best estimates after consideration of a variety of internal and external factors. | ||||||||||||||
Level II Valuation Methodologies | ||||||||||||||
Financial assets and liabilities categorized as Level II consist primarily of securities indexed to publicly-listed securities and credit and other investments. | ||||||||||||||
Credit investments and investments of consolidated CLOs 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 in both methodologies. However, when a definitive agreement has been executed to sell an investment, KKR generally considers a significant determinant of fair value to be the consideration to be received by KKR pursuant to the executed definitive agreement. | ||||||||||||||
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, except that the value may be higher or lower than such range in the case of investments being sold pursuant to an executed definitive agreement. | ||||||||||||||
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, the expected hold period and manner of realization for the investment, and in the case of investments being sold pursuant to an executed definitive agreement, the probability of such sale being completed. 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 51.2% 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 an illiquidity discount is 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 energy 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, commodity prices 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 current capitalization rate. The valuations of real assets investments also use other inputs. Certain investments in real estate and energy generally do not include a minimum illiquidity discount. | ||||||||||||||
Credit Investments: Credit investments are valued using values obtained from dealers or market makers, and where these values are not available, credit investments are valued by KKR based on ranges of valuations determined by an independent valuation firm. 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. | ||||||||||||||
CLO Debt Obligations: Collateralized loan obligation senior secured and subordinated notes are initially valued at transaction price and are subsequently valued using a third party valuation service. The most significant inputs to the valuation of these instruments are default and loss expectations and discount margins. | ||||||||||||||
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 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 credit (including investments held by consolidated CLOs) 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 credit 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 the investments being valued. The valuation teams for energy, 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 Private Markets 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 annually for all Level III investments in Private Markets and quarterly for investments other than certain investments, which fall below pre-set value thresholds and which in the aggregate comprise less than 5% of the total value of KKR’s Level III Private Markets investments. For most investments classified as Level III in Public Markets, in general, an independent valuation firm is engaged by KKR to provide third party valuations, or ranges of valuations from which KKR’s investment professionals select a preliminary valuation, or an independent valuation firm is engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR’s valuations. All preliminary valuations in Private Markets and Public Markets are then reviewed by the applicable valuation committee, and after reflecting any input by their respective valuation committees, the preliminary valuations are presented to the firm’s management committee. 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. | ||||||||||||||
Fees | ||||||||||||||
Fees consist primarily of (i) transaction fees earned in connection with successful investment transactions and from capital markets activities, (ii) management and incentive fees from providing investment management services to unconsolidated funds, CLOs, other vehicles, and separately managed accounts, (iii) monitoring fees from providing services to portfolio companies, (iv) revenue earned by oil and gas-producing entities that are consolidated and (v) consulting fees earned by entities that employ non-employee operating consultants. | ||||||||||||||
Transaction, Management, Incentive, Monitoring and Consulting Fees Recognition | ||||||||||||||
Transaction, management, incentive, monitoring and consulting fees are recognized when earned based on the contractual terms of the governing agreements and coincides with the period during which the related services are performed. In the case of transaction fees, the fees are recognized upon closing of the transaction. Monitoring fees may provide for a termination payment following an initial public offering or change of control. These termination payments are recognized in the period when the related transaction closes. | ||||||||||||||
Oil and Gas Revenue Recognition | ||||||||||||||
Oil, natural gas and natural gas liquid revenues are recognized when production is sold to a purchaser at fixed or determinable prices, when delivery has occurred and title has transferred and collectability of the revenue is reasonably assured. The oil and gas producing entities consolidated by KKR follow the sales method of accounting for natural gas revenues. Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume to which the entity is entitled based on KKR’s working interest. An imbalance is recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the under-produced owners to recoup their entitled share through future production. Under the sales method, no receivables are recorded when these entities have taken less than their share of production and no payables are recorded when it has taken more than its share of production. | ||||||||||||||
For the three and nine months ended September 30, 2014 and 2013, respectively, fees consisted of the following: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Transaction Fees | $ | 153,604 | $ | 105,387 | $ | 380,580 | $ | 202,107 | ||||||
Management Fees | 52,904 | 45,787 | 161,772 | 130,402 | ||||||||||
Oil and Gas Revenue | 69,380 | 9,575 | 143,369 | 9,575 | ||||||||||
Monitoring Fees | 51,489 | 43,155 | 142,902 | 119,571 | ||||||||||
Consulting Fees | 10,096 | 15,686 | 32,581 | 41,298 | ||||||||||
Incentive Fees | 7,295 | 438 | 35,860 | 34,691 | ||||||||||
Total Fees | $ | 344,768 | $ | 220,028 | $ | 897,064 | $ | 537,644 | ||||||
All fees presented in the table above, except for oil and gas revenue are earned from KKR investment funds and portfolio companies. Consulting fees are earned by entities that employ non-employee operating consultants, which are consolidated by KKR but whose fees are not shared with KKR. | ||||||||||||||
Recently Issued Accounting Pronouncements | ||||||||||||||
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 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 was effective as of January 1, 2014. The adoption of this guidance did not 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 disclosure requirements. This guidance was effective as of January 1, 2014. The adoption of this guidance did not have a material impact on KKR’s financial statements. | ||||||||||||||
Revenue from Contracts with Customers | ||||||||||||||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers Topic 606 (“ASU 2014-09”) which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Revenue recorded under ASU 2014-09 will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for KKR’s fiscal year beginning January 1, 2017 and early adoption is not permitted. KKR is in the process of assessing the impact that the adoption of this guidance may have on its financial statements, including with respect to the timing of the recognition of carried interest. | ||||||||||||||
Measurement of Financial Assets and Liabilities - Consolidated Collateralized Financing Entities | ||||||||||||||
In August 2014, the FASB issued ASU 2014-13, “Measuring the Financial Assets and Financial Liabilities of a Consolidated Collateralized Financing Entity” (“CFE”), such as CLOs. This standard provides that an entity with an election to measure the financial assets and financial liabilities of a consolidated CFE should be measured on the basis of either the fair value of the CFE’s financial assets or financial liabilities, whichever is more observable. The effective date of the consensus will be for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 for public companies and early adoption will be permitted. KKR is currently evaluating the impact on its consolidated financial statements. | ||||||||||||||
Going Concern | ||||||||||||||
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management’s plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on KKR’s financial statements. | ||||||||||||||
NET_GAINS_LOSSES_FROM_INVESTME
NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||||||||
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, 2014 and 2013, respectively: | ||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||||||||||||
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) | $ | 917,917 | $ | (688,912 | ) | $ | 692,932 | $ | 1,626,536 | $ | 4,459,039 | $ | (658,948 | ) | $ | 2,180,059 | $ | 2,140,102 | ||||||||
Credit and Other (a) | 35,420 | (221,237 | ) | 63,032 | 72,901 | 232,306 | (35,326 | ) | 202,623 | 20,638 | ||||||||||||||||
Investments of Consolidated CLOs (a) | 1,764 | (142,208 | ) | — | — | 8,144 | (103,138 | ) | — | — | ||||||||||||||||
Real Assets (a) | 24,466 | 38,530 | — | 47,053 | 227,820 | (264,968 | ) | 14,855 | 133,610 | |||||||||||||||||
Equity Method (a) | 4,121 | 1,204 | 10,016 | 13,123 | 9,980 | 80,118 | 35,532 | 27,863 | ||||||||||||||||||
Foreign Exchange Forward Contracts and Options (b) | (19,610 | ) | 385,840 | (528 | ) | (247,428 | ) | (31,405 | ) | 428,690 | 24,408 | (76,845 | ) | |||||||||||||
Securities Sold Short (b) | (12,551 | ) | 18,423 | (29,652 | ) | (16,241 | ) | (35,338 | ) | 29,483 | (71,459 | ) | (14,115 | ) | ||||||||||||
Other Derivatives | (3,068 | ) | (11,591 | ) | (2,056 | ) | 1,229 | (19,997 | ) | (12,085 | ) | (20,454 | ) | 4,907 | ||||||||||||
Foreign Exchange Gains (Losses) and Other (c) | (5,031 | ) | (25,218 | ) | (2,849 | ) | 2,333 | (18,938 | ) | (53,148 | ) | (9,176 | ) | 6,207 | ||||||||||||
Total Net Gains (Losses) from Investment Activities | $ | 943,428 | $ | (645,169 | ) | $ | 730,895 | $ | 1,499,506 | $ | 4,831,611 | $ | (589,322 | ) | $ | 2,356,388 | $ | 2,242,367 | ||||||||
(a) | See Note 4 “Investments.” | |||||||||||||||||||||||||
(b) | See Note 7 “Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities.” | |||||||||||||||||||||||||
(c) | 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, 2014 | ||||||||||||||
INVESTMENTS | ' | |||||||||||||
INVESTMENTS | ' | |||||||||||||
4. INVESTMENTS | ||||||||||||||
Investments consist of the following: | ||||||||||||||
Fair Value | Cost | |||||||||||||
September 30, 2014 | December 31, 2013 | September 30, 2014 | December 31, 2013 | |||||||||||
Private Equity | $ | 37,767,643 | $ | 36,875,693 | $ | 28,776,432 | $ | 27,191,849 | ||||||
Credit | 6,674,687 | 5,023,253 | 6,621,887 | 4,841,913 | ||||||||||
Investments of Consolidated CLOs | 8,262,658 | — | 8,380,627 | — | ||||||||||
Real Assets | 4,184,340 | 3,353,605 | 6,462,906 | 5,367,912 | ||||||||||
Equity Method | 862,276 | 546,422 | 594,690 | 310,709 | ||||||||||
Other | 2,176,638 | 1,584,724 | 1,998,540 | 1,485,417 | ||||||||||
Total Investments | $ | 59,928,242 | $ | 47,383,697 | $ | 52,835,082 | $ | 39,197,800 | ||||||
As of September 30, 2014, investments which represented greater than 5% of total investments consisted of Alliance Boots GmbH of $5.1 billion and First Data of $3.4 billion. As of December 31, 2013, investments which represented greater than 5% of total investments consisted of Alliance Boots GmbH of $4.6 billion. In addition, as of September 30, 2014 and December 31, 2013, investments totaling $11.2 billion and $3.3 billion, respectively, were pledged as direct collateral against various financing arrangements. See Note 9 “Debt Obligations.” | ||||||||||||||
The following table represents private equity investments by industry as of September 30, 2014 and December 31, 2013, respectively: | ||||||||||||||
Fair Value | ||||||||||||||
September 30, 2014 | December 31, 2013 | |||||||||||||
Health Care | $ | 9,642,534 | $ | 8,480,933 | ||||||||||
Financial Services | 5,184,348 | 3,714,657 | ||||||||||||
Manufacturing | 4,453,568 | 4,459,220 | ||||||||||||
Retail | 4,321,969 | 4,582,846 | ||||||||||||
Technology | 4,210,333 | 5,192,488 | ||||||||||||
Other | 9,954,891 | 10,445,549 | ||||||||||||
$ | 37,767,643 | $ | 36,875,693 | |||||||||||
In the table above, other investments represent private equity investments in the following industries: Consumer Products, Education, Forestry, Media, Services, Telecommunications, Transportation, Hotel/Leisure, Packaging and Recycling. None of these industries represents more than 10% of total private equity investments as of September 30, 2014. | ||||||||||||||
The majority of the securities underlying private equity investments represent equity securities. As of September 30, 2014 and December 31, 2013, the fair value of investments that were other than equity securities amounted to $535.6 million and $548.5 million, respectively. | ||||||||||||||
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended | |||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||||||||
5. FAIR VALUE MEASUREMENTS | ||||||||||||||||||||
The following tables summarize the valuation of KKR’s assets and liabilities reported at fair value by the fair value hierarchy levels described in Note 2 “Summary of Significant Accounting Policies” as of September 30, 2014 and December 31, 2013 including those investments, other financial instruments and debt obligations of consolidated CLOs 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, 2014 | ||||||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | |||||||||||||||||
Active Markets for | Observable Inputs | Unobservable Inputs | ||||||||||||||||||
Identical Assets | (Level II) | (Level III) | ||||||||||||||||||
(Level I) | ||||||||||||||||||||
Private Equity | $ | 5,278,447 | $ | 600,492 | $ | 31,888,704 | $ | 37,767,643 | ||||||||||||
Credit | 16,936 | 3,331,765 | 3,325,986 | 6,674,687 | ||||||||||||||||
Investments of Consolidated CLOs | — | 8,171,294 | 91,364 | 8,262,658 | ||||||||||||||||
Real Assets | 35,092 | — | 4,149,248 | 4,184,340 | ||||||||||||||||
Other | 623,089 | 424,039 | 1,129,510 | 2,176,638 | ||||||||||||||||
Total | 5,953,564 | 12,527,590 | 40,584,812 | 59,065,966 | ||||||||||||||||
Foreign Exchange Forward Contracts and Options | — | 217,768 | — | 217,768 | ||||||||||||||||
Other Derivatives | — | 16,868 | — | 16,868 | ||||||||||||||||
Total Assets | $ | 5,953,564 | $ | 12,762,226 | $ | 40,584,812 | $ | 59,300,602 | ||||||||||||
December 31, 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 | $ | 7,244,643 | $ | 548,545 | $ | 29,082,505 | $ | 36,875,693 | ||||||||||||
Credit | — | 3,078,789 | 1,944,464 | 5,023,253 | ||||||||||||||||
Investments of Consolidated CLOs | — | — | — | — | ||||||||||||||||
Real Assets | 52,931 | — | 3,300,674 | 3,353,605 | ||||||||||||||||
Other | 943,976 | 292,262 | 348,486 | 1,584,724 | ||||||||||||||||
Total | 8,241,550 | 3,919,596 | 34,676,129 | 46,837,275 | ||||||||||||||||
Foreign Exchange Forward Contracts and Options | — | 89,090 | — | 89,090 | ||||||||||||||||
Other Derivatives | — | 5,080 | — | 5,080 | ||||||||||||||||
Total Assets | $ | 8,241,550 | $ | 4,013,766 | $ | 34,676,129 | $ | 46,931,445 | ||||||||||||
Liabilities, at fair value: | ||||||||||||||||||||
September 30, 2014 | ||||||||||||||||||||
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 | $ | 740,585 | $ | 96,072 | $ | — | $ | 836,657 | ||||||||||||
Foreign Exchange Forward Contracts and Options | — | 131,628 | — | 131,628 | ||||||||||||||||
Unfunded Revolver Commitments | — | 1,385 | — | 1,385 | ||||||||||||||||
Other Derivatives | — | 75,218 | — | 75,218 | ||||||||||||||||
Debt Obligations of Consolidated CLOs | — | — | 7,227,997 | 7,227,997 | ||||||||||||||||
Total Liabilities | $ | 740,585 | $ | 304,303 | $ | 7,227,997 | $ | 8,272,885 | ||||||||||||
December 31, 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 | $ | 624,653 | $ | 51,491 | $ | — | $ | 676,144 | ||||||||||||
Foreign Exchange Forward Contracts and Options | — | 414,782 | — | 414,782 | ||||||||||||||||
Unfunded Revolver Commitments | — | 1,902 | — | 1,902 | ||||||||||||||||
Other Derivatives | — | 14,177 | — | 14,177 | ||||||||||||||||
Debt Obligations of Consolidated CLOs | — | — | — | — | ||||||||||||||||
Total Liabilities | $ | 624,653 | $ | 482,352 | $ | — | $ | 1,107,005 | ||||||||||||
The following tables summarize changes in assets and liabilities 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, 2014 and 2013, respectively: | ||||||||||||||||||||
Three Months Ended September 30, 2014 | ||||||||||||||||||||
Level III Assets | Level III Liabilities | |||||||||||||||||||
Private | Credit | Investments of | Real Assets | Other | Debt Obligations of | |||||||||||||||
Equity | Consolidated | Consolidated CLOs | ||||||||||||||||||
CLOs | ||||||||||||||||||||
Balance, Beginning of Period | $ | 30,914,162 | $ | 3,047,412 | $ | 95,703 | $ | 3,799,200 | $ | 713,190 | $ | 7,356,678 | ||||||||
Transfers In (1) | — | 150,559 | — | — | 3,397 | — | ||||||||||||||
Transfers Out (2) | (170,107 | ) | (3,397 | ) | — | — | (6,291 | ) | — | |||||||||||
Acquisitions | — | — | — | — | — | — | ||||||||||||||
Purchases | 2,340,143 | 474,528 | 1,327 | 422,001 | 502,149 | 940,940 | ||||||||||||||
Sales | (1,469,359 | ) | (295,236 | ) | (6,091 | ) | (134,977 | ) | (60,767 | ) | (972,518 | ) | ||||||||
Settlements | — | 53,216 | 869 | — | — | 690 | ||||||||||||||
Net Realized Gains (Losses) | 587,627 | 26 | — | 21,319 | (3,755 | ) | — | |||||||||||||
Net Unrealized Gains (Losses) | (313,762 | ) | (89,150 | ) | (444 | ) | 41,705 | (18,413 | ) | 681 | ||||||||||
Change in Other Comprehensive Income | — | (11,972 | ) | — | — | — | (98,474 | ) | ||||||||||||
Balance, End of Period | $ | 31,888,704 | $ | 3,325,986 | $ | 91,364 | $ | 4,149,248 | $ | 1,129,510 | $ | 7,227,997 | ||||||||
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 or Debt Obligations still held at Reporting Date | $ | 319,942 | $ | (95,460 | ) | $ | (444 | ) | $ | 34,878 | $ | (16,966 | ) | $ | 701 | |||||
Three Months Ended September 30, 2013 | ||||||||||||||||||||
Level III Assets | Level III Liabilities | |||||||||||||||||||
Private | Credit | Investments of | Real Assets | Other | Debt Obligations of | |||||||||||||||
Equity | Consolidated | Consolidated CLOs | ||||||||||||||||||
CLOs | ||||||||||||||||||||
Balance, Beginning of Period | $ | 25,992,622 | $ | 1,416,016 | $ | — | $ | 2,198,427 | $ | 184,213 | $ | — | ||||||||
Transfers In (1) | — | 44,503 | — | — | 34,978 | — | ||||||||||||||
Transfers Out (2) | (904,039 | ) | (17,594 | ) | — | — | (4,040 | ) | — | |||||||||||
Acquisitions | — | — | — | — | — | — | ||||||||||||||
Purchases | 1,071,808 | 503,140 | — | 167,967 | 35,922 | — | ||||||||||||||
Sales | (15,945 | ) | (117,103 | ) | — | — | (5,064 | ) | — | |||||||||||
Settlements | — | 16,002 | — | — | — | — | ||||||||||||||
Net Realized Gains (Losses) | 15,945 | 2,240 | — | — | (557 | ) | — | |||||||||||||
Net Unrealized Gains (Losses) | 950,754 | 9,342 | — | 47,053 | (2,427 | ) | — | |||||||||||||
Change in Other Comprehensive Income | — | — | — | — | — | — | ||||||||||||||
Balance, End of Period | $ | 27,111,145 | $ | 1,856,546 | $ | — | $ | 2,413,447 | $ | 243,025 | $ | — | ||||||||
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 or Debt Obligations still held at Reporting Date | $ | 966,779 | $ | 9,547 | $ | — | $ | 47,053 | $ | (2,427 | ) | $ | — | |||||||
Nine Months Ended September 30, 2014 | ||||||||||||||||||||
Level III Assets | Level III Liabilities | |||||||||||||||||||
Private | Credit | Investments of | Real Assets | Other | Debt Obligations of | |||||||||||||||
Equity | Consolidated | Consolidated CLOs | ||||||||||||||||||
CLOs | ||||||||||||||||||||
Balance, Beginning of Period | $ | 29,082,505 | $ | 1,944,464 | $ | — | $ | 3,300,674 | $ | 348,486 | $ | — | ||||||||
Transfers In (1) | — | 150,559 | — | — | 3,397 | — | ||||||||||||||
Transfers Out (2) | (1,428,691 | ) | (4,627 | ) | — | — | (202,010 | ) | — | |||||||||||
Acquisitions | 82,986 | 539,247 | 97,996 | 197,471 | 52,502 | 6,814,217 | ||||||||||||||
Purchases | 5,492,831 | 1,360,129 | 4,884 | 1,120,505 | 967,494 | 1,661,904 | ||||||||||||||
Sales | (4,334,889 | ) | (736,963 | ) | (12,188 | ) | (426,095 | ) | (98,636 | ) | (1,169,533 | ) | ||||||||
Settlements | — | 114,174 | 295 | — | — | 3,988 | ||||||||||||||
Net Realized Gains (Losses) | 1,911,995 | (4,006 | ) | — | 222,626 | (4,024 | ) | — | ||||||||||||
Net Unrealized Gains (Losses) | 1,081,967 | (23,032 | ) | 377 | (265,933 | ) | 62,301 | 15,895 | ||||||||||||
Change in Other Comprehensive Income | — | (13,959 | ) | — | — | — | (98,474 | ) | ||||||||||||
Balance, End of Period | $ | 31,888,704 | $ | 3,325,986 | $ | 91,364 | $ | 4,149,248 | $ | 1,129,510 | $ | 7,227,997 | ||||||||
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 or Debt Obligations still held at Reporting Date | $ | 3,134,239 | $ | (6,555 | ) | $ | (239 | ) | $ | (272,760 | ) | $ | 66,730 | $ | 15,915 | |||||
Nine Months Ended September 30, 2013 | ||||||||||||||||||||
Level III Assets | Level III Liabilities | |||||||||||||||||||
Private | Credit | Investments of | Real Assets | Other | Debt Obligations of | |||||||||||||||
Equity | Consolidated | Consolidated CLOs | ||||||||||||||||||
CLOs | ||||||||||||||||||||
Balance, Beginning of Period | $ | 25,734,400 | $ | 1,587,046 | $ | — | $ | 1,775,683 | $ | 239,230 | $ | — | ||||||||
Transfers In (1) | — | 53,439 | — | — | 34,978 | — | ||||||||||||||
Transfers Out (2) | (1,819,651 | ) | (252,323 | ) | — | — | (23,304 | ) | — | |||||||||||
Acquisitions | — | — | — | — | — | — | ||||||||||||||
Purchases | 2,346,126 | 954,462 | — | 545,424 | 46,574 | — | ||||||||||||||
Sales | (1,042,698 | ) | (534,852 | ) | — | (56,275 | ) | (59,730 | ) | — | ||||||||||
Settlements | — | 59,043 | — | — | — | — | ||||||||||||||
Net Realized Gains (Losses) | 649,534 | (2,683 | ) | — | 14,930 | 1,797 | — | |||||||||||||
Net Unrealized Gains (Losses) | 1,243,434 | (7,586 | ) | — | 133,685 | 3,480 | — | |||||||||||||
Change in Other Comprehensive Income | — | — | — | — | — | — | ||||||||||||||
Balance, End of Period | $ | 27,111,145 | $ | 1,856,546 | $ | — | $ | 2,413,447 | $ | 243,025 | $ | — | ||||||||
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 or Debt Obligations still held at Reporting Date | $ | 1,817,352 | $ | 980 | $ | — | $ | 169,051 | $ | 3,480 | $ | — | ||||||||
-1 | The Transfers In noted in the tables above for credit 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 credit 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 accompanying condensed consolidated statements of operations. There was one transfer between Level I and Level II for private equity investments during the nine months ended September 30, 2014 attributable to a portfolio company that is now valued using its publicly traded market price. There were no transfers between Level I and Level II during the three months ended September 30, 2014 and 2013 or the nine months ended September 30, 2013. | ||||||||||||||||||||
The following table presents additional information about valuation methodologies and significant unobservable inputs used for investments that are measured at fair value and categorized within Level III as of September 30, 2014: | ||||||||||||||||||||
Impact to Valuation | ||||||||||||||||||||
Fair Value | Valuation | Weighted | from an | |||||||||||||||||
September 30, 2014 | Methodologies | Unobservable Input(s) (1) | Average (2) | Range | Increase in Input (3) | |||||||||||||||
Assets: | ||||||||||||||||||||
Private Equity Investments | $ | 31,888,704 | ||||||||||||||||||
Healthcare | $ | 8,552,204 | Inputs to market | Illiquidity Discount | 7% | 5% - 15% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 17% | 5% - 50% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 17% | 5% - 50% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 66% | 0% - 90% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 9x | 8x - 12x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 9x | 8x - 11x | Increase | |||||||||||||||||
Control Premium | 1% | 0% - 10% | -8 | Increase | ||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 9% | 7% - 13% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 8x - 12x | Increase | |||||||||||||||||
Financial Services | $ | 4,604,891 | Inputs to market | Illiquidity Discount | 11% | 10% - 15% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 24% | 13% - 100% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 21% | 0% - 50% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 55% | 0% - 75% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 11x - 13x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 11x | 10x - 12x | Increase | |||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 11% | 10% - 12% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 10x - 11x | Increase | |||||||||||||||||
Technology | $ | 3,936,133 | Inputs to market | Illiquidity Discount | 10% | 5% - 15% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 47% | 25% - 50% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 47% | 25% - 50% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 6% | 0% - 50% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 6x - 16x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 11x | 5x - 14x | Increase | |||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 12% | 8% - 19% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 6x - 11x | Increase | |||||||||||||||||
Retail | $ | 3,570,182 | Inputs to market | Illiquidity Discount | 7% | 5% - 20% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 33% | 0% - 50% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 33% | 13% - 100% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 34% | 0% - 75% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 11x | 7x - 12x | -7 | Increase | |||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 7x - 12x | -7 | Increase | ||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 10% | 9% - 23% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 8x | 6x - 15x | Increase | |||||||||||||||||
Manufacturing | $ | 3,352,378 | Inputs to both market | Illiquidity Discount | 10% | 5% - 20% | Decrease | |||||||||||||
comparable and discounted cash flow | Weight Ascribed to Market Comparables | 46% | 33% - 50% | -4 | ||||||||||||||||
Weight Ascribed to Discounted Cash Flow | 54% | 50% - 67% | -5 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 6x - 16x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 7x - 14x | Increase | |||||||||||||||||
Control Premium | 3% | 0% - 20% | -8 | Increase | ||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 14% | 10% - 22% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 7x - 11x | Increase | |||||||||||||||||
Other | $ | 7,872,916 | Inputs to market | Illiquidity Discount | 11% | 10% - 20% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 39% | 0% - 50% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 42% | 0% - 100% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 19% | 0% - 100% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 11x | 7x - 19x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 7x - 15x | Increase | |||||||||||||||||
Control Premium | 1% | 0% - 20% | -8 | Increase | ||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 12% | 9% - 26% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 7x - 12x | Increase | |||||||||||||||||
Real Assets | $ | 4,149,248 | ||||||||||||||||||
Energy/Infrastructure (12) | $ | 3,083,543 | Discounted cash flow | Weighted Average Cost of Capital | 11% | 6% - 20% | Decrease | |||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 8x - 11x | Increase | |||||||||||||||||
Real Estate | $ | 1,065,705 | Inputs to direct income capitalization and | Weight Ascribed to Direct Income Capitalization | 28% | 0% - 100% | -10 | |||||||||||||
discounted cash flow | Weight Ascribed to Discounted Cash Flow | 72% | 0% - 100% | -5 | ||||||||||||||||
Direct Income Capitalization | Current Capitalization Rate | 7% | 5% - 9% | Decrease | ||||||||||||||||
Discounted cash flow | Unlevered Discount Rate | 10% | 7% - 18% | Decrease | ||||||||||||||||
Credit (11) | $ | 3,325,986 (9) | Yield Analysis | Yield | 11% | 4% - 20% | Decrease | |||||||||||||
Net Leverage | 6x | 1x - 13x | Decrease | |||||||||||||||||
EBITDA Multiple | 9x | 2x - 13x | Increase | |||||||||||||||||
Liabilities: | ||||||||||||||||||||
Collateralized Loan Obligation secured notes | $ | 7,227,997 | Discount margin | 270 bps | 95bps - 1500bps | Decrease | ||||||||||||||
Probability of default | 3% | 2% - 3% | Decrease | |||||||||||||||||
Loss severity | 32% | 30% - 38% | Decrease | |||||||||||||||||
In the table above, Other Investments, within private equity investments, represents the following industries: Consumer Products, Education, Forestry, Media, Services, Telecommunications, Transportation, Hotels/Leisure and Recycling. None of these industries represents more than 10% of total Level III private equity investments as of September 30, 2014. | ||||||||||||||||||||
-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 and transaction price. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and transaction price. | |||||||||||||||||||
-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 and transaction price. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach and transaction price. | |||||||||||||||||||
-6 | The directional change from an increase in the weight ascribed to the transaction price would increase the fair value of the Level III investments if the transaction price results in a higher valuation than the market comparables and discounted cash flow approach. The opposite would be true if the transaction price results in a lower valuation than the market comparables approach and discounted cash flow approach. | |||||||||||||||||||
-7 | 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 31.5x and 24.1x, respectively. The exclusion of this investment does not impact the weighted average. | |||||||||||||||||||
-8 | 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. | |||||||||||||||||||
-9 | Amounts include $348.5 million of investments that were valued using dealer quotes or third party valuation firms. | |||||||||||||||||||
10) | 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. | |||||||||||||||||||
-11 | Includes Level III Credit Investments and Level III Investments of Consolidated CLOs. | |||||||||||||||||||
-12 | Includes two private equity investments involved in energy investments. | |||||||||||||||||||
In the table above, certain private equity investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value. In addition, certain valuations of private equity investments may be entirely or partially derived by reference to observable valuation measures for a pending or consummated transaction. | ||||||||||||||||||||
The table above excludes Other Investments in the amount of $1.1 billion comprised primarily of privately-held equity and equity-like securities (e.g. warrants) in companies that are neither private equity, real assets nor credit 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, 2014 | ||||||||||||||
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, 2014 and 2013, basic and diluted Net Income (Loss) attributable to KKR & Co. L.P. per common unit were calculated as follows: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. | $ | 89,938 | $ | 204,740 | $ | 478,194 | $ | 413,313 | ||||||
Basic Net Income (Loss) Per Common Unit | ||||||||||||||
Weighted Average Common Units Outstanding - Basic | 419,961,455 | 282,148,802 | 364,127,956 | 270,484,224 | ||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Basic | $ | 0.21 | $ | 0.73 | $ | 1.31 | $ | 1.53 | ||||||
Diluted Net Income (Loss) Per Common Unit (a) | ||||||||||||||
Weighted Average Common Units Outstanding - Basic | 419,961,455 | 282,148,802 | 364,127,956 | 270,484,224 | ||||||||||
Weighted Average Unvested Common Units | 26,862,703 | 25,986,389 | 27,917,101 | 25,696,846 | ||||||||||
Weighted Average Exchangeable Equity Securities | 5,195,584 | — | 4,187,771 | — | ||||||||||
Weighted Average Common Units Outstanding - Diluted | 452,019,742 | 308,135,191 | 396,232,828 | 296,181,070 | ||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Diluted | $ | 0.20 | $ | 0.66 | $ | 1.21 | $ | 1.40 | ||||||
Diluted Net Income (Loss) attributable to KKR & Co. L.P. per common unit primarily includes unvested equity awards that have been granted under the Equity Incentive Plan as well as exchangeable equity securities issued in connection with the acquisition of Avoca. Vesting or exchanges of these equity interests dilute KKR and KKR Holdings pro rata in accordance with their respective ownership interests in the KKR Group Partnerships. | ||||||||||||||
For the three and nine months ended September 30, 2014 and 2013, 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 not dilute KKR’s respective ownership interests in the KKR Group Partnerships. | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Weighted Average KKR Holdings Units Outstanding | 383,937,941 | 407,646,472 | 391,269,962 | 417,990,571 | ||||||||||
OTHER_ASSETS_AND_ACCOUNTS_PAYA
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
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, | |||||||
2014 | 2013 | |||||||
Oil & Gas Assets, net | $ | 645,474 | $ | 187,448 | ||||
Due from Broker (a) | 510,727 | 720,245 | ||||||
Unsettled Investment Sales (b) | 221,856 | 85,097 | ||||||
Interest, Dividend and Notes Receivable (c) | 589,321 | 380,099 | ||||||
Intangible Assets, net (d) | 218,139 | 177,545 | ||||||
Deferred Tax Assets, net | 237,354 | 165,699 | ||||||
Goodwill (d) | 89,000 | 89,000 | ||||||
Fixed Assets, net (e) | 76,606 | 80,565 | ||||||
Receivables | 67,571 | 19,455 | ||||||
Foreign Exchange Contracts and Options (f) | 217,768 | 89,090 | ||||||
Deferred Financing Costs | 33,192 | 22,773 | ||||||
Prepaid Taxes | 10,958 | 26,901 | ||||||
Prepaid Expenses | 10,395 | 9,846 | ||||||
Other | 49,755 | 40,867 | ||||||
Total | $ | 2,978,116 | $ | 2,094,630 | ||||
(a) | Represents amounts held at clearing brokers resulting from securities transactions. | |||||||
(b) | Represents amounts due from third parties for investments sold for which cash settlement has not occurred. | |||||||
(c) | Represents interest and dividend receivables 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 2018. | |||||||
(d) | See Note 15 “Goodwill and Intangible Assets.” | |||||||
(e) | Net of accumulated depreciation and amortization of $120,034 and $100,724 as of September 30, 2014 and December 31, 2013, respectively. Depreciation and amortization expense totaled $3,852 and $3,619 for the three months ended September 30, 2014 and 2013, respectively, and $12,054 and $11,042 for the nine months ended September 30, 2014 and 2013, respectively. | |||||||
(f) | 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. | |||||||
Accounts Payable, Accrued Expenses and Other Liabilities consist of the following: | ||||||||
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Amounts Payable to Carry Pool (a) | $ | 1,083,031 | $ | 1,062,643 | ||||
Unsettled Investment Purchases (b) | 1,047,146 | 260,164 | ||||||
Securities Sold Short (c) | 836,657 | 676,144 | ||||||
Foreign Exchange Contracts and Options (d) | 131,628 | 414,782 | ||||||
Accounts Payable and Accrued Expenses | 183,427 | 165,092 | ||||||
Contingent Consideration Obligation (e) | 38,600 | 122,800 | ||||||
Accrued Compensation and Benefits | 184,602 | 21,531 | ||||||
Interest Payable | 42,096 | 23,700 | ||||||
Due to Broker (f) | 81,854 | 28,669 | ||||||
Deferred Rent and Income | 28,411 | 28,029 | ||||||
Redemptions Payable | — | 13,618 | ||||||
Taxes Payable | 7,083 | 5,742 | ||||||
Other Liabilities | 114,602 | 17,012 | ||||||
Total | $ | 3,779,137 | $ | 2,839,926 | ||||
(a) | Represents the amount of carried interest payable to principals, professionals and other individuals with respect to KKR’s active funds and co-investment vehicles that provide for carried interest. | |||||||
(b) | Represents amounts owed to third parties for investment purchases for which cash settlement has not occurred. | |||||||
(c) | 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, 2014 and December 31, 2013 were $840,022 and $650,026, respectively. | |||||||
(d) | 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. | |||||||
(e) | Represents the fair value of the contingent consideration related to the acquisition of Prisma. During the third quarter of 2014, a portion of the obligation recorded as of June 30, 2014 was settled for $123.6 million. Of this amount, approximately $84.1 million was settled with the issuance of KKR & Co. L.P. common units. | |||||||
(f) | Represents amounts owed for securities transactions initiated at clearing brokers. | |||||||
VARIABLE_INTEREST_ENTITIES
VARIABLE INTEREST ENTITIES | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
VARIABLE INTEREST ENTITIES | ' | |||||||
VARIABLE INTEREST ENTITIES | ' | |||||||
8. VARIABLE INTEREST ENTITIES | ||||||||
Consolidated VIEs | ||||||||
KKR consolidates certain VIEs in which it is determined that KKR is the primary beneficiary, which predominately are CLO vehicles. In developing its conclusion that it is the primary beneficiary of these CLO vehicles, KKR determined that it has more than an insignificant variable interest in these CLO vehicles by virtue of its residual interest in these CLO vehicles and, in certain cases, the presence of an incentive collateral management fee. These two variable interests were determined to expose KKR to a more than insignificant amount of these CLO vehicles’ variability relative to its anticipated economic performance. In addition, in KKR’s role as collateral manager of these CLO vehicles, KKR has the power to direct the activities that most significantly impact the economic performance of the entities. In each case, KKR’s variable interests represent an obligation to absorb losses of or a right to receive benefits from the entity that could potentially be significant to the entity. In consideration of these factors, KKR concluded that it was the primary beneficiary of these CLO vehicles for consolidation accounting purposes. The primary purpose of these CLO vehicles is to provide investment opportunities with the objective of generating current income for these CLO investors in exchange for management and/or incentive based fees. The investment strategies of these CLO vehicles are similar and the fundamental risks of these CLO vehicles have similar characteristics, which include loss of invested capital and loss of management fees and/or incentive based fees. KKR does not provide performance guarantees and has no other financial obligation to provide funding to these consolidated CLO vehicles. | ||||||||
Unconsolidated VIEs | ||||||||
KKR holds variable interests in certain VIEs which are not consolidated as it is determined that KKR is not the primary beneficiary. VIEs that are not consolidated include (i) certain investment funds sponsored by KKR where the equity at risk to KKR is not considered substantive and (ii) certain CLO vehicles where KKR does not hold a variable interest that exposes KKR to a more than insignificant amount of the CLO vehicle’s variability. | ||||||||
Investments in Unconsolidated Investment Funds | ||||||||
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. KKR’s maximum exposure to loss as a result of its investments in the unconsolidated investment funds is the carrying value of such investments, which was $327.5 million at September 30, 2014. Accordingly disaggregation of KKR’s involvement by type of unconsolidated investment fund would not provide more useful information. For these unconsolidated investment funds in which KKR is the sponsor, KKR may have an obligation as general partner to provide commitments to such investment funds. KKR has not provided any financial support other than its obligated amount as of September 30, 2014. | ||||||||
Investments in Unconsolidated CLO Vehicles | ||||||||
KKR provides collateral management services for, and has made nominal investments in, certain CLO vehicles that it does not consolidate. KKR’s ownership interests in the unconsolidated CLO vehicles, if any, are carried at fair value in the consolidated statements of financial condition. KKR earns management fees, including subordinated management fees, for managing the collateral of the CLO vehicles. At September 30, 2014, combined assets under management in the pools of unconsolidated CLO vehicles were $3.0 billion. KKR’s maximum exposure to loss as a result of its investments in the residual interests of unconsolidated CLO vehicles is the carrying value of such investments, which was $2.2 million at September 30, 2014. CLO investors in CLO vehicles have no recourse against KKR for any losses sustained in the CLO structures. | ||||||||
As of September 30, 2014 and December 31, 2013, 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, | |||||||
2014 | 2013 | |||||||
Investments | $ | 329,653 | $ | 209,525 | ||||
Due from Affiliates, net | 2,338 | 5,105 | ||||||
Maximum Exposure to Loss | $ | 331,991 | $ | 214,630 | ||||
DEBT_OBLIGATIONS
DEBT OBLIGATIONS | 9 Months Ended | |||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||
DEBT OBLIGATIONS | ' | |||||||||||||||||||
DEBT OBLIGATIONS | ' | |||||||||||||||||||
9. DEBT OBLIGATIONS | ||||||||||||||||||||
KKR borrows and enters into credit agreements and issues debt for its general operating and investment purposes and certain of its investment funds borrow to meet financing needs of their operating and investing activities. Investment financing facilities have been established for the benefit of selected KKR investment funds. In addition, consolidated CLO vehicles issue debt securities to third party investors which are collateralized by investments held by the CLO vehicle. When a KKR investment fund borrows from the facility in which it participates, the proceeds from the borrowings are strictly limited for its intended use by the borrowing investment fund. KKR’s obligations with respect to these financing arrangements are generally limited to KKR’s pro-rata equity interest in such funds. KKR’s management companies bear no obligation with respect to financing arrangements at KKR’s consolidated funds. Debt securities issued by CLO vehicles are supported solely by the investments held at the CLO vehicles and are not collateralized by assets of any other KKR entity. In connection with the acquisition of KFN, KKR reports KFN’s debt obligations which are non-recourse to KKR beyond the assets of KFN. | ||||||||||||||||||||
KKR’s borrowings consisted of the following: | ||||||||||||||||||||
September 30, 2014 | December 31, 2013 | |||||||||||||||||||
Available | Carrying Value | Fair Value | Available | Carrying Value | Fair Value | |||||||||||||||
2020 Senior Notes (a) | $ | — | $ | 498,752 | $ | 583,050 | (h) | $ | — | $ | 498,596 | $ | 560,930 | (h) | ||||||
2041 Senior Notes (b) | — | 291,205 | 289,843 | (i) | — | — | — | |||||||||||||
2042 Senior Notes (c) | — | 123,700 | 122,728 | (i) | — | — | — | |||||||||||||
2043 Senior Notes (d) | — | 494,596 | 543,395 | (h) | — | 494,454 | 468,200 | (h) | ||||||||||||
2044 Senior Notes (e) | — | 493,156 | 520,110 | (h) | — | — | — | |||||||||||||
Junior Subordinated Notes (f) | — | 246,484 | 243,394 | — | — | — | ||||||||||||||
Revolving Credit Facilities | 1,250,000 | — | — | 1,250,000 | — | — | ||||||||||||||
Investment Financing Facilities (g) | 1,532,237 | 930,880 | 930,880 | (j) | 531,231 | 915,556 | 915,556 | (j) | ||||||||||||
Debt Obligations of Consolidated CLOs (k) | — | 7,227,997 | 7,227,997 | — | — | — | ||||||||||||||
$ | 2,782,237 | $ | 10,306,770 | $ | 10,461,397 | $ | 1,781,231 | $ | 1,908,606 | $ | 1,944,686 | |||||||||
(a) | $500 million aggregate principal amount of 6.375% senior notes of KKR due 2020. | |||||||||||||||||||
(b) | KKR consolidates KFN and thus reports KFN’s outstanding $259 million aggregate principal amount of 8.375% senior notes due 2041. | |||||||||||||||||||
(c) | KKR consolidates KFN and thus reports KFN’s outstanding $115 million aggregate principal amount of 7.500% senior notes due 2042. | |||||||||||||||||||
(d) | $500 million aggregate principal amount of 5.500% senior notes of KKR due 2043. | |||||||||||||||||||
(e) | $500 million aggregate principal amount of 5.125% senior notes of KKR due 2044. | |||||||||||||||||||
(f) | KKR consolidates KFN and thus reports KFN’s outstanding $284 million aggregate principal amount of junior subordinated notes. The weighted average interest rate is 5.4% and the weighted average years to maturity is 22.0 years as of September 30, 2014. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR’s Level III credit investments. | |||||||||||||||||||
(g) | Certain of KKR’s investment funds have entered into financing arrangements with major financial institutions, generally in connection with specific investments in connection with the management of capital calls to fund limited partners to provide liquidity to such investment funds. The weighted average interest rate is 2.91% and 3.09% as of September 30, 2014 and December 31, 2013, respectively. The weighted average years to maturity is 2.5 years and 2.3 years as of September 30, 2014 and December 31, 2013, respectively. | |||||||||||||||||||
(h) | The notes are classified as Level II within the fair value hierarchy and fair value is determined by third party broker quotes. | |||||||||||||||||||
(i) | The notes are classified as Level I within the fair value hierarchy and fair value is determined by quoted prices in active markets since the debt is publicly listed. | |||||||||||||||||||
(j) | Carrying amounts approximate fair value given the investment financing facilities’ interest rates are variable. | |||||||||||||||||||
(k) | Represents borrowings due to the holders of debt securities issued by CLO vehicles consolidated by KKR and are carried at fair value. These debt obligations are classified as Level III within the fair value hierarchy. See Note 5 “Fair Value Measurements.” | |||||||||||||||||||
2044 Senior Notes | ||||||||||||||||||||
On May 29, 2014, KKR Group Finance Co. III LLC, a subsidiary of KKR Management Holdings Corp., issued $500 million aggregate principal amount of 5.125% Senior Notes due 2044 (the “2044 Senior Notes”), which were issued at a price of 98.612%. The 2044 Senior Notes are unsecured and unsubordinated obligations of the issuer and will mature on June 1, 2044, unless earlier redeemed or repurchased. The 2044 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 2044 Senior Notes bear interest at a rate of 5.125% per annum, accruing from May 29, 2014. Interest is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2014. | ||||||||||||||||||||
The indenture, as supplemented by a first supplemental indenture, relating to the 2044 Senior Notes includes covenants, including limitations on the issuer’s 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 2044 Senior Notes may declare the 2044 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 2044 Senior Notes and any accrued and unpaid interest on the 2044 Senior Notes automatically becomes due and payable. All or a portion of the 2044 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 2044 Senior Notes. If a change of control repurchase event occurs, the 2044 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 2044 Senior Notes repurchased plus any accrued and unpaid interest on the 2044 Senior Notes repurchased to, but not including, the date of repurchase. | ||||||||||||||||||||
Corporate Credit Agreement | ||||||||||||||||||||
On October 22, 2014, Kohlberg Kravis Roberts & Co. L.P. and the KKR Group Partnerships., as borrowers, entered into a new credit agreement with certain lending institutions and HSBC Bank USA, National Association, as Administrative Agent. The new credit agreement provides the borrowers with a senior unsecured multicurrency revolving credit facility in an aggregate principal amount of $1.0 billion, as of the closing date, with the option to request an increase in the facility amount of up to an additional $250 million, for an aggregate principal amount of $1.25 billion, subject to certain conditions, including obtaining new or increased commitments from new or existing lenders. The credit facility is a five-year facility, scheduled to mature on October 22, 2019, with the borrowers’ option to extend the maturity date, subject to the consent of the applicable lenders, and the borrowers may prepay, terminate or reduce the commitments under the credit facility at any time without penalty. Interest on borrowings under the credit facility will be based on either London Interbank Offered Rate (LIBOR) or Alternate Base Rate, with the applicable margin per annum based on a corporate ratings-based pricing grid ranging from 69 basis points to 120 basis points (for LIBOR borrowings). Borrowings under the credit facility are guaranteed by KKR & Co. L.P. and any other entity (other than the borrowers) that guarantees the 2020 Senior Notes, 2043 Senior Notes or the 2044 Senior Notes. | ||||||||||||||||||||
The new credit agreement replaces the Amended and Restated Credit Agreement dated as of February 11, 2011, as amended, among Kohlberg Kravis Roberts & Co. L.P., KKR Management Holdings L.P., KKR Fund Holdings L.P., as borrowers, HSBC Bank plc, as administrative agent, and the other parties thereto, which was terminated on October 22, 2014. | ||||||||||||||||||||
Debt Obligations of Consolidated CLOs | ||||||||||||||||||||
As of September 30, 2014, debt obligations of consolidated CLOs consisted of the following: | ||||||||||||||||||||
September 30, 2014 | ||||||||||||||||||||
Borrowing | Weighted | Weighted Average | ||||||||||||||||||
Outstanding | Average | Remaining | ||||||||||||||||||
Interest Rate | Maturity in Years | |||||||||||||||||||
Senior Secured Notes | $ | 6,939,451 | 1.8 | % | 8.4 | |||||||||||||||
Subordinated Notes | 288,546 | (a) | 8.6 | |||||||||||||||||
$ | 7,227,997 | |||||||||||||||||||
(a) | The subordinated notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the consolidated CLO vehicles. | |||||||||||||||||||
Debt obligations of consolidated CLOs are collateralized by assets held by each respective CLO vehicle and assets of one CLO vehicle may not be used to satisfy the liabilities of another. As of September 30, 2014, the fair value of the consolidated CLO assets was $9.6 billion. This collateral consisted of Cash and Cash Equivalents Held at Consolidated Entities, Investments, and Other Assets. | ||||||||||||||||||||
INCOME_TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2014 | |
INCOME TAXES | ' |
INCOME TAXES | ' |
10. INCOME TAXES | |
The consolidated entities of KKR are generally treated as partnerships or disregarded entities for U.S. and non-U.S. tax purposes. The taxes payable on the income generated by partnerships and disregarded entities are generally paid by the fund investors, unitholders, principals and other third parties who beneficially own such partnerships and disregarded entities and are generally not payable by KKR. However, certain consolidated entities 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 3.25% and 0.35% for the three months ended September 30, 2014 and 2013, respectively, and 1.15% and 0.55% for the nine months ended September 30, 2014 and 2013, respectively. The effective tax rate differs from the statutory rate primarily due to the following: (i) a substantial portion of the reported net income (loss) before taxes is not attributable to KKR but rather is attributable to noncontrolling interests held in KKR’s consolidated entities by third parties or by KKR Holdings, (ii) a significant portion of the amount of the reported net income (loss) before taxes attributable to KKR is from certain entities that are not subject to U.S. federal, state or local income taxes and/or non- U.S. taxes, and (iii) certain compensation charges attributable to KKR are not deductible for tax purposes. | |
During the three and nine month period ended September 30, 2014, 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, 2014 | ||||||||||||||
EQUITY BASED COMPENSATION | ' | |||||||||||||
EQUITY BASED COMPENSATION | ' | |||||||||||||
11. EQUITY BASED COMPENSATION | ||||||||||||||
The following table summarizes the expense associated with equity based compensation for the three and nine months ended September 30, 2014 and 2013, respectively. | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
KKR Holdings Principal Awards | $ | 9,981 | $ | 33,740 | $ | 27,770 | $ | 85,309 | ||||||
KKR Holdings Restricted Equity Units | 243 | 765 | 749 | 3,173 | ||||||||||
Equity Incentive Plan Units | 42,090 | 31,227 | 122,320 | 84,581 | ||||||||||
Other Exchangeable Securities | 7,249 | — | 17,192 | — | ||||||||||
Discretionary Compensation | 24,387 | 19,483 | 86,404 | 74,120 | ||||||||||
Total | $ | 83,950 | $ | 85,215 | $ | 254,435 | $ | 247,183 | ||||||
KKR Holdings—Principal Awards | ||||||||||||||
Certain KKR employees and non-employee operating consultants and other 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, 2014, KKR Holdings owned approximately 47%, or 382,297,599 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 382,297,599 KKR Holdings units have been legally allocated, but the allocation of 34,691,990 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 8% to 57%, multiplied by the number of unvested units on the grant date. Expense is recognized using the graded-attribution method, which treats each vesting tranche as a separate award. 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 6% annually based upon expected turnover by class of principal, consultant, or service provider. | ||||||||||||||
As of September 30, 2014, there was approximately $11.9 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 as follows: | ||||||||||||||
Unrecognized | ||||||||||||||
Expense (in | ||||||||||||||
Year | millions) | |||||||||||||
Remainder of 2014 | $ | 2.7 | ||||||||||||
2015 | 7.2 | |||||||||||||
2016 | 1.8 | |||||||||||||
2017 | 0.2 | |||||||||||||
Total | $ | 11.9 | ||||||||||||
A summary of the status of unvested Principal Awards from January 1, 2014 through September 30, 2014 is presented below: | ||||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 31, 2014 | 32,801,131 | $ | 7.13 | |||||||||||
Granted | 122,995 | 19.24 | ||||||||||||
Vested | (1,146,755 | ) | 10.76 | |||||||||||
Forfeited | (2,292,072 | ) | 7.05 | |||||||||||
Balance, September 30, 2014 | 29,485,299 | $ | 7.05 | |||||||||||
The weighted average remaining vesting period over which unvested units are expected to vest is 0.2 years. | ||||||||||||||
The following table summarizes the remaining vesting tranches of Principal Awards: | ||||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2014 | 24,704,431 | |||||||||||||
April 1, 2015 | 1,166,055 | |||||||||||||
October 1, 2015 | 2,104,885 | |||||||||||||
April 1, 2016 | 97,950 | |||||||||||||
October 1, 2016 | 1,240,163 | |||||||||||||
April 1, 2017 | 45,522 | |||||||||||||
October 1, 2017 | 111,293 | |||||||||||||
April 1, 2018 | 15,000 | |||||||||||||
29,485,299 | ||||||||||||||
KKR Holdings—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 are funded by KKR Holdings and do not dilute KKR’s interests in the KKR Group Partnerships. The vesting of these Holdings REU Awards occurs 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 generally entitled to distributions. The calculation assumes a forfeiture rate of up to 6% annually based upon expected turnover by class of professionals, support staff, and other personnel. Expense is recognized using the graded-attribution method, which treats each vesting tranche as a separate award. | ||||||||||||||
As of September 30, 2014, there was approximately $0.3 million of estimated unrecognized expense related to unvested awards. That cost is expected to be recognized as follows: | ||||||||||||||
Unrecognized | ||||||||||||||
Expense (in | ||||||||||||||
Year | millions) | |||||||||||||
Remainder of 2014 | $ | 0.1 | ||||||||||||
2015 | 0.2 | |||||||||||||
Total | $ | 0.3 | ||||||||||||
A summary of the status of unvested Holdings REU Awards from January 1, 2014 through September 30, 2014 is presented below: | ||||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2014 | 556,205 | $ | 12.19 | |||||||||||
Granted | — | — | ||||||||||||
Vested | (142,510 | ) | 14.18 | |||||||||||
Forfeited | (41,251 | ) | 10.67 | |||||||||||
Balance, September 30, 2014 | 372,444 | $ | 11.6 | |||||||||||
The weighted average remaining vesting period over which unvested Holdings REU Awards are expected to vest is 0.2 years. | ||||||||||||||
A summary of the remaining vesting tranches of Holdings REU Awards is presented below: | ||||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2014 | 235,953 | |||||||||||||
April 1, 2015 | 113,758 | |||||||||||||
October 1, 2015 | 22,733 | |||||||||||||
372,444 | ||||||||||||||
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, 2014, equity awards relating to 43,930,951 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/or 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 8% to 57% 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 6% annually based upon expected turnover by class of recipient. | ||||||||||||||
As of September 30, 2014, there was approximately $204.1 million of estimated unrecognized expense related to unvested awards. That cost is expected to be recognized as follows: | ||||||||||||||
Unrecognized | ||||||||||||||
Expense (in | ||||||||||||||
Year | millions) | |||||||||||||
Remainder of 2014 | $ | 30.8 | ||||||||||||
2015 | 102.9 | |||||||||||||
2016 | 55.7 | |||||||||||||
2017 | 11.9 | |||||||||||||
2018 | 2.8 | |||||||||||||
Total | $ | 204.1 | ||||||||||||
A summary of the status of unvested awards granted under the Equity Incentive Plan from January 1, 2014 through September 30, 2014 is presented below: | ||||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2014 | 22,942,987 | $ | 10.05 | |||||||||||
Granted | 8,956,193 | 19.07 | ||||||||||||
Vested | (4,645,712 | ) | 11.67 | |||||||||||
Forfeited | (1,180,585 | ) | 11.27 | |||||||||||
Balance, September 30, 2014 | 26,072,883 | $ | 12.8 | |||||||||||
The weighted average remaining vesting period over which unvested awards are expected to vest is 1.1 years. | ||||||||||||||
A summary of the remaining vesting tranches of awards granted under the Equity Incentive Plan is presented below: | ||||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2014 | 5,813,779 | |||||||||||||
April 1, 2015 | 5,358,090 | |||||||||||||
October 1, 2015 | 4,980,195 | |||||||||||||
April 1, 2016 | 3,294,669 | |||||||||||||
October 1, 2016 | 3,779,864 | |||||||||||||
April 1, 2017 | 1,254,938 | |||||||||||||
October 1, 2017 | 731,241 | |||||||||||||
April 1, 2018 | 8,820 | |||||||||||||
October 1, 2018 | 851,287 | |||||||||||||
26,072,883 | ||||||||||||||
Other Exchangeable Securities | ||||||||||||||
In connection with the acquisition of Avoca, KKR issued 2,545,602 equity securities of a subsidiary of a KKR Group Partnership and of KKR & Co. L.P. both of which are subject to vesting and are exchangeable into common units of KKR & Co. L.P. on a one-for-one basis once vested (“Other Exchangeable Securities”). The unvested Other Exchangeable Securities are subject to time based vesting (generally over a three-year period from the date of issuance), and in certain cases are subject to minimum retained ownership requirements and transfer restrictions. Consistent with grants of KKR Holdings awards and grants made under the KKR Equity Incentive Plan, holders of Other Exchangeable Securities are not entitled to receive distributions while unvested. | ||||||||||||||
The fair value of Other Exchangeable Securities 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, Other Exchangeable Securities are instruments with terms and conditions similar to those of a KKR & Co. L.P. common unit. Specifically, these Other Exchangeable Securities are exchangeable into KKR & Co. L.P. common units on a one-for-one basis upon vesting. | ||||||||||||||
Expense associated with the vesting of these Other Exchangeable Securities is based on the closing price of a KKR & Co. L.P. common unit on the date of grant, discounted for the lack of participation rights in the expected distributions on unvested Other Exchangeable Securities, which currently ranges from 8% to 57% multiplied by the number of unvested Other Exchangeable Securities on the issuance date. The discount range was based on management’s estimates of future distributions that unvested Other Exchangeable Securities will not be entitled to receive between the issuance date and the vesting date. Therefore, Other Exchangeable Securities that vest in earlier periods have a lower discount as compared to Other Exchangeable Securities 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 issuance 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 security and assumes a forfeiture rate of up to 6% annually based upon expected turnover by class of recipient. | ||||||||||||||
As of September 30, 2014, there was approximately $26.4 million of estimated unrecognized expense related to unvested Other Exchangeable Securities. That cost is expected to be recognized as follows: | ||||||||||||||
Unrecognized | ||||||||||||||
Expense (in | ||||||||||||||
Year | millions) | |||||||||||||
Remainder of 2014 | $ | 3.4 | ||||||||||||
2015 | 13.7 | |||||||||||||
2016 | 9.3 | |||||||||||||
Total | $ | 26.4 | ||||||||||||
A summary of the status of unvested Other Exchangeable Securities from January 1, 2014 through September 30, 2014 is presented below: | ||||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2014 | — | $ | — | |||||||||||
Granted | 2,545,602 | 19.67 | ||||||||||||
Vested | — | — | ||||||||||||
Forfeited | (1,654 | ) | 19.67 | |||||||||||
Balance, September 30, 2014 | 2,543,948 | $ | 19.67 | |||||||||||
The weighted average remaining vesting period over which unvested Other Exchangeable Securities are expected to vest is 1.0 years. | ||||||||||||||
The following table summarizes the remaining vesting tranches of Other Exchangeable Securities: | ||||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2014 | 847,976 | |||||||||||||
October 1, 2015 | 847,983 | |||||||||||||
October 1, 2016 | 847,989 | |||||||||||||
2,543,948 | ||||||||||||||
Discretionary Compensation | ||||||||||||||
All 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 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 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, 2014 | ||||||||
RELATED PARTY TRANSACTIONS | ' | |||||||
RELATED PARTY TRANSACTIONS | ' | |||||||
12. RELATED PARTY TRANSACTIONS | ||||||||
Due from and to Affiliates consists of: | ||||||||
September 30, 2014 | December 31, 2013 | |||||||
Due from Related Entities | $ | 61,432 | $ | 98,793 | ||||
Due from Portfolio Companies | 69,567 | 45,115 | ||||||
Due from Affiliates | $ | 130,999 | $ | 143,908 | ||||
September 30, 2014 | December 31, 2013 | |||||||
Due to KKR Holdings in Connection with the Tax Receivable Agreement | $ | 123,243 | $ | 89,797 | ||||
Due to Related Entities | 9,880 | 4,054 | ||||||
Due to Affiliates | $ | 133,123 | $ | 93,851 | ||||
SEGMENT_REPORTING
SEGMENT REPORTING | 9 Months Ended | |||||||||||||
Sep. 30, 2014 | ||||||||||||||
SEGMENT REPORTING | ' | |||||||||||||
SEGMENT REPORTING | ' | |||||||||||||
13. SEGMENT REPORTING | ||||||||||||||
KKR transacts its investment advisory business primarily in the United States and the majority of the fees from such business are earned from the United States. KKR operates through three reportable business segments. These segments, which are differentiated primarily by their business objectives and investment strategies, consist of the following: | ||||||||||||||
Private Markets | ||||||||||||||
Through KKR’s 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 sponsors a group of funds and co-investment vehicles that invest capital in real assets, such as infrastructure, energy and real estate. These funds, vehicles and accounts are managed by Kohlberg Kravis Roberts & Co. L.P., an SEC registered investment adviser. | ||||||||||||||
Public Markets | ||||||||||||||
KKR operates, reports, and combines its credit and hedge funds businesses through the Public Markets segment. KKR’s credit business advises funds, CLOs, separately managed accounts, and investment companies registered under the Investment Company Act, including a business development company or BDC, undertakings for collective investment in transferable investment funds or UCITS and alternative investment funds or AIFs, which invests capital in (i) leveraged credit strategies, such as leveraged loans and high yield bonds and (ii) alternative credit strategies such as mezzanine investments, special situations investments, direct lending investments and long/short credit. KKR’s Public Markets segment also includes its hedge funds business that offers a variety of investment strategies including customized hedge fund portfolios, hedge fund-of-fund solutions and acquiring stakes in or seeding hedge fund managers. KKR’s funds in the credit and hedge funds strategies are managed by KKR Credit Advisors (US) LLC (formerly known as KKR Asset Management LLC) and Prisma Capital Partners LP, both of which are SEC-registered investment advisers, and KKR Credit Advisors (Ireland), regulated by the Central Bank of Ireland. KKR Credit Advisors (Ireland) (formerly known as Avoca Capital) was acquired on February 19, 2014. | ||||||||||||||
Capital Markets and Other | ||||||||||||||
Capital Markets and Other segment is comprised primarily of KKR’s global capital markets business. KKR’s capital markets business supports the firm, portfolio companies and third-party clients by developing and implementing both traditional and non-traditional capital solutions for investments or companies seeking financing. These services include arranging debt and equity financing for transactions, placing and underwriting securities offerings and providing other types of capital markets services. When KKR underwrites an offering of securities or a loan on a firm commitment basis, KKR commits to buy and sell an issue of securities or indebtedness and generate revenue by purchasing the securities or indebtedness at a discount or for a fee. When KKR acts in an agency capacity, KKR generates revenue for arranging financing or placing securities or debt with capital markets investors. KKR Capital Markets LLC is an SEC-registered broker-dealer and a FINRA member, and KKR is also registered or authorized to carry out certain broker-dealer activities in various countries in North America, Europe, Asia-Pacific and the Middle East. KKR’s third party capital markets activities are generally carried out through Merchant Capital Solutions LLC, a joint venture with two other unaffiliated partners, and non-bank financial companies, or NBFCs, in India. | ||||||||||||||
Key Performance Measure - Economic Net Income (“ENI”) | ||||||||||||||
ENI is 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. | ||||||||||||||
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 total segment revenues; less total segment expenses and 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 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 non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the Equity Incentive Plan and other securities that are exchangeable for common units of KKR & Co. L.P.; (v) the exclusion of certain non-recurring items; (vi) the exclusion of investment income (loss) relating to noncontrolling interests; and (vii) the exclusion of income taxes. | ||||||||||||||
In connection with KKR’s acquisition of KKR Financial Holdings LLC (“KFN”) on April 30, 2014, and the related increase in the amount of assets held by KKR, KKR’s management reevaluated the manner in which it makes operational and resource deployment decisions and assesses the overall performance of each of KKR’s operating segments. As a result, beginning with the second quarter of 2014, KKR has modified the presentation of its segment financial information. | ||||||||||||||
Certain of the more significant changes between KKR’s current segment presentation and its previously reported segment presentation are as follows: | ||||||||||||||
-1 | Income on investments is now attributed to either the Private Markets segment or Public Markets segment based on the character of the income generated. | |||||||||||||
-2 | Carried interest and other investment income (both realized and unrealized) is now included in total segment revenues as opposed to investment income. | |||||||||||||
-3 | Total segment expenses now include allocation to carry pool within compensation and benefits (both realized and unrealized), as opposed to such amounts being included in investment income. | |||||||||||||
-4 | The Capital Markets and Principal Activities segment has been renamed Capital Markets and Other. | |||||||||||||
In connection with these modifications, segment information for the three and nine months ended September 30, 2013 has been presented to conform to KKR’s current segment presentation. Consequently, this will not be consistent with historical segment financial results previously reported. While the modified segment presentation impacted the amount of ENI reported by each operating segment, it had no impact on KKR’s ENI on a total reportable segment basis. | ||||||||||||||
The following tables present the financial data for KKR’s reportable segments: | ||||||||||||||
As of and for the Three Months Ended September 30, 2014 | ||||||||||||||
Private Markets | Public Markets | Capital Markets | Total | |||||||||||
and Other | Reportable | |||||||||||||
Segments | ||||||||||||||
Segment Revenues | ||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||
Management Fees | $ | 107,443 | $ | 66,469 | $ | — | $ | 173,912 | ||||||
Monitoring Fees | 30,449 | — | — | 30,449 | ||||||||||
Transaction Fees | 67,772 | 3,262 | 87,530 | 158,564 | ||||||||||
Fee Credits (1) | (58,810 | ) | (3,001 | ) | — | (61,811 | ) | |||||||
Total Management, Monitoring and Transaction Fees, Net | 146,854 | 66,730 | 87,530 | 301,114 | ||||||||||
Performance Income | ||||||||||||||
Realized Carried Interest | 236,126 | 9,900 | — | 246,026 | ||||||||||
Incentive Fees | — | 8,009 | — | 8,009 | ||||||||||
Unrealized Carried Interest | 53,776 | 2,416 | — | 56,192 | ||||||||||
Total Performance Income | 289,902 | 20,325 | — | 310,227 | ||||||||||
Investment Income (Loss) | ||||||||||||||
Net Realized Gains (Losses) | 165,047 | (630 | ) | (1,622 | ) | 162,795 | ||||||||
Net Unrealized Gains (Losses) | 8,293 | (46,118 | ) | (8 | ) | (37,833 | ) | |||||||
Total Realized and Unrealized | 173,340 | (46,748 | ) | (1,630 | ) | 124,962 | ||||||||
Net Interest and Dividends | 21,463 | 53,335 | 7,456 | 82,254 | ||||||||||
Total Investment Income (Loss) | 194,803 | 6,587 | 5,826 | 207,216 | ||||||||||
Total Segment Revenues | 631,559 | 93,642 | 93,356 | 818,557 | ||||||||||
Segment Expenses | ||||||||||||||
Compensation and Benefits | ||||||||||||||
Cash Compensation and Benefits | 59,991 | 26,787 | 22,012 | 108,790 | ||||||||||
Realized Allocation to Carry Pool (2) | 94,451 | 3,960 | — | 98,411 | ||||||||||
Unrealized Allocation to Carry Pool (2) | 21,729 | 967 | — | 22,696 | ||||||||||
Total Compensation and Benefits | 176,171 | 31,714 | 22,012 | 229,897 | ||||||||||
Occupancy and related charges | 11,460 | 2,518 | 480 | 14,458 | ||||||||||
Other operating expenses | 44,619 | 10,929 | 4,724 | 60,272 | ||||||||||
Total Segment Expenses | 232,250 | 45,161 | 27,216 | 304,627 | ||||||||||
Income (Loss) attributable to noncontrolling interests (3) | 342 | 335 | 4,512 | 5,189 | ||||||||||
Economic Net Income (Loss) | $ | 398,967 | $ | 48,146 | $ | 61,628 | $ | 508,741 | ||||||
Total Assets | $ | 7,419,105 | $ | 4,333,710 | $ | 1,763,040 | $ | 13,515,855 | ||||||
-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 | Represents economic interests that will (i) allocate to third parties 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 Other segment. | |||||||||||||
As of and for the Three Months Ended September 30, 2013 | ||||||||||||||
Private Markets | Public Markets | Capital Markets | Total | |||||||||||
and Other | Reportable | |||||||||||||
Segments | ||||||||||||||
Segment Revenues | ||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||
Management Fees | $ | 119,410 | $ | 53,835 | $ | — | $ | 173,245 | ||||||
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 | ) | |||||||
Total Management, Monitoring and Transaction Fees, Net | 160,791 | 59,184 | 53,625 | 273,600 | ||||||||||
Performance Income | ||||||||||||||
Realized Carried Interest | 81,532 | — | — | 81,532 | ||||||||||
Incentive Fees | — | 1,225 | — | 1,225 | ||||||||||
Unrealized Carried Interest | 256,215 | 14,022 | — | 270,237 | ||||||||||
Total Performance Income | 337,747 | 15,247 | — | 352,994 | ||||||||||
Investment Income (Loss) | ||||||||||||||
Net Realized Gains (Losses) | 104,061 | 979 | (1,495 | ) | 103,545 | |||||||||
Net Unrealized Gains (Losses) | 194,270 | 4,653 | 1,783 | 200,706 | ||||||||||
Total Realized and Unrealized | 298,331 | 5,632 | 288 | 304,251 | ||||||||||
Net Interest and Dividends | (8,344 | ) | 3,481 | 4,084 | (779 | ) | ||||||||
Total Investment Income (Loss) | 289,987 | 9,113 | 4,372 | 303,472 | ||||||||||
Total Segment Revenues | 788,525 | 83,544 | 57,997 | 930,066 | ||||||||||
Segment Expenses | ||||||||||||||
Compensation and Benefits | ||||||||||||||
Cash Compensation and Benefits | 65,400 | 18,606 | 8,223 | 92,229 | ||||||||||
Realized Allocation to Carry Pool (2) | 32,613 | — | — | 32,613 | ||||||||||
Unrealized Allocation to Carry Pool (2) | 107,290 | 5,609 | — | 112,899 | ||||||||||
Total Compensation and Benefits | 205,303 | 24,215 | 8,223 | 237,741 | ||||||||||
Occupancy and related charges | 13,367 | 1,906 | 401 | 15,674 | ||||||||||
Other operating expenses | 37,586 | 19,670 | 3,628 | 60,884 | ||||||||||
Total Segment Expenses | 256,256 | 45,791 | 12,252 | 314,299 | ||||||||||
Income (Loss) attributable to noncontrolling interests (3) | 433 | 202 | 1,385 | 2,020 | ||||||||||
Economic Net Income (Loss) | $ | 531,836 | $ | 37,551 | $ | 44,360 | $ | 613,747 | ||||||
Total Assets | $ | 6,164,029 | $ | 1,149,196 | $ | 1,201,819 | $ | 8,515,044 | ||||||
-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 | Represents economic interests that will (i) allocate to third parties 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 Other segment. | |||||||||||||
As of and for the Nine Months Ended September 30, 2014 | ||||||||||||||
Private Markets | Public Markets | Capital Markets | Total | |||||||||||
and Other | Reportable | |||||||||||||
Segments | ||||||||||||||
Segment Revenues | ||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||
Management Fees | $ | 342,024 | $ | 205,955 | $ | — | $ | 547,979 | ||||||
Monitoring Fees | 96,422 | — | — | 96,422 | ||||||||||
Transaction Fees | 206,132 | 16,634 | 183,619 | 406,385 | ||||||||||
Fee Credits (1) | (182,626 | ) | (13,683 | ) | — | (196,309 | ) | |||||||
Total Management, Monitoring and Transaction Fees, Net | 461,952 | 208,906 | 183,619 | 854,477 | ||||||||||
Performance Income | ||||||||||||||
Realized Carried Interest | 960,414 | 34,650 | — | 995,064 | ||||||||||
Incentive Fees | — | 36,506 | — | 36,506 | ||||||||||
Unrealized Carried Interest | 35,988 | 28,025 | — | 64,013 | ||||||||||
Total Performance Income | 996,402 | 99,181 | — | 1,095,583 | ||||||||||
Investment Income (Loss) | ||||||||||||||
Net Realized Gains (Losses) | 549,137 | 19,133 | (2,086 | ) | 566,184 | |||||||||
Net Unrealized Gains (Losses) | (43,763 | ) | (27,553 | ) | (693 | ) | (72,009 | ) | ||||||
Total Realized and Unrealized | 505,374 | (8,420 | ) | (2,779 | ) | 494,175 | ||||||||
Net Interest and Dividends | 41,415 | 96,734 | 15,701 | 153,850 | ||||||||||
Total Investment Income (Loss) | 546,789 | 88,314 | 12,922 | 648,025 | ||||||||||
Total Segment Revenues | 2,005,143 | 396,401 | 196,541 | 2,598,085 | ||||||||||
Segment Expenses | ||||||||||||||
Compensation and Benefits | ||||||||||||||
Cash Compensation and Benefits | 183,411 | 80,436 | 45,302 | 309,149 | ||||||||||
Realized Allocation to Carry Pool (2) | 384,166 | 13,860 | — | 398,026 | ||||||||||
Unrealized Allocation to Carry Pool (2) | 16,742 | 11,209 | — | 27,951 | ||||||||||
Total Compensation and Benefits | 584,319 | 105,505 | 45,302 | 735,126 | ||||||||||
Occupancy and related charges | 34,784 | 7,234 | 1,386 | 43,404 | ||||||||||
Other operating expenses | 124,267 | 30,910 | 12,207 | 167,384 | ||||||||||
Total Segment Expenses | 743,370 | 143,649 | 58,895 | 945,914 | ||||||||||
Income (Loss) attributable to noncontrolling interests (3) | 1,192 | 1,242 | 9,163 | 11,597 | ||||||||||
Economic Net Income (Loss) | $ | 1,260,581 | $ | 251,510 | $ | 128,483 | $ | 1,640,574 | ||||||
Total Assets | $ | 7,419,105 | $ | 4,333,710 | $ | 1,763,040 | $ | 13,515,855 | ||||||
-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 | Represents economic interests that will (i) allocate to third parties 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 Other segment. | |||||||||||||
As of and for the Nine Months Ended September 30, 2013 | ||||||||||||||
Private Markets | Public Markets | Capital Markets | Total | |||||||||||
and Other | Reportable | |||||||||||||
Segments | ||||||||||||||
Segment Revenues | ||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||
Management Fees | $ | 340,715 | $ | 149,669 | $ | — | $ | 490,384 | ||||||
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 | ) | |||||||
Total Management, Monitoring and Transaction Fees, Net | 434,158 | 158,107 | 104,717 | 696,982 | ||||||||||
Performance Income | ||||||||||||||
Realized Carried Interest | 439,527 | — | — | 439,527 | ||||||||||
Incentive Fees | — | 35,664 | — | 35,664 | ||||||||||
Unrealized Carried Interest | 340,254 | 45,212 | — | 385,466 | ||||||||||
Total Performance Income | 779,781 | 80,876 | — | 860,657 | ||||||||||
Investment Income (Loss) | ||||||||||||||
Net Realized Gains (Losses) | 401,750 | 6,128 | (3,127 | ) | 404,751 | |||||||||
Net Unrealized Gains (Losses) | 210,154 | 13,981 | 4,302 | 228,437 | ||||||||||
Total Realized and Unrealized | 611,904 | 20,109 | 1,175 | 633,188 | ||||||||||
Net Interest and Dividends | (18,410 | ) | 10,229 | 9,713 | 1,532 | |||||||||
Total Investment Income (Loss) | 593,494 | 30,338 | 10,888 | 634,720 | ||||||||||
Total Segment Revenues | 1,807,433 | 269,321 | 115,605 | 2,192,359 | ||||||||||
Segment Expenses | ||||||||||||||
Compensation and Benefits | ||||||||||||||
Cash Compensation and Benefits | 164,917 | 60,296 | 22,614 | 247,827 | ||||||||||
Realized Allocation to Carry Pool (2) | 175,811 | — | — | 175,811 | ||||||||||
Unrealized Allocation to Carry Pool (2) | 147,656 | 18,085 | — | 165,741 | ||||||||||
Total Compensation and Benefits | 488,384 | 78,381 | 22,614 | 589,379 | ||||||||||
Occupancy and related charges | 35,935 | 5,063 | 1,065 | 42,063 | ||||||||||
Other operating expenses | 105,516 | 36,643 | 8,382 | 150,541 | ||||||||||
Total Segment Expenses | 629,835 | 120,087 | 32,061 | 781,983 | ||||||||||
Income (Loss) attributable to noncontrolling interests (3) | 1,242 | 935 | 2,267 | 4,444 | ||||||||||
Economic Net Income (Loss) | $ | 1,176,356 | $ | 148,299 | $ | 81,277 | $ | 1,405,932 | ||||||
Total Assets | $ | 6,164,029 | $ | 1,149,196 | $ | 1,201,819 | $ | 8,515,044 | ||||||
-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 | Represents economic interests that will (i) allocate to third parties 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 Other segment. | |||||||||||||
The following tables reconcile KKR’s total reportable segments to the most directly comparable financial measures calculated and presented in accordance with GAAP: | ||||||||||||||
Fees | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Total Segment Revenues | 818,557 | 930,066 | 2,598,085 | 2,192,359 | ||||||||||
Management fees relating to consolidated funds and other entities | (121,008 | ) | (127,458 | ) | (386,207 | ) | (357,607 | ) | ||||||
Fee credits relating to consolidated funds | 58,580 | 48,641 | 184,039 | 103,070 | ||||||||||
Net realized and unrealized carried interest | (302,218 | ) | (351,769 | ) | (1,059,077 | ) | (824,993 | ) | ||||||
Total investment income (loss) | (207,216 | ) | (303,472 | ) | (648,025 | ) | (634,720 | ) | ||||||
Revenue earned by oil & gas producing entities | 69,380 | 9,575 | 143,369 | 9,575 | ||||||||||
Reimbursable expenses | 21,040 | 10,145 | 46,480 | 25,586 | ||||||||||
Other | 7,653 | 4,300 | 18,400 | 24,374 | ||||||||||
Fees | $ | 344,768 | $ | 220,028 | $ | 897,064 | $ | 537,644 | ||||||
Expenses | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Total Segment Expenses | 304,627 | 314,299 | 945,914 | 781,983 | ||||||||||
Equity-based compensation | 83,950 | 85,215 | 254,435 | 247,183 | ||||||||||
Reimbursable expenses | 34,355 | 15,516 | 66,847 | 35,029 | ||||||||||
Operating expenses relating to consolidated funds and other entities | 28,219 | 16,061 | 81,536 | 52,874 | ||||||||||
Expenses incurred by oil & gas producing entities | 40,234 | 6,951 | 90,405 | 6,951 | ||||||||||
Acquisition, contingent payment, litigation and other non-recurring costs | 2,396 | 6,500 | 87,893 | 35,922 | ||||||||||
Other | 10,629 | 10,953 | 35,876 | 26,905 | ||||||||||
Total Expenses | $ | 504,410 | $ | 455,495 | $ | 1,562,906 | $ | 1,186,847 | ||||||
Income (Loss) Before Taxes | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Economic net income | $ | 508,741 | $ | 613,747 | $ | 1,640,574 | $ | 1,405,932 | ||||||
Income taxes | (29,267 | ) | (7,644 | ) | (57,145 | ) | (25,525 | ) | ||||||
Amortization of intangibles and other, net | (204,676 | ) | (15,979 | ) | (262,300 | ) | (57,524 | ) | ||||||
Equity-based compensation | (83,950 | ) | (85,215 | ) | (254,435 | ) | (247,183 | ) | ||||||
Net income (loss) attributable to noncontrolling interests | ||||||||||||||
held by KKR Holdings | (100,910 | ) | (300,169 | ) | (588,500 | ) | (662,387 | ) | ||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 89,938 | $ | 204,740 | $ | 478,194 | $ | 413,313 | ||||||
Net income (loss) attributable to noncontrolling interests and appropriated capital | 784,568 | 1,984,245 | 4,449,146 | 4,134,293 | ||||||||||
Net income (loss) attributable to redeemable noncontrolling interests | (2,462 | ) | 9,169 | 1,366 | 25,992 | |||||||||
Income taxes | 29,267 | 7,644 | 57,145 | 25,525 | ||||||||||
Income (loss) before taxes | $ | 901,311 | $ | 2,205,798 | $ | 4,985,851 | $ | 4,599,123 | ||||||
The items that reconcile KKR’s total reportable segments to the most directly comparable financial measures calculated and presented in accordance with GAAP for (i) net income (loss) attributable to redeemable noncontrolling interests, (ii) income (loss) attributable to noncontrolling interests and appropriated capital and (iii) total assets are primarily attributable to the impact of the consolidation of KKR’s funds and certain other entities. | ||||||||||||||
ACQUISITIONS
ACQUISITIONS | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
ACQUISITIONS | ' | |||||||
ACQUISITIONS | ' | |||||||
14. ACQUISITIONS | ||||||||
Acquisition of KFN | ||||||||
On April 30, 2014, KKR, affiliates of KKR and KFN, completed the acquisition by merger (the “Merger”) contemplated by an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which KFN became a subsidiary of KKR Fund Holdings. KFN is a specialty finance company with expertise in a range of asset classes in which it invests, including bank loans, high yield securities, natural resources, special situations, mezzanine, commercial real estate and private equity with a focus on specialty lending. The addition of KFN provides KKR with over $2 billion of permanent equity capital to support the continued growth of its business. | ||||||||
The total consideration paid was approximately $2.4 billion consisting entirely of the issuance of 104.3 million KKR common units as follows (amounts in thousands except unit data): | ||||||||
Number of KKR common units issued | 104,340,028 | |||||||
KKR common unit price on April 30, 2014 | $ | 22.71 | ||||||
Estimated fair value of KKR common units issued | $ | 2,369,559 | ||||||
The following is a summary of the estimated fair values of the assets acquired and liabilities as of April 30, 2014, the date they were assumed: | ||||||||
Cash and cash equivalents | $ | 210,413 | ||||||
Cash and cash equivalents held at consolidated entities | 614,929 | |||||||
Restricted cash and cash equivalents | 35,038 | |||||||
Investments | 1,235,813 | |||||||
Investments of consolidated CLOs | 6,742,768 | |||||||
Other assets | 642,721 | |||||||
Other assets of consolidated CLOs | 133,036 | |||||||
Total assets | 9,614,718 | |||||||
Debt obligations | 724,509 | |||||||
Debt obligations of consolidated CLOs | 5,663,666 | |||||||
Accounts payable, accrued expenses and other liabilities | 118,427 | |||||||
Other liabilities of consolidated CLOs | 344,660 | |||||||
Total liabilities | 6,851,262 | |||||||
Noncontrolling interests | 378,983 | |||||||
Fair value of Net Assets Acquired | 2,384,473 | |||||||
Less: Fair value of consideration transferred | 2,369,559 | |||||||
Gain on acquisition | $ | 14,914 | ||||||
As of April 30, 2014, the fair value of the net assets acquired exceeded the fair value of consideration transferred by approximately $14.9 million and relates primarily to the difference between the fair value of the assets and liabilities of CLOs consolidated by KFN. This amount has been recorded in net gains (losses) from investment activities in the condensed consolidated statement of operations. | ||||||||
KKR incurred $8.3 million of acquisition related costs through the date of closing, which were expensed as incurred and are reflected within General, Administrative and Other Expense. | ||||||||
On a segment basis, the financial results of KFN are included within each of the Private Markets segment, Public Markets segment and Capital Markets and Other segment, based on the character of each asset of KFN. | ||||||||
Acquisition of Avoca Capital | ||||||||
On February 19, 2014, KKR closed its previously announced acquisition of 100% of the equity interests of Avoca Capital and its affiliates (“Avoca”). Avoca, now renamed KKR Credit Advisors (Ireland), was a European credit investment manager with approximately $8.2 billion in assets under management at the time of acquisition. The addition of Avoca provided KKR with a greater presence in the European leveraged credit markets. | ||||||||
The total consideration included $83.3 million in cash and $56.5 million in securities of a subsidiary of a KKR Group Partnership and of KKR & Co. L.P. that are exchangeable into approximately 2.4 million KKR & Co. L.P. common units, at any time, at the election of the holders of the securities. In connection with this transaction, there is no contingent consideration payable in the future. | ||||||||
The following is a summary of the estimated fair values of the assets acquired and liabilities as of February 19, 2014, the date they were assumed: | ||||||||
Cash and cash equivalents | $ | 24,381 | ||||||
Investments | 20,905 | |||||||
Investments of consolidated CLOs | 1,226,174 | |||||||
Other assets of consolidated CLOs | 186,609 | |||||||
Other assets | 7,370 | |||||||
Intangible assets | 65,880 | |||||||
Total assets | 1,531,319 | |||||||
Liabilities | 13,584 | |||||||
Debt obligations of consolidated CLOs | 1,150,551 | |||||||
Other liabilities of consolidated CLOs | 140,308 | |||||||
Total liabilities | 1,304,443 | |||||||
Fair Value of Net Assets Acquired | 226,876 | |||||||
Less: Fair value of subordinated notes of consolidated CLOs held by KKR prior to acquisition (a) | 74,029 | |||||||
Less: Fair value of consideration transferred | 139,798 | |||||||
Gain on acquisition | $ | 13,049 | ||||||
(a) | Represents subordinated notes in one of the consolidated CLOs held by KKR prior to the acquisition of Avoca. Upon acquisition of Avoca, KKR’s investment in the subordinated notes was offset against the corresponding debt obligations of the consolidated CLO in purchase accounting. | |||||||
As of February 19, 2014, the fair value of the net assets acquired exceeded the fair value of consideration transferred by approximately $13.0 million and relates primarily to the difference between the fair value of the assets and liabilities of CLOs required to be consolidated in connection with the Avoca transaction. This amount has been recorded in net gains (losses) from investment activities in the condensed consolidated statement of operations. | ||||||||
KKR incurred $4.4 million of acquisition related costs through the date of closing, which were expensed as incurred and are reflected within General, Administrative and Other Expense. | ||||||||
On a segment basis, the financial results of Avoca are included within the Public Markets segment. | ||||||||
KFN and Avoca Supplemental Financial Information | ||||||||
The condensed consolidated statement of operations for the three and nine months ended September 30, 2014 include the financial results of KFN since the date of acquisition, April 30, 2014, and of Avoca since the date of acquisition, February 19, 2014. The information that follows provides supplemental financial information about the KFN and Avoca fees and net income (loss) attributable to KKR & Co. L.P. during the three and nine months ended September 30, 2014. Additionally, the portion of net income that is allocable to KKR reflects KKR’s approximate ownership interest in the KKR Group Partnerships after applicable corporate and local income taxes for the three and nine months ended September 30, 2014. | ||||||||
For the Three Months Ended September 30, 2014 | KFN | Avoca | ||||||
Fees (a) | $ | 17.9 | $ | 13.8 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. | $ | (34.9 | ) | $ | 1.5 | |||
For the Nine Months Ended September 30, 2014 | KFN | Avoca | ||||||
Fees (a) | $ | 49.8 | $ | 30.2 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. | $ | (16.1 | ) | $ | (0.6 | ) | ||
(a) | Fees for KFN represent oil and gas revenue from working and royalty interests in oil and natural gas producing properties consolidated by KKR. | |||||||
Pro Forma Financial Information | ||||||||
The information that follows provides supplemental information about pro forma fees and net income (loss) attributable to KKR & Co. L.P. as if the acquisitions of KFN and Avoca had been consummated as of January 1, 2013. Such information is unaudited and is based on estimates and assumptions which KKR believes are reasonable. These results are not necessarily indicative of the consolidated statements of operations in future periods or the results that would have actually been realized had KKR, KFN and Avoca been a combined entity during 2014 and 2013. | ||||||||
Nine Months Ended September 30, | ||||||||
Selected Pro Forma Financial Information | 2014 | 2013 | ||||||
Fees | $ | 939,453 | $ | 608,227 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. | $ | 534,411 | $ | 513,731 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. per common unit - basic | $ | 1.30 | $ | 1.37 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. per common unit - diluted | $ | 1.21 | $ | 1.27 | ||||
GOODWILL_AND_INTANGIBLE_ASSETS
GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
GOODWILL AND INTANGIBLE ASSETS | ' | |||||||
GOODWILL AND INTANGIBLE ASSETS | ' | |||||||
15. GOODWILL AND INTANGIBLE ASSETS | ||||||||
Goodwill | ||||||||
Goodwill from the acquisition of Prisma represents the excess of acquisition costs over the fair value of net tangible and intangible assets acquired and is primarily attributed to synergies expected to arise after the acquisition of Prisma. The carrying value of goodwill was $89.0 million as of September 30, 2014 and December 31, 2013, and is recorded within Other Assets on the condensed consolidated statements of financial condition. Goodwill has been allocated entirely to the Public Markets segment. As of September 30, 2014, 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: | ||||||||
As of | ||||||||
September 30, 2014 | December 31, 2013 | |||||||
Finite-Lived Intangible Assets | $ | 284,766 | $ | 218,886 | ||||
Accumulated Amortization (includes foreign exchange) | (66,627 | ) | (41,341 | ) | ||||
Intangible Assets, Net | $ | 218,139 | $ | 177,545 | ||||
Changes in Intangible Assets, Net consists of the following: | ||||||||
Nine Months Ended, | ||||||||
September 30, 2014 | ||||||||
Balance, Beginning of Period | $ | 177,545 | ||||||
Avoca Acquisition | 65,880 | |||||||
Amortization Expense | (20,101 | ) | ||||||
Foreign Exchange | (5,185 | ) | ||||||
Balance, End of Period | $ | 218,139 | ||||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2014 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
16. COMMITMENTS AND CONTINGENCIES | |
Debt Covenants | |
Borrowings of KKR contain various debt covenants. These covenants do not, in management’s opinion, materially restrict KKR’s operating business or investment strategies. KKR is in compliance with its debt covenants in all material respects. | |
Investment Commitments | |
As of September 30, 2014, KKR had unfunded commitments consisting of (i) $862.1 million to its active private equity and other investment funds and (ii) $612.4 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 relating to private equity, mezzanine, infrastructure, energy, real estate, 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, 2014, no carried interest was subject to this clawback obligation, assuming that all applicable carry paying funds were liquidated at their September 30, 2014 fair values. Had the investments in such funds been liquidated at zero value, the clawback obligation would have been $2,121.7 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 condensed 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 in 2009 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, 2014, 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 $284.2 million as of September 30, 2014. | |
Prior to the KPE Transaction in 2009, certain 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 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. Through investment realizations, this amount has been reduced to $191.4 million as of September 30, 2014. Using valuations as of September 30, 2014, no amounts are due with respect to the clawback obligation required to be funded by principals. Carry distributions arising subsequent to the KPE Transaction may give rise to clawback obligations that may be allocated generally to KKR and principals who participate in the carry pool. Unlike the clawback obligation, KKR will be responsible for all amounts due under a net loss sharing obligation and will indemnify 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 and KFN 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 on the grounds that plaintiff’s claims were barred by the statute of limitations. On December 20, 2013, the Court of Chancery granted the motion in part and denied the motion in part. Discovery is ongoing. | |
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. KKR filed a renewed motion for summary judgment on April 16, 2013, which the court denied on July 18, 2013. Plaintiffs moved for class certification on October 21, 2013. Defendants filed their opposition to the motion on January 24, 2014. The court has not yet decided plaintiffs’ motion for class certification. On July 28, 2014, KKR entered into a definitive agreement to settle all claims without the admission of wrongdoing, which was preliminarily approved by the court on September 29, 2014, and is subject to the court’s final approval, the hearing for which is scheduled for February 11, 2015. The amount to be paid by KKR pursuant to the settlement is not expected to have a material effect on KKR’s financial results. | |
From December 19, 2013 to January 31, 2014, multiple putative class action lawsuits were filed in the Superior Court of California, County of San Francisco, the United States District Court of the District of Northern California, and the Court of Chancery of the State of Delaware by KFN shareholders against KFN, individual members of KFN’s board of directors, KKR, and certain of KKR’s affiliates in connection with KFN’s entry into a merger agreement pursuant to which it would become a subsidiary of KKR. The merger transaction was completed on April 30, 2014. The actions filed in California state court have been consolidated but an operative complaint has not been filed or designated. The complaint filed in the California federal court action, which was never served on the defendants, was voluntarily dismissed on May 6, 2014. Two of the Delaware actions were voluntarily dismissed, and the remaining Delaware actions were consolidated. On February 21, 2014, a consolidated complaint was filed in the consolidated Delaware action which all defendants moved to dismiss on March 7, 2014. On October 14, 2014, the Delaware Court of Chancery granted defendants’ motions to dismiss. | |
The complaints in these actions allege variously that the members of the KFN board of directors breached fiduciary duties owed to KFN shareholders by approving the proposed transaction for inadequate consideration; approving the proposed transaction in order to obtain benefits not equally shared by other KFN shareholders; entering into the merger agreement containing preclusive deal protection devices; failing to take steps to maximize the value to be paid to the KFN shareholders; and failing to disclose material information necessary for KFN shareholders to make a fully informed decision about the proposed transaction. The actions also allege variously that KKR, and certain of KKR’s affiliates aided and abetted the alleged breaches of fiduciary duties and that KKR is a controlling shareholder of KFN by means of a management agreement between KFN and KKR Financial Advisors LLC, a subsidiary of KKR, and KKR breached a fiduciary duty it allegedly owed to KFN shareholders by causing KFN to enter into the merger agreement. The relief sought in these actions includes, among other things, declaratory and injunctive relief concerning the alleged breaches of fiduciary duties and the proposed transaction, rescission, an accounting by defendants, damages and attorneys’ fees and costs, and other relief. | |
KKR currently is and expects to continue to become, from time to time, subject to examinations, inquiries and investigations by various U.S. and non U.S. governmental and regulatory agencies, including but not limited to the Securities and Exchange Commission, Department of Justice, state attorney generals, Financial Industry Regulatory Authority, and the U.K. Financial Conduct Authority. Such examinations, inquiries and investigations may result in the commencement of civil or criminal lawsuits against KKR or its personnel. | |
Moreover, in the ordinary course of business, KKR is and can be both the defendant and the plaintiff in numerous lawsuits 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 legal proceedings 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. In addition, such loss contingencies may be, in part or in whole, subject to insurance or other payments such as contributions and/or indemnity, which may reduce any ultimate loss. 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 $80.0 million. 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 legal proceedings, and some of the matters discussed above seek or may 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 or may be 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, 2014 | |
REGULATORY CAPITAL REQUIREMENTS | ' |
REGULATORY CAPITAL REQUIREMENTS | ' |
17. 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 entities based in London and Ireland, which are subject to the regulatory capital requirements of the U.K. Financial Conduct Authority and the Central Bank of Ireland. In addition, KKR has an 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 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, 2014, approximately $80.0 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, 2014 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
18. SUBSEQUENT EVENTS | |
Distribution | |
A distribution of $0.45 per KKR & Co. L.P. common unit was announced on October 23, 2014, and will be paid on November 18, 2014 to unitholders of record as of the close of business on November 3, 2014. KKR Holdings will receive its pro rata share of the distribution from the KKR Group Partnerships. | |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | |||||||||||||
Sep. 30, 2014 | ||||||||||||||
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 (referred to hereafter as the “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, 2013 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, 2013, 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”). | ||||||||||||||
KKR & Co. L.P. consolidates the financial results of the KKR Group Partnerships and their consolidated subsidiaries, which 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 including certain CLOs. References in the accompanying financial statements to “principals” are to KKR’s senior employees and non-employee operating consultants who hold interests in KKR’s business through KKR Holdings, and references to “Senior Principals” are to KKR’s senior employees who hold interests in the Managing Partner entitling them to vote for the election of the Managing Partner’s directors. | ||||||||||||||
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. | ||||||||||||||
Principles of Consolidation | ' | |||||||||||||
Principles of Consolidation | ||||||||||||||
The types of entities KKR assesses for consolidation include (i) subsidiaries, including management companies, broker-dealers and general partners of investment funds that KKR manages, (ii) entities that have all the attributes of an investment company, like investment funds, (iii) CLOs and (iv) other entities, including entities that employ non-employee operating consultants. Each of these entities is assessed for consolidation on a case by case basis depending on the specific facts and circumstances surrounding that entity. | ||||||||||||||
Pursuant to its consolidation policy, KKR first considers whether an entity is considered a VIE and therefore whether to apply the consolidation guidance under the VIE model. Entities that do not qualify as VIEs are generally assessed for consolidation as voting interest entities (“VOEs”) under the voting interest model. | ||||||||||||||
The consolidation rules were revised effective January 1, 2010 which had the effect of changing the criteria for determining whether a reporting entity is the primary beneficiary of a VIE. However, the adoption of these new consolidation rules was indefinitely deferred (the “Deferral”) for a reporting entity’s interests in certain entities. In particular, entities that have all the attributes of an investment company such as investment funds generally meet the conditions necessary for the Deferral. Entities that are securitization or asset-backed financing entities such as CLOs would generally not qualify for the Deferral. Accordingly, when making the assessment of whether an entity is a VIE, KKR considers whether the entity being assessed meets the conditions for the Deferral and therefore would be subject to the rules that existed prior to January 1, 2010. Under both sets of rules, VIEs for which KKR is determined to be the primary beneficiary are consolidated and such VIEs generally include certain CLO vehicles and entities that employ non-employee operating consultants. | ||||||||||||||
An entity in which KKR holds a variable interest is a VIE if any one of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support, (b) the holders of equity investment at risk (as a group) lack either the direct or indirect ability through voting rights or similar rights to make decisions about a legal entity’s activities that have a significant effect on the success of the legal entity or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some investors are disproportionate to their obligation to absorb the expected losses of the legal entity, their rights to receive the expected residual returns of the legal entity, or both and substantially all of the legal entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. | ||||||||||||||
With respect to VIEs such as KKR’s investment funds that qualify for the Deferral and therefore apply the previous consolidation rules, KKR is determined to be the primary beneficiary if its involvement, through holding interests directly or indirectly in the VIE or contractually through other variable interests (e.g., carried interest), would be expected to absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. In cases where two or more KKR related parties hold a variable interest in a VIE, and the aggregate variable interest held by those parties would, if held by a single party, identify that party as the primary beneficiary, then KKR is determined to be the primary beneficiary to the extent it is the party within the related party group that is most closely associated with the VIE. | ||||||||||||||
Under the voting interest model, KKR consolidates those entities it controls through a majority voting interest or through other means, including those VOEs in which the general partner is presumed to have control. KKR does not consolidate those VOEs in which the presumption of control by the general partner has been overcome through either the granting of substantive rights to the unaffiliated fund investors to either dissolve the fund or remove the general partner (“kick-out rights”) or the granting of substantive participating rights. | ||||||||||||||
The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE depends on the facts and circumstances surrounding each entity and therefore certain of KKR’s investment funds may qualify as VIEs whereas others may qualify as VOEs. | ||||||||||||||
With respect to KKR’s consolidated funds that are not CLOs, KKR meets the criteria for the Deferral and therefore applies the consolidation rules that existed prior to January 1, 2010. For these funds, 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. 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 considered to be a VOE and KKR generally consolidates the fund under the VOE model. | ||||||||||||||
With respect to CLOs, which are generally VIEs, the criteria for the Deferral are not met and therefore KKR applies the consolidation rules issued on January 1, 2010. In its role as collateral manager, KKR generally has the power to direct the activities of the CLO entities that most significantly impact the economic performance of the entity. In some, but not all cases, KKR, through both its residual interest in the CLO and the potential to earn an incentive fee, may have variable interests that represent an obligation to absorb losses of, or a right to receive benefits from, the CLO that could potentially be significant to the CLO. In cases where KKR has both (a) the power to direct the activities of the CLO that most significantly impact the CLOs economic performance and (b) the obligation to absorb losses of the CLO or the right to receive benefits from the CLO that could potentially be significant to the CLO, KKR consolidates the CLO. | ||||||||||||||
Certain of KKR’s funds and CLOs are consolidated by KKR notwithstanding the fact that KKR has only a minority economic interest in those funds and CLOs. KKR’s financial statements reflect the assets, liabilities, fees, expenses, investment income (loss) and cash flows of the consolidated KKR funds and CLOs on a gross basis, and the majority of the economic interests in those funds and CLOs, which are held by fund investors or other third parties, are attributed to noncontrolling interests or appropriated capital in the accompanying financial statements. All of the management fees and certain other amounts earned by KKR from those funds and CLOs 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 and CLOs 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 are, for GAAP purposes, investment companies and therefore are not required to consolidate their investments in portfolio companies even if majority-owned and controlled. Rather, the consolidated funds and vehicles reflect their investments at fair value as described below in “Fair Value Measurements”. | ||||||||||||||
All intercompany transactions and balances have been eliminated. | ||||||||||||||
Variable Interest Entities - Collateralized Loan Obligations | ' | |||||||||||||
Variable Interest Entities — Collateralized Loan Obligations | ||||||||||||||
For the assets and liabilities of the consolidated CLO vehicles, KKR has elected the fair value option. KKR accounts for the difference between the fair value of the assets and the fair value of the liabilities of the consolidated CLOs in Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. This amount is attributed to KKR and third party interest holders based on each beneficial holder’s residual interest in the consolidated CLO vehicles. The amount attributed to third party interest holders is reflected in the condensed consolidated statements of operations in Net Income (Loss) Attributable to Noncontrolling Interests and Appropriated Capital and in the condensed consolidated statements of financial condition in Appropriated Capital within Equity. The amount is recorded as appropriated capital since the other holders of the CLOs’ beneficial interests, not KKR, will receive the benefits or absorb the losses associated with their proportionate share of the CLOs’ assets and liabilities. | ||||||||||||||
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. | ||||||||||||||
Oil and Natural Gas Properties | ' | |||||||||||||
Oil and Natural Gas Properties | ||||||||||||||
Primarily as a result of the KKR Financial Holdings LLC (“KFN”) acquisition on April 30, 2014, KKR consolidates working and royalty interests in oil and natural gas producing properties. | ||||||||||||||
Oil and natural gas producing activities are accounted for under the successful efforts method of accounting. Under this method, exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. Costs that are associated with the drilling of successful exploration wells are capitalized if proved reserves are found. Lease acquisition costs are capitalized when incurred. Costs associated with the drilling of exploratory wells that do not find proved reserves, geological and geophysical costs and costs of certain nonproducing leasehold costs are charged to expense as incurred. | ||||||||||||||
Expenditures for repairs and maintenance, including workovers, are charged to expense as incurred. | ||||||||||||||
The capitalized costs of producing oil and natural gas properties are depleted on a field-by-field basis using the units-of production method based on the ratio of current production to estimated total net proved oil, natural gas and natural gas liquid reserves. Proved developed reserves are used in computing depletion rates for drilling and development costs and total proved reserves are used for depletion rates of leasehold costs. | ||||||||||||||
Estimated dismantlement and abandonment costs for oil and natural gas properties, net of salvage value, are capitalized at their estimated net present value and amortized on a unit-of-production basis over the remaining life of the related proved developed reserves. | ||||||||||||||
Intangible Assets | ' | |||||||||||||
Intangible Assets | ||||||||||||||
Intangible assets consist primarily of contractual rights to earn future fee income, including management and incentive fees, and are recorded in Other Assets in the accompanying condensed consolidated 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 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 is assessed for impairment annually or more frequently if circumstances indicate impairment may have occurred. Goodwill is recorded in Other Assets in the accompanying 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. Fund investors interests subject to redemption as described above are presented as Redeemable Noncontrolling Interests in the accompanying condensed consolidated statements of financial condition and presented as Net Income (Loss) attributable to Redeemable Noncontrolling Interests in the accompanying 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 accompanying 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 accompanying 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) | third parties holding 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 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 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; | |||||||||||||
(v) | third parties in KKR’s capital markets business; | |||||||||||||
(vi) | exchangeable equity securities representing ownership interests in a subsidiary of a KKR Group Partnership issued in connection with the acquisition of Avoca; and | |||||||||||||
(vii) | holders of the 7.375% Series A LLC Preferred Shares of KFN whose rights are limited to the assets of KFN. | |||||||||||||
Noncontrolling Interests held by KKR Holdings | ||||||||||||||
Noncontrolling interests held by KKR Holdings include economic interests held by principals in the KKR Group Partnerships. Such 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, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Balance at the beginning of the period | $ | 5,082,655 | $ | 4,699,114 | $ | 5,116,761 | $ | 4,981,864 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings (a) | 100,910 | 300,169 | 588,500 | 662,387 | ||||||||||
Other comprehensive income (loss), net of tax (b) | (11,105 | ) | (96 | ) | (7,764 | ) | (4,846 | ) | ||||||
Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units (c) | (47,858 | ) | (84,838 | ) | (292,380 | ) | (328,481 | ) | ||||||
Equity based compensation | 34,611 | 53,988 | 114,923 | 162,602 | ||||||||||
Capital contributions | 656 | 600 | 1,504 | 1,399 | ||||||||||
Capital distributions | (272,335 | ) | (172,719 | ) | (634,010 | ) | (678,707 | ) | ||||||
Balance at the end of the period | $ | 4,887,534 | $ | 4,796,218 | $ | 4,887,534 | $ | 4,796,218 | ||||||
(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, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Net income (loss) | $ | 872,044 | $ | 2,198,154 | $ | 4,928,706 | $ | 4,573,598 | ||||||
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | (2,462 | ) | 9,169 | 1,366 | 25,992 | |||||||||
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities and appropriated capital | 683,658 | 1,684,076 | 3,860,646 | 3,471,906 | ||||||||||
Plus: Income taxes attributable to KKR Management Holdings Corp. | 20,427 | 3,020 | 32,062 | 12,894 | ||||||||||
Net income (loss) attributable to KKR & Co. L.P. and KKR Holdings | $ | 211,275 | $ | 507,929 | $ | 1,098,756 | $ | 1,088,594 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | $ | 100,910 | $ | 300,169 | $ | 588,500 | $ | 662,387 | ||||||
Investments | ' | |||||||||||||
Investments | ||||||||||||||
Investments consist primarily of private equity, real assets, credit, investments of consolidated CLOs, 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 equity investments in operating businesses. | ||||||||||||||
Real Assets —Consists primarily of investments in (i) energy related assets, principally oil and natural gas producing properties, (ii) infrastructure assets, and (iii) real estate, principally residential and commercial real estate assets and businesses. | ||||||||||||||
Credit —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 unconsolidated CLOs. | ||||||||||||||
Investments of Consolidated CLOs — Consists primarily of investments in below investment grade corporate debt securities (primarily high yield bonds and syndicated bank loans) held directly by the consolidated CLOs. | ||||||||||||||
Equity Method —Consists primarily of investments in which KKR has significant influence, including investments in unconsolidated investment funds. | ||||||||||||||
Other —Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets, credit, investments of consolidated CLOs or equity method investments. | ||||||||||||||
Equity Method | ' | |||||||||||||
Equity Method | ||||||||||||||
Equity method investments include (i) certain investments in private equity funds, real assets funds, funds of hedge funds, and credit funds which are not consolidated and (ii) certain investments in less than majority owned asset management companies. 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. See Note 3 “Net Gains (Losses) from Investment Activities.” Because the underlying investments of unconsolidated investment funds are reported at fair value, the carrying value of these equity method investments representing KKR’s interests in unconsolidated funds approximates fair value. The carrying value of equity method investments in certain less than majority owned asset management companies is determined based on the amounts invested by KKR, adjusted for the equity in earnings or losses of the investee allocated based on KKR’s respective ownership percentage, less distributions. | ||||||||||||||
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 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 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. In addition, KKR has elected the fair value option for the investments and debt obligations of the consolidated CLO vehicles. | ||||||||||||||
The carrying amounts of Other Assets, Accounts Payable, Accrued Expenses and Other Liabilities recognized on the condensed consolidated 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 KKR’s debt obligations are presented in Note 9, “Debt Obligations.” | ||||||||||||||
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, debt and securities sold short. | ||||||||||||||
Level II | ||||||||||||||
Inputs are 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 credit 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 credit 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. | ||||||||||||||
Management’s determination of fair value is based upon the best information available for a given circumstance and may incorporate assumptions that are management’s best estimates after consideration of a variety of internal and external factors. | ||||||||||||||
Level II Valuation Methodologies | ||||||||||||||
Financial assets and liabilities categorized as Level II consist primarily of securities indexed to publicly-listed securities and credit and other investments. | ||||||||||||||
Credit investments and investments of consolidated CLOs 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 in both methodologies. However, when a definitive agreement has been executed to sell an investment, KKR generally considers a significant determinant of fair value to be the consideration to be received by KKR pursuant to the executed definitive agreement. | ||||||||||||||
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, except that the value may be higher or lower than such range in the case of investments being sold pursuant to an executed definitive agreement. | ||||||||||||||
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, the expected hold period and manner of realization for the investment, and in the case of investments being sold pursuant to an executed definitive agreement, the probability of such sale being completed. 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 51.2% 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 an illiquidity discount is 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 energy 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, commodity prices 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 current capitalization rate. The valuations of real assets investments also use other inputs. Certain investments in real estate and energy generally do not include a minimum illiquidity discount. | ||||||||||||||
Credit Investments: Credit investments are valued using values obtained from dealers or market makers, and where these values are not available, credit investments are valued by KKR based on ranges of valuations determined by an independent valuation firm. 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. | ||||||||||||||
CLO Debt Obligations: Collateralized loan obligation senior secured and subordinated notes are initially valued at transaction price and are subsequently valued using a third party valuation service. The most significant inputs to the valuation of these instruments are default and loss expectations and discount margins. | ||||||||||||||
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 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 credit (including investments held by consolidated CLOs) 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 credit 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 the investments being valued. The valuation teams for energy, 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 Private Markets 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 annually for all Level III investments in Private Markets and quarterly for investments other than certain investments, which fall below pre-set value thresholds and which in the aggregate comprise less than 5% of the total value of KKR’s Level III Private Markets investments. For most investments classified as Level III in Public Markets, in general, an independent valuation firm is engaged by KKR to provide third party valuations, or ranges of valuations from which KKR’s investment professionals select a preliminary valuation, or an independent valuation firm is engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR’s valuations. All preliminary valuations in Private Markets and Public Markets are then reviewed by the applicable valuation committee, and after reflecting any input by their respective valuation committees, the preliminary valuations are presented to the firm’s management committee. 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. | ||||||||||||||
Fees | ' | |||||||||||||
Fees | ||||||||||||||
Fees consist primarily of (i) transaction fees earned in connection with successful investment transactions and from capital markets activities, (ii) management and incentive fees from providing investment management services to unconsolidated funds, CLOs, other vehicles, and separately managed accounts, (iii) monitoring fees from providing services to portfolio companies, (iv) revenue earned by oil and gas-producing entities that are consolidated and (v) consulting fees earned by entities that employ non-employee operating consultants. | ||||||||||||||
Transaction, Management, Incentive, Monitoring and Consulting Fees Recognition | ||||||||||||||
Transaction, management, incentive, monitoring and consulting fees are recognized when earned based on the contractual terms of the governing agreements and coincides with the period during which the related services are performed. In the case of transaction fees, the fees are recognized upon closing of the transaction. Monitoring fees may provide for a termination payment following an initial public offering or change of control. These termination payments are recognized in the period when the related transaction closes. | ||||||||||||||
Oil and Gas Revenue Recognition | ||||||||||||||
Oil, natural gas and natural gas liquid revenues are recognized when production is sold to a purchaser at fixed or determinable prices, when delivery has occurred and title has transferred and collectability of the revenue is reasonably assured. The oil and gas producing entities consolidated by KKR follow the sales method of accounting for natural gas revenues. Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume to which the entity is entitled based on KKR’s working interest. An imbalance is recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the under-produced owners to recoup their entitled share through future production. Under the sales method, no receivables are recorded when these entities have taken less than their share of production and no payables are recorded when it has taken more than its share of production. | ||||||||||||||
For the three and nine months ended September 30, 2014 and 2013, respectively, fees consisted of the following: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Transaction Fees | $ | 153,604 | $ | 105,387 | $ | 380,580 | $ | 202,107 | ||||||
Management Fees | 52,904 | 45,787 | 161,772 | 130,402 | ||||||||||
Oil and Gas Revenue | 69,380 | 9,575 | 143,369 | 9,575 | ||||||||||
Monitoring Fees | 51,489 | 43,155 | 142,902 | 119,571 | ||||||||||
Consulting Fees | 10,096 | 15,686 | 32,581 | 41,298 | ||||||||||
Incentive Fees | 7,295 | 438 | 35,860 | 34,691 | ||||||||||
Total Fees | $ | 344,768 | $ | 220,028 | $ | 897,064 | $ | 537,644 | ||||||
All fees presented in the table above, except for oil and gas revenue are earned from KKR investment funds and portfolio companies. Consulting fees are earned by entities that employ non-employee operating consultants, which are consolidated by KKR but whose fees are not shared with KKR. | ||||||||||||||
Recently Issued Accounting Pronouncements | ' | |||||||||||||
Recently Issued Accounting Pronouncements | ||||||||||||||
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 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 was effective as of January 1, 2014. The adoption of this guidance did not 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 disclosure requirements. This guidance was effective as of January 1, 2014. The adoption of this guidance did not have a material impact on KKR’s financial statements. | ||||||||||||||
Revenue from Contracts with Customers | ||||||||||||||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers Topic 606 (“ASU 2014-09”) which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Revenue recorded under ASU 2014-09 will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for KKR’s fiscal year beginning January 1, 2017 and early adoption is not permitted. KKR is in the process of assessing the impact that the adoption of this guidance may have on its financial statements, including with respect to the timing of the recognition of carried interest. | ||||||||||||||
Measurement of Financial Assets and Liabilities - Consolidated Collateralized Financing Entities | ||||||||||||||
In August 2014, the FASB issued ASU 2014-13, “Measuring the Financial Assets and Financial Liabilities of a Consolidated Collateralized Financing Entity” (“CFE”), such as CLOs. This standard provides that an entity with an election to measure the financial assets and financial liabilities of a consolidated CFE should be measured on the basis of either the fair value of the CFE’s financial assets or financial liabilities, whichever is more observable. The effective date of the consensus will be for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 for public companies and early adoption will be permitted. KKR is currently evaluating the impact on its consolidated financial statements. | ||||||||||||||
Going Concern | ||||||||||||||
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management’s plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on KKR’s financial statements. | ||||||||||||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2014 | ||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||
Schedule of calculation of noncontrolling interests held by KKR Holdings | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Balance at the beginning of the period | $ | 5,082,655 | $ | 4,699,114 | $ | 5,116,761 | $ | 4,981,864 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings (a) | 100,910 | 300,169 | 588,500 | 662,387 | ||||||||||
Other comprehensive income (loss), net of tax (b) | (11,105 | ) | (96 | ) | (7,764 | ) | (4,846 | ) | ||||||
Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units (c) | (47,858 | ) | (84,838 | ) | (292,380 | ) | (328,481 | ) | ||||||
Equity based compensation | 34,611 | 53,988 | 114,923 | 162,602 | ||||||||||
Capital contributions | 656 | 600 | 1,504 | 1,399 | ||||||||||
Capital distributions | (272,335 | ) | (172,719 | ) | (634,010 | ) | (678,707 | ) | ||||||
Balance at the end of the period | $ | 4,887,534 | $ | 4,796,218 | $ | 4,887,534 | $ | 4,796,218 | ||||||
(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, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Net income (loss) | $ | 872,044 | $ | 2,198,154 | $ | 4,928,706 | $ | 4,573,598 | ||||||
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | (2,462 | ) | 9,169 | 1,366 | 25,992 | |||||||||
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities and appropriated capital | 683,658 | 1,684,076 | 3,860,646 | 3,471,906 | ||||||||||
Plus: Income taxes attributable to KKR Management Holdings Corp. | 20,427 | 3,020 | 32,062 | 12,894 | ||||||||||
Net income (loss) attributable to KKR & Co. L.P. and KKR Holdings | $ | 211,275 | $ | 507,929 | $ | 1,098,756 | $ | 1,088,594 | ||||||
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | $ | 100,910 | $ | 300,169 | $ | 588,500 | $ | 662,387 | ||||||
Schedule of fees | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Transaction Fees | $ | 153,604 | $ | 105,387 | $ | 380,580 | $ | 202,107 | ||||||
Management Fees | 52,904 | 45,787 | 161,772 | 130,402 | ||||||||||
Oil and Gas Revenue | 69,380 | 9,575 | 143,369 | 9,575 | ||||||||||
Monitoring Fees | 51,489 | 43,155 | 142,902 | 119,571 | ||||||||||
Consulting Fees | 10,096 | 15,686 | 32,581 | 41,298 | ||||||||||
Incentive Fees | 7,295 | 438 | 35,860 | 34,691 | ||||||||||
Total Fees | $ | 344,768 | $ | 220,028 | $ | 897,064 | $ | 537,644 | ||||||
NET_GAINS_LOSSES_FROM_INVESTME1
NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES (Tables) | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||||||||
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, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||||||||||||
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) | $ | 917,917 | $ | (688,912 | ) | $ | 692,932 | $ | 1,626,536 | $ | 4,459,039 | $ | (658,948 | ) | $ | 2,180,059 | $ | 2,140,102 | ||||||||
Credit and Other (a) | 35,420 | (221,237 | ) | 63,032 | 72,901 | 232,306 | (35,326 | ) | 202,623 | 20,638 | ||||||||||||||||
Investments of Consolidated CLOs (a) | 1,764 | (142,208 | ) | — | — | 8,144 | (103,138 | ) | — | — | ||||||||||||||||
Real Assets (a) | 24,466 | 38,530 | — | 47,053 | 227,820 | (264,968 | ) | 14,855 | 133,610 | |||||||||||||||||
Equity Method (a) | 4,121 | 1,204 | 10,016 | 13,123 | 9,980 | 80,118 | 35,532 | 27,863 | ||||||||||||||||||
Foreign Exchange Forward Contracts and Options (b) | (19,610 | ) | 385,840 | (528 | ) | (247,428 | ) | (31,405 | ) | 428,690 | 24,408 | (76,845 | ) | |||||||||||||
Securities Sold Short (b) | (12,551 | ) | 18,423 | (29,652 | ) | (16,241 | ) | (35,338 | ) | 29,483 | (71,459 | ) | (14,115 | ) | ||||||||||||
Other Derivatives | (3,068 | ) | (11,591 | ) | (2,056 | ) | 1,229 | (19,997 | ) | (12,085 | ) | (20,454 | ) | 4,907 | ||||||||||||
Foreign Exchange Gains (Losses) and Other (c) | (5,031 | ) | (25,218 | ) | (2,849 | ) | 2,333 | (18,938 | ) | (53,148 | ) | (9,176 | ) | 6,207 | ||||||||||||
Total Net Gains (Losses) from Investment Activities | $ | 943,428 | $ | (645,169 | ) | $ | 730,895 | $ | 1,499,506 | $ | 4,831,611 | $ | (589,322 | ) | $ | 2,356,388 | $ | 2,242,367 | ||||||||
(a) | See Note 4 “Investments.” | |||||||||||||||||||||||||
(b) | See Note 7 “Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities.” | |||||||||||||||||||||||||
(c) | 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, 2014 | ||||||||||||||
INVESTMENTS | ' | |||||||||||||
Summary of investments | ' | |||||||||||||
Fair Value | Cost | |||||||||||||
September 30, 2014 | December 31, 2013 | September 30, 2014 | December 31, 2013 | |||||||||||
Private Equity | $ | 37,767,643 | $ | 36,875,693 | $ | 28,776,432 | $ | 27,191,849 | ||||||
Credit | 6,674,687 | 5,023,253 | 6,621,887 | 4,841,913 | ||||||||||
Investments of Consolidated CLOs | 8,262,658 | — | 8,380,627 | — | ||||||||||
Real Assets | 4,184,340 | 3,353,605 | 6,462,906 | 5,367,912 | ||||||||||
Equity Method | 862,276 | 546,422 | 594,690 | 310,709 | ||||||||||
Other | 2,176,638 | 1,584,724 | 1,998,540 | 1,485,417 | ||||||||||
Total Investments | $ | 59,928,242 | $ | 47,383,697 | $ | 52,835,082 | $ | 39,197,800 | ||||||
Schedule of information about the private equity investments balance, categorized by industry | ' | |||||||||||||
Fair Value | ||||||||||||||
September 30, 2014 | December 31, 2013 | |||||||||||||
Health Care | $ | 9,642,534 | $ | 8,480,933 | ||||||||||
Financial Services | 5,184,348 | 3,714,657 | ||||||||||||
Manufacturing | 4,453,568 | 4,459,220 | ||||||||||||
Retail | 4,321,969 | 4,582,846 | ||||||||||||
Technology | 4,210,333 | 5,192,488 | ||||||||||||
Other | 9,954,891 | 10,445,549 | ||||||||||||
$ | 37,767,643 | $ | 36,875,693 | |||||||||||
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended | |||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||||||||
Schedule of assets and liabilities at fair value | ' | |||||||||||||||||||
Assets, at fair value: | ||||||||||||||||||||
September 30, 2014 | ||||||||||||||||||||
Quoted Prices in | Significant Other | Significant | Total | |||||||||||||||||
Active Markets for | Observable Inputs | Unobservable Inputs | ||||||||||||||||||
Identical Assets | (Level II) | (Level III) | ||||||||||||||||||
(Level I) | ||||||||||||||||||||
Private Equity | $ | 5,278,447 | $ | 600,492 | $ | 31,888,704 | $ | 37,767,643 | ||||||||||||
Credit | 16,936 | 3,331,765 | 3,325,986 | 6,674,687 | ||||||||||||||||
Investments of Consolidated CLOs | — | 8,171,294 | 91,364 | 8,262,658 | ||||||||||||||||
Real Assets | 35,092 | — | 4,149,248 | 4,184,340 | ||||||||||||||||
Other | 623,089 | 424,039 | 1,129,510 | 2,176,638 | ||||||||||||||||
Total | 5,953,564 | 12,527,590 | 40,584,812 | 59,065,966 | ||||||||||||||||
Foreign Exchange Forward Contracts and Options | — | 217,768 | — | 217,768 | ||||||||||||||||
Other Derivatives | — | 16,868 | — | 16,868 | ||||||||||||||||
Total Assets | $ | 5,953,564 | $ | 12,762,226 | $ | 40,584,812 | $ | 59,300,602 | ||||||||||||
December 31, 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 | $ | 7,244,643 | $ | 548,545 | $ | 29,082,505 | $ | 36,875,693 | ||||||||||||
Credit | — | 3,078,789 | 1,944,464 | 5,023,253 | ||||||||||||||||
Investments of Consolidated CLOs | — | — | — | — | ||||||||||||||||
Real Assets | 52,931 | — | 3,300,674 | 3,353,605 | ||||||||||||||||
Other | 943,976 | 292,262 | 348,486 | 1,584,724 | ||||||||||||||||
Total | 8,241,550 | 3,919,596 | 34,676,129 | 46,837,275 | ||||||||||||||||
Foreign Exchange Forward Contracts and Options | — | 89,090 | — | 89,090 | ||||||||||||||||
Other Derivatives | — | 5,080 | — | 5,080 | ||||||||||||||||
Total Assets | $ | 8,241,550 | $ | 4,013,766 | $ | 34,676,129 | $ | 46,931,445 | ||||||||||||
Liabilities, at fair value: | ||||||||||||||||||||
September 30, 2014 | ||||||||||||||||||||
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 | $ | 740,585 | $ | 96,072 | $ | — | $ | 836,657 | ||||||||||||
Foreign Exchange Forward Contracts and Options | — | 131,628 | — | 131,628 | ||||||||||||||||
Unfunded Revolver Commitments | — | 1,385 | — | 1,385 | ||||||||||||||||
Other Derivatives | — | 75,218 | — | 75,218 | ||||||||||||||||
Debt Obligations of Consolidated CLOs | — | — | 7,227,997 | 7,227,997 | ||||||||||||||||
Total Liabilities | $ | 740,585 | $ | 304,303 | $ | 7,227,997 | $ | 8,272,885 | ||||||||||||
December 31, 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 | $ | 624,653 | $ | 51,491 | $ | — | $ | 676,144 | ||||||||||||
Foreign Exchange Forward Contracts and Options | — | 414,782 | — | 414,782 | ||||||||||||||||
Unfunded Revolver Commitments | — | 1,902 | — | 1,902 | ||||||||||||||||
Other Derivatives | — | 14,177 | — | 14,177 | ||||||||||||||||
Debt Obligations of Consolidated CLOs | — | — | — | — | ||||||||||||||||
Total Liabilities | $ | 624,653 | $ | 482,352 | $ | — | $ | 1,107,005 | ||||||||||||
Summary of changes in assets and liabilities reported at fair value for which Level III inputs have been used to determine fair value | ' | |||||||||||||||||||
Three Months Ended September 30, 2014 | ||||||||||||||||||||
Level III Assets | Level III Liabilities | |||||||||||||||||||
Private | Credit | Investments of | Real Assets | Other | Debt Obligations of | |||||||||||||||
Equity | Consolidated | Consolidated CLOs | ||||||||||||||||||
CLOs | ||||||||||||||||||||
Balance, Beginning of Period | $ | 30,914,162 | $ | 3,047,412 | $ | 95,703 | $ | 3,799,200 | $ | 713,190 | $ | 7,356,678 | ||||||||
Transfers In (1) | — | 150,559 | — | — | 3,397 | — | ||||||||||||||
Transfers Out (2) | (170,107 | ) | (3,397 | ) | — | — | (6,291 | ) | — | |||||||||||
Acquisitions | — | — | — | — | — | — | ||||||||||||||
Purchases | 2,340,143 | 474,528 | 1,327 | 422,001 | 502,149 | 940,940 | ||||||||||||||
Sales | (1,469,359 | ) | (295,236 | ) | (6,091 | ) | (134,977 | ) | (60,767 | ) | (972,518 | ) | ||||||||
Settlements | — | 53,216 | 869 | — | — | 690 | ||||||||||||||
Net Realized Gains (Losses) | 587,627 | 26 | — | 21,319 | (3,755 | ) | — | |||||||||||||
Net Unrealized Gains (Losses) | (313,762 | ) | (89,150 | ) | (444 | ) | 41,705 | (18,413 | ) | 681 | ||||||||||
Change in Other Comprehensive Income | — | (11,972 | ) | — | — | — | (98,474 | ) | ||||||||||||
Balance, End of Period | $ | 31,888,704 | $ | 3,325,986 | $ | 91,364 | $ | 4,149,248 | $ | 1,129,510 | $ | 7,227,997 | ||||||||
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 or Debt Obligations still held at Reporting Date | $ | 319,942 | $ | (95,460 | ) | $ | (444 | ) | $ | 34,878 | $ | (16,966 | ) | $ | 701 | |||||
Three Months Ended September 30, 2013 | ||||||||||||||||||||
Level III Assets | Level III Liabilities | |||||||||||||||||||
Private | Credit | Investments of | Real Assets | Other | Debt Obligations of | |||||||||||||||
Equity | Consolidated | Consolidated CLOs | ||||||||||||||||||
CLOs | ||||||||||||||||||||
Balance, Beginning of Period | $ | 25,992,622 | $ | 1,416,016 | $ | — | $ | 2,198,427 | $ | 184,213 | $ | — | ||||||||
Transfers In (1) | — | 44,503 | — | — | 34,978 | — | ||||||||||||||
Transfers Out (2) | (904,039 | ) | (17,594 | ) | — | — | (4,040 | ) | — | |||||||||||
Acquisitions | — | — | — | — | — | — | ||||||||||||||
Purchases | 1,071,808 | 503,140 | — | 167,967 | 35,922 | — | ||||||||||||||
Sales | (15,945 | ) | (117,103 | ) | — | — | (5,064 | ) | — | |||||||||||
Settlements | — | 16,002 | — | — | — | — | ||||||||||||||
Net Realized Gains (Losses) | 15,945 | 2,240 | — | — | (557 | ) | — | |||||||||||||
Net Unrealized Gains (Losses) | 950,754 | 9,342 | — | 47,053 | (2,427 | ) | — | |||||||||||||
Change in Other Comprehensive Income | — | — | — | — | — | — | ||||||||||||||
Balance, End of Period | $ | 27,111,145 | $ | 1,856,546 | $ | — | $ | 2,413,447 | $ | 243,025 | $ | — | ||||||||
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 or Debt Obligations still held at Reporting Date | $ | 966,779 | $ | 9,547 | $ | — | $ | 47,053 | $ | (2,427 | ) | $ | — | |||||||
Nine Months Ended September 30, 2014 | ||||||||||||||||||||
Level III Assets | Level III Liabilities | |||||||||||||||||||
Private | Credit | Investments of | Real Assets | Other | Debt Obligations of | |||||||||||||||
Equity | Consolidated | Consolidated CLOs | ||||||||||||||||||
CLOs | ||||||||||||||||||||
Balance, Beginning of Period | $ | 29,082,505 | $ | 1,944,464 | $ | — | $ | 3,300,674 | $ | 348,486 | $ | — | ||||||||
Transfers In (1) | — | 150,559 | — | — | 3,397 | — | ||||||||||||||
Transfers Out (2) | (1,428,691 | ) | (4,627 | ) | — | — | (202,010 | ) | — | |||||||||||
Acquisitions | 82,986 | 539,247 | 97,996 | 197,471 | 52,502 | 6,814,217 | ||||||||||||||
Purchases | 5,492,831 | 1,360,129 | 4,884 | 1,120,505 | 967,494 | 1,661,904 | ||||||||||||||
Sales | (4,334,889 | ) | (736,963 | ) | (12,188 | ) | (426,095 | ) | (98,636 | ) | (1,169,533 | ) | ||||||||
Settlements | — | 114,174 | 295 | — | — | 3,988 | ||||||||||||||
Net Realized Gains (Losses) | 1,911,995 | (4,006 | ) | — | 222,626 | (4,024 | ) | — | ||||||||||||
Net Unrealized Gains (Losses) | 1,081,967 | (23,032 | ) | 377 | (265,933 | ) | 62,301 | 15,895 | ||||||||||||
Change in Other Comprehensive Income | — | (13,959 | ) | — | — | — | (98,474 | ) | ||||||||||||
Balance, End of Period | $ | 31,888,704 | $ | 3,325,986 | $ | 91,364 | $ | 4,149,248 | $ | 1,129,510 | $ | 7,227,997 | ||||||||
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 or Debt Obligations still held at Reporting Date | $ | 3,134,239 | $ | (6,555 | ) | $ | (239 | ) | $ | (272,760 | ) | $ | 66,730 | $ | 15,915 | |||||
Nine Months Ended September 30, 2013 | ||||||||||||||||||||
Level III Assets | Level III Liabilities | |||||||||||||||||||
Private | Credit | Investments of | Real Assets | Other | Debt Obligations of | |||||||||||||||
Equity | Consolidated | Consolidated CLOs | ||||||||||||||||||
CLOs | ||||||||||||||||||||
Balance, Beginning of Period | $ | 25,734,400 | $ | 1,587,046 | $ | — | $ | 1,775,683 | $ | 239,230 | $ | — | ||||||||
Transfers In (1) | — | 53,439 | — | — | 34,978 | — | ||||||||||||||
Transfers Out (2) | (1,819,651 | ) | (252,323 | ) | — | — | (23,304 | ) | — | |||||||||||
Acquisitions | — | — | — | — | — | — | ||||||||||||||
Purchases | 2,346,126 | 954,462 | — | 545,424 | 46,574 | — | ||||||||||||||
Sales | (1,042,698 | ) | (534,852 | ) | — | (56,275 | ) | (59,730 | ) | — | ||||||||||
Settlements | — | 59,043 | — | — | — | — | ||||||||||||||
Net Realized Gains (Losses) | 649,534 | (2,683 | ) | — | 14,930 | 1,797 | — | |||||||||||||
Net Unrealized Gains (Losses) | 1,243,434 | (7,586 | ) | — | 133,685 | 3,480 | — | |||||||||||||
Change in Other Comprehensive Income | — | — | — | — | — | — | ||||||||||||||
Balance, End of Period | $ | 27,111,145 | $ | 1,856,546 | $ | — | $ | 2,413,447 | $ | 243,025 | $ | — | ||||||||
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 or Debt Obligations still held at Reporting Date | $ | 1,817,352 | $ | 980 | $ | — | $ | 169,051 | $ | 3,480 | $ | — | ||||||||
-1 | The Transfers In noted in the tables above for credit 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 credit 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, 2014 | Methodologies | Unobservable Input(s) (1) | Average (2) | Range | Increase in Input (3) | |||||||||||||||
Assets: | ||||||||||||||||||||
Private Equity Investments | $ | 31,888,704 | ||||||||||||||||||
Healthcare | $ | 8,552,204 | Inputs to market | Illiquidity Discount | 7% | 5% - 15% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 17% | 5% - 50% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 17% | 5% - 50% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 66% | 0% - 90% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 9x | 8x - 12x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 9x | 8x - 11x | Increase | |||||||||||||||||
Control Premium | 1% | 0% - 10% | -8 | Increase | ||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 9% | 7% - 13% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 8x - 12x | Increase | |||||||||||||||||
Financial Services | $ | 4,604,891 | Inputs to market | Illiquidity Discount | 11% | 10% - 15% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 24% | 13% - 100% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 21% | 0% - 50% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 55% | 0% - 75% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 11x - 13x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 11x | 10x - 12x | Increase | |||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 11% | 10% - 12% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 10x - 11x | Increase | |||||||||||||||||
Technology | $ | 3,936,133 | Inputs to market | Illiquidity Discount | 10% | 5% - 15% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 47% | 25% - 50% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 47% | 25% - 50% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 6% | 0% - 50% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 6x - 16x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 11x | 5x - 14x | Increase | |||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 12% | 8% - 19% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 6x - 11x | Increase | |||||||||||||||||
Retail | $ | 3,570,182 | Inputs to market | Illiquidity Discount | 7% | 5% - 20% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 33% | 0% - 50% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 33% | 13% - 100% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 34% | 0% - 75% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 11x | 7x - 12x | -7 | Increase | |||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 7x - 12x | -7 | Increase | ||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 10% | 9% - 23% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 8x | 6x - 15x | Increase | |||||||||||||||||
Manufacturing | $ | 3,352,378 | Inputs to both market | Illiquidity Discount | 10% | 5% - 20% | Decrease | |||||||||||||
comparable and discounted cash flow | Weight Ascribed to Market Comparables | 46% | 33% - 50% | -4 | ||||||||||||||||
Weight Ascribed to Discounted Cash Flow | 54% | 50% - 67% | -5 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 12x | 6x - 16x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 7x - 14x | Increase | |||||||||||||||||
Control Premium | 3% | 0% - 20% | -8 | Increase | ||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 14% | 10% - 22% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 10x | 7x - 11x | Increase | |||||||||||||||||
Other | $ | 7,872,916 | Inputs to market | Illiquidity Discount | 11% | 10% - 20% | Decrease | |||||||||||||
comparable, discounted cash flow and transaction | Weight Ascribed to Market Comparables | 39% | 0% - 50% | -4 | ||||||||||||||||
cost | Weight Ascribed to Discounted Cash Flow | 42% | 0% - 100% | -5 | ||||||||||||||||
Weight Ascribed to Transaction Price | 19% | 0% - 100% | -6 | |||||||||||||||||
Market comparables | Enterprise Value/LTM EBITDA Multiple | 11x | 7x - 19x | Increase | ||||||||||||||||
Enterprise Value/Forward EBITDA Multiple | 10x | 7x - 15x | Increase | |||||||||||||||||
Control Premium | 1% | 0% - 20% | -8 | Increase | ||||||||||||||||
Discounted cash flow | Weighted Average Cost of Capital | 12% | 9% - 26% | Decrease | ||||||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 7x - 12x | Increase | |||||||||||||||||
Real Assets | $ | 4,149,248 | ||||||||||||||||||
Energy/Infrastructure (12) | $ | 3,083,543 | Discounted cash flow | Weighted Average Cost of Capital | 11% | 6% - 20% | Decrease | |||||||||||||
Enterprise Value/LTM EBITDA Exit Multiple | 9x | 8x - 11x | Increase | |||||||||||||||||
Real Estate | $ | 1,065,705 | Inputs to direct income capitalization and | Weight Ascribed to Direct Income Capitalization | 28% | 0% - 100% | -10 | |||||||||||||
discounted cash flow | Weight Ascribed to Discounted Cash Flow | 72% | 0% - 100% | -5 | ||||||||||||||||
Direct Income Capitalization | Current Capitalization Rate | 7% | 5% - 9% | Decrease | ||||||||||||||||
Discounted cash flow | Unlevered Discount Rate | 10% | 7% - 18% | Decrease | ||||||||||||||||
Credit (11) | $ | 3,325,986 (9) | Yield Analysis | Yield | 11% | 4% - 20% | Decrease | |||||||||||||
Net Leverage | 6x | 1x - 13x | Decrease | |||||||||||||||||
EBITDA Multiple | 9x | 2x - 13x | Increase | |||||||||||||||||
Liabilities: | ||||||||||||||||||||
Collateralized Loan Obligation secured notes | $ | 7,227,997 | Discount margin | 270 bps | 95bps - 1500bps | Decrease | ||||||||||||||
Probability of default | 3% | 2% - 3% | Decrease | |||||||||||||||||
Loss severity | 32% | 30% - 38% | Decrease | |||||||||||||||||
In the table above, Other Investments, within private equity investments, represents the following industries: Consumer Products, Education, Forestry, Media, Services, Telecommunications, Transportation, Hotels/Leisure and Recycling. None of these industries represents more than 10% of total Level III private equity investments as of September 30, 2014. | ||||||||||||||||||||
-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 and transaction price. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and transaction price. | |||||||||||||||||||
-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 and transaction price. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach and transaction price. | |||||||||||||||||||
-6 | The directional change from an increase in the weight ascribed to the transaction price would increase the fair value of the Level III investments if the transaction price results in a higher valuation than the market comparables and discounted cash flow approach. The opposite would be true if the transaction price results in a lower valuation than the market comparables approach and discounted cash flow approach. | |||||||||||||||||||
-7 | 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 31.5x and 24.1x, respectively. The exclusion of this investment does not impact the weighted average. | |||||||||||||||||||
-8 | 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. | |||||||||||||||||||
-9 | Amounts include $348.5 million of investments that were valued using dealer quotes or third party valuation firms. | |||||||||||||||||||
10) | 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. | |||||||||||||||||||
-11 | Includes Level III Credit Investments and Level III Investments of Consolidated CLOs. | |||||||||||||||||||
-12 | Includes two private equity investments involved in energy investments. | |||||||||||||||||||
NET_INCOME_LOSS_ATTRIBUTABLE_T1
NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2014 | ||||||||||||||
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 | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. | $ | 89,938 | $ | 204,740 | $ | 478,194 | $ | 413,313 | ||||||
Basic Net Income (Loss) Per Common Unit | ||||||||||||||
Weighted Average Common Units Outstanding - Basic | 419,961,455 | 282,148,802 | 364,127,956 | 270,484,224 | ||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Basic | $ | 0.21 | $ | 0.73 | $ | 1.31 | $ | 1.53 | ||||||
Diluted Net Income (Loss) Per Common Unit (a) | ||||||||||||||
Weighted Average Common Units Outstanding - Basic | 419,961,455 | 282,148,802 | 364,127,956 | 270,484,224 | ||||||||||
Weighted Average Unvested Common Units | 26,862,703 | 25,986,389 | 27,917,101 | 25,696,846 | ||||||||||
Weighted Average Exchangeable Equity Securities | 5,195,584 | — | 4,187,771 | — | ||||||||||
Weighted Average Common Units Outstanding - Diluted | 452,019,742 | 308,135,191 | 396,232,828 | 296,181,070 | ||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Diluted | $ | 0.20 | $ | 0.66 | $ | 1.21 | $ | 1.40 | ||||||
Schedule of KKR Holdings units excluded from the calculation of diluted Net Income (Loss) attributable to KKR & Co. L.P. per common unit | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Weighted Average KKR Holdings Units Outstanding | 383,937,941 | 407,646,472 | 391,269,962 | 417,990,571 | ||||||||||
OTHER_ASSETS_AND_ACCOUNTS_PAYA1
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES | ' | |||||||
Schedule of other assets | ' | |||||||
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Oil & Gas Assets, net | $ | 645,474 | $ | 187,448 | ||||
Due from Broker (a) | 510,727 | 720,245 | ||||||
Unsettled Investment Sales (b) | 221,856 | 85,097 | ||||||
Interest, Dividend and Notes Receivable (c) | 589,321 | 380,099 | ||||||
Intangible Assets, net (d) | 218,139 | 177,545 | ||||||
Deferred Tax Assets, net | 237,354 | 165,699 | ||||||
Goodwill (d) | 89,000 | 89,000 | ||||||
Fixed Assets, net (e) | 76,606 | 80,565 | ||||||
Receivables | 67,571 | 19,455 | ||||||
Foreign Exchange Contracts and Options (f) | 217,768 | 89,090 | ||||||
Deferred Financing Costs | 33,192 | 22,773 | ||||||
Prepaid Taxes | 10,958 | 26,901 | ||||||
Prepaid Expenses | 10,395 | 9,846 | ||||||
Other | 49,755 | 40,867 | ||||||
Total | $ | 2,978,116 | $ | 2,094,630 | ||||
(a) | Represents amounts held at clearing brokers resulting from securities transactions. | |||||||
(b) | Represents amounts due from third parties for investments sold for which cash settlement has not occurred. | |||||||
(c) | Represents interest and dividend receivables 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 2018. | |||||||
(d) | See Note 15 “Goodwill and Intangible Assets.” | |||||||
(e) | Net of accumulated depreciation and amortization of $120,034 and $100,724 as of September 30, 2014 and December 31, 2013, respectively. Depreciation and amortization expense totaled $3,852 and $3,619 for the three months ended September 30, 2014 and 2013, respectively, and $12,054 and $11,042 for the nine months ended September 30, 2014 and 2013, respectively. | |||||||
(f) | 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. | |||||||
Schedule of accounts payable, accrued expenses and other liabilities | ' | |||||||
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Amounts Payable to Carry Pool (a) | $ | 1,083,031 | $ | 1,062,643 | ||||
Unsettled Investment Purchases (b) | 1,047,146 | 260,164 | ||||||
Securities Sold Short (c) | 836,657 | 676,144 | ||||||
Foreign Exchange Contracts and Options (d) | 131,628 | 414,782 | ||||||
Accounts Payable and Accrued Expenses | 183,427 | 165,092 | ||||||
Contingent Consideration Obligation (e) | 38,600 | 122,800 | ||||||
Accrued Compensation and Benefits | 184,602 | 21,531 | ||||||
Interest Payable | 42,096 | 23,700 | ||||||
Due to Broker (f) | 81,854 | 28,669 | ||||||
Deferred Rent and Income | 28,411 | 28,029 | ||||||
Redemptions Payable | — | 13,618 | ||||||
Taxes Payable | 7,083 | 5,742 | ||||||
Other Liabilities | 114,602 | 17,012 | ||||||
Total | $ | 3,779,137 | $ | 2,839,926 | ||||
(a) | Represents the amount of carried interest payable to principals, professionals and other individuals with respect to KKR’s active funds and co-investment vehicles that provide for carried interest. | |||||||
(b) | Represents amounts owed to third parties for investment purchases for which cash settlement has not occurred. | |||||||
(c) | 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, 2014 and December 31, 2013 were $840,022 and $650,026, respectively. | |||||||
(d) | 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. | |||||||
(e) | Represents the fair value of the contingent consideration related to the acquisition of Prisma. During the third quarter of 2014, a portion of the obligation recorded as of June 30, 2014 was settled for $123.6 million. Of this amount, approximately $84.1 million was settled with the issuance of KKR & Co. L.P. common units. | |||||||
(f) | Represents amounts owed for securities transactions initiated at clearing brokers. | |||||||
VARIABLE_INTEREST_ENTITIES_Tab
VARIABLE INTEREST ENTITIES (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
VARIABLE INTEREST ENTITIES | ' | |||||||
Schedule of maximum exposure to loss, before allocations to the carry pool, if any, for those VIEs in which entity is determined not to be the primary beneficiary but in which it has a variable interest | ' | |||||||
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Investments | $ | 329,653 | $ | 209,525 | ||||
Due from Affiliates, net | 2,338 | 5,105 | ||||||
Maximum Exposure to Loss | $ | 331,991 | $ | 214,630 | ||||
DEBT_OBLIGATIONS_Tables
DEBT OBLIGATIONS (Tables) | 9 Months Ended | |||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||
DEBT OBLIGATIONS | ' | |||||||||||||||||||
Schedule of borrowings | ' | |||||||||||||||||||
September 30, 2014 | December 31, 2013 | |||||||||||||||||||
Available | Carrying Value | Fair Value | Available | Carrying Value | Fair Value | |||||||||||||||
2020 Senior Notes (a) | $ | — | $ | 498,752 | $ | 583,050 | (h) | $ | — | $ | 498,596 | $ | 560,930 | (h) | ||||||
2041 Senior Notes (b) | — | 291,205 | 289,843 | (i) | — | — | — | |||||||||||||
2042 Senior Notes (c) | — | 123,700 | 122,728 | (i) | — | — | — | |||||||||||||
2043 Senior Notes (d) | — | 494,596 | 543,395 | (h) | — | 494,454 | 468,200 | (h) | ||||||||||||
2044 Senior Notes (e) | — | 493,156 | 520,110 | (h) | — | — | — | |||||||||||||
Junior Subordinated Notes (f) | — | 246,484 | 243,394 | — | — | — | ||||||||||||||
Revolving Credit Facilities | 1,250,000 | — | — | 1,250,000 | — | — | ||||||||||||||
Investment Financing Facilities (g) | 1,532,237 | 930,880 | 930,880 | (j) | 531,231 | 915,556 | 915,556 | (j) | ||||||||||||
Debt Obligations of Consolidated CLOs (k) | — | 7,227,997 | 7,227,997 | — | — | — | ||||||||||||||
$ | 2,782,237 | $ | 10,306,770 | $ | 10,461,397 | $ | 1,781,231 | $ | 1,908,606 | $ | 1,944,686 | |||||||||
(a) | $500 million aggregate principal amount of 6.375% senior notes of KKR due 2020. | |||||||||||||||||||
(b) | KKR consolidates KFN and thus reports KFN’s outstanding $259 million aggregate principal amount of 8.375% senior notes due 2041. | |||||||||||||||||||
(c) | KKR consolidates KFN and thus reports KFN’s outstanding $115 million aggregate principal amount of 7.500% senior notes due 2042. | |||||||||||||||||||
(d) | $500 million aggregate principal amount of 5.500% senior notes of KKR due 2043. | |||||||||||||||||||
(e) | $500 million aggregate principal amount of 5.125% senior notes of KKR due 2044. | |||||||||||||||||||
(f) | KKR consolidates KFN and thus reports KFN’s outstanding $284 million aggregate principal amount of junior subordinated notes. The weighted average interest rate is 5.4% and the weighted average years to maturity is 22.0 years as of September 30, 2014. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR’s Level III credit investments. | |||||||||||||||||||
(g) | Certain of KKR’s investment funds have entered into financing arrangements with major financial institutions, generally in connection with specific investments in connection with the management of capital calls to fund limited partners to provide liquidity to such investment funds. The weighted average interest rate is 2.91% and 3.09% as of September 30, 2014 and December 31, 2013, respectively. The weighted average years to maturity is 2.5 years and 2.3 years as of September 30, 2014 and December 31, 2013, respectively. | |||||||||||||||||||
(h) | The notes are classified as Level II within the fair value hierarchy and fair value is determined by third party broker quotes. | |||||||||||||||||||
(i) | The notes are classified as Level I within the fair value hierarchy and fair value is determined by quoted prices in active markets since the debt is publicly listed. | |||||||||||||||||||
(j) | Carrying amounts approximate fair value given the investment financing facilities’ interest rates are variable. | |||||||||||||||||||
(k) | Represents borrowings due to the holders of debt securities issued by CLO vehicles consolidated by KKR and are carried at fair value. These debt obligations are classified as Level III within the fair value hierarchy. See Note 5 “Fair Value Measurements.” | |||||||||||||||||||
Schedule of debt obligations of consolidated CLOs | ' | |||||||||||||||||||
September 30, 2014 | ||||||||||||||||||||
Borrowing | Weighted | Weighted Average | ||||||||||||||||||
Outstanding | Average | Remaining | ||||||||||||||||||
Interest Rate | Maturity in Years | |||||||||||||||||||
Senior Secured Notes | $ | 6,939,451 | 1.8 | % | 8.4 | |||||||||||||||
Subordinated Notes | 288,546 | (a) | 8.6 | |||||||||||||||||
$ | 7,227,997 | |||||||||||||||||||
(a) | The subordinated notes do not have contractual interest rates but instead receive distributions from the excess cash flows of the consolidated CLO vehicles. | |||||||||||||||||||
EQUITY_BASED_COMPENSATION_Tabl
EQUITY BASED COMPENSATION (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2014 | ||||||||||||||
EQUITY BASED COMPENSATION | ' | |||||||||||||
Schedule of expense associated with equity based compensation | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
KKR Holdings Principal Awards | $ | 9,981 | $ | 33,740 | $ | 27,770 | $ | 85,309 | ||||||
KKR Holdings Restricted Equity Units | 243 | 765 | 749 | 3,173 | ||||||||||
Equity Incentive Plan Units | 42,090 | 31,227 | 122,320 | 84,581 | ||||||||||
Other Exchangeable Securities | 7,249 | — | 17,192 | — | ||||||||||
Discretionary Compensation | 24,387 | 19,483 | 86,404 | 74,120 | ||||||||||
Total | $ | 83,950 | $ | 85,215 | $ | 254,435 | $ | 247,183 | ||||||
Schedule of unrecognized expense of principal awards expected to be recognized | ' | |||||||||||||
Unrecognized | ||||||||||||||
Expense (in | ||||||||||||||
Year | millions) | |||||||||||||
Remainder of 2014 | $ | 2.7 | ||||||||||||
2015 | 7.2 | |||||||||||||
2016 | 1.8 | |||||||||||||
2017 | 0.2 | |||||||||||||
Total | $ | 11.9 | ||||||||||||
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 31, 2014 | 32,801,131 | $ | 7.13 | |||||||||||
Granted | 122,995 | 19.24 | ||||||||||||
Vested | (1,146,755 | ) | 10.76 | |||||||||||
Forfeited | (2,292,072 | ) | 7.05 | |||||||||||
Balance, September 30, 2014 | 29,485,299 | $ | 7.05 | |||||||||||
Schedule of remaining vesting tranches for principals and certain non-employee consultant and service providers | ' | |||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2014 | 24,704,431 | |||||||||||||
April 1, 2015 | 1,166,055 | |||||||||||||
October 1, 2015 | 2,104,885 | |||||||||||||
April 1, 2016 | 97,950 | |||||||||||||
October 1, 2016 | 1,240,163 | |||||||||||||
April 1, 2017 | 45,522 | |||||||||||||
October 1, 2017 | 111,293 | |||||||||||||
April 1, 2018 | 15,000 | |||||||||||||
29,485,299 | ||||||||||||||
Schedule of unrecognized expense of restricted equity awards expected to be recognized | ' | |||||||||||||
Unrecognized | ||||||||||||||
Expense (in | ||||||||||||||
Year | millions) | |||||||||||||
Remainder of 2014 | $ | 0.1 | ||||||||||||
2015 | 0.2 | |||||||||||||
Total | $ | 0.3 | ||||||||||||
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, 2014 | 556,205 | $ | 12.19 | |||||||||||
Granted | — | — | ||||||||||||
Vested | (142,510 | ) | 14.18 | |||||||||||
Forfeited | (41,251 | ) | 10.67 | |||||||||||
Balance, September 30, 2014 | 372,444 | $ | 11.6 | |||||||||||
Schedule of remaining vesting tranches of restricted equity awards granted to professionals, support staff, and other personnel | ' | |||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2014 | 235,953 | |||||||||||||
April 1, 2015 | 113,758 | |||||||||||||
October 1, 2015 | 22,733 | |||||||||||||
372,444 | ||||||||||||||
Schedule of unrecognized expense of Equity Incentive Plan awards expected to be recognized | ' | |||||||||||||
Unrecognized | ||||||||||||||
Expense (in | ||||||||||||||
Year | millions) | |||||||||||||
Remainder of 2014 | $ | 30.8 | ||||||||||||
2015 | 102.9 | |||||||||||||
2016 | 55.7 | |||||||||||||
2017 | 11.9 | |||||||||||||
2018 | 2.8 | |||||||||||||
Total | $ | 204.1 | ||||||||||||
Schedule of awards granted under Equity Incentive Plan | ' | |||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2014 | 22,942,987 | $ | 10.05 | |||||||||||
Granted | 8,956,193 | 19.07 | ||||||||||||
Vested | (4,645,712 | ) | 11.67 | |||||||||||
Forfeited | (1,180,585 | ) | 11.27 | |||||||||||
Balance, September 30, 2014 | 26,072,883 | $ | 12.8 | |||||||||||
Schedule of remaining vesting tranches of awards granted under the Equity Incentive Plan | ' | |||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2014 | 5,813,779 | |||||||||||||
April 1, 2015 | 5,358,090 | |||||||||||||
October 1, 2015 | 4,980,195 | |||||||||||||
April 1, 2016 | 3,294,669 | |||||||||||||
October 1, 2016 | 3,779,864 | |||||||||||||
April 1, 2017 | 1,254,938 | |||||||||||||
October 1, 2017 | 731,241 | |||||||||||||
April 1, 2018 | 8,820 | |||||||||||||
October 1, 2018 | 851,287 | |||||||||||||
26,072,883 | ||||||||||||||
Schedule of unrecognized expense of other exchangeable securities expected to be recognized | ' | |||||||||||||
Unrecognized | ||||||||||||||
Expense (in | ||||||||||||||
Year | millions) | |||||||||||||
Remainder of 2014 | $ | 3.4 | ||||||||||||
2015 | 13.7 | |||||||||||||
2016 | 9.3 | |||||||||||||
Total | $ | 26.4 | ||||||||||||
Schedule of KKR Holdings awards granted to other exchangeable securities | ' | |||||||||||||
Units | Weighted | |||||||||||||
Average Grant | ||||||||||||||
Date Fair Value | ||||||||||||||
Balance, January 1, 2014 | — | $ | — | |||||||||||
Granted | 2,545,602 | 19.67 | ||||||||||||
Vested | — | — | ||||||||||||
Forfeited | (1,654 | ) | 19.67 | |||||||||||
Balance, September 30, 2014 | 2,543,948 | $ | 19.67 | |||||||||||
Schedule of remaining vesting tranches for other exchangeable securities | ' | |||||||||||||
Vesting Date | Units | |||||||||||||
October 1, 2014 | 847,976 | |||||||||||||
October 1, 2015 | 847,983 | |||||||||||||
October 1, 2016 | 847,989 | |||||||||||||
2,543,948 | ||||||||||||||
RELATED_PARTY_TRANSACTIONS_Tab
RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
RELATED PARTY TRANSACTIONS | ' | |||||||
Schedule of due from and to affiliates | ' | |||||||
September 30, 2014 | December 31, 2013 | |||||||
Due from Related Entities | $ | 61,432 | $ | 98,793 | ||||
Due from Portfolio Companies | 69,567 | 45,115 | ||||||
Due from Affiliates | $ | 130,999 | $ | 143,908 | ||||
September 30, 2014 | December 31, 2013 | |||||||
Due to KKR Holdings in Connection with the Tax Receivable Agreement | $ | 123,243 | $ | 89,797 | ||||
Due to Related Entities | 9,880 | 4,054 | ||||||
Due to Affiliates | $ | 133,123 | $ | 93,851 | ||||
SEGMENT_REPORTING_Tables
SEGMENT REPORTING (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2014 | ||||||||||||||
SEGMENT REPORTING | ' | |||||||||||||
Schedule of financial data of the entity's reportable segments | ' | |||||||||||||
As of and for the Three Months Ended September 30, 2014 | ||||||||||||||
Private Markets | Public Markets | Capital Markets | Total | |||||||||||
and Other | Reportable | |||||||||||||
Segments | ||||||||||||||
Segment Revenues | ||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||
Management Fees | $ | 107,443 | $ | 66,469 | $ | — | $ | 173,912 | ||||||
Monitoring Fees | 30,449 | — | — | 30,449 | ||||||||||
Transaction Fees | 67,772 | 3,262 | 87,530 | 158,564 | ||||||||||
Fee Credits (1) | (58,810 | ) | (3,001 | ) | — | (61,811 | ) | |||||||
Total Management, Monitoring and Transaction Fees, Net | 146,854 | 66,730 | 87,530 | 301,114 | ||||||||||
Performance Income | ||||||||||||||
Realized Carried Interest | 236,126 | 9,900 | — | 246,026 | ||||||||||
Incentive Fees | — | 8,009 | — | 8,009 | ||||||||||
Unrealized Carried Interest | 53,776 | 2,416 | — | 56,192 | ||||||||||
Total Performance Income | 289,902 | 20,325 | — | 310,227 | ||||||||||
Investment Income (Loss) | ||||||||||||||
Net Realized Gains (Losses) | 165,047 | (630 | ) | (1,622 | ) | 162,795 | ||||||||
Net Unrealized Gains (Losses) | 8,293 | (46,118 | ) | (8 | ) | (37,833 | ) | |||||||
Total Realized and Unrealized | 173,340 | (46,748 | ) | (1,630 | ) | 124,962 | ||||||||
Net Interest and Dividends | 21,463 | 53,335 | 7,456 | 82,254 | ||||||||||
Total Investment Income (Loss) | 194,803 | 6,587 | 5,826 | 207,216 | ||||||||||
Total Segment Revenues | 631,559 | 93,642 | 93,356 | 818,557 | ||||||||||
Segment Expenses | ||||||||||||||
Compensation and Benefits | ||||||||||||||
Cash Compensation and Benefits | 59,991 | 26,787 | 22,012 | 108,790 | ||||||||||
Realized Allocation to Carry Pool (2) | 94,451 | 3,960 | — | 98,411 | ||||||||||
Unrealized Allocation to Carry Pool (2) | 21,729 | 967 | — | 22,696 | ||||||||||
Total Compensation and Benefits | 176,171 | 31,714 | 22,012 | 229,897 | ||||||||||
Occupancy and related charges | 11,460 | 2,518 | 480 | 14,458 | ||||||||||
Other operating expenses | 44,619 | 10,929 | 4,724 | 60,272 | ||||||||||
Total Segment Expenses | 232,250 | 45,161 | 27,216 | 304,627 | ||||||||||
Income (Loss) attributable to noncontrolling interests (3) | 342 | 335 | 4,512 | 5,189 | ||||||||||
Economic Net Income (Loss) | $ | 398,967 | $ | 48,146 | $ | 61,628 | $ | 508,741 | ||||||
Total Assets | $ | 7,419,105 | $ | 4,333,710 | $ | 1,763,040 | $ | 13,515,855 | ||||||
-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 | Represents economic interests that will (i) allocate to third parties 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 Other segment. | |||||||||||||
As of and for the Three Months Ended September 30, 2013 | ||||||||||||||
Private Markets | Public Markets | Capital Markets | Total | |||||||||||
and Other | Reportable | |||||||||||||
Segments | ||||||||||||||
Segment Revenues | ||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||
Management Fees | $ | 119,410 | $ | 53,835 | $ | — | $ | 173,245 | ||||||
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 | ) | |||||||
Total Management, Monitoring and Transaction Fees, Net | 160,791 | 59,184 | 53,625 | 273,600 | ||||||||||
Performance Income | ||||||||||||||
Realized Carried Interest | 81,532 | — | — | 81,532 | ||||||||||
Incentive Fees | — | 1,225 | — | 1,225 | ||||||||||
Unrealized Carried Interest | 256,215 | 14,022 | — | 270,237 | ||||||||||
Total Performance Income | 337,747 | 15,247 | — | 352,994 | ||||||||||
Investment Income (Loss) | ||||||||||||||
Net Realized Gains (Losses) | 104,061 | 979 | (1,495 | ) | 103,545 | |||||||||
Net Unrealized Gains (Losses) | 194,270 | 4,653 | 1,783 | 200,706 | ||||||||||
Total Realized and Unrealized | 298,331 | 5,632 | 288 | 304,251 | ||||||||||
Net Interest and Dividends | (8,344 | ) | 3,481 | 4,084 | (779 | ) | ||||||||
Total Investment Income (Loss) | 289,987 | 9,113 | 4,372 | 303,472 | ||||||||||
Total Segment Revenues | 788,525 | 83,544 | 57,997 | 930,066 | ||||||||||
Segment Expenses | ||||||||||||||
Compensation and Benefits | ||||||||||||||
Cash Compensation and Benefits | 65,400 | 18,606 | 8,223 | 92,229 | ||||||||||
Realized Allocation to Carry Pool (2) | 32,613 | — | — | 32,613 | ||||||||||
Unrealized Allocation to Carry Pool (2) | 107,290 | 5,609 | — | 112,899 | ||||||||||
Total Compensation and Benefits | 205,303 | 24,215 | 8,223 | 237,741 | ||||||||||
Occupancy and related charges | 13,367 | 1,906 | 401 | 15,674 | ||||||||||
Other operating expenses | 37,586 | 19,670 | 3,628 | 60,884 | ||||||||||
Total Segment Expenses | 256,256 | 45,791 | 12,252 | 314,299 | ||||||||||
Income (Loss) attributable to noncontrolling interests (3) | 433 | 202 | 1,385 | 2,020 | ||||||||||
Economic Net Income (Loss) | $ | 531,836 | $ | 37,551 | $ | 44,360 | $ | 613,747 | ||||||
Total Assets | $ | 6,164,029 | $ | 1,149,196 | $ | 1,201,819 | $ | 8,515,044 | ||||||
-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 | Represents economic interests that will (i) allocate to third parties 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 Other segment. | |||||||||||||
As of and for the Nine Months Ended September 30, 2014 | ||||||||||||||
Private Markets | Public Markets | Capital Markets | Total | |||||||||||
and Other | Reportable | |||||||||||||
Segments | ||||||||||||||
Segment Revenues | ||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||
Management Fees | $ | 342,024 | $ | 205,955 | $ | — | $ | 547,979 | ||||||
Monitoring Fees | 96,422 | — | — | 96,422 | ||||||||||
Transaction Fees | 206,132 | 16,634 | 183,619 | 406,385 | ||||||||||
Fee Credits (1) | (182,626 | ) | (13,683 | ) | — | (196,309 | ) | |||||||
Total Management, Monitoring and Transaction Fees, Net | 461,952 | 208,906 | 183,619 | 854,477 | ||||||||||
Performance Income | ||||||||||||||
Realized Carried Interest | 960,414 | 34,650 | — | 995,064 | ||||||||||
Incentive Fees | — | 36,506 | — | 36,506 | ||||||||||
Unrealized Carried Interest | 35,988 | 28,025 | — | 64,013 | ||||||||||
Total Performance Income | 996,402 | 99,181 | — | 1,095,583 | ||||||||||
Investment Income (Loss) | ||||||||||||||
Net Realized Gains (Losses) | 549,137 | 19,133 | (2,086 | ) | 566,184 | |||||||||
Net Unrealized Gains (Losses) | (43,763 | ) | (27,553 | ) | (693 | ) | (72,009 | ) | ||||||
Total Realized and Unrealized | 505,374 | (8,420 | ) | (2,779 | ) | 494,175 | ||||||||
Net Interest and Dividends | 41,415 | 96,734 | 15,701 | 153,850 | ||||||||||
Total Investment Income (Loss) | 546,789 | 88,314 | 12,922 | 648,025 | ||||||||||
Total Segment Revenues | 2,005,143 | 396,401 | 196,541 | 2,598,085 | ||||||||||
Segment Expenses | ||||||||||||||
Compensation and Benefits | ||||||||||||||
Cash Compensation and Benefits | 183,411 | 80,436 | 45,302 | 309,149 | ||||||||||
Realized Allocation to Carry Pool (2) | 384,166 | 13,860 | — | 398,026 | ||||||||||
Unrealized Allocation to Carry Pool (2) | 16,742 | 11,209 | — | 27,951 | ||||||||||
Total Compensation and Benefits | 584,319 | 105,505 | 45,302 | 735,126 | ||||||||||
Occupancy and related charges | 34,784 | 7,234 | 1,386 | 43,404 | ||||||||||
Other operating expenses | 124,267 | 30,910 | 12,207 | 167,384 | ||||||||||
Total Segment Expenses | 743,370 | 143,649 | 58,895 | 945,914 | ||||||||||
Income (Loss) attributable to noncontrolling interests (3) | 1,192 | 1,242 | 9,163 | 11,597 | ||||||||||
Economic Net Income (Loss) | $ | 1,260,581 | $ | 251,510 | $ | 128,483 | $ | 1,640,574 | ||||||
Total Assets | $ | 7,419,105 | $ | 4,333,710 | $ | 1,763,040 | $ | 13,515,855 | ||||||
-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 | Represents economic interests that will (i) allocate to third parties 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 Other segment. | |||||||||||||
As of and for the Nine Months Ended September 30, 2013 | ||||||||||||||
Private Markets | Public Markets | Capital Markets | Total | |||||||||||
and Other | Reportable | |||||||||||||
Segments | ||||||||||||||
Segment Revenues | ||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||
Management Fees | $ | 340,715 | $ | 149,669 | $ | — | $ | 490,384 | ||||||
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 | ) | |||||||
Total Management, Monitoring and Transaction Fees, Net | 434,158 | 158,107 | 104,717 | 696,982 | ||||||||||
Performance Income | ||||||||||||||
Realized Carried Interest | 439,527 | — | — | 439,527 | ||||||||||
Incentive Fees | — | 35,664 | — | 35,664 | ||||||||||
Unrealized Carried Interest | 340,254 | 45,212 | — | 385,466 | ||||||||||
Total Performance Income | 779,781 | 80,876 | — | 860,657 | ||||||||||
Investment Income (Loss) | ||||||||||||||
Net Realized Gains (Losses) | 401,750 | 6,128 | (3,127 | ) | 404,751 | |||||||||
Net Unrealized Gains (Losses) | 210,154 | 13,981 | 4,302 | 228,437 | ||||||||||
Total Realized and Unrealized | 611,904 | 20,109 | 1,175 | 633,188 | ||||||||||
Net Interest and Dividends | (18,410 | ) | 10,229 | 9,713 | 1,532 | |||||||||
Total Investment Income (Loss) | 593,494 | 30,338 | 10,888 | 634,720 | ||||||||||
Total Segment Revenues | 1,807,433 | 269,321 | 115,605 | 2,192,359 | ||||||||||
Segment Expenses | ||||||||||||||
Compensation and Benefits | ||||||||||||||
Cash Compensation and Benefits | 164,917 | 60,296 | 22,614 | 247,827 | ||||||||||
Realized Allocation to Carry Pool (2) | 175,811 | — | — | 175,811 | ||||||||||
Unrealized Allocation to Carry Pool (2) | 147,656 | 18,085 | — | 165,741 | ||||||||||
Total Compensation and Benefits | 488,384 | 78,381 | 22,614 | 589,379 | ||||||||||
Occupancy and related charges | 35,935 | 5,063 | 1,065 | 42,063 | ||||||||||
Other operating expenses | 105,516 | 36,643 | 8,382 | 150,541 | ||||||||||
Total Segment Expenses | 629,835 | 120,087 | 32,061 | 781,983 | ||||||||||
Income (Loss) attributable to noncontrolling interests (3) | 1,242 | 935 | 2,267 | 4,444 | ||||||||||
Economic Net Income (Loss) | $ | 1,176,356 | $ | 148,299 | $ | 81,277 | $ | 1,405,932 | ||||||
Total Assets | $ | 6,164,029 | $ | 1,149,196 | $ | 1,201,819 | $ | 8,515,044 | ||||||
-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 | Represents economic interests that will (i) allocate to third parties 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 Other segment. | |||||||||||||
Schedule of reconciliation of financial information from total reportable segments to the most directly comparable financial measures calculated and presented in accordance with GAAP | ' | |||||||||||||
Fees | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Total Segment Revenues | 818,557 | 930,066 | 2,598,085 | 2,192,359 | ||||||||||
Management fees relating to consolidated funds and other entities | (121,008 | ) | (127,458 | ) | (386,207 | ) | (357,607 | ) | ||||||
Fee credits relating to consolidated funds | 58,580 | 48,641 | 184,039 | 103,070 | ||||||||||
Net realized and unrealized carried interest | (302,218 | ) | (351,769 | ) | (1,059,077 | ) | (824,993 | ) | ||||||
Total investment income (loss) | (207,216 | ) | (303,472 | ) | (648,025 | ) | (634,720 | ) | ||||||
Revenue earned by oil & gas producing entities | 69,380 | 9,575 | 143,369 | 9,575 | ||||||||||
Reimbursable expenses | 21,040 | 10,145 | 46,480 | 25,586 | ||||||||||
Other | 7,653 | 4,300 | 18,400 | 24,374 | ||||||||||
Fees | $ | 344,768 | $ | 220,028 | $ | 897,064 | $ | 537,644 | ||||||
Expenses | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Total Segment Expenses | 304,627 | 314,299 | 945,914 | 781,983 | ||||||||||
Equity-based compensation | 83,950 | 85,215 | 254,435 | 247,183 | ||||||||||
Reimbursable expenses | 34,355 | 15,516 | 66,847 | 35,029 | ||||||||||
Operating expenses relating to consolidated funds and other entities | 28,219 | 16,061 | 81,536 | 52,874 | ||||||||||
Expenses incurred by oil & gas producing entities | 40,234 | 6,951 | 90,405 | 6,951 | ||||||||||
Acquisition, contingent payment, litigation and other non-recurring costs | 2,396 | 6,500 | 87,893 | 35,922 | ||||||||||
Other | 10,629 | 10,953 | 35,876 | 26,905 | ||||||||||
Total Expenses | $ | 504,410 | $ | 455,495 | $ | 1,562,906 | $ | 1,186,847 | ||||||
Income (Loss) Before Taxes | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||
Economic net income | $ | 508,741 | $ | 613,747 | $ | 1,640,574 | $ | 1,405,932 | ||||||
Income taxes | (29,267 | ) | (7,644 | ) | (57,145 | ) | (25,525 | ) | ||||||
Amortization of intangibles and other, net | (204,676 | ) | (15,979 | ) | (262,300 | ) | (57,524 | ) | ||||||
Equity-based compensation | (83,950 | ) | (85,215 | ) | (254,435 | ) | (247,183 | ) | ||||||
Net income (loss) attributable to noncontrolling interests | ||||||||||||||
held by KKR Holdings | (100,910 | ) | (300,169 | ) | (588,500 | ) | (662,387 | ) | ||||||
Net income (loss) attributable to KKR & Co. L.P. | $ | 89,938 | $ | 204,740 | $ | 478,194 | $ | 413,313 | ||||||
Net income (loss) attributable to noncontrolling interests and appropriated capital | 784,568 | 1,984,245 | 4,449,146 | 4,134,293 | ||||||||||
Net income (loss) attributable to redeemable noncontrolling interests | (2,462 | ) | 9,169 | 1,366 | 25,992 | |||||||||
Income taxes | 29,267 | 7,644 | 57,145 | 25,525 | ||||||||||
Income (loss) before taxes | $ | 901,311 | $ | 2,205,798 | $ | 4,985,851 | $ | 4,599,123 | ||||||
ACQUISITIONS_Tables
ACQUISITIONS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
KFN | ' | |||||||
Acquisitions | ' | |||||||
Schedule of consideration paid | ' | |||||||
The total consideration paid was approximately $2.4 billion consisting entirely of the issuance of 104.3 million KKR common units as follows (amounts in thousands except unit data): | ||||||||
Number of KKR common units issued | 104,340,028 | |||||||
KKR common unit price on April 30, 2014 | $ | 22.71 | ||||||
Estimated fair value of KKR common units issued | $ | 2,369,559 | ||||||
Summary of the estimated fair values of the assets acquired and liabilities assumed | ' | |||||||
The following is a summary of the estimated fair values of the assets acquired and liabilities as of April 30, 2014, the date they were assumed: | ||||||||
Cash and cash equivalents | $ | 210,413 | ||||||
Cash and cash equivalents held at consolidated entities | 614,929 | |||||||
Restricted cash and cash equivalents | 35,038 | |||||||
Investments | 1,235,813 | |||||||
Investments of consolidated CLOs | 6,742,768 | |||||||
Other assets | 642,721 | |||||||
Other assets of consolidated CLOs | 133,036 | |||||||
Total assets | 9,614,718 | |||||||
Debt obligations | 724,509 | |||||||
Debt obligations of consolidated CLOs | 5,663,666 | |||||||
Accounts payable, accrued expenses and other liabilities | 118,427 | |||||||
Other liabilities of consolidated CLOs | 344,660 | |||||||
Total liabilities | 6,851,262 | |||||||
Noncontrolling interests | 378,983 | |||||||
Fair value of Net Assets Acquired | 2,384,473 | |||||||
Less: Fair value of consideration transferred | 2,369,559 | |||||||
Gain on acquisition | $ | 14,914 | ||||||
Avoca Capital and its affiliates | ' | |||||||
Acquisitions | ' | |||||||
Summary of the estimated fair values of the assets acquired and liabilities assumed | ' | |||||||
The following is a summary of the estimated fair values of the assets acquired and liabilities as of February 19, 2014, the date they were assumed: | ||||||||
Cash and cash equivalents | $ | 24,381 | ||||||
Investments | 20,905 | |||||||
Investments of consolidated CLOs | 1,226,174 | |||||||
Other assets of consolidated CLOs | 186,609 | |||||||
Other assets | 7,370 | |||||||
Intangible assets | 65,880 | |||||||
Total assets | 1,531,319 | |||||||
Liabilities | 13,584 | |||||||
Debt obligations of consolidated CLOs | 1,150,551 | |||||||
Other liabilities of consolidated CLOs | 140,308 | |||||||
Total liabilities | 1,304,443 | |||||||
Fair Value of Net Assets Acquired | 226,876 | |||||||
Less: Fair value of subordinated notes of consolidated CLOs held by KKR prior to acquisition (a) | 74,029 | |||||||
Less: Fair value of consideration transferred | 139,798 | |||||||
Gain on acquisition | $ | 13,049 | ||||||
(a) | Represents subordinated notes in one of the consolidated CLOs held by KKR prior to the acquisition of Avoca. Upon acquisition of Avoca, KKR’s investment in the subordinated notes was offset against the corresponding debt obligations of the consolidated CLO in purchase accounting. | |||||||
KFN and Avoca | ' | |||||||
Acquisitions | ' | |||||||
Schedule of supplemental financial information | ' | |||||||
For the Three Months Ended September 30, 2014 | KFN | Avoca | ||||||
Fees (a) | $ | 17.9 | $ | 13.8 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. | $ | (34.9 | ) | $ | 1.5 | |||
For the Nine Months Ended September 30, 2014 | KFN | Avoca | ||||||
Fees (a) | $ | 49.8 | $ | 30.2 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. | $ | (16.1 | ) | $ | (0.6 | ) | ||
(a) | Fees for KFN represent oil and gas revenue from working and royalty interests in oil and natural gas producing properties consolidated by KKR. | |||||||
KKR, KFN and Avoca | ' | |||||||
Acquisitions | ' | |||||||
Schedule of unaudited pro forma fees and net income (loss) attributable to the entity | ' | |||||||
Nine Months Ended September 30, | ||||||||
Selected Pro Forma Financial Information | 2014 | 2013 | ||||||
Fees | $ | 939,453 | $ | 608,227 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. | $ | 534,411 | $ | 513,731 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. per common unit - basic | $ | 1.30 | $ | 1.37 | ||||
Net Income (Loss) attributable to KKR & Co. L.P. per common unit - diluted | $ | 1.21 | $ | 1.27 | ||||
GOODWILL_AND_INTANGIBLE_ASSETS1
GOODWILL AND INTANGIBLE ASSETS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
GOODWILL AND INTANGIBLE ASSETS | ' | |||||||
Schedule of intangible assets, net | ' | |||||||
As of | ||||||||
September 30, 2014 | December 31, 2013 | |||||||
Finite-Lived Intangible Assets | $ | 284,766 | $ | 218,886 | ||||
Accumulated Amortization (includes foreign exchange) | (66,627 | ) | (41,341 | ) | ||||
Intangible Assets, Net | $ | 218,139 | $ | 177,545 | ||||
Schedule of changes in intangible assets, net | ' | |||||||
Nine Months Ended, | ||||||||
September 30, 2014 | ||||||||
Balance, Beginning of Period | $ | 177,545 | ||||||
Avoca Acquisition | 65,880 | |||||||
Amortization Expense | (20,101 | ) | ||||||
Foreign Exchange | (5,185 | ) | ||||||
Balance, End of Period | $ | 218,139 | ||||||
ORGANIZATION_Details
ORGANIZATION (Details) | 9 Months Ended |
Sep. 30, 2014 | |
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 | 53.00% |
KKR Group Partnerships | KKR Holdings L.P. | ' |
ORGANIZATION AND BASIS OF PRESENTATION | ' |
Percentage of economic interest held by parent entity | 47.00% |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2014 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
Effect on net income (loss) as a result of the elimination in consolidation of management fees earned from noncontrolling interests | $0 |
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, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
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 | ' | ' | $254,435 | $247,183 |
Capital contributions | ' | ' | 9,509,493 | 4,615,392 |
Capital distributions | ' | ' | -11,749,949 | -7,442,293 |
Calculation of net income (loss) attributable to noncontrolling interests held by KKR Holdings | ' | ' | ' | ' |
Net income (loss) | 872,044 | 2,198,154 | 4,928,706 | 4,573,598 |
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | -2,462 | 9,169 | 1,366 | 25,992 |
Fees | ' | ' | ' | ' |
Transaction Fees | 153,604 | 105,387 | 380,580 | 202,107 |
Management Fees | 52,904 | 45,787 | 161,772 | 130,402 |
Oil and Gas Revenue | 69,380 | 9,575 | 143,369 | 9,575 |
Monitoring Fees | 51,489 | 43,155 | 142,902 | 119,571 |
Consulting Fees | 10,096 | 15,686 | 32,581 | 41,298 |
Incentive Fees | 7,295 | 438 | 35,860 | 34,691 |
Management, Monitoring and Transaction Fees, Net | 344,768 | 220,028 | 897,064 | 537,644 |
Noncontrolling Interests held by KKR Holdings | ' | ' | ' | ' |
Calculation of noncontrolling Interests held by KKR Holdings | ' | ' | ' | ' |
Balance at the beginning of the period | 5,082,655 | 4,699,114 | 5,116,761 | 4,981,864 |
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | 100,910 | 300,169 | 588,500 | 662,387 |
Other comprehensive income (loss), net of tax | -11,105 | -96 | -7,764 | -4,846 |
Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units | -47,858 | -84,838 | -292,380 | -328,481 |
Equity based compensation | 34,611 | 53,988 | 114,923 | 162,602 |
Capital contributions | 656 | 600 | 1,504 | 1,399 |
Capital distributions | -272,335 | -172,719 | -634,010 | -678,707 |
Balance at the end of the period | 4,887,534 | 4,796,218 | 4,887,534 | 4,796,218 |
Calculation of net income (loss) attributable to noncontrolling interests held by KKR Holdings | ' | ' | ' | ' |
Net income (loss) | 872,044 | 2,198,154 | 4,928,706 | 4,573,598 |
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests | -2,462 | 9,169 | 1,366 | 25,992 |
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities and appropriated capital | 683,658 | 1,684,076 | 3,860,646 | 3,471,906 |
Plus: Income taxes attributable to KKR Management Holdings Corp. | 20,427 | 3,020 | 32,062 | 12,894 |
Net income (loss) attributable to KKR & Co. L.P. and KKR Holdings | 211,275 | 507,929 | 1,098,756 | 1,088,594 |
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | $100,910 | $300,169 | $588,500 | $662,387 |
KFN | 7.375% Series A LLC Preferred Shares | ' | ' | ' | ' |
Noncontrolling Interest in Consolidation Entities | ' | ' | ' | ' |
Preferred Shares dividend rate (as a percent) | ' | ' | 7.38% | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) | 9 Months Ended |
Sep. 30, 2014 | |
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 | 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 | ' |
Level III Valuation Methodologies | ' |
Percentage of fair value of investments which are valued on certain methodologies | 51.20% |
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% |
Private Markets Investments Valuation | Level III | Maximum | ' |
Level III Valuation Methodologies | ' |
Percentage of total investments for which valuations are reviewed quarterly | 5.00% |
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, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | $943,428 | $730,895 | $4,831,611 | $2,356,388 |
Net Unrealized Gains (Losses) | -645,169 | 1,499,506 | -589,322 | 2,242,367 |
Real Assets | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | 24,466 | ' | 227,820 | 14,855 |
Net Unrealized Gains (Losses) | 38,530 | 47,053 | -264,968 | 133,610 |
Equity Method | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | 4,121 | 10,016 | 9,980 | 35,532 |
Net Unrealized Gains (Losses) | 1,204 | 13,123 | 80,118 | 27,863 |
Private Equity | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | 917,917 | 692,932 | 4,459,039 | 2,180,059 |
Net Unrealized Gains (Losses) | -688,912 | 1,626,536 | -658,948 | 2,140,102 |
Credit and Other | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | 35,420 | 63,032 | 232,306 | 202,623 |
Net Unrealized Gains (Losses) | -221,237 | 72,901 | -35,326 | 20,638 |
Investments of Consolidated CLOs | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | 1,764 | ' | 8,144 | ' |
Net Unrealized Gains (Losses) | -142,208 | ' | -103,138 | ' |
Foreign Exchange Forward Contracts | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | -19,610 | -528 | -31,405 | 24,408 |
Net Unrealized Gains (Losses) | 385,840 | -247,428 | 428,690 | -76,845 |
Securities Sold Short | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | -12,551 | -29,652 | -35,338 | -71,459 |
Net Unrealized Gains (Losses) | 18,423 | -16,241 | 29,483 | -14,115 |
Other Derivative | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | -3,068 | -2,056 | -19,997 | -20,454 |
Net Unrealized Gains (Losses) | -11,591 | 1,229 | -12,085 | 4,907 |
Foreign Exchange Gains (Losses) | ' | ' | ' | ' |
Total Net Gains (Losses) from Investment Activities | ' | ' | ' | ' |
Net Realized Gains (Losses) | -5,031 | -2,849 | -18,938 | -9,176 |
Net Unrealized Gains (Losses) | ($25,218) | $2,333 | ($53,148) | $6,207 |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Investments | ' | ' |
Fair Value | $59,928,242,000 | $47,383,697,000 |
Cost | 52,835,082,000 | 39,197,800,000 |
Investments pledged as direct collateral | 11,200,000,000 | 3,300,000,000 |
Private Equity | ' | ' |
Investments | ' | ' |
Fair Value | 37,767,643,000 | 36,875,693,000 |
Cost | 28,776,432,000 | 27,191,849,000 |
Credit | ' | ' |
Investments | ' | ' |
Fair Value | 6,674,687,000 | 5,023,253,000 |
Cost | 6,621,887,000 | 4,841,913,000 |
Investments of Consolidated CLOs | ' | ' |
Investments | ' | ' |
Fair Value | 8,262,658,000 | ' |
Cost | 8,380,627,000 | ' |
Real Assets | ' | ' |
Investments | ' | ' |
Fair Value | 4,184,340,000 | 3,353,605,000 |
Cost | 6,462,906,000 | 5,367,912,000 |
Equity Method | ' | ' |
Investments | ' | ' |
Fair Value | 862,276,000 | 546,422,000 |
Cost | 594,690,000 | 310,709,000 |
Other | ' | ' |
Investments | ' | ' |
Fair Value | 2,176,638,000 | 1,584,724,000 |
Cost | $1,998,540,000 | $1,485,417,000 |
INVESTMENTS_Details_2
INVESTMENTS (Details 2) (USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Investments | ' | ' |
Fair value of investment with greater than 5% of total investments | 59,928,242,000 | 47,383,697,000 |
Aggregate investments in other than equity securities | 535,600,000 | 548,500,000 |
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 | 5,100,000,000 | 4,600,000,000 |
First Data | Investment Concentration Risk | Investments. | ' | ' |
Investments | ' | ' |
Fair value of investment with greater than 5% of total investments | 3,400,000,000 | ' |
INVESTMENTS_Details_3
INVESTMENTS (Details 3) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Investments | ' | ' |
Fair Value | $59,928,242 | $47,383,697 |
Private Equity | ' | ' |
Investments | ' | ' |
Fair Value | 37,767,643 | 36,875,693 |
Private Equity | Health Care | ' | ' |
Investments | ' | ' |
Fair Value | 9,642,534 | 8,480,933 |
Private Equity | Financial Services | ' | ' |
Investments | ' | ' |
Fair Value | 5,184,348 | 3,714,657 |
Private Equity | Manufacturing | ' | ' |
Investments | ' | ' |
Fair Value | 4,453,568 | 4,459,220 |
Private Equity | Retail | ' | ' |
Investments | ' | ' |
Fair Value | 4,321,969 | 4,582,846 |
Private Equity | Technology | ' | ' |
Investments | ' | ' |
Fair Value | 4,210,333 | 5,192,488 |
Private Equity | Other | ' | ' |
Investments | ' | ' |
Fair Value | $9,954,891 | $10,445,549 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Level III | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | $31,888,704 | ' |
Level III | Credit | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 3,325,986 | ' |
Level III | Real Assets | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 4,149,248 | ' |
Fair value measured on recurring basis | Level I | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 5,953,564 | 8,241,550 |
Total Assets | 5,953,564 | 8,241,550 |
Liabilities, at fair value: | ' | ' |
Securities Sold Short | 740,585 | 624,653 |
Total Liabilities | 740,585 | 624,653 |
Fair value measured on recurring basis | Level I | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 5,278,447 | 7,244,643 |
Fair value measured on recurring basis | Level I | Credit | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 16,936 | ' |
Fair value measured on recurring basis | Level I | Real Assets | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 35,092 | 52,931 |
Fair value measured on recurring basis | Level I | Other | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 623,089 | 943,976 |
Fair value measured on recurring basis | Level II | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 12,527,590 | 3,919,596 |
Total Assets | 12,762,226 | 4,013,766 |
Liabilities, at fair value: | ' | ' |
Securities Sold Short | 96,072 | 51,491 |
Unfunded Revolver Commitments | 1,385 | 1,902 |
Total Liabilities | 304,303 | 482,352 |
Fair value measured on recurring basis | Level II | Foreign Exchange Forward Contracts | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 217,768 | 89,090 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 131,628 | 414,782 |
Fair value measured on recurring basis | Level II | Other Derivatives | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 16,868 | 5,080 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 75,218 | 14,177 |
Fair value measured on recurring basis | Level II | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 600,492 | 548,545 |
Fair value measured on recurring basis | Level II | Credit | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 3,331,765 | 3,078,789 |
Fair value measured on recurring basis | Level II | Other | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 424,039 | 292,262 |
Fair value measured on recurring basis | Level II | Investments of Consolidated CLOs | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 8,171,294 | ' |
Fair value measured on recurring basis | Level III | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 40,584,812 | 34,676,129 |
Total Assets | 40,584,812 | 34,676,129 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 7,227,997 | ' |
Fair value measured on recurring basis | Level III | Debt Obligations of Consolidated CLOs | ' | ' |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 7,227,997 | ' |
Fair value measured on recurring basis | Level III | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 31,888,704 | 29,082,505 |
Fair value measured on recurring basis | Level III | Credit | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 3,325,986 | 1,944,464 |
Fair value measured on recurring basis | Level III | Real Assets | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 4,149,248 | 3,300,674 |
Fair value measured on recurring basis | Level III | Other | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 1,129,510 | 348,486 |
Fair value measured on recurring basis | Level III | Investments of Consolidated CLOs | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 91,364 | ' |
Fair value measured on recurring basis | Total | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 59,065,966 | 46,837,275 |
Total Assets | 59,300,602 | 46,931,445 |
Liabilities, at fair value: | ' | ' |
Securities Sold Short | 836,657 | 676,144 |
Unfunded Revolver Commitments | 1,385 | 1,902 |
Total Liabilities | 8,272,885 | 1,107,005 |
Fair value measured on recurring basis | Total | Debt Obligations of Consolidated CLOs | ' | ' |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 7,227,997 | ' |
Fair value measured on recurring basis | Total | Foreign Exchange Forward Contracts | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 217,768 | 89,090 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 131,628 | 414,782 |
Fair value measured on recurring basis | Total | Other Derivatives | ' | ' |
Assets, at fair value: | ' | ' |
Total Assets | 16,868 | 5,080 |
Liabilities, at fair value: | ' | ' |
Total Liabilities | 75,218 | 14,177 |
Fair value measured on recurring basis | Total | Private Equity | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 37,767,643 | 36,875,693 |
Fair value measured on recurring basis | Total | Credit | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 6,674,687 | 5,023,253 |
Fair value measured on recurring basis | Total | Real Assets | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 4,184,340 | 3,353,605 |
Fair value measured on recurring basis | Total | Other | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | 2,176,638 | 1,584,724 |
Fair value measured on recurring basis | Total | Investments of Consolidated CLOs | ' | ' |
Assets, at fair value: | ' | ' |
Total Investments | $8,262,658 | ' |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Transfers between Level I and Level II | $0 | $0 | ' | $0 |
Private Equity | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Number of transfers between Level I and Level II | ' | ' | 1 | ' |
Private Equity | Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 30,914,162 | 25,992,622 | 29,082,505 | 25,734,400 |
Transfers Out | -170,107 | -904,039 | -1,428,691 | -1,819,651 |
Acquisitions | ' | ' | 82,986 | ' |
Purchases | 2,340,143 | 1,071,808 | 5,492,831 | 2,346,126 |
Sales | -1,469,359 | -15,945 | -4,334,889 | -1,042,698 |
Net Realized Gains (Losses) | 587,627 | 15,945 | 1,911,995 | 649,534 |
Net Unrealized Gains (Losses) | -313,762 | 950,754 | 1,081,967 | 1,243,434 |
Balance, End of Period | 31,888,704 | 27,111,145 | 31,888,704 | 27,111,145 |
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 | 319,942 | 966,779 | 3,134,239 | 1,817,352 |
Credit | Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 3,047,412 | 1,416,016 | 1,944,464 | 1,587,046 |
Transfers In | 150,559 | 44,503 | 150,559 | 53,439 |
Transfers Out | -3,397 | -17,594 | -4,627 | -252,323 |
Acquisitions | ' | ' | 539,247 | ' |
Purchases | 474,528 | 503,140 | 1,360,129 | 954,462 |
Sales | -295,236 | -117,103 | -736,963 | -534,852 |
Settlements | 53,216 | 16,002 | 114,174 | 59,043 |
Net Realized Gains (Losses) | 26 | 2,240 | -4,006 | -2,683 |
Net Unrealized Gains (Losses) | -89,150 | 9,342 | -23,032 | -7,586 |
Change in Other Comprehensive Income | -11,972 | ' | -13,959 | ' |
Balance, End of Period | 3,325,986 | 1,856,546 | 3,325,986 | 1,856,546 |
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 | -95,460 | 9,547 | -6,555 | 980 |
Investments of Consolidated CLOs | Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 95,703 | ' | ' | ' |
Acquisitions | ' | ' | 97,996 | ' |
Purchases | 1,327 | ' | 4,884 | ' |
Sales | -6,091 | ' | -12,188 | ' |
Settlements | 869 | ' | 295 | ' |
Net Unrealized Gains (Losses) | -444 | ' | 377 | ' |
Balance, End of Period | 91,364 | ' | 91,364 | ' |
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 | -444 | ' | -239 | ' |
Real Assets | Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 3,799,200 | 2,198,427 | 3,300,674 | 1,775,683 |
Acquisitions | ' | ' | 197,471 | ' |
Purchases | 422,001 | 167,967 | 1,120,505 | 545,424 |
Sales | -134,977 | ' | -426,095 | -56,275 |
Net Realized Gains (Losses) | 21,319 | ' | 222,626 | 14,930 |
Net Unrealized Gains (Losses) | 41,705 | 47,053 | -265,933 | 133,685 |
Balance, End of Period | 4,149,248 | 2,413,447 | 4,149,248 | 2,413,447 |
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 | 34,878 | 47,053 | -272,760 | 169,051 |
Other | Level III | ' | ' | ' | ' |
Fair value, assets measured on recurring basis, level 3 fair-value category reconciliation | ' | ' | ' | ' |
Balance, Beginning of Period | 713,190 | 184,213 | 348,486 | 239,230 |
Transfers In | 3,397 | 34,978 | 3,397 | 34,978 |
Transfers Out | -6,291 | -4,040 | -202,010 | -23,304 |
Acquisitions | ' | ' | 52,502 | ' |
Purchases | 502,149 | 35,922 | 967,494 | 46,574 |
Sales | -60,767 | -5,064 | -98,636 | -59,730 |
Net Realized Gains (Losses) | -3,755 | -557 | -4,024 | 1,797 |
Net Unrealized Gains (Losses) | -18,413 | -2,427 | 62,301 | 3,480 |
Balance, End of Period | 1,129,510 | 243,025 | 1,129,510 | 243,025 |
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 | ($16,966) | ($2,427) | $66,730 | $3,480 |
FAIR_VALUE_MEASUREMENTS_Detail2
FAIR VALUE MEASUREMENTS (Details 3) (Level III, Debt Obligations of Consolidated CLOs, USD $) | 3 Months Ended | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2014 |
Level III | Debt Obligations of Consolidated CLOs | ' | ' |
Fair value, liabilities measured on recurring basis, level 3 fair-value category reconciliation | ' | ' |
Balance, Beginning of Period | $7,356,678 | ' |
Acquisitions | ' | 6,814,217 |
Purchases | 940,940 | 1,661,904 |
Sales | -972,518 | -1,169,533 |
Settlements | 690 | 3,988 |
Net Unrealized Gains (Losses) | 681 | 15,895 |
Change in Other Comprehensive Income | -98,474 | -98,474 |
Balance, End of Period | 7,227,997 | 7,227,997 |
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 Debt Obligations still held at Reporting Date | $701 | $15,915 |
FAIR_VALUE_MEASUREMENTS_Detail3
FAIR VALUE MEASUREMENTS (Details 4) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
Minimum | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Illiquidity Discount (as a percent) | 5.00% |
Level III | Debt Obligations of Consolidated CLOs | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Liabilities, Fair Value | 7,227,997,000 |
Level III | Weighted Average | Debt Obligations of Consolidated CLOs | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Discount Margin (as a percent) | 2.70% |
Probability of default | 3.00% |
Loss severity | 32.00% |
Level III | Minimum | Debt Obligations of Consolidated CLOs | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Discount Margin (as a percent) | 0.95% |
Probability of default | 2.00% |
Loss severity | 30.00% |
Level III | Maximum | Debt Obligations of Consolidated CLOs | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Discount Margin (as a percent) | 15.00% |
Probability of default | 3.00% |
Loss severity | 38.00% |
Level III | Private Equity | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 31,888,704,000 |
Level III | Private Equity | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 8,552,204,000 |
Level III | Private Equity | Financial Services | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 4,604,891,000 |
Level III | Private Equity | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 3,936,133,000 |
Level III | Private Equity | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 3,570,182,000 |
Level III | Private Equity | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 3,352,378,000 |
Level III | Private Equity | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 7,872,916,000 |
Level III | Real Assets | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 4,149,248,000 |
Level III | Real Assets | Energy/Infrastructure | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 3,083,543,000 |
Level III | Real Assets | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 1,065,705,000 |
Level III | Credit | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 3,325,986,000 |
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 | 1,100,000,000 |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | 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) | 17.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 17.00% |
Weight Ascribed to Transaction Price (as a percent) | 66.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Weighted Average | Financial Services | ' |
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) | 24.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 21.00% |
Weight Ascribed to Transaction Price (as a percent) | 55.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | 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) | 47.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 47.00% |
Weight Ascribed to Transaction Price (as a percent) | 6.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Weighted Average | Retail | ' |
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) | 33.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 33.00% |
Weight Ascribed to Transaction Price (as a percent) | 34.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | 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) | 39.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 42.00% |
Weight Ascribed to Transaction Price (as a percent) | 19.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Minimum | 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) | 5.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 5.00% |
Weight Ascribed to Transaction Price (as a percent) | 0.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Minimum | Financial Services | ' |
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) | 13.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 0.00% |
Weight Ascribed to Transaction Price (as a percent) | 0.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Minimum | 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) | 25.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 25.00% |
Weight Ascribed to Transaction Price (as a percent) | 0.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Minimum | 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) | 13.00% |
Weight Ascribed to Transaction Price (as a percent) | 0.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Minimum | 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% |
Weight Ascribed to Transaction Price (as a percent) | 0.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Maximum | 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% |
Weight Ascribed to Transaction Price (as a percent) | 90.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Maximum | Financial Services | ' |
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) | 100.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 50.00% |
Weight Ascribed to Transaction Price (as a percent) | 75.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Maximum | 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% |
Weight Ascribed to Transaction Price (as a percent) | 50.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Maximum | 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% |
Weight Ascribed to Transaction Price (as a percent) | 75.00% |
Level III | Market Comparables, Discounted Cash Flow, and Transaction Cost Method | Private Equity | Maximum | 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) | 50.00% |
Weight Ascribed to Discounted Cash Flow (as a percent) | 100.00% |
Weight Ascribed to Transaction Price (as a percent) | 100.00% |
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) | 10.00% |
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 | Minimum | 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) | 50.00% |
Level III | Market Comparables and Discounted Cash Flows | Private Equity | Maximum | Manufacturing | ' |
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) | 67.00% |
Level III | Market Comparables | Private Equity | Health Care | ' |
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 | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value / LTM EBITDA Multiple, excluded investment | 31.5 |
Enterprise Value / Forward EBITDA Multiple, excluded investment | 24.1 |
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 | 9 |
Enterprise Value/Forward EBITDA Multiple | 9 |
Control Premium (as a percent) | 1.00% |
Level III | Market Comparables | Private Equity | Weighted Average | Financial Services | ' |
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 | Weighted Average | Technology | ' |
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 | Weighted Average | Retail | ' |
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 | 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) | 3.00% |
Level III | Market Comparables | Private Equity | Weighted Average | Other | ' |
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) | 1.00% |
Level III | Market Comparables | Private Equity | Minimum | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value/LTM EBITDA Multiple | 8 |
Enterprise Value/Forward EBITDA Multiple | 8 |
Control Premium (as a percent) | 0.00% |
Level III | Market Comparables | Private Equity | Minimum | Financial Services | ' |
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 | Minimum | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value/LTM EBITDA Multiple | 6 |
Enterprise Value/Forward EBITDA Multiple | 5 |
Level III | Market Comparables | Private Equity | Minimum | 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 | Minimum | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value/LTM EBITDA Multiple | 6 |
Enterprise Value/Forward EBITDA Multiple | 7 |
Control Premium (as a percent) | 0.00% |
Level III | Market Comparables | Private Equity | Minimum | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value/LTM EBITDA Multiple | 7 |
Enterprise Value/Forward EBITDA Multiple | 7 |
Control Premium (as a percent) | 0.00% |
Level III | Market Comparables | Private Equity | Maximum | Health Care | ' |
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) | 10.00% |
Level III | Market Comparables | Private Equity | Maximum | Financial Services | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value/LTM EBITDA Multiple | 13 |
Enterprise Value/Forward EBITDA Multiple | 12 |
Level III | Market Comparables | Private Equity | Maximum | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value/LTM EBITDA Multiple | 16 |
Enterprise Value/Forward EBITDA Multiple | 14 |
Level III | Market Comparables | Private Equity | Maximum | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value/LTM EBITDA Multiple | 12 |
Enterprise Value/Forward EBITDA Multiple | 12 |
Portfolio company's investments as a percentage of total investments, at fair value | 0.50% |
Level III | Market Comparables | Private Equity | Maximum | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value/LTM EBITDA Multiple | 16 |
Enterprise Value/Forward EBITDA Multiple | 14 |
Control Premium (as a percent) | 20.00% |
Level III | Market Comparables | Private Equity | Maximum | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Enterprise Value/LTM EBITDA Multiple | 19 |
Enterprise Value/Forward EBITDA Multiple | 15 |
Control Premium (as a percent) | 20.00% |
Level III | Direct Income Capitalization And Discounted Cash Flow | Real Assets | Weighted Average | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weight Ascribed to Discounted Cash Flow (as a percent) | 72.00% |
Weight Ascribed to Direct Income Capitalization (as a percent) | 28.00% |
Level III | Direct Income Capitalization And Discounted Cash Flow | Real Assets | Minimum | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weight Ascribed to Discounted Cash Flow (as a percent) | 0.00% |
Weight Ascribed to Direct Income Capitalization (as a percent) | 0.00% |
Level III | Direct Income Capitalization And Discounted Cash Flow | Real Assets | Maximum | Real Estate | ' |
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) | 100.00% |
Level III | Direct income capitalization | Real Assets | Weighted Average | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Current Capitalization Rate (as a percent) | 7.00% |
Level III | Direct income capitalization | Real Assets | Minimum | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Current Capitalization Rate (as a percent) | 5.00% |
Level III | Direct income capitalization | Real Assets | Maximum | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Current Capitalization Rate (as a percent) | 9.00% |
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 | 10 |
Level III | Discounted Cash Flows | Private Equity | Weighted Average | Financial Services | ' |
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 | Weighted Average | Technology | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted Average Cost of Capital (as a percent) | 12.00% |
Enterprise Value/Exit Multiple LTM EBITDA | 9 |
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) | 10.00% |
Enterprise Value/Exit Multiple LTM EBITDA | 8 |
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) | 14.00% |
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) | 12.00% |
Enterprise Value/Exit Multiple LTM EBITDA | 9 |
Level III | Discounted Cash Flows | Private Equity | Minimum | Health Care | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted Average Cost of Capital (as a percent) | 7.00% |
Enterprise Value/Exit Multiple LTM EBITDA | 8 |
Level III | Discounted Cash Flows | Private Equity | Minimum | Financial Services | ' |
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 | Minimum | 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 | Minimum | Retail | ' |
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 | Minimum | Manufacturing | ' |
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 | 7 |
Level III | Discounted Cash Flows | Private Equity | Minimum | 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 | 7 |
Level III | Discounted Cash Flows | Private Equity | Maximum | 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 | Maximum | Financial Services | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted Average Cost of Capital (as a percent) | 12.00% |
Enterprise Value/Exit Multiple LTM EBITDA | 11 |
Level III | Discounted Cash Flows | Private Equity | Maximum | Technology | ' |
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 | Maximum | Retail | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted Average Cost of Capital (as a percent) | 23.00% |
Enterprise Value/Exit Multiple LTM EBITDA | 15 |
Level III | Discounted Cash Flows | Private Equity | Maximum | Manufacturing | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted Average Cost of Capital (as a percent) | 22.00% |
Enterprise Value/Exit Multiple LTM EBITDA | 11 |
Level III | Discounted Cash Flows | Private Equity | Maximum | Other | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Weighted Average Cost of Capital (as a percent) | 26.00% |
Enterprise Value/Exit Multiple LTM EBITDA | 12 |
Level III | Discounted Cash Flows | Real Assets | Weighted Average | Energy/Infrastructure | ' |
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 | Real Assets | Weighted Average | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Unlevered Discount Rate (as a percent) | 10.00% |
Level III | Discounted Cash Flows | Real Assets | Minimum | Energy/Infrastructure | ' |
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 | 8 |
Level III | Discounted Cash Flows | Real Assets | Minimum | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Unlevered Discount Rate (as a percent) | 7.00% |
Level III | Discounted Cash Flows | Real Assets | Maximum | Energy/Infrastructure | ' |
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 | 11 |
Level III | Discounted Cash Flows | Real Assets | Maximum | Real Estate | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Unlevered Discount Rate (as a percent) | 18.00% |
Level III | Yield analysis | Credit | Weighted Average | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Yield (as a percent) | 11.00% |
Net Leverage | 6 |
EBITDA Multiple | 9 |
Level III | Yield analysis | Credit | Minimum | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Yield (as a percent) | 4.00% |
Net Leverage | 1 |
EBITDA Multiple | 2 |
Level III | Yield analysis | Credit | Maximum | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Yield (as a percent) | 20.00% |
Net Leverage | 13 |
EBITDA Multiple | 13 |
Level III | Dealer quotes or third party fund managers | Credit | ' |
Level III investments and other financial instruments by valuation methodologies | ' |
Fair Value | 348,500,000 |
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, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT | ' | ' | ' | ' |
Net Income (Loss) Attributable to KKR & Co. L.P. | $89,938 | $204,740 | $478,194 | $413,313 |
Basic Net Income (Loss) Per Common Unit | ' | ' | ' | ' |
Weighted Average Common Units Outstanding - Basic (in units) | 419,961,455 | 282,148,802 | 364,127,956 | 270,484,224 |
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Basic (in dollars per unit) | $0.21 | $0.73 | $1.31 | $1.53 |
Diluted Net Income (Loss) Per Common Unit | ' | ' | ' | ' |
Weighted Average Common Units Outstanding - Basic (in units) | 419,961,455 | 282,148,802 | 364,127,956 | 270,484,224 |
Weighted Average Unvested Common Units (in units) | 26,862,703 | 25,986,389 | 27,917,101 | 25,696,846 |
Weighted Average Exchangeable Equity Securities (in units) | 5,195,584 | ' | 4,187,771 | ' |
Weighted Average Common Units Outstanding - Diluted (in units) | 452,019,742 | 308,135,191 | 396,232,828 | 296,181,070 |
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Diluted (in dollars per unit) | $0.20 | $0.66 | $1.21 | $1.40 |
Weighted Average KKR Holdings Units Outstanding (in units) | 383,937,941 | 407,646,472 | 391,269,962 | 417,990,571 |
OTHER_ASSETS_AND_ACCOUNTS_PAYA2
OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Other assets | ' | ' | ' | ' | ' |
Oil & Gas Assets, net | $645,474,000 | ' | $645,474,000 | ' | $187,448,000 |
Due from Broker | 510,727,000 | ' | 510,727,000 | ' | 720,245,000 |
Unsettled Investment Sales | 221,856,000 | ' | 221,856,000 | ' | 85,097,000 |
Interest, Dividend and Notes Receivable | 589,321,000 | ' | 589,321,000 | ' | 380,099,000 |
Intangible Assets, net | 218,139,000 | ' | 218,139,000 | ' | 177,545,000 |
Deferred Tax Assets, net | 237,354,000 | ' | 237,354,000 | ' | 165,699,000 |
Goodwill | 89,000,000 | ' | 89,000,000 | ' | 89,000,000 |
Fixed Assets, net | 76,606,000 | ' | 76,606,000 | ' | 80,565,000 |
Receivables | 67,571,000 | ' | 67,571,000 | ' | 19,455,000 |
Foreign Exchange Contracts and Options | 217,768,000 | ' | 217,768,000 | ' | 89,090,000 |
Deferred Financing Costs | 33,192,000 | ' | 33,192,000 | ' | 22,773,000 |
Prepaid Taxes | 10,958,000 | ' | 10,958,000 | ' | 26,901,000 |
Prepaid Expenses | 10,395,000 | ' | 10,395,000 | ' | 9,846,000 |
Other | 49,755,000 | ' | 49,755,000 | ' | 40,867,000 |
Total | 2,978,116,000 | ' | 2,978,116,000 | ' | 2,094,630,000 |
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% | ' | ' |
Accumulated depreciation and amortization | 120,034,000 | ' | 120,034,000 | ' | 100,724,000 |
Depreciation and amortization expense | 3,852,000 | 3,619,000 | 12,054,000 | 11,042,000 | ' |
Accounts Payable, Accrued Expenses and Other Liabilities | ' | ' | ' | ' | ' |
Amounts Payable to Carry Pool | 1,083,031,000 | ' | 1,083,031,000 | ' | 1,062,643,000 |
Unsettled Investment Purchases | 1,047,146,000 | ' | 1,047,146,000 | ' | 260,164,000 |
Securities Sold Short | 836,657,000 | ' | 836,657,000 | ' | 676,144,000 |
Foreign Exchange Contracts and Options | 131,628,000 | ' | 131,628,000 | ' | 414,782,000 |
Accounts Payable and Accrued Expenses | 183,427,000 | ' | 183,427,000 | ' | 165,092,000 |
Contingent Consideration Obligation | 38,600,000 | ' | 38,600,000 | ' | 122,800,000 |
Accrued Compensation and Benefits | 184,602,000 | ' | 184,602,000 | ' | 21,531,000 |
Interest Payable | 42,096,000 | ' | 42,096,000 | ' | 23,700,000 |
Due to Broker | 81,854,000 | ' | 81,854,000 | ' | 28,669,000 |
Deferred Rent and Income | 28,411,000 | ' | 28,411,000 | ' | 28,029,000 |
Redemptions Payable | ' | ' | ' | ' | 13,618,000 |
Taxes Payable | 7,083,000 | ' | 7,083,000 | ' | 5,742,000 |
Other Liabilities | 114,602,000 | ' | 114,602,000 | ' | 17,012,000 |
Total | 3,779,137,000 | ' | 3,779,137,000 | ' | 2,839,926,000 |
Securities sold, not yet purchased, cost basis | 840,022,000 | ' | 840,022,000 | ' | 650,026,000 |
Equity Issued in Connection With Contingent Payment Obligation | ' | ' | 84,051,000 | ' | ' |
Prisma Capital Partners LP and affiliates (Prisma) | ' | ' | ' | ' | ' |
Accounts Payable, Accrued Expenses and Other Liabilities | ' | ' | ' | ' | ' |
Settlement of contingent consideration obligation | 123,600,000 | ' | ' | ' | ' |
Equity Issued in Connection With Contingent Payment Obligation | $84,100,000 | ' | ' | ' | ' |
VARIABLE_INTEREST_ENTITIES_Det
VARIABLE INTEREST ENTITIES (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Dec. 31, 2013 | |
Investments in Unconsolidated Investment Funds | ' | ' |
Maximum exposure to loss relating to non-consolidated VIEs | ' | ' |
Investments | $327,500,000 | ' |
Investments in Unconsolidated CLO Vehicles | ' | ' |
VARIABLE INTEREST ENTITIES | ' | ' |
Combined assets under management | 3,000,000,000 | ' |
Maximum exposure to loss as a result of investments in the residual interests | 2,200,000 | ' |
Maximum exposure to loss relating to non-consolidated VIEs | ' | ' |
Investments | 329,653,000 | 209,525,000 |
Due from Affiliates, net | 2,338,000 | 5,105,000 |
Maximum Exposure to Loss | $331,991,000 | $214,630,000 |
DEBT_OBLIGATIONS_Details
DEBT OBLIGATIONS (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | 29-May-14 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Oct. 22, 2014 | Oct. 22, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Oct. 22, 2014 | Sep. 30, 2014 |
2020 Senior Notes | 2020 Senior Notes | 2043 Senior Notes | 2043 Senior Notes | 2041 Senior Notes | 2041 Senior Notes | 2042 Senior Notes | 2042 Senior Notes | 2044 Senior Notes | 2044 Senior Notes | Junior Subordinated Notes | Junior Subordinated Notes | Revolving Credit Facilities | Revolving Credit Facilities | Investment Financing Facilities | Investment Financing Facilities | Debt Obligations of Consolidated CLOs | Debt Obligations of Consolidated CLOs | Debt Obligations of Consolidated CLOs | Debt Obligations of Consolidated CLOs | Debt Obligations of Consolidated CLOs | Corporate Credit Agreement | Corporate Credit Agreement | Corporate Credit Agreement | Corporate Credit Agreement | Corporate Credit Agreement | Corporate Credit Agreement | |||
KFN | KFN | Level III | Senior Secured Notes | Senior Secured Notes | Subordinated Notes | Subordinated Notes | Subsequent event | Subsequent event | London Interbank Offered Rate (LIBOR) [Member] | London Interbank Offered Rate (LIBOR) [Member] | London Interbank Offered Rate (LIBOR) [Member] | Base Rate [Member] | |||||||||||||||||
KFN | Level III | Level III | Subsequent event | Minimum | Maximum | Subsequent event | |||||||||||||||||||||||
Subsequent event | Subsequent event | ||||||||||||||||||||||||||||
Debt obligations | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Aggregate principal amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1,000,000,000 | ' | ' | ' | ' |
Additions to maximum borrowing capacity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 250,000,000 | ' | ' | ' | ' | ' |
Optional expansion, maximum borrowing capacity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,250,000,000 | ' | ' | ' | ' | ' |
Term of revolving credit agreement | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '5 years | ' | ' | ' | ' | ' |
Variable interest rate base | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 'LIBOR | ' | ' | 'Alternate Base Rate |
Available | 2,782,237,000 | 1,781,231,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,250,000,000 | 1,250,000,000 | 1,532,237,000 | 531,231,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Carrying Value | 10,306,770,000 | 1,908,606,000 | 498,752,000 | 498,596,000 | 494,596,000 | 494,454,000 | 291,205,000 | ' | 123,700,000 | ' | 493,156,000 | ' | 246,484,000 | ' | ' | ' | 930,880,000 | 915,556,000 | 7,227,997,000 | ' | 6,939,451,000 | ' | 288,546,000 | ' | ' | ' | ' | ' | ' |
Fair value | 10,461,397,000 | 1,944,686,000 | 583,050,000 | 560,930,000 | 543,395,000 | 468,200,000 | 289,843,000 | ' | 122,728,000 | ' | 520,110,000 | ' | 243,394,000 | ' | ' | ' | 930,880,000 | 915,556,000 | 7,227,997,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Principal amount | ' | ' | 500,000,000 | 500,000,000 | 500,000,000 | 500,000,000 | ' | 259 | ' | 115,000,000 | 500,000,000 | 500,000,000 | ' | 284,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate (as a percent) | ' | ' | 6.38% | 6.38% | 5.50% | 5.50% | ' | 8.38% | ' | 7.50% | 5.13% | 5.13% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average interest rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5.40% | ' | ' | 2.91% | 3.09% | ' | 1.80% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average maturity period | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '22 years | ' | ' | '2 years 6 months | '2 years 3 months 18 days | ' | '8 years 4 months 24 days | ' | '8 years 7 months 6 days | ' | ' | ' | ' | ' | ' | ' |
Percentage of par value at which debt was issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 98.61% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
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% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair value of consolidated CLO assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $9,600,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage points added to the reference rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.69% | 1.20% | ' |
INCOME_TAXES_Details
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
INCOME TAXES | ' | ' | ' | ' |
Effective income tax rate (as a percent) | 3.25% | 0.35% | 1.15% | 0.55% |
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, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | $83,950 | $85,215 | $254,435 | $247,183 |
Equity Incentive Plan Units | ' | ' | ' | ' |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | 42,090 | 31,227 | 122,320 | 84,581 |
Principal's equity based awards | ' | ' | ' | ' |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | 9,981 | 33,740 | 27,770 | 85,309 |
Restricted Equity Units | ' | ' | ' | ' |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | 243 | 765 | 749 | 3,173 |
Other Exchangeable Securities | ' | ' | ' | ' |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | 7,249 | ' | 17,192 | ' |
Discretionary Compensation | ' | ' | ' | ' |
Expense associated with equity based compensation | ' | ' | ' | ' |
Equity based expenses | $24,387 | $19,483 | $86,404 | $74,120 |
EQUITY_BASED_COMPENSATION_Deta1
EQUITY BASED COMPENSATION (Details 2) (USD $) | 9 Months Ended |
In Millions, except Share data, unless otherwise specified | Sep. 30, 2014 |
item | |
Equity Incentive Plan Units | ' |
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) | 6.00% |
Estimated unrecognized equity-based payment expense | $204.10 |
Units | ' |
Balance at the beginning of the period (in units) | 22,942,987 |
Granted (in units) | 8,956,193 |
Vested (in units) | -4,645,712 |
Forfeited (in units) | -1,180,585 |
Balance at the end of the period (in units) | 26,072,883 |
Weighted Average Grant Date Fair Value | ' |
Balance at the beginning of the period (in dollars per unit) | $10.05 |
Granted (in dollars per unit) | $19.07 |
Vested (in dollars per unit) | $11.67 |
Forfeited (in dollars per unit) | $11.27 |
Balance at the end of the period (in dollars per unit) | $12.80 |
Weighted average remaining vesting period over which unvested units are expected to vest | '1 year 1 month 6 days |
Total awards issuable as a percentage of diluted common units outstanding | 15.00% |
Number of common units granted to date (in units) | 43,930,951 |
Minimum retained ownership required to continuously hold common unit equivalents to as percentage of cumulatively vested interests | 15.00% |
Equity Incentive Plan Units | Remainder of 2014 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 30.8 |
Equity Incentive Plan Units | 2015 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 102.9 |
Equity Incentive Plan Units | 2016 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 55.7 |
Equity Incentive Plan Units | 2017 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 11.9 |
Equity Incentive Plan Units | 2018 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 2.8 |
Equity Incentive Plan Units | Minimum | ' |
Equity Based Payments | ' |
Vesting period | '3 years |
Discount rate (as a percent) | 8.00% |
Equity Incentive Plan Units | Maximum | ' |
Equity Based Payments | ' |
Vesting period | '5 years |
Discount rate (as a percent) | 57.00% |
Principal's equity based awards | ' |
Units | ' |
Balance at the end of the period (in units) | 29,485,299 |
Restricted Equity Units | ' |
Units | ' |
Balance at the end of the period (in units) | 372,444 |
Other Exchangeable Securities | ' |
Equity Based Payments | ' |
Common units conversion basis | 1 |
Vesting period | '3 years |
Maximum forfeiture rate assumed (as a percent) | 6.00% |
Estimated unrecognized equity-based payment expense | 26.4 |
Units | ' |
Granted (in units) | 2,545,602 |
Forfeited (in units) | -1,654 |
Balance at the end of the period (in units) | 2,543,948 |
Weighted Average Grant Date Fair Value | ' |
Granted (in dollars per unit) | $19.67 |
Forfeited (in dollars per unit) | $19.67 |
Balance at the end of the period (in dollars per unit) | $19.67 |
Weighted average remaining vesting period over which unvested units are expected to vest | '1 year |
Other Exchangeable Securities | Remainder of 2014 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 3.4 |
Other Exchangeable Securities | 2015 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 13.7 |
Other Exchangeable Securities | 2016 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 9.3 |
Other Exchangeable Securities | Minimum | ' |
Equity Based Payments | ' |
Discount rate (as a percent) | 8.00% |
Other Exchangeable Securities | Maximum | ' |
Equity Based Payments | ' |
Discount rate (as a percent) | 57.00% |
KKR Holdings L.P. | Principal's equity based awards | ' |
Equity Based Payments | ' |
Common units conversion basis | 1 |
Ownership percentage in KKR Group Partnership Units | 47.00% |
Number of common units owned in KKR Group Partnership Units (in units) | 382,297,599 |
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) | 34,691,990 |
Maximum forfeiture rate assumed (as a percent) | 6.00% |
Estimated unrecognized equity-based payment expense | 11.9 |
Units | ' |
Balance at the beginning of the period (in units) | 32,801,131 |
Granted (in units) | 122,995 |
Vested (in units) | -1,146,755 |
Forfeited (in units) | -2,292,072 |
Balance at the end of the period (in units) | 29,485,299 |
Weighted Average Grant Date Fair Value | ' |
Balance at the beginning of the period (in dollars per unit) | $7.13 |
Granted (in dollars per unit) | $19.24 |
Vested (in dollars per unit) | $10.76 |
Forfeited (in dollars per unit) | $7.05 |
Balance at the end of the period (in dollars per unit) | $7.05 |
Weighted average remaining vesting period over which unvested units are expected to vest | '2 months 12 days |
KKR Holdings L.P. | Principal's equity based awards | Remainder of 2014 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 2.7 |
KKR Holdings L.P. | Principal's equity based awards | 2015 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 7.2 |
KKR Holdings L.P. | Principal's equity based awards | 2016 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 1.8 |
KKR Holdings L.P. | Principal's equity based awards | 2017 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 0.2 |
KKR Holdings L.P. | Principal's 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) | 8.00% |
KKR Holdings L.P. | Principal's 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) | 57.00% |
KKR Holdings L.P. | Restricted Equity Units | ' |
Equity Based Payments | ' |
Maximum forfeiture rate assumed (as a percent) | 6.00% |
Estimated unrecognized equity-based payment expense | 0.3 |
Units | ' |
Balance at the beginning of the period (in units) | 556,205 |
Vested (in units) | -142,510 |
Forfeited (in units) | -41,251 |
Balance at the end of the period (in units) | 372,444 |
Weighted Average Grant Date Fair Value | ' |
Balance at the beginning of the period (in dollars per unit) | $12.19 |
Vested (in dollars per unit) | $14.18 |
Forfeited (in dollars per unit) | $10.67 |
Balance at the end of the period (in dollars per unit) | $11.60 |
Weighted average remaining vesting period over which unvested units are expected to vest | '2 months 12 days |
KKR Holdings L.P. | Restricted Equity Units | Remainder of 2014 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | 0.1 |
KKR Holdings L.P. | Restricted Equity Units | 2015 | ' |
Equity Based Payments | ' |
Estimated unrecognized equity-based payment expense | $0.20 |
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, 2014 | Dec. 31, 2013 |
Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 26,072,883 | 22,942,987 |
Principal's equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 29,485,299 | ' |
Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 372,444 | ' |
Other Exchangeable Securities | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 2,543,948 | ' |
October 1, 2014 | Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 5,813,779 | ' |
October 1, 2014 | Principal's equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 24,704,431 | ' |
October 1, 2014 | Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 235,953 | ' |
October 1, 2014 | Other Exchangeable Securities | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 847,976 | ' |
April 1, 2015 | Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 5,358,090 | ' |
April 1, 2015 | Principal's equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 1,166,055 | ' |
April 1, 2015 | Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 113,758 | ' |
October 1, 2015 | Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 4,980,195 | ' |
October 1, 2015 | Principal's equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 2,104,885 | ' |
October 1, 2015 | Restricted Equity Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 22,733 | ' |
October 1, 2015 | Other Exchangeable Securities | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 847,983 | ' |
April 1, 2016 | Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 3,294,669 | ' |
April 1, 2016 | Principal's equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 97,950 | ' |
October 1, 2016 | Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 3,779,864 | ' |
October 1, 2016 | Principal's equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 1,240,163 | ' |
October 1, 2016 | Other Exchangeable Securities | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 847,989 | ' |
April 1, 2017 | Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 1,254,938 | ' |
April 1, 2017 | Principal's equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 45,522 | ' |
October 1, 2017 | Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 731,241 | ' |
October 1, 2017 | Principal's equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 111,293 | ' |
April 1, 2018 | Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 8,820 | ' |
April 1, 2018 | Principal's equity based awards | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 15,000 | ' |
October 1, 2018 | Equity Incentive Plan Units | ' | ' |
Remaining vesting tranches for principals | ' | ' |
Principal Units (in units) | 851,287 | ' |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Related Party Transactions | ' | ' |
Due from Affiliates | $130,999 | $143,908 |
Due to Affiliates | 133,123 | 93,851 |
Related Entities | ' | ' |
Related Party Transactions | ' | ' |
Due from Affiliates | 61,432 | 98,793 |
Due to Affiliates | 9,880 | 4,054 |
Portfolio Companies | ' | ' |
Related Party Transactions | ' | ' |
Due from Affiliates | 69,567 | 45,115 |
KKR Holdings L.P. | ' | ' |
Related Party Transactions | ' | ' |
Due to Affiliates | $123,243 | $89,797 |
SEGMENT_REPORTING_Details
SEGMENT REPORTING (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 |
item | |||||
SEGMENT REPORTING | ' | ' | ' | ' | ' |
Number of reportable segments of the entity | ' | ' | 3 | ' | ' |
Management, Monitoring and Transaction Fees, Net | ' | ' | ' | ' | ' |
Management, Monitoring and Transaction Fees, Net | $344,768 | $220,028 | $897,064 | $537,644 | ' |
Performance Income | ' | ' | ' | ' | ' |
Incentive Fees | 7,295 | 438 | 35,860 | 34,691 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Total Investment Income (Loss) | 1,060,953 | 2,441,265 | 5,651,693 | 5,248,326 | ' |
Compensation and Benefits | ' | ' | ' | ' | ' |
Total Compensation and Benefits | 320,423 | 329,182 | 1,010,191 | 860,905 | ' |
Occupancy and related charges | 15,501 | 17,637 | 46,968 | 46,036 | ' |
Total Expenses | 504,410 | 455,495 | 1,562,906 | 1,186,847 | ' |
Total Assets | 66,332,985 | ' | 66,332,985 | ' | 51,427,201 |
Reportable segments | ' | ' | ' | ' | ' |
Management, Monitoring and Transaction Fees, Net | ' | ' | ' | ' | ' |
Management fees | 173,912 | 173,245 | 547,979 | 490,384 | ' |
Monitoring fees | 30,449 | 33,010 | 96,422 | 93,985 | ' |
Transaction fees | 158,564 | 129,127 | 406,385 | 232,211 | ' |
Fee credits | -61,811 | -61,782 | -196,309 | -119,598 | ' |
Management, Monitoring and Transaction Fees, Net | 301,114 | 273,600 | 854,477 | 696,982 | ' |
Performance Income | ' | ' | ' | ' | ' |
Realized Carried Interest | 246,026 | 81,532 | 995,064 | 439,527 | ' |
Incentive Fees | 8,009 | 1,225 | 36,506 | 35,664 | ' |
Unrealized Carried Interest | 56,192 | 270,237 | 64,013 | 385,466 | ' |
Total Performance Income | 310,227 | 352,994 | 1,095,583 | 860,657 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Net Realized Gains (losses) | 162,795 | 103,545 | 566,184 | 404,751 | ' |
Net Unrealized Gains (losses) | -37,833 | 200,706 | -72,009 | 228,437 | ' |
Total Realized and Unrealized | 124,962 | 304,251 | 494,175 | 633,188 | ' |
Net Interest and Dividends | 82,254 | -779 | 153,850 | 1,532 | ' |
Total Investment Income (Loss) | 207,216 | 303,472 | 648,025 | 634,720 | ' |
Total Segment Revenues | 818,557 | 930,066 | 2,598,085 | 2,192,359 | ' |
Compensation and Benefits | ' | ' | ' | ' | ' |
Cash Compensation and Benefits | 108,790 | 92,229 | 309,149 | 247,827 | ' |
Realized Allocation to Carry Pool | 98,411 | 32,613 | 398,026 | 175,811 | ' |
Unrealized Allocation to Carry Pool | 22,696 | 112,899 | 27,951 | 165,741 | ' |
Total Compensation and Benefits | 229,897 | 237,741 | 735,126 | 589,379 | ' |
Occupancy and related charges | 14,458 | 15,674 | 43,404 | 42,063 | ' |
Other operating expenses | 60,272 | 60,884 | 167,384 | 150,541 | ' |
Total Expenses | 304,627 | 314,299 | 945,914 | 781,983 | ' |
Income (Loss) attributable to noncontrolling interests | 5,189 | 2,020 | 11,597 | 4,444 | ' |
Economic Net Income (Loss) | 508,741 | 613,747 | 1,640,574 | 1,405,932 | ' |
Total Assets | 13,515,855 | 8,515,044 | 13,515,855 | 8,515,044 | ' |
Fee Credits as a percentage of monitoring and transaction fees net of fund-related expenses | 80.00% | 80.00% | 80.00% | 80.00% | ' |
Equity ownership in the business (as a percent) | 1.00% | 1.00% | 1.00% | 1.00% | ' |
Reportable segments | Private Markets | ' | ' | ' | ' | ' |
Management, Monitoring and Transaction Fees, Net | ' | ' | ' | ' | ' |
Management fees | 107,443 | 119,410 | 342,024 | 340,715 | ' |
Monitoring fees | 30,449 | 33,010 | 96,422 | 93,985 | ' |
Transaction fees | 67,772 | 54,968 | 206,132 | 96,611 | ' |
Fee credits | -58,810 | -46,597 | -182,626 | -97,153 | ' |
Management, Monitoring and Transaction Fees, Net | 146,854 | 160,791 | 461,952 | 434,158 | ' |
Performance Income | ' | ' | ' | ' | ' |
Realized Carried Interest | 236,126 | 81,532 | 960,414 | 439,527 | ' |
Unrealized Carried Interest | 53,776 | 256,215 | 35,988 | 340,254 | ' |
Total Performance Income | 289,902 | 337,747 | 996,402 | 779,781 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Net Realized Gains (losses) | 165,047 | 104,061 | 549,137 | 401,750 | ' |
Net Unrealized Gains (losses) | 8,293 | 194,270 | -43,763 | 210,154 | ' |
Total Realized and Unrealized | 173,340 | 298,331 | 505,374 | 611,904 | ' |
Net Interest and Dividends | 21,463 | -8,344 | 41,415 | -18,410 | ' |
Total Investment Income (Loss) | 194,803 | 289,987 | 546,789 | 593,494 | ' |
Total Segment Revenues | 631,559 | 788,525 | 2,005,143 | 1,807,433 | ' |
Compensation and Benefits | ' | ' | ' | ' | ' |
Cash Compensation and Benefits | 59,991 | 65,400 | 183,411 | 164,917 | ' |
Realized Allocation to Carry Pool | 94,451 | 32,613 | 384,166 | 175,811 | ' |
Unrealized Allocation to Carry Pool | 21,729 | 107,290 | 16,742 | 147,656 | ' |
Total Compensation and Benefits | 176,171 | 205,303 | 584,319 | 488,384 | ' |
Occupancy and related charges | 11,460 | 13,367 | 34,784 | 35,935 | ' |
Other operating expenses | 44,619 | 37,586 | 124,267 | 105,516 | ' |
Total Expenses | 232,250 | 256,256 | 743,370 | 629,835 | ' |
Income (Loss) attributable to noncontrolling interests | 342 | 433 | 1,192 | 1,242 | ' |
Economic Net Income (Loss) | 398,967 | 531,836 | 1,260,581 | 1,176,356 | ' |
Total Assets | 7,419,105 | 6,164,029 | 7,419,105 | 6,164,029 | ' |
Reportable segments | Public Markets | ' | ' | ' | ' | ' |
Management, Monitoring and Transaction Fees, Net | ' | ' | ' | ' | ' |
Management fees | 66,469 | 53,835 | 205,955 | 149,669 | ' |
Transaction fees | 3,262 | 20,534 | 16,634 | 30,883 | ' |
Fee credits | -3,001 | -15,185 | -13,683 | -22,445 | ' |
Management, Monitoring and Transaction Fees, Net | 66,730 | 59,184 | 208,906 | 158,107 | ' |
Performance Income | ' | ' | ' | ' | ' |
Realized Carried Interest | 9,900 | ' | 34,650 | ' | ' |
Incentive Fees | 8,009 | 1,225 | 36,506 | 35,664 | ' |
Unrealized Carried Interest | 2,416 | 14,022 | 28,025 | 45,212 | ' |
Total Performance Income | 20,325 | 15,247 | 99,181 | 80,876 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Net Realized Gains (losses) | -630 | 979 | 19,133 | 6,128 | ' |
Net Unrealized Gains (losses) | -46,118 | 4,653 | -27,553 | 13,981 | ' |
Total Realized and Unrealized | -46,748 | 5,632 | -8,420 | 20,109 | ' |
Net Interest and Dividends | 53,335 | 3,481 | 96,734 | 10,229 | ' |
Total Investment Income (Loss) | 6,587 | 9,113 | 88,314 | 30,338 | ' |
Total Segment Revenues | 93,642 | 83,544 | 396,401 | 269,321 | ' |
Compensation and Benefits | ' | ' | ' | ' | ' |
Cash Compensation and Benefits | 26,787 | 18,606 | 80,436 | 60,296 | ' |
Realized Allocation to Carry Pool | 3,960 | ' | 13,860 | ' | ' |
Unrealized Allocation to Carry Pool | 967 | 5,609 | 11,209 | 18,085 | ' |
Total Compensation and Benefits | 31,714 | 24,215 | 105,505 | 78,381 | ' |
Occupancy and related charges | 2,518 | 1,906 | 7,234 | 5,063 | ' |
Other operating expenses | 10,929 | 19,670 | 30,910 | 36,643 | ' |
Total Expenses | 45,161 | 45,791 | 143,649 | 120,087 | ' |
Income (Loss) attributable to noncontrolling interests | 335 | 202 | 1,242 | 935 | ' |
Economic Net Income (Loss) | 48,146 | 37,551 | 251,510 | 148,299 | ' |
Total Assets | 4,333,710 | 1,149,196 | 4,333,710 | 1,149,196 | ' |
Reportable segments | Capital Markets and Other | ' | ' | ' | ' | ' |
Management, Monitoring and Transaction Fees, Net | ' | ' | ' | ' | ' |
Transaction fees | 87,530 | 53,625 | 183,619 | 104,717 | ' |
Management, Monitoring and Transaction Fees, Net | 87,530 | 53,625 | 183,619 | 104,717 | ' |
Investment income (loss) | ' | ' | ' | ' | ' |
Net Realized Gains (losses) | -1,622 | -1,495 | -2,086 | -3,127 | ' |
Net Unrealized Gains (losses) | -8 | 1,783 | -693 | 4,302 | ' |
Total Realized and Unrealized | -1,630 | 288 | -2,779 | 1,175 | ' |
Net Interest and Dividends | 7,456 | 4,084 | 15,701 | 9,713 | ' |
Total Investment Income (Loss) | 5,826 | 4,372 | 12,922 | 10,888 | ' |
Total Segment Revenues | 93,356 | 57,997 | 196,541 | 115,605 | ' |
Compensation and Benefits | ' | ' | ' | ' | ' |
Cash Compensation and Benefits | 22,012 | 8,223 | 45,302 | 22,614 | ' |
Total Compensation and Benefits | 22,012 | 8,223 | 45,302 | 22,614 | ' |
Occupancy and related charges | 480 | 401 | 1,386 | 1,065 | ' |
Other operating expenses | 4,724 | 3,628 | 12,207 | 8,382 | ' |
Total Expenses | 27,216 | 12,252 | 58,895 | 32,061 | ' |
Income (Loss) attributable to noncontrolling interests | 4,512 | 1,385 | 9,163 | 2,267 | ' |
Economic Net Income (Loss) | 61,628 | 44,360 | 128,483 | 81,277 | ' |
Total Assets | $1,763,040 | $1,201,819 | $1,763,040 | $1,201,819 | ' |
SEGMENT_REPORTING_Details_2
SEGMENT REPORTING (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Reconciliation of Fee income to most directly comparable financial measures | ' | ' | ' | ' |
Fees | $344,768 | $220,028 | $897,064 | $537,644 |
Total investment income (loss) | -1,060,953 | -2,441,265 | -5,651,693 | -5,248,326 |
Revenue earned by oil & gas producing entities | 69,380 | 9,575 | 143,369 | 9,575 |
Reportable segments | ' | ' | ' | ' |
Reconciliation of Fee income to most directly comparable financial measures | ' | ' | ' | ' |
Revenues | 818,557 | 930,066 | 2,598,085 | 2,192,359 |
Fees | 301,114 | 273,600 | 854,477 | 696,982 |
Net realized and unrealized carried interest and incentive fees | -310,227 | -352,994 | -1,095,583 | -860,657 |
Total investment income (loss) | -207,216 | -303,472 | -648,025 | -634,720 |
Adjustments | ' | ' | ' | ' |
Reconciliation of Fee income to most directly comparable financial measures | ' | ' | ' | ' |
Management fees relating to consolidated funds and other entities | -121,008 | -127,458 | -386,207 | -357,607 |
Fee credits relating to consolidated funds | 58,580 | 48,641 | 184,039 | 103,070 |
Net realized and unrealized carried interest and incentive fees | -302,218 | -351,769 | -1,059,077 | -824,993 |
Total investment income (loss) | -207,216 | -303,472 | -648,025 | -634,720 |
Revenue earned by oil & gas producing entities | 69,380 | 9,575 | 143,369 | 9,575 |
Reimbursable expenses | 21,040 | 10,145 | 46,480 | 25,586 |
Other | $7,653 | $4,300 | $18,400 | $24,374 |
SEGMENT_REPORTING_Details_3
SEGMENT REPORTING (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Reconciliation of expenses to most directly comparable financial measures | ' | ' | ' | ' |
Total Expenses | $504,410 | $455,495 | $1,562,906 | $1,186,847 |
Reportable segments | ' | ' | ' | ' |
Reconciliation of expenses to most directly comparable financial measures | ' | ' | ' | ' |
Total Expenses | 304,627 | 314,299 | 945,914 | 781,983 |
Adjustments | ' | ' | ' | ' |
Reconciliation of expenses to most directly comparable financial measures | ' | ' | ' | ' |
Equity-based compensation | 83,950 | 85,215 | 254,435 | 247,183 |
Reimbursable expenses | 34,355 | 15,516 | 66,847 | 35,029 |
Operating expenses relating to consolidated funds and other entities | 28,219 | 16,061 | 81,536 | 52,874 |
Expenses incurred by oil & gas producing entities | 40,234 | 6,951 | 90,405 | 6,951 |
Acquisition, contingent payment, litigation and other non-recurring costs | 2,396 | 6,500 | 87,893 | 35,922 |
Other | $10,629 | $10,953 | $35,876 | $26,905 |
SEGMENT_REPORTING_Details_4
SEGMENT REPORTING (Details 4) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Reconciliation of Fee income to most directly comparable financial measures | ' | ' | ' | ' |
Income Taxes | ($29,267) | ($7,644) | ($57,145) | ($25,525) |
Equity based compensation | ' | ' | -254,435 | -247,183 |
Net Income (Loss) Attributable to KKR & Co. L.P. | 89,938 | 204,740 | 478,194 | 413,313 |
Net income (loss) attributable to noncontrolling interests and appropriated capital | 784,568 | 1,984,245 | 4,449,146 | 4,134,293 |
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests | -2,462 | 9,169 | 1,366 | 25,992 |
Income Taxes | 29,267 | 7,644 | 57,145 | 25,525 |
Income (Loss) Before Taxes | 901,311 | 2,205,798 | 4,985,851 | 4,599,123 |
Reportable segments | ' | ' | ' | ' |
Reconciliation of Fee income to most directly comparable financial measures | ' | ' | ' | ' |
Economic net income | 508,741 | 613,747 | 1,640,574 | 1,405,932 |
Adjustments | ' | ' | ' | ' |
Reconciliation of Fee income to most directly comparable financial measures | ' | ' | ' | ' |
Income Taxes | -29,267 | -7,644 | -57,145 | -25,525 |
Amortization of intangibles and other, net | -204,676 | -15,979 | -262,300 | -57,524 |
Equity based compensation | -83,950 | -85,215 | -254,435 | -247,183 |
Net income (loss) attributable to noncontrolling interests held by KKR Holdings | -100,910 | -300,169 | -588,500 | -662,387 |
Net Income (Loss) Attributable to KKR & Co. L.P. | 89,938 | 204,740 | 478,194 | 413,313 |
Net income (loss) attributable to noncontrolling interests and appropriated capital | 784,568 | 1,984,245 | 4,449,146 | 4,134,293 |
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests | -2,462 | 9,169 | 1,366 | 25,992 |
Income Taxes | $29,267 | $7,644 | $57,145 | $25,525 |
ACQUISITIONS_Details
ACQUISITIONS (Details) (USD $) | 3 Months Ended | 9 Months Ended | 0 Months Ended | 3 Months Ended | 9 Months Ended | 0 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Apr. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Apr. 30, 2014 | Feb. 19, 2014 | Feb. 19, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | |
KFN | KFN | KFN | KFN | KFN | Avoca Capital and its affiliates | Avoca Capital and its affiliates | Avoca Capital and its affiliates | Avoca Capital and its affiliates | KKR, KFN and Avoca | KKR, KFN and Avoca | ||||||
KKR & Co. L.P. | KKR & Co. L.P. | KKR & Co. L.P. | KKR & Co. L.P. | KKR & Co. L.P. | ||||||||||||
Acquisitions | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount of permanent equity capital to support the continued growth of business | ' | ' | ' | ' | ' | ' | ' | ' | ' | $2,000,000,000 | ' | ' | ' | ' | ' | ' |
Consideration: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of KKR common units issued | ' | ' | ' | ' | ' | ' | 104,340,028 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
KKR common unit price | ' | ' | ' | ' | ' | ' | $22.71 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Estimated fair value of KKR common units issued | ' | ' | ' | ' | ' | 2,369,559,000 | ' | ' | ' | ' | 139,798,000 | ' | ' | ' | ' | ' |
Equity interests acquired (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | ' | ' | ' |
Assets under management | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 8,200,000,000 | ' | ' | ' | ' |
Initial cash consideration transferred | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 83,300,000 | ' | ' | ' | ' | ' |
Securities vested | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 56,500,000 | ' | ' | ' | ' | ' |
Shares vested | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,400,000 | ' | ' | ' | ' | ' |
Fair Value of Contingent Consideration | 38,600,000 | ' | 38,600,000 | ' | 122,800,000 | ' | ' | ' | ' | ' | ' | 0 | ' | ' | ' | ' |
Fair Value of Assets Acquired and Liabilities Assumed: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash and Cash Equivalents | ' | ' | ' | ' | ' | ' | 210,413,000 | ' | ' | ' | ' | 24,381,000 | ' | ' | ' | ' |
Cash and equivalents held at consolidated entities | ' | ' | ' | ' | ' | ' | 614,929,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Restricted cash and cash equivalents | ' | ' | ' | ' | ' | ' | 35,038,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Investments | ' | ' | ' | ' | ' | ' | 1,235,813,000 | ' | ' | ' | ' | 20,905,000 | ' | ' | ' | ' |
Investments of consolidated CLOs | ' | ' | ' | ' | ' | ' | 6,742,768,000 | ' | ' | ' | ' | 1,226,174,000 | ' | ' | ' | ' |
Other Assets | ' | ' | ' | ' | ' | ' | 642,721,000 | ' | ' | ' | ' | 7,370,000 | ' | ' | ' | ' |
Other assets of consolidated CLOs | ' | ' | ' | ' | ' | ' | 133,036,000 | ' | ' | ' | ' | 186,609,000 | ' | ' | ' | ' |
Intangible Assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 65,880,000 | ' | ' | ' | ' |
Total Assets | ' | ' | ' | ' | ' | ' | 9,614,718,000 | ' | ' | ' | ' | 1,531,319,000 | ' | ' | ' | ' |
Liabilities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 13,584,000 | ' | ' | ' | ' |
Debt obligations | ' | ' | ' | ' | ' | ' | 724,509,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt obligations of consolidated CLOs | ' | ' | ' | ' | ' | ' | 5,663,666,000 | ' | ' | ' | ' | 1,150,551,000 | ' | ' | ' | ' |
Accounts payable, accrued expenses and other liabilities | ' | ' | ' | ' | ' | ' | 118,427,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Other liabilities of consolidated CLOs | ' | ' | ' | ' | ' | ' | 344,660,000 | ' | ' | ' | ' | 140,308,000 | ' | ' | ' | ' |
Total Liabilities | ' | ' | ' | ' | ' | ' | 6,851,262,000 | ' | ' | ' | ' | 1,304,443,000 | ' | ' | ' | ' |
Noncontrolling interests | ' | ' | ' | ' | ' | ' | 378,983,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair Value of Net Assets Acquired | ' | ' | ' | ' | ' | ' | 2,384,473,000 | ' | ' | ' | ' | 226,876,000 | ' | ' | ' | ' |
Less: Fair value of subordinated notes of consolidated CLOs held by KKR prior to acquisition (a) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 74,029,000 | ' | ' | ' | ' |
Less: Fair value of consideration transferred | ' | ' | ' | ' | ' | 2,369,559,000 | ' | ' | ' | ' | 139,798,000 | ' | ' | ' | ' | ' |
Gain on acquisition | 298,259,000 | 2,230,401,000 | 4,242,289,000 | 4,598,755,000 | ' | 14,914,000 | ' | ' | ' | ' | 13,049,000 | ' | ' | ' | ' | ' |
Fees | ' | ' | ' | ' | ' | ' | ' | 17,900,000 | 49,800,000 | ' | ' | ' | 13,800,000 | 30,200,000 | ' | ' |
Net income (loss) attributable to KKR & Co. L.P. | ' | ' | ' | ' | ' | ' | ' | -34,900,000 | -16,100,000 | ' | ' | ' | 1,500,000 | -600,000 | ' | ' |
Acquisition-related costs | ' | ' | ' | ' | ' | 8,300,000 | ' | ' | ' | ' | ' | 4,400,000 | ' | ' | ' | ' |
Fees - Pro forma basis | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 939,453,000 | 608,227,000 |
Net income (loss) attributable to KKR & Co. L.P. - Pro forma basis | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $534,411,000 | $513,731,000 |
Net income (loss) attributable to KKR & Co. L.P. per common unit-basic (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1.30 | $1.37 |
Net income (loss) attributable to KKR & Co. L.P. per common unit-diluted (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1.21 | $1.27 |
GOODWILL_AND_INTANGIBLE_ASSETS2
GOODWILL AND INTANGIBLE ASSETS (Details) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Dec. 31, 2013 |
GOODWILL AND INTANGIBLE ASSETS | ' | ' |
Carrying value of goodwill | $89,000 | $89,000 |
Intangible Assets, Net consists of the following: | ' | ' |
Finite - Lived Intangible Assets | 284,766 | 218,886 |
Accumulated Amortization | -66,627 | -41,341 |
Intangible Assets, Net | 218,139 | ' |
Changes in Intangible Assets, Net consists of the following: | ' | ' |
Balance, Beginning of Year | 177,545 | ' |
Acquisitions | 65,880 | ' |
Amortization Expense | -20,101 | ' |
Foreign Exchange | 5,185 | ' |
Balance, End of Year | $218,139 | ' |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Sep. 30, 2014 |
In Millions, unless otherwise specified | |
Investment Commitments | ' |
Unfunded commitments to private equity and other investment vehicles | $862.10 |
Unfunded commitments of capital market business | 612.4 |
Contingent Repayment Guarantees | ' |
Private equity fund carried interest amount subject to clawback provision assuming liquidation at fair value | 0 |
Clawback obligation amount at zero value | 2,121.70 |
Percentage of net losses on investment required capital to be contributed by general partners | 20.00% |
Net loss sharing obligation at zero value | 284.2 |
Contingent repayment obligation of the general partners if private equity vehicles liquidated at fair value | 0 |
Clawback receivable maximum potential amount | 223.6 |
Clawback receivable | 191.4 |
Clawback obligations, amount due from noncontrolling interest holders | $0 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details 2) (USD $) | Sep. 30, 2014 |
In Millions, unless otherwise specified | item |
COMMITMENTS AND CONTINGENCIES | ' |
Minimum number of matters in which a loss is both probable and reasonably estimable | 1 |
Estimated aggregate amount of losses | $80 |
REGULATORY_CAPITAL_REQUIREMENT1
REGULATORY CAPITAL REQUIREMENTS (Details) (USD $) | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2014 |
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 | $80 |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (Subsequent event, USD $) | 0 Months Ended |
Oct. 23, 2014 | |
Subsequent event | ' |
Subsequent Events | ' |
Common unit distribution announced (in dollars per share) | $0.45 |