KKR & Co. Inc. (KKR) Earnings Call Transcript & Summary

Good morning, good afternoon, good evening. Welcome to KKR's 2021 Investor Day. My name is Craig Larson. I'm a partner, and I'm Head of Investor Relations. We're all thrilled with the level of interest we've had in this morning's event. Thank you, everybody, for your continued interest in KKR and for joining us. Now before we begin in earnest, it's my pleasure to review first our disclosure statement that's at the beginning of the presentation. Our presentations today will contain forward-looking statements, which do not guarantee future events or performance and actual results may differ materially. We will be referring to non-GAAP measures over the course of the morning that are reconciled to the most directly comparable GAAP figures that are in the presentation and are also on our website, and the presentation materials contain other important information. For the further discussion of some of the risks that could affect results, please refer to the Risk Factors sections in our 10-K as well as our other SEC filings for additional cautionary factors. We're really excited to be with you, even if only virtually. It's been fun preparing for this event because it's given us the opportunity to look back and reflect on the growth that we've seen across the firm. While at the same time, looking forward, we really believe we're as well positioned today as we've ever been. So in this vein, we thought we'd begin by looking back at our last Investor Day that was held in July 2018, review the key messages from that event and update you on our progress. So first, we spent a great deal of time in July 2018 focused on scaling and how well positioned we were for continued growth, and that has played out over the last 3 years. Our flagship funds and strategies have continued to scale. Younger platforms for us, like core and growth, have flourished. And 2020 was a record fundraising year for us with a lot more to come. We're nicely ahead of plan. C-corp conversion. We were the first in our industry to change our structure from a partnership to a corporation, and our 2018 Investor Day was only a week or so after that conversion had actually taken place. We felt the opportunities we saw from broadening our shareholder base comfortably outweighed the negative tax implications. Fast forward to today, the number of institutions that own KKR stock has doubled. And while we really think the strong fundamental performance is really what has driven our stock price as well as the significant outperformance you see on this page, we certainly think the conversion was an important catalyst in broadening the universe of investors that could consider KKR as a key equity holding. And looking forward, we continue to believe that we offer our shareholders a unique combination of growth and value. And finally, in July 2018, we provided a framework in order for our earnings and book value to double over a 5-year period. And on the right-hand side of the page, you see how we're tracking. Relative to the 8% framework figure, our fee-paying AUM has grown at a 14% CAGR organically. And in total, on a pro forma basis, including Global Atlantic, the current CAGR of our fee-paying AUM is 37%. Transitioning to investment performance across our key asset classes, gross performance has met or exceeded the numbers reviewed in July 2018. Most significantly, both from an AUM as well as a carried interest standpoint, are the numbers you see for private equity and growth equity. Performance here of 22% is well ahead of the 17.5% framework figure and several hundred basis points ahead of public indices. When you look at the annualized total returns for the S&P 500, MSCI World and Russell 2000 indices, those figures are 16%, 13% and 11%, respectively, performance really has been quite strong. So in terms of our event today, we're pursuing a much more streamlined approach relative to our previous investor days. Joe Bae and Scott Nuttall, our Co-Presidents, are going to begin with a strategic review across our businesses. We're pleased to have Allan Levine, Global Atlantic's Chairman and CEO, introduce all of you to Global Atlantic personally. And Rob Lewin, our CFO, is going to wrap up with our financials. And at the end of the presentations, all 5 of us are going to be available for a Q&A session with the equity research community. And in addition to this, if you have any questions, you would be interested in our review and during that Q&A session, please feel free to e-mail me directly. My e-mail is craig.larson, L-A-R-S-O-N, @kkr.com. And with that, it's my pleasure to turn things over to Scott Nuttall, our Co-President and Co-COO. Scott?

Thank you, Craig, and thanks, everybody, for joining us today. Joe and I thought we would start by taking you through the 4 main takeaways we hope you have at the end of today's session. The first of those is that, from our vantage point, scaling is happening faster than we expected. And as a result, our fee-related earnings opportunity is significant and it's highly visible. It's right in front of us. So the scaling has been occurring, and we see even more right in front of us today. And a little bit of background first. So we've scaled meaningfully since our last Investor Day, which was in July of 2018. You can see at that moment, we had about $176 billion of AUM. That scaled to $252 billion, or up 43%, before the Global Atlantic acquisition, which scales us more meaningfully. So you can see a 98% growth rate since July 2018 with GA. It's about $349 billion. And as a reminder, we are very fortunate. We are in an industry that is growing quickly. Alternative asset AUM has been growing at an 11% growth rate since 2004, as you can see on the slide. And if you look at the right-hand side, you can see we've been growing faster than the industry itself. So we have been actually growing at a 22% CAGR with Global Atlantic. But ex-GA, it's still been a 19% annual growth rate over this period of time. So we are growing faster than the fast-growing industry. And what that's translated into is very significant growth in our management fees. And on the slide, you can see, over the last 5 years, they've doubled from a bit over $700 million to a bit over $1.4 billion. So we've seen a 15% growth rate in our management fees over this period of time. And as you go from the left to the right, you can see they become more diversified across our different major platforms. So the growth has resulted in management fee profile growing as well. But what's critically important and a big takeaway here is that we have even more growth to come. And why is that? We have spent the last 10 to 15 years, we believe, building highly differentiated investment platforms. And as a reminder, our strategy is to only be in businesses where we believe we can be a top 3 player, either we want to be there now or we want a clear and credible path to get there. And most of our strategies, given their age, are not yet top 3, but we believe we have a path to make it happen. And we're much closer to that inflection point than we've ever been. And many of our businesses are actually experiencing that inflection right now. So let's talk about the businesses themselves. You can see 26 different investing businesses on this slide. And as you can tell from the aging, a number of these businesses have been started in the last 10 to 15 years or less. And so as we experienced our business at KKR, what we find is it takes 10-plus years to start to get to scale. And as you can see from the slide, we only have 6 of these 26 businesses that are over 10 years old. And that means we have a lot of growth ahead of us. And the great thing is, we believe we can grow in these markets and the markets themselves are growing. So take a look. This just gives you a sense for the market size across many of our businesses, where we are from an AUM standpoint and what our market share is. So take the top line, private equity, $4.7 trillion market. We're one of the largest players. We're already top 3 in this business. Our AUM only gives us a 4.2% market share. And you can see the rest of the slide as well, low single digits to mid-single digits market share. If you look at the whole slide, $14 trillion in market, our market share is somewhere between 2% and 2.5%. So a lot of opportunity for us to grow our market share in an absolute way and the market itself is growing very quickly. So as we grow market share in growing markets, the growth opportunity is immense. And we have many different ways to grow. There's the traditional way, Asia III, which was $9 billion to Asia IV, which we've just announced is $15 billion. We have that happening all across the firm. But the culture of the firm, the innovation of the firm, the connectedness of the enterprise has allowed us to create a lot of different adjacencies and a lot of new businesses out of observations that we see from existing businesses. Private equity is a great example. In our private equity business, we were seeing opportunities that had lower risk and a bit lower reward, but were really great companies. We didn't have a place to put them, so we created the core private equity business. Healthcare PE, we're seeing opportunities to invest in companies that were young and more growthful than the typical private equity investment. We didn't have a place to put it, so we created health care growth and so on. You can see this all across the enterprise, really facilitated by our culture. But the geographic expansion, too. Many of our businesses were started in the U.S. and then taken them to Europe. We're now taking the rest of the businesses to Europe and to Asia, critically. Infrastructure, real estate, private credit and otherwise, we're basically taking our businesses global on the back of the incredible franchise that we have on the ground in Asia. Our platforms have been able to expand dramatically. Real estate is a good example. We'll get into this later. We started that business with U.S. real estate, opportunistic equity only. That business has now spun 9 different real estate strategies. It's global, debt, equity, core plus and more coming across a lot of different types of constructs for investors. And it's not just investment platforms. It's also distribution. We started with just a U.S. institutional sales force. It's now gone global. We built out institutional globally, insurance and retail capabilities. And we become much more solutions-oriented, creating bespoke product for investors all around the world. And Capital Markets the same. That business started in 2007 as private equity syndication. It's now global, multiple strategies, debt and equity and take care and third parties now, which we'll talk about. So we have a lot of different ways to grow and a lot of different ways to win. And back to my point about top 3, what does it mean in practice? For us to get to top 3 across several of our businesses implies a huge opportunity for us to grow. And this is just a few examples of that. Take real estate. Today, we're $27 billion of real estate AUM. The top player is $187 billion. You can see that's a 7x growth opportunity. Look across the slide, infrastructure, 8x. Credit, we think we can double again and so on. So the scaling opportunity is immense. The visibility is also high. And so if you look back to last year, as an example, we raised $44 billion as a firm. That was up 72% over the prior year. But we have many more strategies coming to market now than we did at the beginning of 2020. On the right-hand side of the slide, you can see what I mean. There's 23 different fundraises and strategies on that right-hand side of the slide. Those are all in market or coming to market shortly, so over the course of 2021 and 2022. The consequence of that is our fundraising pipeline is very large, and it's highly visible where we expect to raise capital in the near term. The punchline is that we expect to raise over $100 billion in 2021 and 2022 combined. So really this year and next. And here's where we think that can happen. $40 billion to $50 billion in private equity, $15 billion to $20 billion in infrastructure, $10 billion to $15 billion in real estate and $20 billion to $25 billion in credit. You put all that together, you get to $100-billion-plus opportunity over the course of this year and next. And all of that combined is why we have such confidence that we can comfortably exceed $2 per share in fee-related earnings next year. Now with that, let me turn it over to Joe to take you through the second big takeaway we hope you have from today.

Thanks, Scott, and good morning, everyone. The second main takeaway for today is to highlight our firm's strong and differentiated investment performance across our global platform, which has allowed us to scale significantly and accelerate the pace of deployment over the last 4 to 5 years. In combination, we believe our business has very exciting latent earnings power in the form of unrealized carry and embedded balance sheet gains, which will be monetized in the years ahead. At KKR, we have a world-class global investment franchise that has been built and improved over the last 45 years. It all starts with an incredibly deep bench of talent, operating in a 1 firm culture, which allows us to connect the dots and use the entire firm to source and evaluate unique investment opportunities. Over the past 5 years, in particular, we have become more thematic in developing deep domain expertise in critical areas such as technology, ESG and life sciences. We've become more disciplined in portfolio construction and risk management. And we've expanded significantly our value creation toolkit with our global team of operational specialists at Capstone and an extensive network of senior advisers. This has allowed us to become more nimble, entrepreneurial and forward leaning, particularly in periods of volatility like we had last year. In 2020, we had a record deployment year at KKR. Today, we have a more focused, disciplined and institutionalized investment process than at any point in our history, which enables us to generate exceptional returns for our investors as well as continue to scale our business around the world and accelerate our pace of deployment. Our investment performance over the last 5 years has been highly differentiated in the marketplace. These returns are not merely a reflection of a strong stock market, quite the contrary. Our recent performance is a direct result of our ability to attract and retain world class talent, build cohesive teams with ambitious goals and a laser focus on continuously improving our internal investment processes. In private equity, our flagship U.S., European and Asian funds are generating collectively over a 30% return. In our long-term core private equity strategy, we have delivered north of 20% IRRs since inception. And in our portfolio of newer growth equity strategies, in technology, health care and ESG, our funds have generated exceptional performance with fund level IRRs of 34%, 64% and 38%, respectively. Similarly, in our real assets platform, our infrastructure and real estate funds are providing very attractive absolute and relative returns to investors. And finally, in our global credit businesses, our recently launched dislocation fund, raised just last year, is off to a terrific start while our private credit and direct lending strategies are delivering very solid performance. On the back of strong underlying investment performance, we've been able to meaningfully scale and accelerate our investment activities. If you look at our capital deployment over the last decade, what you'll see is a relatively modest increase in deployment from 2010 to 2014 as we were just starting the seeding of many of the strategies that Scott referenced. However, since 2015, as many of our strategies have started to scale from Fund I to Fund II to Fund III, you have seen a dramatic increase in the last 5 years that our deployment growing at a 31% CAGR with nearly $30 billion invested in 2020 alone. Another way to think about this is that our average deployment over the last 4 years has been $23 billion annually. That compares to just $9 billion a year during the prior 4 years. This represents a 2.6x increase in the commercial activity across the firm. This acceleration of investment activity is critical to understanding the future potential earnings power at KKR. Since 2018, our total gross unrealized carry has more than doubled from $2.3 billion to $4.7 billion in 2020, representing a 42% CAGR over the last 3 years. We have a very similar dynamic when you look at KKR's balance sheet in terms of improving investment performance, scaling of deployment and the growth in embedded unrealized gains. From a performance standpoint, average annual returns have increased from 13% over the last 5 years, 17% on a 3-year basis and 18% last year alone. Deployment in the last 4 years was approximately $2.4 billion on the balance sheet. That compares very favorably to the $1.5 billion on average in the prior 4 years. This combination of strong performance and accelerating deployment has led to significant increases in embedded gains for the balance sheet. Since 2018, our balance sheet embedded gains have grown from approximately $700 million to over $4.4 billion at the end of 2020, representing more than a 6x increase in unrealized gains that will be monetized in the future. You can also see the growing importance of our core private equity strategy in driving a long-term compounding of our balance sheet. As all of you know, in our carry-generating businesses, there is a multiple year lag from the time we make a new investment to the time we sell these investments, typically 4 to 6 years later, which is when we crystallize carry and balance sheet earnings. Over the last 3 years, our realized carry interest was approximately $1 billion per year, reflecting the monetization of historical investments made 4 to 6 years ago when our deployment levels were significantly lower. Going forward, our expectation is that realized carry at interest will grow significantly based on the current levels of unrealized carry across the firm. Similarly, over the past 3 years, our realized investment income has averaged approximately $650 million per year, reflecting a much lower deployment pace 4 to 6 years ago. With the dramatic increase in unrealized balance sheet gains, we would expect our realized investment income to grow meaningfully in the years ahead. So the first key take away from this morning was an FRE growth -- will grow to over $2 per share by 2022. And the second key takeaway is the latent earnings power of our firm with over $9.1 billion in total unrealized gains between carried interest and our balance sheet. Scott, back over to you.

Thanks, Joe. The third main takeaway is what Global Atlantic really does for the firm. The concept behind the acquisition of Global Atlantic is actually quite simple. At KKR, we believe we can source best-in-class investments. GA is able to source low-cost liabilities. The combination of the two is incredibly powerful. The transaction benefits are significant. First, let me start with the management team. You're going to hear from our partner, Allan Levine, later in this session, but it's really an exceptional team that has built this company. And we're really excited about what it is today, but even more excited about what we can build together with them going forward. The transaction immediately adds scale to several of our investing platforms and really accelerates our path to top 3 that we talked about earlier. And there's multiple opportunities to drive growth for KKR on a go-forward basis. Not only can we generate investment performance for GA, which will allow them to underwrite more annuities and life insurance and reinsure more blocks, which leads to the AUM, but we believe there's product development and distribution opportunities working together as well, and there's really multiple ways to win that come out of it. It's highly accretive to all of our financial metrics and we believe the growth opportunities will be both organic and inorganic on a go-forward basis. But let me focus on one area in terms of the impact that GA has on KKR, really our assets. So on this slide, you can see, our fee-paying AUM grows by 48% as a result of the Global Atlantic transaction. Our perpetual capital increases by 5x from $22 billion to $120 billion. And it has a particularly large impact on 2 of our businesses. Our credit AUM doubles to $164 billion. And our real estate AUM actually goes up by 81% to $27 billion, just as a result of the transaction closing. So the GA deal is highly impactful to us as a firm. So if you think about the 3 takeaways so far, $2-plus per share in fee-related earnings in 2022; $9 plus billion of unrealized gains, both carry and balance sheet; and now with GA, $98 billion and growing of perpetual capital added to the firm. All of that leads to the fourth takeaway, which is that we expect significant acceleration of our after-tax distributable earnings on a go-forward basis. The result of all of these things working together, we believe, will be $4 to $5 per share in annual after tax DE in the 2023 to 2024 time frame. So let's step back again. First takeaway, scaling is happening faster than we ever thought. And the opportunity ahead is highly visible and right in front of us. Second, our differentiated investment performance has led to a lot of latent earnings power. This isn't things you need to believe what we're going to do in the future, this has already happened. The earnings power is already in the firm with respect to carry and realized gains on the balance sheet yet to be monetized. Third, GA adds even more growth and turbocharges everything that we've just been talking about. And the result is $4 to $5 per share of after-tax DE in 2023 to 2024. We've been trying to think about how do we actually get this across to you? What's it feel like to have been in KKR for the last decade plus? And forgive the hokey slide, but this is the best we could come up with. It's really felt for the last 10 to 15 years like we've been planting a lot of seeds and working really hard, toiling away. That's what it felt like with a view that if we did that well, it would pay off later. And where we sit today is we think the payoff is about to happen. Later is now. And you can see with everything that we're talking about, the visibility and all the work that's been done, all of this is right in front of us. So let's shift gears. What we're going to do now is talk a little bit about how we think about the life cycle of our businesses and the life cycle of the platform within KKR. We have been seeding and growing a lot of businesses over the course of the last many years. In fact, if you look at the AUM growth from 2010 to 2020 as a firm, 57% of that AUM growth has come from businesses that did not exist 10 years ago. So there's been a lot of happening inside the firm. So what we've done is we've really created a framework through which we can talk about this. And we've broken our platforms into different -- 4 different phases: early, which is kind of the formation, the seeding phase; developing, kind of getting it going; maturing, and then scale. And if you look on the slide, you can see we've kind of laid out what does this mean for all of our major line items in terms of our P&L and a little bit of color about the focus that we have as a firm in these different phases. So the early phase is Fund I. You're getting going. Management fees are modest, Capital Markets fees are modest, carry or performance income is nonexistent and you're drawing down capital from the balance sheet. In the developing phase, you're in Fund II to III. Management fees start to grow a bit; Capital Markets fees are episodic, but starting to show up; performance income is starting to be relevant, but probably more lumpy because it's in the early days. And it's still a drawing capital for the balance sheet for the most part. When you get into the maturing phase, you're in Fund III, Fund IV, you're really starting to get more scale in management fees. Capital Markets fees start to be more consistent. And performance income and carry starts to grow and be much more consistent itself. And the balance sheet investment is actually starting to see some return of capital. And when you get to scale, you really get to Fund IV and beyond. And all of the line items are quite meaningful. Management fees, Capital Markets fees are quite meaningful and consistent because you have a portfolio as well at that point. Carry and realized gains are significant and starting to be something that really shows up in the income statement in a very meaningful way. So that's how we think about the different stages, the 4 different stages of our business. So let's talk about where we are today. And what we've done here is now put our 4 major businesses on the slide: private equity, credit, real assets and Capital Markets. And you can see by area where we are. So take private equity as the first example. It's our largest business, our longest-standing business. But if you look at the right-hand side, you can see, North American PE, Europe and Asia are all scaled. But look at where we are in early in developing. There's a lot of parts of the private equity business, where we see a significant amount of growth ahead where we've been doing a lot of seeding and building. And you can see a lot of that business by eyeing on the most of it is in the early and developing phases. Credit, again, significant opportunities to grow across everything that you see on this slide, and we'll get into all this in more detail. Real assets. You can see the vast majority of the activity in real assets is in the early and developing phase. And Capital Markets, a business that has been around since 2007. They're, again, significant number of businesses that we think have a lot of growth ahead of them. And so this is a framework we're going to use to talk to you about each of our different businesses as a firm and where we are and where we think we can go from here and our areas of focus for the next several years. The punch line in terms of high-level takeaway is that over 50% of the AUM of KKR is not yet scaled. And that's part of the reason we have such confidence as we move from where we are to top 3 in all these businesses that we've got such a large opportunity ahead of us. I'm going to now hand it over to Joe, who's just going to pick one of these line items, our infrastructure business, and take you through a case study as to what this looks like in practice. Joe?

Thanks, Scott. In the next section, I want to walk you through a specific case study on our global infrastructure business to give you a more detailed understanding of how we approach building new businesses and investment platforms inside of KKR. When we build new businesses, there are really 4 key building blocks for success. And when these 4 elements come together, they create powerful economics to the firm. First, when launching any new business, it's critical to start with great investment talent and leadership. One of the great strengths of KKR is our proven ability to recruit and integrate world-class talent across the globe. We then need to marry this talent with a differentiated investment strategy to establish credibility with investors and the marketplace. In infrastructure, we've built a strong 10-year track record built around our initial Fund I and Fund II, where we delivered high teens gross returns, attractive multiples of invested capital, a strong annual cash dividend yield of 5% to 6% and nearly 1,000 basis points of outperformance to the relevant public benchmarks. With strong initial performance in our flagship funds, we've been able to significantly scale our infrastructure platform and launch highly accretive adjacent products. Our flagship infrastructure funds have grown from $1 billion in Fund I to $3 billion in Fund 2 to $7.2 billion in Fund III. And we're currently in the market raising our next flagship fund, which we expect will be significantly larger than Fund III. With strong investment performance and increased investor support, we've also been able to consistently improve the overall management fee and carry rates in our funds, enhancing the overall economics of every new dollar that we raise. So in addition to raising our next flagship fund this year, we were very active in 2020, launching 2 important product extensions. We raised our first time Asia infrastructure fund and also launched a diversified core infrastructure fund to participate in the large and growing market for lower risk, lower return infrastructure investment. This new fund is a perpetual capital format with significant opportunities to scale. And in the future, we believe there is an exciting opportunity to continue to innovate and grow our platform in this area, particularly in the fields of energy transition and renewables as well as expanding in the large-scale infrastructure debt market. Let me take a minute to talk about our first-time Asia infrastructure fund. This is really a great example of how we've been able to leverage both our differentiated track record in the infra space and marry that with our dominant private equity platform in Asia. At $3.9 billion, this is the largest Asia-focused infrastructure fund that's ever been raised. And I'm really glad to report that the business is off to a great start and is being recognized as a leader in the marketplace. From an AUM standpoint, our Global Infrastructure franchise has grown from $13 billion in 2018 to over $17 billion in 2020. As we raise capital for our next flagship fund and continue to scale our core infrastructure vehicle, we believe our AUM can nearly double again in the next 2 years to $30-plus billion. Similarly, our infrastructure management fees have nearly doubled from $84 million in 2018 to $158 million in 2020. As our AUM continues to scale, we believe we'll be able to double manage the fees, yet again, in the next 2 years to approximately $275 million to $300 million. The third major building block is ramping deployment and exiting early investments to start contributing to the firm's realized carry and realized balance sheet investment income. In infrastructure, we have seen a dramatic increase in our annual deployment pace as we scaled our flagship funds and added new products like Asia infra and core infrastructure. As you can see, our average deployment over the last 4 years was $1.6 billion per year, nearly 4x higher than the average investment deployment in the prior 4 years. With this increased deployment pace, we have built significant future earnings potential as we begin to monetize many of our Fund I and Fund II investments. As you can see in the chart below, for the first 5 years of our infrastructure business, we generated 0 carry as all of our investments were brand-new and seasoning. However, over the last 5 years, we have just begun to benefit from carry realizations and balance sheet gains. 2020 was an important inflection point for our infrastructure business with over $200 million of cash carry generated from historical investments. The final building block in scaling a new investment platform relates to capturing greater economics through our Capital Markets franchise. We have seen a dramatic increase in KCM fees generated by our global infrastructure team as capital deployment and AUM have scaled. Over the last 4 years, our infra business has generated, on average, $71 million per year of KCM revenues. That compares to just $8 million per year for the prior 4 years, and barely $1 million a year when we first launched the strategy. As all 4 of these building blocks come together, the overall economic contribution to the firm can be quite powerful. AUM has grown from 0 in 2010 to $17 billion in 2020 with a visible path to $30-plus billion in the next 2 years. As our funds continue to scale and we continue to develop new adjacent products and strategies, we've seen management fees, Capital Market fees grow rapidly. And more recently, we're finally starting to see and get the benefit of significant earnings from realized carried interest and balance sheet gains. From a standing start, where this business had 0 revenues in 2010, we wound up in 2020 with nearly $550 million in revenue. And while we're very proud of these historical results, we're even more excited about the massive growth opportunities in the future. To put this in context, our infrastructure business today is only 1/4 the size of our Global PE business with multiple ways to grow and scale from here. So let me turn it back over to Craig.

Thanks, Joe. The case study we just ran through was one of my favorite parts of our materials today. Because in the dialogue that we have with investors on a strategy like infrastructure, there often tends to be a pretty narrow focus, and that focus really is on the fundraising aspect. That's the topic where we see the most inbounds. And the questions will often be really specific. Is that strategy in the market? When might we see an initial close? I'm assuming that, that fund could turn on somewhere in Q3 or Q4, does that sound reasonable? And I understand that. That makes a lot of sense because everybody wants their models to be as tight as possible. But what we really were trying to bring to light through this case study, really 3 things. One, is the broad financial impact that you can see as a business reaches that inflection point as it progresses through that life cycle of a platform that Scott introduced at the beginning of the section. It's management fees, it's carry, it's investment income and its Capital Markets. All of those pieces combined. Two, alongside of the scaling of a benchmark flagship product, you see innovation. In the case of infrastructure, again, it's more than just flagship funds. It's Asia infrastructure. It's diversified core. That's, again, in a perpetual capital framework with a strategy like renewables infra on the horizon. And with all of these adjacencies with performance, we expect, in turn, to have opportunities to grow and scale these adjacencies in the framework of massive end markets. And the final point, when you go back to how Joe described our approach in building these franchises and those 4 building blocks, strong performance of flagship funds; scaling, together with innovation; driving meaningful gains; and then finally, using our unique model then to capture more of everything that we do. That aspect, those building blocks, do not apply only to infrastructure, far from it. We're almost like a machine as you think about our focus on executing our strategic growth plans across businesses. So we're going to transition now to a section focused on our 4 major businesses: Private equity, credit, real assets and Capital Markets. And we're going to review our strategic growth plans across all of them. And I think this almost machine-like framework as you think about the attractive underlying growth on a stand-alone basis of these flagship funds and products and strategies, amplified with layering, given scaling and innovation, is something I expect or hope you'll gain a better appreciation of as we review each of the core business lines. And with that, I'll turn things back over to Joe.

Thanks, Craig. Our private equity platform is the business KKR is best known for globally. It's the industry that Henry Kravis and George Roberts helped pioneer in the 1960s and '70s. It's a business where we have built a 45-year track record of delivering exceptional returns to our investors. We are a strong top 3 global player in this market with significant competitive differentiation in terms of experience, talent, sector specialization, geographic reach and scale. But most importantly, it's a business where we have some of the most exciting future growth opportunities through product innovation and adjacent strategies. Today, our Global Private Equity platform manages $113 billion in AUM. At the center of this business is our traditional large-cap private equity strategy, which has grown to $88 billion in assets as we've expanded our strong U.S. franchise into Europe and then in Asia. Leveraging our dominant brand and track record in the space, we are building 3 very exciting adjacent strategies that are highly complementary and synergistic to our traditional PE business. We are leveraging the same investment talent, experience, sourcing channels and investment processes to create new growth avenues for KKR. This includes our long duration core private equity franchise; a portfolio of growth equity products in technology, health care and ESG; and our customized portfolio solutions business, which provides an attractive alternative to traditional PE fund of funds products. We have a very attractive portfolio of both large scale, high-margin traditional private equity funds and newer higher growth strategies, which will help drive meaningfully the growth in our global franchise. Let me spend a couple of minutes on our flagship private equity business, where we have a 45-year track record, again, of exceptional, consistent performance. We've delivered a 26% compounded annual return across 19 different funds through just about every economic cycle imaginable. We can now add COVID and pandemic resiliency to this list. This compares to a 12% return for the S&P 500 on a comparable basis, representing approximately a 1,400 basis point outperformance over 4 decades. What I love about this slide is that our absolute and relative outperformance in our most recent funds are stronger than ever. Our private equity platform continues to find ways to innovate, create competitive differentiation and drive alpha for our investors. The misconception about our traditional private equity business is that given its current scale, that it's a lower growth mature business, quite the contrary. As you can see on this slide below, our business is in Asia, U.S. and in Europe have had a decade of significant scaling and asset growth. In Asia, we started with a $5.8 billion in Asia II. And we just recently closed our fourth fund at $15 billion. Similarly, in the United States, we've gone from an $8.7 billion fund, 2 funds ago, to a $13.5 billion fund today. And we're currently in the market raising our next flagship fund for the United States, which we expect to be meaningfully larger. In Europe, a similar trend, $3.5 billion 2 cycles ago to $6.4 billion in Europe V, with an expectation of raising Europe VI in the next 12 to 18 months. In our traditional private equity business, we have taken this regional approach versus a global fund approach. It has a lot of key benefits. It allows us to maximize our fundraising potential. It allows us to diversify our carry pools. It reduces the vintage risk across these different products and we're less susceptible to a single point in the fundraising cycle. Let me spend 1 second on our Asia Private Equity fund. At $15 billion at size, again, this is the largest private equity fund ever raised in the region. It's also the largest private equity fund within our global flagship business. I'll get to this later in the presentation, but this is one of the most distinctive parts of our firm in private equity. We have 15 years now on the ground building a very large-scale business across all the major markets in Asia. And for the fifth consecutive year, KKR Asia has been voted large-cap firm of the year. With the growth in our regional funds, which you've seen is a rapid acceleration of deployment. In the last 4 years, we deployed on average $8.4 billion across our traditional private equity business. That compares to $4.6 billion in the prior 4 years, so almost a doubling in investment activity. You can also see on this chart the significant contribution of Asia PE in the last 4 years, in particular. So let me move to some of the new adjacent strategies. As Scott mentioned previously, a lot of the innovation that happens at KKR really comes when we can't find a home for great investment opportunities, and that's exactly the case with core private equity. Again, this is a long duration strategy where we expect to hold companies for 10 to 15 years, but the risk/reward profile is very different than our opportunistic private equity funds. We're looking for mid-teens IRRs that we can compound for north of a decade. So we're looking for business with less disruption risk, very good cash flows, often consolidation opportunities in fragmented sectors, and we put together an incredible portfolio of companies. It's diversified around the world. Our deployment pace has nearly tripled in the last 4 years alone from $1 billion to $2.8 billion and our returns inception-to-date have been very strong with 21% gross IRRs. And with a large participation of our balance sheet in this strategy, you can see the impact in terms of compounding book value. We have over $1.2 billion now of unrealized gains on our balance sheet from our core private equity business. The second growth vector for us in private equity is really this portfolio of growth equity funds that we've created really starting 5 years ago. With roughly $1 billion of AUM in 2016, we've now scaled that to over $8 billion of assets across 3 different strategies, which I'll get to in a second. It's our technology growth business, our health care growth business and our global impact business. So technology. Obviously, this is a critical area for the firm to be a leader in. What we noticed in technology, what we were seeing some really exciting growth businesses that, quite frankly, were too small for our main private equity fund. These are investments that range from $50 million to $200 million in check size with great entrepreneurs in great sectors, and we want to participate that. So in 2016, we raised our first growth fund at $700 million. In Fund II, with great performance, we were able to scale that triple the size of the fund to $2.1 billion. And as you can see, the returns have been very strong at 34% IRR. In the next 12 months, we expect to launch and raise our successor fund, NGT III, as well as our first-time Asia Fund. Moving to health care. This is an industry where KKR has over 20 years of dominant investing experience across large-cap health care names. We saw a very similar trend in health care, a lot of innovation happening at the smaller end of the market, in life sciences and biotech and medical devices. And we want to participate that. We have the teams, we have the reach, we have the sourcing channels. So in 2016, we raised our first time health care growth fund at $1.3 billion. Again, the performance here out of the box has been really strong, 64% IRRs inception to date. And that's given us the ability to raise our next health care growth fund, which we're in the market right now. We've had initial set of closes at $2.8 billion and expect this to be a meaningfully sized fund. And finally, global impact. Sustainability and ESG is a huge priority for KKR. Scott's going to talk about that later today. We've been doing this for over a decade in terms of working with our global portfolio companies to improve their ESG practices and sustainability practices. And we're now starting to see ways to invest behind those themes. Again, these are generally smaller growth ideas and opportunities. So in 2019, we raised our first time impact fund at $1.2 billion with tremendous support from our investors. All institutional investors around the world are looking for more exposure to this asset class. That first-time fund, again, has very, very strong performance with 38% gross IRRs since inception, and our expectation would be to raise the successor fund for impact, again, in the next 12 to 18 months. So when you put that all together, with these 3 growth platforms, we've been able to meaningfully scale our deployment from roughly $100 million in 2016 to $1.7 billion in 2020. And finally, our customized portfolio solutions business. Again, this is an alternative to what the market was providing in terms of the traditional fund to funds business. We're able to highly customize, create bespoke product for institutional investors and large family offices. The product's designed not only for very attractive returns, but to minimize the cost and reduce the costs relative to fund to funds. We accomplished that with a diversified portfolio that invests in our core flagship funds as well as a meaningful amount of co-invest in KKR deals and best-in-class third-party managers. And the return since inception have been very strong at 20% gross IRRs. That's really allowed us to scale this business from our last Investor Day in July of 2018 from $1.3 billion to $3.8 billion today, a 3x increase in just 3 years. So again, when you put both our flagship business, the heart of our private equity franchise, together with these new growth vectors, we've seen some very significant growth in our global business, around a 16% CAGR. Today, we manage $113 billion of assets in Global Private Equity, but we think there are more product extensions, continued scaling across all these avenues, which will allow us to continue to grow this business at a double-digit rate. Over to you, Scott.

Thank you, Joe. Now let's shift to our credit business. The platform itself has about $164 billion of assets under management as of now, broken down a little over $100 billion in leveraged credit, a bit over $50 billion in private credit and $8 billion in dislocated or opportunistic credit. But if you look back first before we go forward, this is how the business has grown. You can see the business was created in 2004. And before Global Atlantic had scaled about $78 billion of AUM at the end of last year, very attractive annual growth rates and really exceptional growth over time. And what you can see has happened is this AUM line has grown, our revenues have grown as well. So you can see on the chart, it kind of builds, the management fees for leverage credit, then alternative credit, capital markets transaction fees related to credit start to show up, carry and performance income shows up as well. So there's been really attractive historical growth in revenues alongside the AUM growth. If you put it simplistically, this business has more or less doubled its AUM and its revenues every 3.5 to 4 years over time, and that's before Global Atlantic. And GA has a very significant impact on the credit business as you can see on the slide. In effect, it doubles our AUM from $78 billion to $164 billion, and it's a significant ramp across a number of the different parts of our credit platform. And the GA transaction really creates this virtuous circle of growth because what happens is Global Atlantic can source low-cost liabilities. And when it does that, it needs assets that have an attractive risk reward, largely with the yield. And our origination platforms in credit generate those assets. So as we generate assets with attractive returns, that allows GA to go originate more low cost liabilities and so forth, and we do it again. And as all of that happens, we build net income for GA and we build fee-related earnings and profitability for KKR as a whole. So it's a really neat virtuous cycle that we've built here. So let's talk about the credit platform in the context of the life cycle that we talked about earlier. And you can see on the slide how the business breaks down. Some scaled business, a number of developing and mature and early business in Asia credit. And the strategy, the areas of focus are pretty straightforward. We want to expand our Asia credit platform, which I'll come to in a second. We want to continue our success in dislocated and opportunistic credit. We want to scale our leveraged credit businesses, which have had great performance, and we want to grow our mezzanine and asset-based finance platforms. But first, let's start with Asia credit. This is a newer business for us. We're actually in the market with a fund now. And just to give you the high level background, this is a business that we think can scale very dramatically over time. The GDP growth in the world is predominantly in Asia. So 60% of global GDP growth comes from Asia. Only 8% of Global Private Credit AUM is actually in Asia. We think that will change over time. We think Global Private Credit, the percentage from Asia will continue to increase. There's also more needs for private credit in the region as private equity continues to be a larger and larger active player in Asia. And our positioning is really great. We have almost 200 people on the ground in Asia across 8 offices. And given the 1 firm culture, everybody is helping each other. Relationships are traveling. We're using our corporate relationships to go and source opportunities for Asia credit. And we've already begun to be recognized. 2020 Asia-Pacific Lender of the Year by Private Debt Investor, it's nice to have the early recognition. Even more importantly, we sourced $1.4 billion of new investments since the beginning of 2019 in Asia credit and is an attractive pipeline. Second, let's see some of the developing businesses, and I'll just hit a couple here just to give you a sense of what's in this category. Our leverage credit business is an area of the platform that has had really strong performance. As you can see here, top quartile performance on a 1-, 3-, 5- and 7-year basis. And this business has been scaling quite nicely. 5 years ago, $14 billion, now $35 billion. So significant growth. We've also had great performance in high yield. And this is an asset class that we haven't emphasized as much from a distribution standpoint and sales standpoint, and we are changing that now. So we've had the same 1-, 3-, 5-, 7-year top quartile track record, and we're going to look to monetize that to a greater extent. So think of this area as an exceptional track record. GA adds $4 billion or so of assets to what's already on the slide. And you can see more sales resources to be added here to continue to scale these numbers. Another part of this aspect of the platform is our dislocated and opportunistic credit business, about $8 billion of AUM. Last year, we raised a $4 billion pool of capital over 4 months for dislocation. We did that through a fund and separate accounts. About 40% of the LPs were new to KKR. And the concept was let's go monetize the dislocation resulting from the pandemic. And we're able to move very, very quickly. And what this business does is it really sits in the middle of the firm. So it can do credit on the corporate side, real estate, it can do structured equity, it can do public investing and private investing. So think of it as really monetizing what's in the middle of the firm and maybe doesn't fit elsewhere. And this is a business that we believe we can expand over time and continue with this theme and even broaden its mandate. Okay. Now let's shift to the mature category. And what I'm going to do is hit one part of the platform here for a second, which is our asset-based finance business. So this is a part of the business we've been quietly building for the last several years. And asset-based finance is a huge market, $4.5 trillion in total size. That's expected to grow to $7 trillion by 2025. And so what we've done here is we've invested in or partnered with about 16 different specialty finance platforms that are actually originating all the asset classes that you can see on this slide. And so far, we've had really nice performance as you can see in the upper right. Now these platforms that I'm mentioning actually have about 4,000 employees of their own and they have about $100 billion of AUM. And what's been happening is they've been originating assets and selling a lot of those on to the market or partnering with third parties. And that's really important because those assets are actually quite attractive for Global Atlantic. So when you think about the power of the combination, asset-based finance is a great example of this. So we've created these platforms at KKR or invested into them over time. And those originations now can go to GA. And GA is about $20 billion of AUM in very similar asset classes and a lot of appetite for those originations. So we can now monetize those in a way that we never could before. It provides us with the ability to be a one-stop shop and a provider of solutions in a way we never could before and generate other economics for the firm, including in Capital Markets. So a really exciting development for this part of the platform. On the scale side, just quickly, direct lending. This is a business that is also quite large. We're the top 3 players here already. This is an asset class that has about $1.1 trillion in total size. And that $1.1 trillion is expected to grow to $1.8 trillion by 2025. So another space that is large and growing quickly. We started in 2005. We had really nice performance, as you can see on the left-hand side of the slide, in our most recent fund, in particular. And a lot of this business has evolved. We're making bigger investments in bigger companies and increasingly in a sole or lead role. So this is another platform that we believe we can grow over time. And it's largely done today in permanent capital format or BDCs. So let's step back. If you look at this business, credit as a whole, back in 2007, this is what we looked like. We were just U.S. We were largely loans executed through CLOs and KKR Financial Holdings, which was a public permanent capital vehicle we controlled at the time. Now look where we are today. We've got all sorts of different ways to invest in credit. U.S. Europe, and increasingly, Asia, lots of different ways to scale and win. So we went from $11 billion of AUM in 2007 to $78 billion before GA to $164 billion after GA. And not only have we scaled the ways that we can invest in credit and broaden the platform dramatically, we have also broadened the way that investors can invest with us. So it's now separately managed accounts, open-ended funds, '40 Act Funds, drawdown funds, closed-end funds, permanent capital vehicles. There's lots of different ways that investors can invest with us in credit now. And so step back and remember what I said before. This is a business that has, in effect, been doubling its AUM and its revenues every 3.5 to 4 years before we had all of this breadth. And before we had all of these ways for investors to invest with us and before the power of Global Atlantic. So we're highly confident that we can double the business again by virtue of what we've now created and the opportunity ahead of us. So the strategic growth plan for credit is very straightforward. We want to keep expanding and leverage credit and monetize the great performance we've had. In private credit, there's going to be a lot of different ways to grow, but in particular, Asia and asset-based finance. We think we can scale further in dislocated and opportunistic credit and we can integrate Global Atlantic, which makes us that much more powerful. And with that, let me hand it over to Joe to take up real assets.

Thanks, Scott. Let me now turn our attention to KKR's global real assets platforms. When you take a big step back, what we're talking about here is the global real estate market, the global infrastructure market and the global energy market. These are enormous, enormous industries where 10 years ago, we were not even active players in investing in this space. So this is a platform that we're building that we think has tremendous growth potential for decades to come. Today, we have $47 billion of AUM in our real assets platforms, and that's really in 4 different businesses. In real estate, we have an opportunistic equities business that has $10 billion of AUM. We have a real estate credit business today with $17 billion of AUM. As I've discussed previously, an infrastructure platform of $17 billion and the $3 billion energy business. When you look at the composition of our platform, many of these strategies, 11 out of the 13, are in the early and developing stages. We only have 2 businesses, really, our U.S. Real Estate Equities business and our Global Infrastructure business that are in this maturing category about to get to scale, so tons of growth ahead of us. The other dynamic is that given the importance of yield in many of these strategies, we're raising capital in many of these new products in a perpetual capital format. Let me spend a second on real estate first. Again, just a massive end market globally in real estate. This is a business in 2015, we were managing just $2 billion of AUM, and that's grown $27 billion in 2020. It's split between $10 billion in equity and $17 billion in credit. Given the team we have in place, given the track record that we have seeded across credit and equity and the brand of KKR and our growing investor base, there's no reason to believe that our real estate platform globally won't be $100-plus billion over time. Let me start on the equity side. This is really a mirror image to our global private equity footprint. We have a private equity business in real estate in the U.S., in Europe and in Asia, and we're just rolling out a core plus real estate strategy called KPPA. The initial performance has been very strong. In the U.S., our first 2 real estate funds have generated returns of 16% to 21%. And in Europe, Fund I is generating a 15% return. That's allowed us to really scale each of these platforms over the last 5 to 10 years. In the U.S., we've gone from a $1.2 billion fund to a $1.9 billion Fund II, and we're currently in the market raising Fund III, with an initial set of closes at $2.5 billion already. In Europe, again, we started with a relatively small first fund at $700 million. We're in the market raising Fund II that closed on over $1 billion to date, and expect that fund to be meaningfully higher. In 2020, we closed on our first Asia real estate fund at $1.7 billion. So we have the full suite now in U.S., Europe and Asia of our opportunistic real estate product. Last year, we also started raising KPPA, our core plus fund, our permanent capital vehicle where we have $2 billion of capital raised already. And as we scale these funds and launched all these adjacencies and geographic expansion, you've seen a meaningful acceleration of capital deployment from roughly $200 million back in 2015 to $2.2 billion in 2020. In real estate credit, again, a $17 billion asset class for us today. We have a family, a portfolio of specialized credit products in the real estate space, and I'll talk about the impact GA will have in a second. Our more mature products are off to a very, very good start. Again, many of these are yield-oriented strategies targeting high single-digit returns and a very attractive risk-reward product. RECOP and RECOP II has generated nearly a 10% cash yield since inception. And KREF, which is our publicly listed mortgage REIT, is generating nearly a 9% dividend yield for investors. Again, we expect to be able to continue to scale and raise successor funds across this full family of credit products. One of the most exciting things about our real estate credit business is a synergistic impact with Global Atlantic. As you can see on this chart, we operate a series of opportunistic funds in the real estate credit space. In partnership with Global Atlantic, we could create something really special, a more diversified business with the ability to scale, with more product depth and an ability to create large customized solutions for institutional investors. In total, when you run through our infrastructure business, our real estate equities and real estate credit businesses and energy businesses, we've seen a dramatic scaling of our real assets platform in a very short period of time. We've grown from $12 billion of AUM just 5 years ago to roughly $47 billion of AUM today, a 41% CAGR. And the good news is we're still in the first or second inning in terms of growth and scaling. Scott, over to you.

Thank you, Joe. Let's shift to our Capital Markets business. This is a business that last year had about $480 million of transaction fees for us. It's a bit of a distinct platform for KKR and something that's pretty unique about our business model. As you can see on the page, a lot of different parts of this business are relatively young as well, a continuation of this theme that you're going to hear over and over. Our areas of focus here are fairly straightforward. We have a number of opportunities to scale in businesses that are growing themselves. Real assets and core are just 2 good examples. We also have some emerging businesses where we see a lot of upside, especially with GA around structured finance, as an example. We think our third-party business can continue to grow. And as Asia grows for the firm, we expect Capital Markets will grow there as well. So lots of growth opportunities for KCM going forward. But before we get into the forward, let's spend a minute looking back. This is a business that has evolved dramatically since its founding in 2007. So you can see here the first 5 years averaged about $66 million of fees as we were just getting going, about 23 deals per year on average, largely just KKR deals themselves. Second 5 years, the $66 million goes to $172 million and the number of deals per year goes from 23 to 88, so a significant expansion as we start to take KCM Global and start to embed it across all of our investment activities around the firm. And then more recently, look at the last 4 years, the $172 million goes to $490 million of average revenues over the last 4 years. The number of deals per year doubles from 88 to 166, so significant scaling, again. We keep seeing these step function changes in KCM's growth as KKR grows. And so if you get into the details a little bit, look at the first 5 years, you can see how the business broke down. It was largely traditional PE and facilitating private equity transactions for KKR, initially in equity and then into debt. And you can see it was largely a North American business. The second 5 years, you start to see a bit of expansion. The third-party business starts to become a bigger piece of the pie and Europe and Asia grow as well. And more recently, the last 4 years, you can see it's become even more diversified. You can see infrastructure pick up. You can see real estate start to come into play, and it becomes more global, again, now 52% North America. And we think you're going to continue to see this trend around diversification. And what's really happened is not only have the revenues grown, and you can see on the slide, from $182 million in 2016 to $490 million on average the last 4 years, are up 2.7x. We've become much more diversified in terms of where those revenues have come from. And really, the background for KCM's growth is similar to the story you've heard across all of these slides today. As KKR grows, KCM grows. So the biggest driver of capital markets for us is the scaling of our investing businesses, deployment activity, monetization activity. And then the size of the portfolio where it's financings, refinancings, repricings, acquisition finance, exits, there's opportunities for KKR Capital Markets. It is not at all a surprise to us that our private equity business, our largest scale business and our most active business by deployment and monetization activity and size of portfolio, is the largest contributor of Capital Markets revenues. It stands to reason, the more activity, the larger the portfolio, the more KCM is going to do. As you see growth across our real assets platform and our credit platform, you're going to continue to see KCM grow. But it's not just the growth of our investing businesses where we see opportunity, it's also our third-party business. It's also more of our businesses using the entire holistic model. And increasingly, we're the lead left position or either sole underwriter or lead left in a lot of the deals, which are much more lucrative for us. And as all of that happens, revenues go up, diversification continues to increase, we've got more ways to win and the business becomes even more resilient. And it's a very high incremental margin business for us, given we're monetizing a lot of what is already resident within the firm. Scale to get scale. And so as you can see on this slide, this just shows KKR's capital deployment as a firm over time last 10-or-so-years. And you can see that 19% CAGR. And look at Capital Markets transaction fees, this is a 3-year rolling average, 25% CAGR. So as KKR grows, KKR Capital Markets grows, and we expect that to continue to be the case. And I want to show just a few more examples of this. This is happening all around the world and all across our businesses. But look at Asia, you can see how the KCM revenues in Asia have grown, $13 million initially, then $30 million then $68 million. Joe already took you through infrastructure, 1 million to $8 million to $71 million. Look at core private equity. That business has grown dramatically. Last year, $46 million of Capital Markets revenues, and that business is just getting going. And then the third-party business has grown meaningfully as well. $55 million average going to $97 million over the last 4 years. And this third-party business is something that we believe we can scale meaningfully again from here. This is a business that is highly synergistic and sits within the firm and actually connects a lot of our asset pools with third parties and facilitates a lot of our transactions around the private credit and now GA platforms. But you can see the number of transactions for third parties has gone from 24 in 2016 to 84 last year. And if you look at the right-hand side of the slide, what you can see is the number of third-party clients that we're transacting with has also grown dramatically. And here, we're only counting transaction once per year, even if we do more than one thing a year with the sponsor. But you can see in 2016, 8 different third-party clients. Last year, 47. And we expect these numbers to continue to go up and to the right. So a lot of opportunity to grow as KKR grows and a lot of opportunity to grow with third-party clients. Okay. Now that we've covered all 4 major businesses of the firm, we want to shift gears a little bit and talk to you about some of the unique differentiators we believe we have here at KKR. And these are differentiators that we believe really cut across everything that we're doing. So the first one of these we're going to talk about is Global Atlantic. So I'm now going to ask Allan Levine to take the stage. Allan is the Chairman and CEO of Global Atlantic. He really has been involved with the business from inception. He was Co-Head of Strategy at Goldman Sachs when the business was founded in 2004. And he has built the management team, and he has really built this great track record in business over the course of the last 16, 17 years. And they've really done a remarkable job. We could not be more thrilled to be their partners and in business together, and we see a lot of opportunities to grow together. And we really think the combination of our 2 sets of capabilities is incredibly powerful. Allan, over to you.

Thank you, Scott, for that very kind introduction. It's great to be with all of you here today and have the opportunity to share the Global Atlantic story, and more importantly, what the business looks like going forward with KKR. It's been 9 months since we announced the transaction and 2 months since we closed. It's been a real pleasure to get to know and work with Henry, George, Joe, Scott and the rest of the KKR team. I'm also pleased to report that the integration of our combined investment areas and the broader KKR-Global Atlantic partnership is going very well. With that, let's turn to the next page. Let me start by providing a brief overview of Global Atlantic. This is a page I like to refer to as the Global Atlantic 101 page. Over the past 15 years, we have quietly and patiently built one of the fastest growing, highest returning to U.S. insurance businesses. We've done that with a very focused strategy. We know exactly who we want to be, a leading U.S.-focused life and annuity business. We also know who we don't want to be. Even though our name is Global, we're not international, we're not in property and casualty, accident and health or long-term care. As you're all aware, on February 1, we closed our transaction with KKR. Today, Global Atlantic is owned approximately 60% by KKR and approximately 40% by third-party shareholders. Looking at the bottom of the page, investors are often surprised by the size, scale and success of the business. We have over $90 billion of assets under management and growing. Because we have a focused strategy, we strive to be top 3 or top 5 in every business we compete, and we have achieved that in our 2 largest businesses. We have generated consistent top quartile performance of 15% or more in AUM, AOE and book value. We have a strong financial profile and balance sheet. And I would note that since the transaction was announced, we were placed on positive watch by 2 of our 4 rating agencies. And finally, core to everything that we do, we have leading risk and investment management capabilities. We have been able to consistently outperform the industry and have even greater conviction in our ability to do that with KKR. Now turning to the next slide. I wanted to provide a brief history of our business. In 2004, we were founded as the Goldman Sachs Reinsurance Group. By 2012, it had become clear that being an insurance company inside of a bank did not work from a capital perspective. And on May 1, 2013, we had a successful separation, raising money from 1,200 high net worth shareholders. At this point in the cycle, we, as a leadership team, had a view that the right strategy was to combine our leading reinsurance business with a leading retail distribution franchise. So we quickly acquired 2 decade-old insurance businesses. By 2015, we realized we had a fast-growing, high-returning U.S. life and annuity business and a subscale P&C business. We made the strategic decision to sell our P&C business and deploy all of that capital into our life and annuity business. Since 2015, we've been executing on and optimizing that same strategy. Heading into 2020, we raised $1 billion of third-party capital to support a very strong reinsurance pipeline. In the fourth quarter, we put a substantial amount of that capital to work, closing 3 deals, which increased our AUM by over $15 billion. And finally, what I hope you take away from this page is that when we separated from Goldman Sachs, in May of 2013, we had $1.4 billion in book value. And in February of 2020, 7.5 years later, when we closed the KKR transaction, we had $4.7 billion of book value. We've been able to over triple our capital without ever having a primary raise. Turning to the next slide. Let me spend a little bit more time on how we manage the business. In addition to having a very focused strategy, we also have a very straightforward business model. Everyone at Global Atlantic, and now KKR, has a role to play in helping us deliver long-term shareholder value. If we grow our assets, manage our margins and remain disciplined stewards of capital, we believe we can continue to produce top quartile results. Starting with growing our assets. We have 2 lines of business, our retailer individual business and our reinsurance or institutional business. Across these complementary businesses, we have multiple $1 billion-plus opportunities to allocate capital across the cycle. I will spend time on the next couple of pages covering each of those. Next, managing our margins. We have an easy-to-understand spread-based business model. If we buy a high-quality, diversified fixed income-oriented asset portfolio that is well matched to a stable, low-cost, low-risk liabilities either as a result of product selection or structure and we closely manage our expenses with significant benefits as we scale, we believe we can produce industry-leading results. From a capital perspective, we have a long-established track record of allocating capital in an efficient way to the highest value opportunities. And more recently, we've begun to build our third-party capital capabilities. Next, let's spend more time on our 2 lines of business. First, our individual business, where we offer a suite of simple products designed to meet our customers' savings, protection and income needs. We are focused on the fixed annuity space, which we view as having the fastest growing, best risk reward opportunity for Global Atlantic and KKR. We sell our products in over 200 banks and broker-dealers through a 150-person sales organization. Our team has very strong industry relationships and the capability and experience to sell retirement, life and hybrid products. Over the past 5 years, we have been a top 5 annuity player. Importantly, we have meaningful market share in many of the top platforms, including LPL Financial, Wells Fargo and Morgan Stanley. Beyond these firms, approximately 90% of our total sales have been through banks and broker-dealers that we believe have higher barriers to entry and more stable economics. We view this positioning as a competitive advantage. Turning to our institutional business. Here, we provide customized solutions to help life and annuity companies meet their strategic risk management and capital goals. At this point in the cycle, we believe this business has the highest risk reward opportunity and best growth profile. As you can see, in 2020 alone, over $100 billion of transactions were executed and Global Atlantic captured meaningful share. Over the past 15 years, we've established a very strong track record as a leading client-focused franchise in the reinsurance space. We've executed about 2 to 3 transactions a year and have entered into transactions with over 20 firms. Most recently, that includes names like Unum, Manulife and Ameriprise. One of the stats our team is most proud of is that over 40% of our clients are repeat counterparties. In addition to block reinsurance, we have recently entered into 3 adjacent institutional solutions: flow reinsurance, pension risk transfer reinsurance and funding agreements. Today, each of these are multibillion-dollar opportunities for Global Atlantic. Looking forward, we believe our partnership with KKR provides for significant growth potential. Starting on the left, we remain very bullish on the fundamentals of our target markets. For life and annuity companies, the combination of historically low interest rates and tight credit spreads creates a challenging investing environment in which to deploy new money. Next, from a demographic perspective, America's retiree population is growing and looking for downside protection and income solutions, particularly in environments of heightened market volatility. Lastly, we believe we're in the middle innings of a major industry restructuring, where over 2/3 of the top 25 players have either executed a reinsurance transaction our undergoing strategic review or considering M&A. The demand for reinsurance solutions as a tool to reduce risk or free up capital is strong, and we believe Global Atlantic is one of the few franchises well positioned to capture this meaningful opportunity as it emerges. We believe the partnership with KKR will accelerate Global Atlantic's growth and enhance the same 5 themes that have driven our success to date. First, our diversified U.S.-focused business model where we can allocate capital over the cycle across our individual and institutional businesses and life and annuity opportunities. In fact, that's even better with KKR. With a long-term strategic partner, we can patiently allocate capital over the cycle, enter into adjacent lines of business and create new products. Second, our established footprint with financial institutions with long-standing distribution partners, including over 200 banks and broker-dealers and the top 50 U.S. life and annuity companies. Here, we have already benefited from KKR's C-suite relationships. Third, risk and investment management core to everything we do. This is about people, process and technology, all of which are enhanced by KKR's world-class platform, which Scott just spoke about earlier. KKR has expertise across asset classes and asset types that are a good to fit for Global Atlantic and can be originated in-house with greater benefits of scale. Fourth, our strong financial profile. This is about ratings, expense scale and deep access to capital. We believe we can benefit from KKR's unparallel access to capital and balance sheet as we grow and expand our business. And finally, the key to our success is about our people and our culture. About half of our most senior team has been together for over a decade, including our years at Goldman Sachs. Half of our new leaders joined because they believed in our vision, mission and values. We are founders, owners and partners in the business. And we have found a great partner with KKR. Our teams are aligned incredibly well with similar cultures, consistent values and a desire to capitalize on and benefit from the opportunity ahead. Next, let's turn the slide to talk about the forward growth opportunities in greater detail. At Global Atlantic, we have an incredibly methodical approach to growth, and we have ways to expand our client reach and expand or enter into adjacent businesses. Starting with our individual business. While we rank as a top 5 player, there is still room to grow between where we are and the #1 player in the industry. So when I think about expanding our client reach, we have a strong footprint across top annuity writers, but we are not in all of them. As an example, we just added a top 10 player, PNC Bank, and started selling in their system this quarter. And we were able to achieve our top 5 ranking without a top 10 position in the independent distribution channel, a $40 billion market, which is a growth opportunity for Global Atlantic in 2021. Looking forward, we also believe there are strategic opportunities to build new products with KKR. And as I mentioned earlier, we have a sales force that is capable of selling multiple products. We are also focused on new potential markets, including the registered investment adviser space and technology-based distribution platforms. Turning to our institutional business. Here, we have 4 distinct client solutions, block, pension risk transfer, flow and funding agreements, all of which are $1 billion-plus opportunities. Our younger strategies, PRT, flow and funding agreements, have a lot of room to grow from a client-based and investor perspective. In January, we entered the funding agreement business and have already exceeded $1 billion in transactions. On the block side, while we already achieved meaningful market share over the past 15 years, traditionally, we have not been able to pursue the largest blocks. We are excited to have the opportunity to evaluate any size transaction partnering with KKR. Looking forward, we believe there are several adjacent lines we can enter, including other areas in the pension space and other low-risk, low-cost spread-based liabilities. Moving to the right side of the page under margins and capital, we believe there are other areas of our business that can also drive growth. On the investment side, KKR can help us improve our in-force portfolio book yields and new business pricing. As I mentioned, we are beginning to see significant benefits of scale. For example, Global Atlantic today is only half the size of other top 5 annuity players. And lastly, deep access to capital. With the benefit of KKR's balance sheet, the KKR Capital Markets team and our co-investment vehicle, Ivy, we have the ability to pursue a wide range of opportunities to grow. In closing, similar to Joe and Scott's presentations, who have left you with 4 themes, let me leave you with 4 themes that summarize why I have such conviction and why I believe we're set up to win. Number one, clear, compelling fundamentals, whether from a macro, demographic or industry perspective; two, Global Atlantic is very well positioned as a leading U.S. life and annuity business to capture this market opportunity and, at the same time, benefit from scale; number three, every part of Global Atlantic gets better with KKR, particularly from an asset origination, capital product and thought leadership perspective. What does all that mean for KKR investors? It means the ability to generate strong AUM, AOE and book value growth. Thank you for your time and attention, and I look forward to having the opportunity to spend more time with you in the future. With that, let me turn the presentation over to Joe.

Thanks, Allan. The next differentiator that I want to talk about is our growing Asia franchise. Our firm went to Asia in 2005, really attracted by the macroeconomic growth opportunities in the region. China today represents around 30% of global GDP growth with its neighborhood countries representing 28%. That growth is underpinned by an incredible demographic trend. In the U.S. and Europe today, we have around 135 million millennials. In Asia Pac, that number is 834 million millennials, over a 6x greater amount. This spending of that generation is driving consumption in the Asia Pac economies. By 2030, Asia will be the largest consumption market in the world, greater than the U.S. and Europe combined. So enormous opportunities for investment in services, value-added goods, education. And the great news for private equity is Asia is underpenetrated today. PE represents around 4.6% penetration in that part of the world relative to 16.8% in the U.S., 1/3 the penetration rate. So we saw the strategic opportunity in 2005 and decided to make a significant long-term investment in the region. What we've built in the last 15 years is the most dominant and widespread platform in the region. Nearly 200 executives spread across 8 different offices in Asia. None of our peers have a footprint like this in the region. And the track record has been exceptional. We've invested over $22 billion of capital over the last 15 years in 86 pan-Asian private equity investments and generated a 22% gross return, close to a 19% net return and significant outperformance to the MSCI Asia Pac Index, which has returned less than 6% over a comparable time frame. With strong performance, we have been able to massively scale our private equity business from an initial $4 billion fund back in 2007 to our recently closed $15 billion Fund IV in Asia. When I move to Asia now V to start this business, I would have never imagined that Asia IV would be our largest global private equity fund. But what's really exciting is with this core business in PE hitting on all cylinders, we've been able to leverage the incredible team, the network we have in the region to create new opportunities and adjacent strategies. As we mentioned previously, last year, we raised our first time pan-Asia real estate fund at $1.7 billion. We raised our first Asia infrastructure fund at $3.8 billion, and there's more new product coming. Scott talked about our Asia credit opportunity where we're raising capital today. And in the next 12 months, we'll be launching our Asia NGT growth strategy. So when you look at our platform holistically in Asia, we've been able to grow AUM from $10 billion in 2016 to close to $40 billion today. And again, the bulk of that AUM today is in our flagship private equity business. As we continue to scale infrastructure and real estate and private credit and tech growth, the growth opportunities in this part of the world, quite frankly, have no limits. So let me now switch to the third topic, which is winning in technology. A big part of what our firm has done differently in the last 5 years is we try to get a lot more thematic in our approach to investing not just in private equity, but across the board. So we have a framework that we've developed, and we continue to refine. Like what are the key themes that are going to really drive value creation around the world? You don't need to be a genius to understand that technology is having a transformational impact everywhere. So what is our approach to this marketplace? We think we have some very unique attributes of KKR, which allow us to both access opportunities, source opportunities and invest in a differentiated way. First of all, is we have incredibly deep origination capability across a lot of the different industry groups that we invest in, whether that's financial services where we're doing fintech, health care where we're doing biotech, retail consumer where we're doing consumer Internet, but there's just a tremendous network of opportunities that we've developed over the last 45 years. Second, we have a large portfolio around the world, 200 portfolio companies that are all grappling with this fundamental issue of how technology is transforming their businesses. So we have those insights, we have those learnings, and we're able to target new technology investments to cater to those. Third, unlike any other firm, we have global reach in the U.S., Europe and Asia. So we can take the lessons learned to see how technology is evolving in Asia and bring those lessons back to the U.S. and vice versa. That's a tremendous advantage in this marketplace. And finally, we've created this platform of growth funds in both technology and health care, which brings us closer to that innovation and the growth. So we've been active investors, particularly in asset classes like enterprise software where we've put $6 billion to work in the last decade and behind consumer Internet opportunities where we've invested over $4 billion in the last decade. So when I think about our firm's relative performance and absolute performance in the last 5 years, a big part of the returns we've generated has been this pivot to technology and to digital. To just put some numbers on the board here. If you look at our large-scale PE businesses, technology has become probably the single largest destination of capital in the last 3 years. In our Americas business, it represents 38% of every dollar that we've invested in private equity; in Europe, an even greater 46% of our portfolio construction; and in Asia, 34%; and in our core PE business globally, 26%. This pivot towards technology and digital transformation is not just in our private equity business. When you look at our real asset platforms, digital has been a major component of how we've invested. In real estate private equity, nearly 50% of our total deployment in the last 3 years has gone behind digital and tech themes, primarily industrial and logistic assets that cater to the growing e-commerce marketplace and commercial investments around technology innovation hubs. And in infrastructure, 1 out of every $4 in the last 3 years has gone into digital plays, telecom infrastructure, wireless towers, fiber to the home and data centers. So as you can see, technology is a critical industry focus of ours. If we're going to be leading investors globally, we really need to be winners in the space, and we're devoting significant resources to this effort. Scott, over to you.

Thanks, Joe. The next unique differentiator we want to talk about is what we've been doing in ESG. Joe mentioned that we've been really focused on a number of themes around the firm, and ESG is one of those macro themes that we spend a significant amount of time on KKR. In terms of background, this is an area that we really started to get very focused on back in 2008. And one of the first things we did was to create a partnership with the Environmental Defense Fund and began working across our portfolio companies with EDF. And in effect, it started with 2 companies and has now expanded to 50 companies that partners with the Environmental Defense Fund. And what we do is we focus on the impact that our companies are having on the environment and how do we make sure that we improve that over the course of our ownership. But that was just step 1. Step 2, for example, in 2009, we became an early signatory of the UN Principles for Responsible Investment. But as you can see on the slide, there's been a series of other things that we've done on the ESG front over time. It's now part of our DNA. So ESG informs all the investment decisions that we make in every business all around the world. It is part of how we screen investments and look for opportunities. We want to make sure that we're being thoughtful about the impact that we have on all the stakeholders that our companies touch. As we were doing this work and building in this thought process into the DNA of the firm, what we began to find is there are really interesting investment themes within ESG that were creating opportunities that we really like. And you can see several of them on this slide. We've now deployed $7 billion behind these ESG themes across 40 different investments. Some of these have been done in our impact fund, but a lot of them have been done outside the impact fund as we've been working to actually deploy capital behind everything that we've learned and have begun to see across everything that we're doing in ESG. And we think this is just the beginning. You continue to see our impact fund that Joe talked about continue to scale, and we'll scale that franchise over time meaningfully, we believe. But also, we think there's opportunity to create ESG-themed alternative investment products across asset classes. So more to come on this over time, but this is just the beginning of what we're doing in ESG. And it really is a huge part of who we are as a firm. The second thing I want to talk about in the ESG space is the employee engagement model that we've created. For those of you that were with us in July 2018 at our last Investor Day, you might remember Pete Stavros talking about this. This was something that was created by our industrials team in private equity in the Americas. And what we've done here is we've actually given stock to employees of many of our companies with a view that if everybody is an owner, they're going to think like an owner and they're going to be more engaged in value creation. Fast forward, we've now done this several times. We've given away over $500 million of stock to over 20,000 nonmanagement employees in our companies. And not a surprise, those companies have performed incredibly well because the more engaged workforce is focused on creating equity value. And that's something that you'll continue to see us do. So a good example of the E part of ESG is what we've done with the Environmental Defense Fund. A good example of the S part of ESG is what we've done with our employee engagement model. We've also been focused on the G part of ESG, which is governance. And as an example, one area of focus there is what are we doing with our Boards of our portfolio companies. And there, we've been quite focused on making sure that those Boards are more diverse themselves. We are big believers that a more diverse team makes better decisions, a more diverse Board will help create a company that has more value, a more diverse investment team will make better investment decisions on the way in. And as we've been focused on diversity of our Boards and within our own firm, we've continued to see our performance improve and we believe that this will only continue going forward. So we'll continue to be focused on the E, S and G elements of ESG and keep you posted in our progress over time. The fifth differentiator I want to spend a minute on is our brand and track record and how we think that leads to an opportunity for us with individual investors. There are very few firms in the world that have the brand that we do and the track record that we do. We think both of those should be very attractive to individual investors over time. And we have just begun to scratch the surface in this space. As we've been building out our sales teams over the course of the last decade plus, we really started with institutional investors and have only more recently begun to focus on the individual investor. So by monetizing the brand and monetizing this track record in the individual space, we think there's a ton of upside. And just to give you a sense of background for why we have that belief. If you look at the slide, in 2020, there's about $279 trillion of total potential client assets in the world. And just to dimensionalize this for you, $179 trillion of the $279 trillion is actually individual investors. You can see it on the slide. 64% of that number is individuals. Now look at the right-hand side. Pension funds, where we have a large presence today, 30% of their assets are in alternatives, endowments is over 50%, individual investors is less than 5%. We believe that number is going to go up over time. And we believe that given our brand and our track record, really unique differentiators for us, we will be able to increase that number and participate in that to a great extent. And that's a lot of upside for us. So what we're doing now is we're starting to invest even more in our sales team focused on the individual. And that's an opportunity that we think will play out over the course of next several years. That's not really baked into the '21, '22 numbers we talked about before, that will sustain us for decades to come. Big opportunity for us going forward. The last differentiator I want to talk about is something that really permeates everything that you've heard about today. It actually enables everything that you've heard about today. It's our people and our culture. As we've referenced, we continue to run KKR as one firm. Everybody is in it together. There's one T&L for the entire enterprise, and everybody helps each other. You can see here are the main components of our culture and values on the slide. This is something that has been the case since 1976 with our founding. And it's something that will continue to be the case. We think it is something that makes KKR incredibly special and allows us to do a lot of the things that we do around the world. But why should you care? The reason you should care about this is that it actually allows us to do everything we've discussed. The culture of the firm allows us to build businesses and innovate. If you think about it, KKR care was an innovation in and of itself in 1976. There was not even a term called private equity. The firm itself was an innovation. We've continued to stay incredibly innovative over time. And as our people see patterns, they see opportunities they can access. We're all sharing that with each other. This one firm, fully connected culture that we've built has allowed us to build the firm in the way that we have. We have a lot of themes at KKR we talk about. One of those is connected dots. We want to make sure we're all benefiting from what each other are seeing around the world. And that has worked incredibly well. So when you think about what we've been doing, the business building we've been talking about, facilitated by the culture; the deployment activity last year where we're really able to lean into the dislocation in a very aggressive way, facilitated by the culture. The way that we've been building around the world and leveraging investments and opportunities that we see with respect to specific companies that might start with equity and turn into credit, the opportunities travel. That does not happen if you run a siloed enterprise. And critically, the way our model has been built, balance sheet, capital markets, third-party capital, all connected, monetizing ideas to a much greater extent, allows us to create economics in a highly efficient, low headcount way. All of that permeates everything that we've done. So the most important unique differentiator for us is really our DNA, the people and the culture of our enterprise. And that will sustain us going forward. Rob, over to you.

Thanks a lot, Scott, and good morning, everyone, and thanks so much for spending the time with us today. I'm going to focus my section on 2 main topics. The first is our financial model, building up to the $4 to $5 of the target that Joe and Scott brought you through a little earlier. The second area is our balance sheet and a deeper dive on why this is such a unique differentiator for us and ultimately, a driver of meaningful profitability as well as long-term compounding of book value. So let's start with our financial model. You've heard this from us before, but there are really 5 things that are going to drive our near-term as well as our long-term financial and business performance. When we're getting 3 or 4 of these things right, our financial performance on behalf of our investors should be pretty good. But right now, we believe we are operating at an extremely high level across all 5 measures, which is really what is leading to our confidence around our future financial performance. So let's start with our deployment. 2020 was a record year. Our capital deployment of $30 billion was roughly 20% higher than it was in 2019. In turn, the thematic approach you heard earlier today around our deployment has led to very strong investment performance. That leads into monetizations. And given the combination of deployment as well as performance, our outlook over the next several years feels very constructive, especially given the current market conditions. The natural outgrowth of strong deployment and performance as well as monetizations is fundraising. And 2020 was a record fundraising year for us as well, raising $44 billion of capital, which was up 70% from 2019. And you've just heard that we expect to raise over $100 billion of new capital over the next couple of years. And lastly, when we use our unique business model, we get really good and differentiated outcomes. Our model allows for us to monetize more of our investment content in a way that others just aren't set up to do. So for every dollar of investment we make, we believe that our model, including our balance sheet and our Capital Markets business, allows for us to monetize a higher level of profitability. When you break down our financial model, it's pretty simple to understand. Along the left-hand side of this page, you see the 3 major sources of revenue that are coming from our asset management segment. Our fees; our realized performance income, which is principally our carried interest; and our realized investment income, which is the realized income from our balance sheet investments, whether through yield, dividends or gains. On the far right side of this slide, you see the profitability that is generated from each area of revenue. I'll spend a few minutes shortly, going into a little bit greater detail on each component. In addition to the main drivers of profitability from our asset management segment, going forward, you're going to see a new segment from us, which is our insurance business. When added together with our asset management segment, this will drive KKR's distributable operating earnings. I'll transition now to a buildup of our fees, starting with our revenues and then moving to our profitability. Our management fees make up the bulk of our fee revenue, accounted for over $1.4 billion in 2020 or over $1.6 billion when you pro forma in the impact of the asset management relationship with Global Atlantic. The next biggest source of fee revenue has really been our Capital Markets business, which generated $480 million of revenue in 2020. The gray bar in the chart is made up of our transaction and monitoring fees. These fees tend to be a pretty stable source of revenue for the firm and are somewhat correlated to our overall deployment. And the last component, which is relatively small today but has the ability to be much larger for us in the future, is our fee-related performance revenues. These fees are generally crystallized quarterly based on the yield of some of our perpetual capital vehicles. In aggregate, our fees grew about 13% in 2020. However, pro forma for our anticipated asset management relationship with GA, that growth would have been closer to 24%. We believe we have really clear line of sight to exciting expansion of our fee revenues both in the near-term and the long term. That growth is expected to come from multiple areas, including an increase in our fee-paying assets under management, which will directly drive management fee growth. In particular, the benefits of scaling new franchises here and the compounding impact that, that can have in our management fee growth should be a substantial driver of future fee revenue. We've talked a lot about Global Atlantic today. But as GA continues to compound its book as well as its asset base, there should be significant opportunities for us to drive our $200 million of pro forma management fees much higher over time. And lastly, our transaction activity, which we do expect to go higher over time given the increased breadth of our investing activities. This should help generate increased capital markets as well as transaction fees for KKR. We thought it would be helpful to go into a little bit of additional detail on our 2 largest forms of fee revenue. First, our management fees and then I'll move on to our capital markets fees. So starting with our management fees. These fees tend to be very stable and provide a meaningful amount of long-term visibility. The biggest driver of that is the long-term nature of our capital base. Over 40% of our AUM today is either perpetual, which means that it has an indefinite life to it; or it has multi-decade recycling provisions. And the final number on this page and maybe the most important number on the page. Close to 90% of our AUM has a duration of at least 8 years from inception and it is not subject to periodic redemptions. Digging a layer deeper into our capital base, we've clearly made a significant investment elongating the duration of our AUM. Perpetual capital, which is now $120 billion, accounts for roughly 1/3 of our total AUM and 42% of our fee-paying AUM. Our goal over the next several years is to get our perpetual capital to the $175 billion to $200-plus billion range. To put that into context, at our last Investor Day, which was in 2018, our total perpetual capital was only $6 billion or 3.5% of our AUM. This significant increase in perpetual capital has multiple benefits for us. But the biggest really include creating much more longevity to our capital base and franchise and also a real ability for us to compound our AUM with performance. Said another way, perpetual capital organically grows on its own as we perform. It doesn't require additional capital to be raised in order for us to grow our fee base. We think this slide is just a great visual representation of our management fees as it shows both there stability, building on the last page around the long duration of our capital base as well as the potential to layer on additional growth on top. In some ways, we think there are some pretty good analogs between our management fees and the highest quality SaaS software companies. Our base management fees mostly have a long runway of stability. And then on top of that, we have growth plans in each one of our business units that will layer on additional management fee revenue growth. We've now taken that exact same chart, but forecasted out to 2022. Our management fees are clearly the primary driver of KKR's trajectory to $2-plus dollars in FRE and beyond. But in order to get there, it's really going to need to be a mix of the highly recurring nature of our existing fees as well as our forward growth plans. You can see in this chart, we expect a real inflection up across every major business at KKR. And one last point on this slide before moving off. We have grouped our traditional private equity into one business here for simplicity. But the reality is that we have 3 separate key businesses in the Americas, Europe and Asia, each with the same people, strategies, funds and investors. So when you think about the diversification of our management fee base, it really is extremely well diversified. Moving on to our Capital Markets business. I know that Scott did a very good job earlier today giving the overview of our Capital Markets franchise and how it has evolved over the last decade plus. So I'm really going to focus today around our growth and how we drive the next 5 years of our platform. The top 3 areas on the right-hand side all in dark blue represent areas where KKR investment activities are expected to meaningfully expand. In order to capitalize on these opportunities, it's really about our continued build out of our capital markets expertise that follow this investment activity. The next real space for continued growth is likely to come from further geographic expansion at KKR. We have talked about this before, but we have every expectation that over time our Asia business can reach the size of our Americas business one day. Our Capital Markets platform should be a real beneficiary of this growth. And the final area here is our continued opportunity to take market share with third-party clients. We think we have 2 big differentiators relative to others. The first, we have a unique model that really does leverage the best of KKR. And we also feel like we could attract the best-in-class talent across the world for our platform. The combination of these 2 things, we think, will continue to yield big market share gains for us in the third-party space. In terms of our expenses, it's pretty straightforward. We've previously announced that our expectation is to pay compensation at a rate of 20% to 25% of our total fee revenues. We are also very focused on balancing the need to keep our operating expenses down, but continuing to invest in growth. Historically, our other operating expenses as a percentage of total fee revenues has really been in that 15% to 20% range. We expect to continue to operate within this range, but it could be close to the top end this year given some of the forward investments we are making across technology as well as distribution. If you run through the math, our equity margin has been in the 60% range. Even with these additional investment areas that I just referenced, we believe having some margin expansion opportunity over the next few years should still be something that we can accomplish. I wasn't planning to spend much time on this slide at all. The punchline of everything we just went through is that we believe we have a real clear path to comfortably exceed $2 of FRE per share in 2022. And as you've heard throughout the day so far, we have a lot of the building blocks already in place to drive continued FRE growth well beyond 2022. The next 2 parts of our revenue, our realized performance income and our realized investment income, really follows similar themes. As you heard earlier, there is a significant amount of related earnings that reside in our business today. I'm going to try and provide you with some additional detail here so that you can better understand that. Let's start with our realized performance income where we have 2 principal drivers, the largest of which is our carried interest, which is our profit allocation for successful investments that are realized. The second component of our realized performance income comes from incentive fees, which are driven by asset management products that pay based on quarterly or annual performance metrics. As you can see on this chart, our realized performance income is relatively flat in 2020 versus 2019. However, that really doesn't tell the full story or give much of an indication for how we expect this revenue line item to perform in the future. One helpful data point that we thought we would include here on this page is the dollar amount of unrealized carried interest during the year. You could see this in the blue box on the right-hand side of the page. This step-up in unrealized carry is driven both by our historical deployment and our strong investment performance over the current year. The $2.2 billion figure will definitely has some year-to-year volatility based on our performance. But we do think that it also gives a better sense for the run rate potential of our realized performance income over time. In terms of expenses, it is really solely compensation here, which we expect to be in the 60% to 70% range of realized performance income. Moving to our growth drivers for realized performance income. I'll walk you through some of the details on the following page. But today, we manage over 2x as much AUM that's carry eligible that we did 5 years ago. Our deployment has increased by 3 to 4x over that same time period. And our performance, as we've talked about, has been quite strong. So the growth algorithm from there is pretty straightforward. You take a greater amount of AUM that is eligible for carry, a meaningful step-up in deployment, and you multiply that by our strong performance, and we think that should equal a sizable step-up in our ability to generate realized performance income, assuming the markets are receptive. So a lot of the go-forward growth here is really about having some market opportunities to realize this performance on the investments that are already in the ground. To be clear, we don't need the market to be a straight line up to be able to capitalize on this. In fact, we don't even need meaningfully up markets. What we do need are periods of time where there is less volatility and public equity or private equity markets are reasonably open and receptive to monetizations. This page really highlights some of the points I was just making. You can see that our AUM that is carry eligible has increased by greater than 2x over the last 5 years. And then you layer on our deployment, which has really followed suit, with records amount of capital deployed in each of 2018, '19 and '20. If you think about how most of our funds work, it's really the deployment that we make going back 4 to 6 years that is going to drive current year carry. Based on this data as well as our performance, it should hopefully give you all a lot of confidence around where our carried interest can go in the future. Our realized investment income is much the same story as realized performance income with probably even more upside. While our revenue here was actually pretty flat in 2020 versus 2019, much the same as our realized performance income slide, this doesn't tell the whole story. So on the right-hand side of the page, like we did on the prior slides, we included our unrealized investment income in 2020. On top of the $645 million of realized gains, we had an additional $1.7 billion of unrealized gains as a result of dollars that have been previously deployed where their performance hasn't yet shown up in realized investment income. The difference between $2.3 billion and $645 million is pretty wide. So I'm going to try and give you a bit of historical context that I think will help explain what's driving that difference. Around 6 years ago, we made the strategic decision as a firm that we really wanted to transition our balance sheet from generating more realized or more regular realized investment revenue to one that could compound gains over a much longer period of time. I think it's safe to say that we feel more strongly today than we did at the time that, that was clearly the right decision for KKR and our shareholders. However, the clear offset to making a decision like that is that there's going to be a period of time, especially as you're going through this transition, where you're generating less realized investment income. The best analytical example I can give to illustrate that point is that over the last 3 years, we have averaged a 17% return on our balance sheet investments. However, the realized cash return on these same investments and over the same period of time has only been 6%. Now even with flat performance going forward, which we don't expect, that dynamic will reverse at some point and our realized cash income should catch up to our accrued investment performance. In terms of our expenses, the only expense allocated to this revenue stream is a 10% to 20% success-based compensation ratio. Now the decision to compound gains is a long-term one for us. However, we're starting to get further along in our transition period. So we would expect to see additional realized investment income flowing through our P&L over the coming years. That's really the first growth driver that you see on this page. Other growth drivers here include, of course, continued investment performance, which is critical. In addition, our expectation is to continue to retain a significant amount of our earnings going forward. By doing so, that's going to provide us with some additional deployment opportunities and over time, additional revenue opportunities as well. I do really like this page a lot as I think it does a really good job summarizing the visibility we have and, therefore, the confidence we have in our ability to drive performance length revenue. As you can see on the left-hand side of the chart, our realized carried interest has been flat to down over the last 3 years. However, our accrued carry on our balance sheet at that same time has more than doubled and has never been higher in our history as a public company. It's even more extreme on the right-hand side of the page, which looks at our investment income. This revenue line item has been virtually flat for 3 years. However, the embedded gains on our balance sheet are up 6x to $4.4 billion, also never been higher in our history, providing a significant amount of forward visibility. The last element of our financial models are 60% or approximately 60% ownership share of GA's earnings. In 2020, our share of GA's earnings would have been just over $380 million. But as you think about your go-forward models here, there were some tax benefits in 2020 that aren't replicable going forward. So we do think the more simple framework we provided on our last earnings call is a good way to think about the expected financial impact of GA on KKR's earnings going forward. And so what we said last quarter, so if you assume that GA's book value is approximately $5 billion and they are able to generate a 12% to 13% ROE, then that should translate into roughly $360 million to $390 million of after-tax operating earnings for our 60% stake. Now I want to bring you back to our summary page really of what we expect of ourselves. I think you can break this down into a few pieces. We talked about our visibility to get to $2-plus of FRE per share with runway for significant growth post-2022. You have heard a lot about the latent earnings that sits within our carried interest and investment income. This information has probably been pretty accessible in the past. But I think maybe we haven't done as good a job as we could really bringing it to life. Hopefully, after today, you have a better sense of the opportunity there. And finally, we think both the fee opportunity as well as the incremental adjusted operating earnings from GA can be really significant and exciting. We have a great deal of confidence around Allan and the GA management team's ability to execute both on an organic as well as on an inorganic basis. And when you pull all that together, our expectation is that we could generate $4 to $5 of aftertax DE per share in the 2023 to 2024 time table. But here's the really neat part of those numbers. Much of the hard work here has already been done. You can see that when you look at the component pieces. We clearly have a lot of the visibility we need in our ability to generate fundraising and fees over the next few years. The track records, our talent and our investor relationships are all in place for us to raise $100 billion of AUM over the next couple of years. While we still have a substantial amount of work in front of us to optimize the integration of GA, I'd say the hard work around identifying that deal, partnering with the team and consummating the transaction is now behind us. And as we look at the deployment and performance that's required to maximize our latent carry and balance sheet earnings, much of that is already in the ground and performing well. While we will definitely need markets to cooperate in order to realize some of our investments, as I mentioned earlier, we don't require straight line up markets. We just need some windows where there are aspects of the global markets that are open and receptive to monetizations. So in a lot of ways, I think if you look back at the presentation that Joe and Scott gave you earlier this morning around scaling our franchise, to me, that's more about our ability to grow well beyond the 2023 and 2024 time frame. So our job as a management team is to go out and really execute on the opportunity in front of us. And then hopefully, we're going to be back here in front of you in 2023 or 2024 and talking about how we could double our earnings again to $8 to $10 per share over the next 5 years after that. That's really our ambition. And we feel strongly that we have both the business model as well as the people in place to be able to achieve it. We're now just focused on the execution and the path towards getting there. I thought it also made sense to separately spend a bit of time today discussing KKR's balance sheet in some greater depth. First, let's go back and take a little bit of a look at history. For the first several years, KKR was a public company. We had a distribution policy or a dividend policy that paid out most of our free cash flow in dividends. At the end of 2015, we made a strategic decision that our shareholders, of which our employees are by far the largest, would be better served by retaining more of our free cash flow to reinvest back into the KKR platform. What you have seen since then is really a robust acceleration in our book value per share, which has grown at a 17% taker since 2016 in spite of also paying out almost $3 of dividends. I also really do like this slide quite a bit as I think it speaks to why our balance sheet is so unique and such a powerful source of economic growth for our shareholders. Number one, and by far the most important, our balance sheet has access to what we think are the best-in-class global investment teams and portfolio management in the world. But our balance sheet has no fixed cost allocated against it. All of our fixed operating expenses are allocated to our fee revenues today. The only cost that we allocate to our balance sheet is an expected 10% to 20% success-based compensation load. As you've now heard a few times today, our current embedded gain on the balance sheet is roughly $4.4 billion. And we believe our investments have some real momentum behind them. And finally, our balance sheet has access to long-dated and low-cost liabilities. The average maturity of our recourse debt is approximately 20 years with a weighted average coupon of about 3.7%. When you take a step back, there's really nothing else like this. I don't think you're going to find it in the private markets. There's been literally trillions of dollars that are poured into asset classes like the ones our balance sheet has exposure to. And those investors regularly pay north of a 1% fixed management fee and a 20% carry. And none of those products start off with $4.4 billion of embedded gains or have access to 20- to 40-year financing with low interest rates. I think if you look at the public markets, you're going to see probably a pretty similar dynamic. As a starting point, how many other balance sheets have access to the types of returns we have been able to generate? And whether they do or don't, they almost certainly have a meaningful amount of fixed costs and in many cases, probably a much less variable and higher compensation load. And none of that even accounts for all of the ways that our balance sheet can positively impact KKR's business strategically. As a management team, we have understood this dynamic for a long time and clearly value our balance sheet holdings at a meaningful premium to its NAV. And that's why we continue to reinvest a lot of our excess capital back into our business. So here's a snapshot of the types of opportunities that are regularly available to our balance sheet. We get asked a lot, how do you use your balance sheet? Or how do you choose which of these paths to pursue? And what I'd say is that it really is a very dynamic process and one that we're constantly evaluating with the ultimate goal of driving capital allocation to the best return opportunities that are available. And when you think about KKR and the people who work here, we really do think that type of skill set is one that is a core competency of ours. So whether that's supporting our funds or seeding new strategies or driving further growth across our Capital Markets franchise or finding compelling M&A opportunities like a Global Atlantic or taking our excess capital to buy back shares, we're constantly having that conversation and evaluating all of these opportunities and are confident that we'll be able to dynamically shift capital to the most compelling all-in ROE opportunity. Next, I thought it would be helpful to spend a few minutes on some specific examples around how our balance sheet has really driven highly strategic and economic outcomes. The first example is our acquisition of GA. But I think to really understand the value our balance sheet brought to the table for this acquisition, you need to bring yourself back to the spring of 2020. Our due diligence here started in earnest really in that March-April 2020 time frame. As you all know, the debt and equity capital markets were obviously heavily dislocated through that period of time. However, we knew this acquisition could be highly compelling as a long-term strategic add-on. So we're really adamant that we weren't going to let a period of dislocation get in the way of our ability to create a very favorable deal dynamic. But we were only able to do that because we had the wherewithal to underwrite a $4.5 billion purchase price. It's not easy to do that at any point in time, but certainly not back in the spring and early summer of 2020. And then as you could see on this page, on the right-hand side of this page, through our capital markets business, we successfully syndicated 40% of the GA acquisition to co-investors who are partnering with us in the continued growth as well as the development of Global Atlantic. Scott had previously walked you through a number of the strategic and operating benefits of the GA acquisition. So we thought a very simple snapshot of the financial impact of the deal could be helpful in terms of its impact on our enterprise. Our final purchase price was around $3 billion for our approximate 60% share of GA. However, in order to consummate the deal, we actually needed to raise $1.15 billion of equity as the rest was funded from a $750 million debt offering and cash on hand. When we announced the transaction, we talked about getting to a $500 million all-in profitability target as a run rate at the end of year one. We remain on target to be able to achieve that, if not outperform. If you look up in the top left of this chart, these are highly compelling economic ROEs on any basis, either as a percentage of total purchase price and especially as a return on our equity funding. And we do think they show the power that M&A can have on our business. We continue to spend a ton of time and energy trying to position ourselves to take advantage of other M&A opportunities that can drive substantial value to our shareholders. Another great example of how we have used our balance sheet over the last few years is around launching our core investment strategy. This is an asset class that is very synergistic with where we want our balance sheet to be positioned, very much around long-term compounding. So we partnered with a very small number of investors. Our investors so far have put up about $8 billion of capital and KKR has put up about $3.5 billion. The punchline is that in a short period of time, we have gone from pretty much no presence in an asset class to now being one of the biggest in the world in something that is highly synergistic with our business model. We are now a meaningful investor in a number of companies that are on our balance sheet that we think are great long-term compounders of capital. We also have substantial third-party investors that have come alongside of us who are paying us fee and carry. And we now have a whole set of portfolio companies that can be potential clients for our Capital Markets franchise. These are all businesses that are likely to be long-term issuers in the debt and equity capital markets. I really don't think that there is any way that we'd be able to build such a substantial business, at least not this quickly and with this type of synergy across our platform without the benefit of our balance sheet. We think the growth potential from here can be really substantial, and we are looking forward to using a similar type book for how we build out our core plus real estate as well as our core infrastructure product offerings. Some of the highest ROEs from our balance sheet over time have been to buy back our own stock. Since 2015, we have used $1.5 billion to repurchase or retire 75 million shares at a weighted average cost of just over $20 per share. So as you think about your models and what will drive our book value per share over time, it's actually pretty simple, and I break it into a few parts. You start with the profitability that's coming from our third-party asset management business. Here, it's the fees and the performance revenue. Sometimes I think this aspect gets lost a little bit, that our asset management profitability is a big driver of our ability to compound capital, then you need to look at the performance of the assets that sit on our balance sheet and finally, how Global Atlantic is able to compound its balance sheet, of which we own 60%. All of the above is really intended to generate retained earnings that allow us to grow, reinvest and compound our balance sheet, hopefully, for a very long period to come. One of the other questions that we get asked a lot is where book value per share could go over the next several years. We're not planning to get into predictions or forecast on that today, but we thought we'd give you some simple data to think through. Over the last few years, we have grown our book value per share at a 17% CAGR. Now if you look at those inputs on the prior page, the things that really drive book value per share, and you make the assumption that with all of these tools, we can compound at a 14% CAGR going forward. So that's roughly 300 basis points less than our history. That 14% CAGR would yield approximately $45 of book value per share in year 5 and approximately $85 of book value per share in year 10. This is not a statement as to whether or not we're going to achieve those numbers. We may do better, we may do worse. But you don't have to believe a lot at least relative to our history as well as how we're positioned as a franchise today in order to be able to achieve this kind of outcome. It's probably worth pausing on these numbers for a minute. At the same time, I also want to refer you back to an earlier slide in the deck where I showed the amount of perpetual AUM that we currently manage and talked about our goal of getting to $175 billion to $200-plus billion over the next several years. We do think that this combination of a robust balance sheet on one hand and a substantial amount of perpetual capital on the other, there's many things for us. The first, it certainly increases the longevity of KKR as a franchise and mitigates a lot of the more typical risks associated with capital raising. And probably the biggest upside is that all of this capital is biased to grow as our performance grows, so we can reinvest proceeds and naturally compound our balance sheet and assets under management organically. This is really on top of everything else that we have gone through today around our ability to scale both our asset management as well as our Capital Markets franchises. That's why we have so much conviction that this combination of balance sheet and third-party perpetual capital is unique and one that we think in its own right is going to lead to very substantial value creation for our shareholders for decades to come. That concludes our presentation today. On behalf of everybody at KKR, thank you so much for investing so much time with us. And we look forward to now taking some of your questions.

Great. Thank you. And now we're excited to transition to the Q&A portion of our event this morning. I'm joined by Scott Nuttall, Joe Bae, Allan Levine and Rob Lewin. Now for the Q&A portion, the 5 of us are not wearing masks. Now we all have been tested over the past several weeks for the coronavirus, most recently yesterday morning and again this morning and all of us have tested negative. And from a production standpoint in the room, we have a very limited crew here and everybody is socially distanced and also has tested negative for the coronavirus. Now I know that we have a handful of people who have -- are prompted and ready to ask an audio question. While we make sure that everyone gets in the queue, we're going to ask our first question actually, one that has been e-mailed directly to us. It's a two-parter and it comes from Bill Katz of Citi. Rob, the first part is one for you. How my dividend policy or capital return shifts as KKR's platform further scales and given the $4 to $5 of aftertax DE looking out a couple of years into 2023, 2024? Could investors assume a higher potential payout rate or faster reduction in shares as you think about capital allocation?

Right. Thanks, Craig, and thanks a lot, Bill. Listen, our capital allocation policy is really unchanged. And so the way we're going to view our dividend policy is much the same as we have in the past. Annually, we're going to evaluate our dividend, which we've done in the last couple of years, and we've increased it in each of the last 3 years as we've evaluated it. And going forward, each year, we're going to look at that as the largest single shareholder in KKR, which the employees and management team are. That's really the lens of which we're going to look at dividend policy going forward. I think our yield right now is a little over 1%; S&P 500, mid-1% range. And then overall, as you think about capital allocation, that's very much a dynamic process here at KKR. I mentioned this in my presentation. We think it is a real core competency of ours to make sure that we're nimble and we can move our capital around to the highest ROE opportunities, one of which our share buybacks, which has been a big tool that we've used in the past to increase ROE for our shareholders. And we'd expect that to be the case in the future as well. But there's many other opportunities we have to take our excess capital, reinvest it back into our business for growth. But I think the most important message in all these things is the employee-based KKR owns a little bit more than 30% of the company is very much aligned to figuring out how we maximize our return for all shareholders with our excess capital.

And the second part of that, Scott, I think is directed towards you. And it's -- as it relates to the $100-plus billion that we expect to raise in '21 to 2022 as well as we think about our current fundraising activity, are we seeing any shifts or changes in LP demands or LP composition from a fundraising standpoint?

Thanks for the question, Bill. Look, I think the high-level answer is we're continuing to see robust demand from LPs and really all types of cross-products. And it's been really hard for investors to find return in the public markets, both equities and credit, especially those that are focused on looking for a yield. And so we're finding more and more investors shifting a larger percentage of their investment portfolio to alternatives. We expect that will continue. Some of the themes that we see, we're seeing more robust demand from insurance investors. We're seeing more demand, as we mentioned in the prepared remarks, from retail or individual investors. There's a lot of interest in anything that's yield-based. So I think yield-based real assets, infrastructure, real estate are good examples and a significant amount of interest in Asia as investors are looking for ways to get in front of a bunch of those macro tailwinds that Joe mentioned. So it continues to be broad-based and probably more robust than even the last time we spoke, but those are some of the themes that we're seeing lately.

Great. And so why don't we now transition to one of the calls from the audio link?

Craig, it's Glenn Schorr. How are you?

Good, Glenn. How are you? Good to hear your voice.

So my question -- look, you outlined a ton of growth across KKR and maybe the scaling of everything will take care of this question. But my question is GA had a lot of growth ahead of it as well, organic and plenty of inorganic opportunities out there. The market recently spoke and kind of draw a line in the sand of how big is too big for an insurance platform. Just curious how you think about any limitations in terms of size, how big you let GA get and how you think about that.

And for everybody, that's Glenn Schorr from Evercore. Scott, do you want to take a first crack at that?

Sure. I'm happy to. Thanks for the question, Glenn. I think the way we constructed our transaction, as you know, is we are a majority owner of Global Atlantic. So it's a bit over 60%, give or take, ownership. You should expect that over time as GA grows, there's a possibility we'll be putting more capital into GA. But overall, we would expect co-investors to be alongside us for the foreseeable future. So that 60% could drift up a little bit. But our expectation is that we'll retain majority, but there's no current expectation to go to anything in terms of close to 100%. And if you think of Global Atlantic in the -- understand, this is a meaningful investment for our balance sheet at about $3 billion. But when you look at the size of the balance sheet, you look at the size of our overall enterprise, you look at the size of our market cap and you think about all the different ways that we have to grow, we see meaningful growth in Global Atlantic. So we think there's an opportunity for GA to continue to grow and to stay a reasonably, consistent percentage of the overall value of KKR, including with GA. And we think the combination of a majority interest where we can consolidate our share of earnings plus the asset management economics creates a really attractive ROE for us as a firm. And so we're just going to continue with that strategy and the great work Allan and the team have done in terms of building the enterprise and hopefully, we can help from here.

For everybody on the line, if you wouldn't mind, when you introduce yourself just for the benefit of everybody in the audience, by giving your name and your firm, that would be great. And why do we continue with our next up?

Can you guys hear me? It's Alex Blostein from Goldman Sachs. Thanks for the presentation and all the details for the businesses, very helpful. I guess as we tie all these pieces together, I was hoping you could give us some sense -- [ given that ] management fee growth to be over the next 5 years. So clearly, you're benefiting from a large fundraising super cycle today, and that's going to take you through 2022 in other areas with significant runway. Maybe you can give us again a sense of how you think about management fee growth beyond the flagships. And I know Rob mentioned some FRE margin expansion on top of it that were kind of a 5-year out FRE growth dynamics.

Sure. Thanks a lot, Alex. We had just given our FRE guidance for next year, for 2022, over the last several weeks. And so as we thought about updating that number, we didn't think it was appropriate, right? But our per share FRE target over the next several quarters, we'll update that number. But as you think longer term, which is where I know your question was geared towards, I'd also think about Allan's presentation where he focused on how GA can grow over time and what that kind of impact has on KKR and its fee revenue. All of that presentation or much of that presentation is very much geared towards post 2022. And so we have very meaningful line of sight I think to robust growth over and above our $2-plus of FRE target in 2022. And that's something that we think we can achieve over the next number of years. And so the math that we look at has a clear path going from 2 plus to 3 over time. And we're not going to get into timetables on achieving it in this call, but we certainly see that and that's visible to us based on the pipeline of fundraises that we have today and our ability to drive margin expansion in the future.

Thank you, Alex. Why don't we go to the next question?

This is Craig Siegenthaler from Crédit Suisse. Good morning and very nice job on the presentation today.

Thanks, Craig. We appreciate it.

So I had a question on C-corp conversion voting rights. And I wanted to get KKR's updated view on the full C-corp structure where 1 share would equal 1 vote. And is this something KKR could eventually migrate to just given how the votes are structured today? And also this process could also potentially accelerate your addition in the S&P 500.

Craig, why don't I take that one, and thanks for the question. Look, I think from a structure standpoint, we have a structure that we think works really well. We think it works well for LPs. We think it works well for our employees. We think it works well for our public shareholders. And when we look at the performance we've seen in the stock since C-corp conversion, it does feel to us as though the market is beginning to recognize all of the opportunities that we have for continued growth when you look at the performance profile that you've seen over that time frame. And I think the good news for us is that when we look at our ownership composition and look at that quite broadly, companies inside the S&P 500, outside of the S&P 500, I think, in particular, within the mutual fund framework, we see lots of opportunities for us to continue to expand our presence within those mutual funds, across mutual funds, within mutual funds, et cetera. So there is continued opportunities for us to continue to see our shareholder base expands. But again, I think the key takeaway is we think we have a structure that works really well. Again, thanks for the question. And why don't we go to the next audio question?

It's Rob Lee.

Good morning, Rob.

Thanks to the thorough presentation. I hope everyone's doing well. I mean clearly, investment performance has been strong the past number of years, as you pointed out, and that's obviously helping to drive demand. But can you maybe touch on, given your continued growth and expansion of the strategies, how you go about maintaining kind of your investment culture, I mean maybe how you reorganize your investment process and how -- and any changes you see there? As at the end of the day, that is the key to your growth aspirations.

And for everybody, this is Rob Lee from KBW. Rob, thanks again for the question. Joe, do you want to kick us off?

Happy to do that. Thank you, Rob. Good morning. As I mentioned in my presentation this morning, I do think as a 45-year-old investment firm, we are continuously evolving our investment practices and disciplines to make sure we have that top tier performance. A lot of it has to do with talent. We continue to invest very heavily around the world across all our strategies in terms of recruitment of great world-class investment talent. That's number one. I think secondly, we've gotten a lot more thematic in the last 3 to 5 years, in particular. This pivot to technology investing across all of our businesses has been a major return driver for us and performance driver. So we're going deeper and the themes in the sectors that we really think have meaningful long-term growth potential. And we went through some of that in the presentation this morning. I think the third area is really trying to look forward in areas like ESG, as Scott mentioned, where it's not just the right theme, but it's trying to build a strategy that's differentiated in the marketplace. That, again, is people, it's our interaction with the market and the specific subsectors that we're targeting. So I think as long as we continue to do those things really, really proactively, we'll be able to maintain very, very strong returns going forward.

Great. Thank you. I'm going to read a question that's been e-mailed from Gerry O'Hara, Jefferies. Scott, perhaps one that you could comment on. With respect to fundraising, when you think about fundraising in a post-pandemic environment, might the trend towards consolidating relationships among the select few providers help us with the opportunity to try to perhaps scale newer initiatives or subscale initiatives that might not have the duration of track record? How is that -- is that dynamic something that could help us?

Thanks for the question, Gerry. The short answer is yes. I think you're right. This is an environment where brand really matters, relationships really matter. And we're finding an opportunity to scale our -- the size of our relationships with a number of our investors. And so we've talked in the past about these strategic partnerships or even just partnerships that expand across asset classes and across geographies, we see more and more opportunities like that. Certainly, the COVID environment we think has caused the investors to accelerate their consolidation of relationships and want to do more with fewer. And as we mentioned, the combination of our brand and our investment performance and, frankly, the breadth of our relationships is allowing us to benefit from all of those dynamics.

Great. Why don't we take another question through the audio feed?

It's Jeremy Campbell from Barclays. Maybe just a couple on Global Atlantic. Allan, it looks like there is a little less than $10 billion of nonblock more organic looking growth in 2020. I know you touched on some of the expansion opportunities. Is there any way to think about what annual production could look like from here in a nonblock perspective? And then, Rob, maybe if you can remind us, does that $2-plus FRE guide contemplate any block acquisitions on a go-forward basis?

Great. Thank you, Jeremy, for the question. As far as organic growth grows, you're right, as I mentioned in the presentation, we see across both our individual and institutional businesses tremendous opportunities for growth. On the individual side, through adding distribution partners and information in the independent space. And clearly, in our younger strategies on the institutional side, we see a lot of room to grow. What I'd point you to you is our track record. Over the last 5 to 7 years, we've been able to consistently double assets. I think our view is we have a good potential to do that. But ultimately, whether it's year-to-year or over that period of time, it's going to really depend on competitive dynamics, the market, and then ultimately, the returns we can achieve. We've always been as much about generating and focusing on AOE as book value growth as we are on top line AUM. So thank you for the question.

Jeremy, just following up on the second part of your question, our $2-plus of FRE target does not include any meaningful or outsized block activity. There's the regular way institutional business that GA benefits from, but nothing on top of that.

And we have two questions from two of our larger shareholders. First one, Scott, for you, relates to the secondaries business. So some of your larger competitors have announced acquisitions in the secondary business or have hired experienced secondary teams. How are we thinking about this strategic opportunity given all of the other growth opportunities that we're focused on currently?

Thanks for the question. The secondary space is one that we continue to spend time on. And as we mentioned in prior calls, it's a space that we've looked at both organically and inorganically as to what's the right way to enter and grow. So nothing to share with you today. I would just say that we continue to be quite proactive in our analysis of that question and are looking at opportunities on both fronts. But we'll share with you what we intend to do when we're ready, but in due course.

And the second question, Rob, is one for you. As it relates to the $2-plus of FRE that we're expecting next year, how much of that do we think will come from the Capital Markets segment?

Sure. Thanks, Craig. So we don't have an explicit target around how much of the $2 plus is going to come from Capital Markets, but I'll say a couple of things. One, we've got a ton of avenues on the fee side of things to drive to the $2 plus. I think the predominant one is going to be the visibility that we have on management fees, and that's going to certainly help drive us towards that goal and beyond. As it relates to Capital Markets specifically, we think it's a really resilient business. We outlined a couple of times today the different avenues that we think we have for growth there. And so it will certainly be a meaningful contributor as well. But the predominant driver is really our management fee growth.

Great. And now why don't we go back to the audio feed?

It's Chris Kotowski from Oppenheimer.

Good morning, Chris. We can hear you just fine. How are you?

Okay. Great. You highlighted your infrastructure business as being one of the ones that had really gotten to kind of a critical mass and scalability. And traditionally, as I understand it, you've been dealing mainly with municipalities and private sector, energy, infrastructure, pipelines, power transmission, that kind of thing. And I was wondering, does the Biden administration infrastructure bill change the way you think about deploying Fund IV. And I guess, specifically, I'm wondering, does it change the processes, opportunities and risks. And I think last year from all the various COVID funding programs, we found private equity kind of reluctant to participate in a lot of those programs. Does that carry on to the infrastructure bill? Or do you think that there are going to be very significant opportunities there for you?

Sure. From a -- and thanks, Chris, for the question. Scott, do you want to take a first crack?

Sure. Happy to. And then, Joe, you can add on. I think the short answer, Chris, is we don't expect this is going to impact our strategy meaningfully. As you noted, we've been incredibly active across all parts of the infrastructure space around the world. And one consistent theme is that governments are underfunded. And to the extent there is a new infrastructure program implemented, I would just view that as potential incremental opportunity for us. But certainly, what we laid out in today's session is not reliant upon anything happening in terms of an infrastructure bill, but it could be more opportunity for us going forward.

Yes. I would just say, there are 3 big sectors that we invested in infrastructure. There's clearly the digital infrastructure that we talked about today, that's the towers, the data centers and fiber, roughly 25% of all the dollars. And again, I think that's less impacted by the Biden plan. The one -- the second sector is really renewable energy and this energy transition theme, which we think has massive long-term tailwinds to it. And again, there could be more incentives, more government programs to help facilitate investment in this area. And that would be a net positive for us in terms of the government program. And the third, as you said, is around midstream, it's been a big part of our infrastructure 2, a smaller part of infrastructure 3, but we expect that's going to continue to be an area of focus for us.

Thank you, Chris. Why don't we go to the next audio question?

Can you hear me?

Yes, we can.

It's Patrick Davitt from Autonomous Research. A couple of times in the presentation you mentioned GA adding I think $98 billion, $99 billion of AUM, which is a good 10% higher than I think what you said in the 4Q release. Is that incremental organic growth since the announcement or something else that's happened there?

Yes. Patrick, it's Rob. Thanks for the question. We went through, as you would, any acquisition, purchase accounting process. And that's really mark-to-market outcome of the purchase accounting process that drove, I would say, most of that growth. And then there was some additional organic growth on top of that to get to the $98 billion.

Thank you, Patrick. Our next question from Chris Brown at JPMorgan. Just as it relates to SPACs, do we think of SPACs as more of an opportunity or is more of a threat? Rob, do you want to start us off there?

Sure. And Joe has been close to it as well, and I'm sure Joe will have some views. Listen, I think largely speaking, we see it as a real opportunity to potentially monetize some of our investments. No doubt, it could increase the level of competition in the market for new assets. But when you think about it, a lot of where our capital deployment is going to go in the future, it's very much around taking business as private and keeping them private. And SPAC is very much around businesses going public. And so we think probably more opportunity as it relates to an overall deployment and monetization perspective on a net basis than there is competition. And then obviously, there's an opportunity for us to raise incremental capital. We just announced the completion of our first SPAC product. And hopefully, there's the opportunity over time to do additional raises that could be beneficial to our platform. So we do think, largely speaking, it's an opportunity for us.

Great. Why don't we go back to the next audio question? Looks like we may have a shy question asker. Why do we go back to a question that's come in through e-mail, and we'll go back to the audio in a second? Joe, a question for you from Brian Bedell at Deutsche Bank, and it's really a question on investment returns. And I think when you go through the presentations and you look at the investment returns that we've been able to deliver on behalf of our LPs, they really do seem quite strong, which is wonderful. Just a question longer term, are we concerned given the amount of capital that seems to be being raised more broadly, do we have a concern that there's too much capital chasing scarcer investment opportunities that looking forward over the next handful of years could reduce the gross return opportunity or profile versus prior years?

Well, I guess what I would say on that is our investment returns, if you want to think about what's the secret sauce behind all of this across the firm and across all the various different platforms, I think the fundamental investment culture of this firm is really geared around this one firm culture, like the connectivity of all of our investment professionals, all of our executives, which is really allowing us to invest, not just more capital every year, but really create these investment themes, the portfolio construction, making sure the best ideas travel around the world. And all of our colleagues across private markets and credit working together to create these unique opportunities. So that fundamental investment culture, I think, is super strong today. It's something we've invested heavily into over the last 5 years, in particular. So I think our investment turns will continue to be very, very strong. We need to stay very, very nimble in terms of how we think about allocating capital to different sectors at different points in time. And we also need to be able to swing capital globally. There could be great opportunities in Asia at one point in time, great opportunities in the U.S. and Europe and across different parts of the capital structure. And that's a big part of how we generate the alpha. And if we could execute that well, I think our investment returns will be strong going forward.

Great. Why don't we go back to the audio line?

It's Mike Carrier from Bank of America. There's been a lot of focus on rates and inflation lately. So if rates continue to move higher and inflation picks up more significantly. Based on your historical perspective, just how do you think that will impact either the outlook for performance or fundraising, if at all?

Thanks, Mike. Rob, do you want to kick us off on that one?

Yes. Sure. Thanks a lot, Mike, and appreciate the question. So I think maybe where I'll start within that question is where we think rates are going and why they're going there. And so our perspective is that more likely than not, rates are going to continue to tick up. But we see them taking up on the back of very robust economic growth. And so as we look out a few years, it certainly wouldn't surprise us if we're in a negative real interest rate environment, which I think largely speaking is constructive to our business. There are, of course, scenarios where you're getting more elevated level of rates and for all kinds of reasons. And then the question there is how is our business positioned? And we think on a relative basis, that we've got quite good positioning. The first reason, as you look at our credit business, it's really large today, north of $160 billion of capital. Quite a bit of our credit business has floating rate exposure. So as interest rates rise, our absolute return goes up and our fixed return hurdles in these funds are static. And so all things equal, in a rising rate environment, we should be making more incentive fee across our credit business. Second is our exposure to Global Atlantic. Largely speaking, I think GA is probably biased to do better financially in a rising rate environment. And then I think you probably looked to KKR's own funding. And I mentioned this in my presentation earlier, the average duration of our debt is roughly 20 years, and we have a fixed cost of capital that is south of 4%. And so when you think of the value of that liability stream in a rising rate environment, we think it's quite high. And you add it all together, including the culture, I think Joe said it being really nimble and being able to move up and down the capital structure and having a big liquid balance sheet to be able to take advantage of potential dislocation. For sure, there are negatives of a rising rate environment, but we think we're set up really well to be able to navigate this.

And why do we, Allan, I think there's probably a handful of our investors will be more familiar from a rising rate environment, how that impacts our business, how do you think of GA from a rising rate standpoint.

Somewhat to what Rob said, it's a net positive. I think about our individual business, our view is that demand will increase as rates go up as the type of products that we can provide are more attractive. On the institutional side, we think this is a net positive across the board, but even more so for our block business, where the ability for insurance companies to do transaction just becomes a lot more accretive, and we think we're well positioned to be able to take advantage of that.

Great. Another question from a large shareholder of ours, Scott, relates to the individual investor opportunity. So thank you for highlighting the opportunity and given investor needs in this very low rate environment, making additional investments in distribution certainly seems to make a lot of sense. Scott, just a question if we could elaborate as it relates more to the strategy, any broad objectives that we might have and how GA might potentially fit in the framework and how we think about that opportunity in the long term?

Yes. Thanks for the question. I'd say the individual investor opportunity, as I mentioned in the prepared remarks, is one that we think is immense for us, real opportunity for us to monetize the brand and the performance in a differentiated way. Just context, last several quarters, about 10% to 20% of the money that we've been raising has been coming from individual investors. We have doubled the size of our team, focused on the individual investor over the last 12 months. And you should expect that team to continue to grow. And as the team grows, we think the opportunity for us to scale will grow as well. In terms of some of the themes, it's not only our flagship funds that we've been raising, which we get onto different bank platforms all around the world. It's also increasingly continuously offered product, whether it's in credit or real estate and other strategies over time. So we're not only investing in facing off against more individual investors, we're also bringing more product and creating more product that's tailored to the individual investor, both in registered and non-registered format. And to the good question and the point embedded within it, if you think about what Global Atlantic does, they're really in an indirect way, facing off against the individual investor as well. The investor in the kind of the underlying annuity or life product is largely a 50 or 60-year-old individual who's planning for their retirement. And so we have, by virtue of the partnership and with Global Atlantic, now much more distribution that over time, nothing that we have in the numbers that we shared with you today, but there's an opportunity over time for us together to think about whether there's product we could create and access that distribution, or if there's other ways that together, we can bring more product to that end investor. So that's an upside opportunity for us that we're excited to explore over time together.

Great. And why do we go back to the audio feed.

Great. It's Alex Blostein again for Goldman. A question around GA for Allan and probably Scott. So Allan, you talked about how GA benefits from being part of KKR makes a ton of sense. I was hoping we can hit on this from a different angle and spend a couple of minutes on how GA can help KKR, but specifically in terms of third-party fundraising. So just thinking through prepaying AUM not related to GA's insurance business. Retail is obviously 1 of these opportunities, Scott, you just talked about. But outside of retail, are there others, and if they are, maybe help us think about the time frames and the addressable markets within those areas?

Yes. Thank you for the question. I'll start off, and then I'll flip it over to Scott. So I think the most obvious, which we commented on was GA's 150 person sales force covering 200 banks and broker, there's 150,000 financial advisers. This, we think, is a long-term potential opportunity that we could jointly leverage. And what I'd say is there's so many opportunities that we're focused on right now, prioritization becomes something incredibly important. But think about that long term. On top of that, Global Atlantic has a broad-based set of relationships, whether that's in the private or public side. And again, what we're finding as we trade notes is -- there's the opportunity to share relationship already defined between these organizations that could result in future fundraising opportunities as well. And then again, as we look forward, as we think about expanding our business into new lines or into new geographies, again, longer term, we think there's opportunities for KKR to partner with us that could result in additional capital raise. What else Scott?

Yes. I'd say, Alex, thanks for the question. The only thing I would add, in addition to kind of the ability to create new product together and potentially distribute what we already do or those new products to the GA and investor. I think the partnership with Global Atlantic is making us better investors on behalf of insurance companies. So before Global Atlantic, we had $34 billion or so of AUM that we manage on behalf of insurers. But now we are in this business in a much different and larger way. And so what we're finding is, even in the couple of months since we closed and the months since we announced the transaction, it's a very different dialogue that we're having with insurers around the world. We're much more practitioner with them than a practitioner for them. And so that's allowed us to stand in their shoes to a different extent. And it's -- one of the things we don't talk enough about is Global Atlantic had its own really talented investment team. The vast majority of which have joined KKR now. So we actually have a larger team out originating assets focused on the insurance space. That is a new thing that we have inside the firm. We did not have a year ago. And so that's making us better investors for insurers as well. So we think it will help not only the individual investor initiative, but also our insurance coverage initiative as well as we continue to grow the AUM in that space away from Global Atlantic.

We have a question -- a couple of questions from Mike Cyprys, at Morgan Stanley. Rob, the first 1 is for you and relates to the compensation guidance framework that we gave. Given the updated comp ranges, how do we think about coming out at the top end or the bottom end of the range? And how are we going to think about that prospectively, given the fee, the carry as well as the investment income ranges that we discussed and outlined for the first-time last quarter?

Great. Thanks a lot, Mike. I think point number one, we're very much focused on making sure in all operating environments that we could maintain our compensation ratios inside of the ranges that we provided. In terms of where we'll be in those ranges, I think it's going to depend on a number of different factors. Certainly, as a base case, we're envisioning the midpoint of the range. Over time, as we perform, hopefully, we'll be able to drive that down towards the lower end of the range, but that's going to come over time and with performance. But I think the main message here, Mike, is that we're -- our intention in all operating environments is really to be able to be able to operate within the range that we provided.

And the second question relates to return on equity. Why don't I take this one, and it's -- the question for Mike is what sort of ROE profile should our business generate? Looking at our targets, it seems to imply it's about a 9% to 11% cash ROE. Does that seem about right? And I think it's an interesting question, and it kind of reinforces a lot of what we went through in the presentation. As we think about and evaluate ROE, we actually look at that on a marked basis. So we'll look at the change in our book value over a 12-month period. We'll add the cash dividends that we paid out. That's our numerator, and our denominator is the average book value over that 12-month period. And so if you look at the ROE that we generated in 2020, the number was 23%. And if you look at the ROE we generated the year prior, it was 24%. So as we think about that metric, that is how we think about that and actually value the performance of the firm. The point that you raised is an interesting one is that much like you've seen in carry, where you've seen more crude carry relative to it being paid out. And the same dynamic in balance sheet as it relates to significant balance sheet gains on a marked basis and less realized balance sheet income. You see that also in the framework of this ROE. So whereas we've -- we generated a very attractive 20-plus ROE on a marked basis over the last couple of years, you're right. You've seen that cash number actually be quite a bit lower than that. And we think over time, we can actually look again to achieve that good balance and look to see attractive book value compounding that remains really important to us. But at the same time, we think there's an opportunity across the firm to see an acceleration in the cash earnings. And I think that's what we've hopefully been -- hopefully one of the things that we've tried to communicate over the balance of the day. And why don't we go back to -- okay. I'm being told let's not go back to the audio. We do have another question. Joe, why don't you take a crack at this? This is, again, from a long-term shareholder of ours. The infrastructure case study was really helpful in framing the opportunity and what we can see financially as a platform scales. As we look forward, if we had to think through a platform that could scale from where we are today to one that you'd see $500-plus million in revenues in the next handful of years, what would be an example of a platform that comes to mind and that people can watch that development?

Sure. I mean, infrastructure is just 1 example of what we have achieved so far in terms of getting to that scale. I could have put up Asia there. Asia private equity would have been a very similar trajectory to infrastructure. But when we think about going forward, there are probably 2 businesses I'd focus on. Real estate, as we mentioned, is just an absolutely massive asset class that we're just getting started in. Next 5, 10 years, I would expect that to have as big, if not bigger, a bigger opportunity than infrastructure in terms of scaling. And the second is really around our core investing products, whether that's core private equity, core infrastructure and our core real estate businesses combined. I think that group of family of products has massive opportunity to scale.

Great. And we have a question from Chris Harris at Wells Fargo. Rob, just broadly curious what you feel is the appropriate amount of leverage on the business. And do you have any kind of a target leverage ratio in mind, whether that's as a percentage of FRE or any other metric?

Sure. Thanks, Chris. So I'll start off by saying our credit rating, and we're rated A by S&P and Fitch is an important, I think, for KKR and something we're focused on. In terms of leverage ratios, we look at a number of different things. We do look at a multiple of fees. We look at a multiple of aggregate EBITDA, given the diversification of some of our performance linked revenues metric. We spend a lot of time looking at as a management team as our debt-to-equity ratio. So when you actually think about for a second, I want to tie back to something Craig said, we generated the last couple of years, low to mid-20s ROE. We did that with somewhere between 0.2x and 0.3x debt to equity. And so we've got a very low level of leverage, especially given that it's got 20-year duration on it, a maturity on it. And even with that low level of leverage have been able to generate ROEs that are north of 20%. And we think that combination is pretty unique. So we pay attention to all of those things. We talk about it quite a bit. We absolutely think there will be opportunities to access the debt markets in the future with increased growth. But we're focused on those measures, and we're focused on our rating.

Great. Thank you, Chris. And with that, why don't I just turn things over to Scott for some final thoughts.

I just want to, first off, thank everybody for joining us today. We hope today gave you a good sense of the opportunities that we believe we have in front of us. And as a result, the growth that we think is achievable over the course of the next several years. We greatly appreciate all the questions, your focus and interest and your partnership and your trust. We really appreciate your ideas and input. So please don't be shy in terms of other questions that you have and other ideas you have as to how we can continue to do even better. We thank you for everything and have a great rest of your day.