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

Great. Well, good morning, everybody, and welcome, everyone, back to the second day of Goldman Sachs Financial Services Conference. We're going to get started with KKR this morning. It is my pleasure to welcome Scott Nuttall, the Co-CEO of KKR. KKR is wrapping up a record year for the firm across multiple metrics, including excellent investment performance on raising realization and deployment. Importantly, with many of the firm's initiatives scaling pretty rapidly, KKR is committed to doubling the business again over the next 5 years or so. Scott will open up with a couple of slides, and then we'll jump into the Q&A. So Scott, over to you.

Great. Thanks, Alex. Great to be with you again. Actually, it's really great to be together in person after last year. And thanks to all of you in the room for being here so early. A little KKR with your coffee today. I thought what I do is just start off with a couple of scene-setting comments and slides. We're a few weeks from the end of the year. So maybe a quick reflection on what's happened in 2021 for our business and then share a little bit of an update on what's happening with a bunch of our growth initiatives. There's going to be several these, picture of a thousand words. It's been a very active year for us as a firm. You can see AUM and fee paying AUM up nearly 100%. We've noted there the Global Atlantic acquisition, which, of course, was quite additive to those growth rates. If you ignore GA though at the time of the closing, you can see still material growth in AUM and fee-paying AUM organically. Book value per share, also benefiting from strong investment results, up 38% over the course of the 12 months through 9/30. If you look at capital raising and deployments, similar story. You can see first 9 months of 2020, $32 billion raised. First 9 months of this year, $102 billion. We've also been busy deploying capital, so that deployment number went from $20 billion to $50 billion, 9 months -- over 9 months. So we've not only been very busy raising the money, we've also been putting it out. If you look at what all this has translated to in terms of profitability metrics, we're seeing real attractive flow-through. Our fee-related earnings per share up 53% in the first 9 months. And our distributable earnings per share, more or less our net income, up 98% over the first 9 months of this year versus last. So a significant amount of growth. And as we'll talk about, a number of our businesses are inflecting at the same time. And so we believe that there's lots of opportunity ahead of us. This is a good slide. It gets across a couple of things because what you'll understand is although we've had significant growth in this year, we have a lot more ahead of us. And so if you look at -- what this slide is telling you is a few things. One is the diversification of our business. So you can see this is based on management fees, how diversified the business has become over the course of the last several years. You can also note the inflection up. Look at the 3Q '21 annualized versus all of 2020, up and to the right, very material growth across a number of our different businesses. So we're inflecting and we're more diversified. And the great thing about this is we have a lot of visibility ahead of us. And so the visibility is there on the management fees because the $102 billion that I mentioned earlier in terms of what we've raised in the first 9 months, very little of that is actually in this management fee number yet. Most of that money has yet to turn on. That will impact '22, '23 and beyond. So we've got visibility on management fees, but we also have visibility on the other metrics that really matter. And so this slide shows you carried interest, and it shows you the investment income potential from our balance sheet. This is something that we look at internally every quarter. If you look at the slide, just to orient you on how to read it, look at the left-hand side. You can see carried interest, the bar, this year, $1.301 billion. That's the amount that we've monetized of carry over the last 12 months. And then the $8.5 billion, the line, that is the unrealized carried interest that we have. So in effect, you can see over the course of 2020 versus LTM, we've kind of monetized an incremental $250 million plus. But at the same time, we've seen the unrealized number go from $4.7 billion to $8.5 billion. So an 80% increase while we've been monetizing more. Same thing on the right-hand side. This is the same dynamic on the balance sheet. Significant increase in investment income realized while we've also seen a massive increase in our unrealized gains on the balance sheet. So we're monetizing more. But because of the investment returns, we're building significantly more future potential for earnings in the enterprise. And so as said, simply, if you put the left and the right together, we've seen a $1 billion increase in carry and investment income realized LTM versus 2020. At the same time, the unrealized has gone from $9 billion at the beginning of this year to $15.5 billion as we sit here today. So we've got lots of visibility on carry and balance sheet income as well. We also have a lot of fundraises still coming to market. And we've been very active raising money. But if you look at this slide, this gives you a sense in the next 12 months what we see coming. There's 28 line items on this slide, and this isn't even everything. So we've got not only a significant amount of success behind us, but a lot of runway. And back to this point about visibility, there's plenty still coming. Then maybe I'd also spend a minute on what we're seeing in terms of several of the growth strategies that we talked about, Alex, when we were together a year ago. And so I'm just going to hit a handful of these. The first is core. This is basically adjacent strategies to what we're doing in private equity, real estate and infrastructure. So think longer-term capital. A lot of this can be raised on a continuous basis. It suits individual investors quite well in a number of instances. So a year ago, $14 billion. As we sit here today, $39 billion. And you can see where this growth has come from. These are newer strategies for us, and they're scaling very, very rapidly. And they're leveraging resources and deal flow already in the firm. Another topic we talked about a year ago when we were together here was real assets. We started our real estate business and our infrastructure business 10, 12 years ago. Massive end markets, the TAM in these businesses is significant, and we are starting to inflect. So you can see the growth on the slide, $13 billion to $36 billion in a year in real estate, $15 billion to $40 billion in infrastructure. And in our business, and several of you know, it takes about 10 years to get to that inflection point. It's about the time Fund III turns on. And we have several of our strategies that are right at that 10-, 12-year inflection point. That's why you're starting to see growth like this. And the really exciting thing from our standpoint is there's much more ahead. This is just the beginning. We're just at the beginning of the inflection part of the curve. Asset-based finance, another massive opportunity, another large end market for us. We now manage over $30 billion in asset-based finance. We have 15 specialty finance platforms. These are creating originated flow that works for Global Atlantic and third-party insurance investors and others. We have a fun business around this as well. You can see,, $4.5 trillion market. We think that's going to be $7 trillion 5 years from now. So a massive end market growing very quickly. Asia, another very large opportunity for us, 8 of our 21 offices are in Asia. We were early to that part of the world in the alternative asset management universe, and we're seeing significant scaling there as well. You can see 20 to 44 over a relatively short period of time. And what's exciting is we're bringing the rest of the firm to Asia. We started in private equity. And now we've brought credit infrastructure, real estate, technology growth. You can see it on the right-hand side, these are all Asia-focused strategies raising money in the next 12 months. So we've got a great footprint, and we're bringing the rest of KKR to that part of the world. Big opportunity for us. And as a reminder, more than half of GDP growth is in that part of the world. So we've got all these newer, younger initiatives that have been growing very rapidly. But we're also seeing our private equity business, our flagship business growing very rapidly as well. And so this slide just gives you a sense, over the last 12 months, private equity, and this includes traditional growth and core and our customized portfolio solutions business, up 60% in the last 12 months. And there's lots of reasons for that, but I think the primary reason is on the right-hand side, which you can see the returns that we've been posting. These are inception-to-date returns for these strategies. Another big opportunity for us, and I'm sure we'll come to it, Alex, is private wealth. We now manage about $47 billion in private wealth. We've been investing meaningfully in this channel. You can see the number of platform partnerships we have continues to increase, and we're creating more democratized products. This has historically been 10% to 20% of the money that we raised annually. We said on the last call, we think that the investments we're making and the new products we're bringing, over time, it will get to 30% to 50% of the money that we raised. So it's an increasing percentage of a growing number. So when you put all of this together, this is why we are so confident that we have a path to double the firm again. We said this on the last earnings call, but fee-related earnings in the last 12 months is a little over $2. Over the next 5 or so years, we see that going to $4 plus. Distributable earnings, same thing, just shy of $3.50. We see that going over $7 in the next 5 or so years. So we can double the place again. And it's because we have all this wind at our back. We've got the performance. There's a lot of capital interested in our space, and we've got most of what we're doing around the world inflecting right now.

Great. Well, Scott, thanks so much for this. Not surprisingly, I haven't seen the slides before, but there's lots of this that I want to talk about this morning. So why don't we start with the concept of doubling earnings power of the company. Again, we've seen you guys do this in the past. You outlined broader -- in broader strokes what some of those building blocks are. Can we expand a little bit more into outside of the flagship funds and kind of the core business? What are the key areas where you guys need to succeed to achieve the doubling of FRE? And then within that, maybe we can hit on the mix. So how much of that do you expect to come from sort of third-party capital versus more GA-tied sources of fundraising?

Sure. Thanks for the question. It's a good one. We spend a lot of time on this. And you're right, I hit on some of this in the slides. But it's probably 3 or 4 things I would call out that are top of the list. Asia, where we just see a significant amount of runway. The capital markets are not nearly as developed there as they are in the U.S. and Europe. So we're seeing opportunities across all of our asset classes. And frankly, there's less competition for what we do in that part of the world right now. We're also seeing big flows into everything we're doing in core, core, core plus. There's an interest in long-dated assets that generate a yield. And so our core plus real estate business where we've got -- we started that in the U.S. We're bringing that to Europe and Asia. Our core infrastructure business, which we just started and we have over $7 billion of capital, already a significant amount of interest there. People are looking for ways to have inflation protection and get a yield and have some collateral. And so we're seeing a lot of interest there. We expect that's going to continue. Private wealth, I mentioned big opportunity, a lot of interest from individual investors in what we do. It is a bit of an oddity that if you're a retired teacher in the state of Texas, you have a significant amount of your retirement savings in alternatives by virtue of your pension fund. If you're a retired accountant, you cannot get access to alternative assets. We think that will change over time. So we're creating a lot of product that will help address that issue. The asset-based finance opportunity I mentioned, we think is significant. GA is a big part of that, but we've also now got a nearly $50 billion AUM business with third-party insurers. We think that can continue to grow. But on top of that, we've got the real estate opportunity, both equity and credit. That's gone from $13 billion to $36 billion in the last 12 months. We think that business 100 to 200 before we take a breath, so massive opportunity there. Our capital markets business $720 million of LTM revenues, growing globally. Third-party KKR, as we expand, the capital markets opportunity expands. Credit, $185 billion AUM business that we think we can double again. And then Global Atlantic, which, of course, when we announced the transaction, had $70 billion of assets. We're now at about $120 billion, and we've grown quite quickly. So a long way of saying we think there's lots of ways for us to win and grow going forward.

Great. Let's spend a couple of minutes on all of these. So first, I was hoping to start with core. Over the last couple of years, that's probably been one of the bigger sort of nuances of the story that maybe the market did not appreciate until you guys started kind of putting out the numbers that you have in the last 12 months. Real estate and infrastructure particularly seem to be getting a lot of focus, especially given where we are in the macro cycle. Can we spend a couple of minutes on how you think about the pace of deployment out of those strategies over the next 12 to 24 months? Because that ultimately is what will drive fees there. And then how are you thinking about expanding core outside the U.S.?

Yes. So these are -- for those of you less familiar, the core opportunity is quite large. So these tend to be very large equity checks, large investment opportunities, longer-term hold and on the real asset side, have a very attractive current yield. And so the opportunities are large. And we were already sourcing these opportunities by virtue of what our real estate infrastructure and private equity teams were doing in their day jobs. So these were opportunities that didn't fit the value-add or opportunistic vehicles we were managing and historically didn't have a home. And so we decided let's go raise pools of capital that would allow us to say yes and be relevant to the opportunities that we were seeing. But because of the size, the amount of capital you can raise is significant, and the deployment opportunity to your question is large. So $3.8 billion of our deployment just in Q3 were around these core opportunities. In terms of the Europe and Asia aspect of your question, the non-U.S., our core infrastructure business, maybe take them in turn quickly. Our core infrastructure business is global in nature. We've been incredibly active outside the United States. We bought a business called John Laing in the U.K. this year, which develops projects all around the world. So we have an embedded set of projects that we now have through the John Laing platform, but we also have a development opportunity because the team came with it, so we can develop more projects with that team. We just bought an electricity distribution business in Finland as an example. And we're also active in the U.S., wind and solar. We just did another renewables deal. So there's plenty to do in core infrastructure, and I think that business is going to scale rapidly. Core plus real estate, we're doing a lot across industrial, multifamily, life science, office. The core plus business was really started in the U.S. It's now -- we're creating dedicated vehicles for Europe and Asia. So that's kind of coming attractions. You'll see that on the coming fundraises page. That's what we're referring to there. So we'll have dedicated strategies there, which we're starting to raise money for now. So that opportunity is meaningful as well. And as you know, real estate is probably the largest end market that we face off against. And then in private equity, that's a very large pool of capital for us, now $30 billion in core private equity. Think of these as targeting kind of more mid-teens return, lower-risk, lower-reward, very recurring revenue businesses, long-term hold, just let it compound. And right now, that strategy is about 50% deployed in the U.S., about 35% Europe, 15% Asia. You should expect that the 50% non-U.S. will continue to increase as a percentage. And we're also exploring raising dedicated geography-focused vehicles for core PE as well. So you put all that together, big TAM, big growth opportunity. And you're right, we didn't talk about it much. We wanted to get it working and then we figured we'd share with you what we're up to.

Great. Zoning in on infrastructure a little bit more, both on the opportunistic side of infrastructure as well as the core side. You guys are one of the leading platforms out there as we've discussed. With the recent passage of the $1 trillion infrastructure bill, what role do you expect private markets to play in that ecosystem? And I guess how do you expect KKR to benefit from that?

Yes. No, I think it's a net positive for our business. I think we're -- we don't expect it's going to meaningfully impact our pipeline. It's definitely going to be helpful, but I don't think it's going to be meaningful. I mean we have a significant amount of activity already underway. Where you probably see it help a bit is in public-private partnerships. We'd expect more activity there. We have a significant amount of experience with those, especially around clean energy and renewables. So we could see that activity picking up as governments figure out how to develop some of these projects. And so that's one place you could see opportunity increase for us. But we are incredibly active in infrastructure. There's just a very significant capital need. As you know, all around the world, trillions a year. Governments do not have the capital to do everything that needs to get done. And we are benefiting from a flow of capital and an understanding and appreciation that this is an interesting investment space. 10, 15 years ago, it was just starting in terms of people's understanding. We're starting to see it mature. But for us, we started at the more flagship, value-add end of the spectrum. And so we've been raising capital there. Our most recent fund that we're in the process of raising, last number I think we put out was $15 billion so far, and we're still in the market with that. So we're still accessing capital there. But then what we've done is we've continued to develop off that flagship strategy, so geography-focused funds. Asia infrastructure raised the first-time fund, nearly $4 billion. So we now have the largest fund in Asia infrastructure. And then there's adjacencies like core. And I think you're just going to see us continue to add more products to the infrastructure space. And given the size of the capital need, there's a significant scaling opportunity.

Great. Let's talk about another big area of growth for you guys in the space broadly, which has obviously been retail. We were just talking about it, right, earlier. It's been definitely sort of one of the bigger themes for the space over the course of the last 12 months. So obviously, a very large end market, as you pointed out. KKR's historic presence in the wealth management channel has been sort of pivoted towards high net worth, ultra-high net worth as some of those kind of participants contribute to the flagship funds. As you think about the broader maybe affluent and mass affluent part of the market, what are the key products you're hoping to tap into that channel with? Obviously, you have KREST on the nontraded REIT side, so maybe a couple of comments on reception to that product so far. Where do you stand with various warehouses in terms of distribution, et cetera?

Yes. No, it's a great question. You're right. The 10% to 20% of the AUM we've raised a year that I mentioned historically has largely been our flagship strategies being sold through warehouses to their high net worth channel. And that will continue. And we'll continue to have relationships on that side, and that will continue to grow. We have been investing meaningfully in building out several aspects of our own direct high net worth efforts. So not only adding to the team that's covering the warehouses, but also bringing on our own direct high net worth coverage team. So we're covering family offices, ourselves. We're building out that team. It's more or less quadrupled over the last 18 months. We're going to continue to invest there and continue to have more feet on the street. We just in the last 6 months, added heads of high net worth and private wealth for Europe and Asia. So you'll see us build even more outside the U.S. as well. So we think it's a big opportunity for us. In terms of the more democratized products, the nature of your question, in addition to our regular way of funds and separate account business, we are creating new product that is built specifically for private wealth investors and the mass affluent. So far, we have 3 that are in the market. There's KREST which is our real estate product that you mentioned, but we also have 1 for credit, and we also have 1 through private equity. And so we're getting on more platforms every quarter, and we're building out that effort. We raised about $2 billion in the first 9 months of this year as these products have been launched. Candidly, we're ahead of our expectations because there's been a significant amount of interest, and we have been growing these relationships. And a lot of the team that we've hired is just showing up in the last 6 months, and there's going to be many more here next year.

Great. So we talked about fundraising. Obviously, investment performance you highlighted is really excellent. I want to pivot a little bit to deployment. That's an area where given current market valuations, I think maybe we've all been a little bit surprised of just how much capital the private market space has been able to deploy, whether it's equity, credit, infrastructure, et cetera. How are you thinking about the pace of deployment from here? How are you thinking about the multiples that are being paid? How are you thinking about underwriting returns in the kind of fairly elevated environment for valuation?

It's a great question. It's something we spend a lot of time on. But if you look beneath where our deployment has happened, and you saw that number, the $20 billion went to $50 billion, it's important to understand where a lot of the growth has come from. Our private equity deployment, traditional private equity is more or less flat year-over-year. So what we did is we meaningfully leaned in last year in private equity during the dislocation, and we deployed more capital than anybody else during the pullback of the spring and summer months. And we've been busy this year in private equity, but it's really gotten us back to last year's levels with a larger capital base. So we're being judicious. We are very thematic in our approach in everything that we do. So we're investing in themes that we think will play out over the next 5, 10, 15 years. And so that's where we've been directing the capital. But it's important to understand, I think people see the deployment, and they think, "Boy, they're buying a lot in DE." That's not really the case. It's more or less flat year-over-year. Where you're seeing growth is a couple of things we talked about, core. So we're investing a lot of incremental capital there. If you look at things like real estate credit and private credit, significant scaling year-over-year, something like $10 billion going -- last year going to the better part of $30 billion to $40 billion this year. And that's Global Atlantic, that's new insurance clients, that's a lot of demand for anything with a yield and being senior in the capital structure. And so that, I think, is how investors are expressing views, including us right now, is you can get incremental return in the private markets, get paid that illiquidity premium and be in a relatively safe place in the capital structure. And so it's a lot underneath that $50 billion of deployment. And look, the way we look at it, we also have a very large portfolio. So it's a wonderful business. You can be happy all the time. If we think a sector is overvalued, we have the ability to monetize, and we've been actively monetizing some of the more mature companies in our portfolio. And if things get cheap and multiples contract, we have $111 billion of dry powder waiting to be called.

Right, that makes sense. All right. Why don't we pivot a little bit? I want to spend a couple of minutes on the capital management strategy. One of the points that you brought up earlier today and obviously been a big part of our thesis is that KKR is going to generate just a tremendous amount of free cash flow over the next couple of years. And that's both from FRE, again, doubling over the next 4 to 5 years. You talked about realization outlook carry as well as balance sheet realizations. As you go through the process for the next couple of years, how are you thinking about deploying of excess cash flows, whether it's increase in dividends, buybacks? Any comments around M&A would be helpful as well.

Sure. We think about this and talk about it a lot. But I think it's important for you to understand, we think about it the same way you do. Like we're the largest shareholders. So the employees of KKR own about 30% of the firm. So as we think about the capital management strategy, we're focused on what you are, which is what's going to create the most per share value, very simple. And we're big believers that the balance sheet has allowed us to create a lot of this growth. We would not have been able to scale the business as quickly as we have if we didn't have the balance sheet to seed a number of things that we've created and accelerate the scaling of the enterprise in a bunch of different ways. So we believe the -- as we think about the capital management strategy going forward, that's what's in our heads. And we're really big believers that the investments that we're making are going to have really attractive risk-adjusted returns. And you can see the returns on the balance sheet, they've been very strong. So you should expect us to continue to invest in everything that we do. We have $11 billion of unfunded commitments off the balance sheet to our existing vehicles. And so that $11 billion is going to get funded over multiple years. So that's obviously something that we are going to -- has been capital for. But a lot of that will be funded as existing investments get monetized. And then to your point, we pay a dividend. That dividend has been growing. We typically revisit the dividend on the Q4 call. So you should expect us to talk about that on the next earnings call. So that is something that we will continue to do. We'll have a dividend. It will grow. That's something that we're committed to. We've also tried to be thoughtful about buybacks. I think we've bought back more than anybody else in our space. We bought back 78 million shares since we started the buyback policy at an average price below $22. Our stock is 77. So we bought back nearly 10% of the company at a fraction of our current share price and below our current book value per share. So it's a body of work. We feel pretty good about that. And you should expect us to continue to buy back stock at least to offset comp-related dilution. And then M&A has been a real value creator for us. And if you think about what we've done with our M&A strategy, we've basically been converting balance sheet and balance sheet earnings into fee-related earnings. So if you think about things like Marshall Wace, Franklin Square, certainly Global Atlantic, we've taken several billion dollars of the balance sheet and converted that into fee-related earnings at a very attractive multiple and a very attractive creation multiple. So we're using the balance sheet to create the types of earnings I think investors are most interested in. And so that M&A strategy is something that we'll continue to execute. And that's how we think about it. And if we can keep doing that, it will allow us to add to the organic growth story we talked about before.

Yes. Great. Well, before I open it up to the audience, I want to ask you one macro question surrounding inflation and interest rates. It's funny, going back, the last time we were here in person is end of 2019, I think we're talking about higher interest rates actually at that point as well, believe it or not. So we've seen this move before inflation may be bringing a little bit of a different twist to this. So as a 2-part question, I guess, as you look across your portfolio of companies, particularly in the private equity side, what are you guys seeing in terms of inflation risk over the next couple of years? How insulated are the portfolio companies from inflationary pressures? And then the second question is around higher interest rates. That comes up a lot when it comes to private markets firms. But how is the higher rate environment if we get some price to the upside could impact both fundraising and obviously, returns?

Well, we have a lot of good data on this topic. So we've got equity investments, meaningful equity investment, about 200 different companies and then we lend money to 1,300. And for a lot of those, we get monthly numbers as well. So we've got a lot of good information. There's no doubt that we're seeing inflation pressures across the portfolio, but it's not at all ramping. We are seeing it in selected places. I'd say a lot of what we're seeing right now, we'd described as kind of scarcity-based inflation, just supply chains adjusting to demand coming back. And we are seeing it mostly on the goods side. We've got some of our industrial companies that have put in place 5 or 6 price increases so far this year. We do think some of that scarcity-based inflation will abate. We're already starting to see it as supply chains start to adjust. So there's some of this that is transitory. But it's more nuanced, and it's more complicated than just saying it's going to be behind us because we don't think that's the case. There's 2 other things that we're seeing that we expect will be more persistent. One is wage pressures. And we're seeing this around the world and across the portfolio. Availability of labor, cost of labor is increasing. There are some people that just dropped out of the workforce. There's a reskilling required in some parts of the economy. That takes time. And so we're expecting that we will continue to have wage growth that will be persistent as some of this goods-related, scarcity-related stuff runs off. We're also expecting that we'll see a shift from goods to services. So you're going to see inflation pick up, health care, education, rental costs. So we expect you'll see a services-based inflation that will pick up. And so when you put all that together, we're not expecting any runaway inflation. We are expecting kind of the resting heart rate of inflation to be a bit higher as we look across the world and think about the next several years. And what does that mean? It means higher nominal GDP growth. It probably means on the margin, lower real interest rates, and that's a very comfortable environment for what we do. In terms of what this means from an investment standpoint, we're focused on investing in companies that have pricing power. You want to be invested in price makers, not price takers at a time like this. And so a lot of our investment committee discussions across the firm are on that topic. And what is the pricing power of the company that we're looking at? And how is this going to evolve? One of the things we do look at is where is the market's view on some of these things. So last we looked, the vast, vast majority of companies in the S&P 500, there's an expectation that margins are going to increase in 2022 versus 2021. I think there's probably going to be a bit of a shift in mood on that topic over the next couple of quarters. And so that would be great for us. If there's a little bit of market contraction around some of those opportunities, that just means things will get more attractively priced, and there's things for us to do. Through the second part of your question, look, I think as we look at interest rates, we are expecting them to move up in a fairly gradual way. The market may overreact to some news, some noise, but we're expecting it to be relatively straightforward. What that means for our business is net positive. If you think about our credit business, which is large, the $185 billion I mentioned, nearly 90% of what is in that portfolio is floating rate. And so the way those strategies work is there tends to be where we have an incentive or a carry right, there's a hurdle that's fixed. So if rates go up, incentive fees, all else equal, will go up. So that's a positive. For Global Atlantic, it's also a positive if rates go up, and so we'll see some benefit there. And if multiples contract in some sectors, as I mentioned, we've got this $100-plus billion of dry powder, and so we're waiting to see if things get more attractive.

Great. Well, we've got about a minute or 2 left on the clock. So why don't we take questions? One up here, please. Over here.

Scott, I just wanted to ask on the core business. It's been extremely impressive what you guys have done there. And I wanted to ask kind of 2 questions. The first is, do you feel that your capital -- do you feel like your constraint in growing that business is more on what you can fund raise or what you can deploy? And then on the deployment side, so far, it feels like -- I've been very impressed by the pace. It feels like you've been monetizing the existing system that you have at KKR. And so to increase that deployment pace in the core by vertical, is that -- what are some of the steps that you're going to take to sort of accelerate that deployment base?

Yes. Both really good questions. The answer to the first one is we're limited by the amount of capital we have right now. The opportunities we're sourcing require more capital than we manage today. And so that's why we're continuing to raise capital for these strategies so that we can catch up to the demand. But that's part of the reason we have the capital markets business because if we source a several billion dollar check, we'll say yes. We'll keep what we can for now and then syndicate the rest to LPs and others. And then ideally, they'll want to put money in our fund vehicles over time. So that's the answer to the first part of the question. And in terms of the second part of the question, I think the dynamic that we're seeing across everything that we're doing in core is -- it's an interesting one in that we're finding that the opportunity set is quite global. And so there's plenty for us to see all around the world. And I think what we're doing is investing in origination, simply put. So we're adding to our teams. And the nice thing about our firm, one of the very nice things is we're culturally connected. Everybody helps each other. Everybody gets paid off one P&L. So as team source opportunities that may not fit into the opportunistic or the value-added funds of everything we do, everybody is motivated to figure out a way to get to yes. And so there's no core infra team or core real estate plus team. It's everybody is an origination team for all the pools of capital that we manage, and that's global. And so what we're doing is we're adding origination on the margin, but we're also leveraging relationships we already have. So this is really about monetizing content that's already in the firm.

Great. Thanks for the question. Well, I think we're actually out of time. So Scott, thank you very much for being here. Appreciate it.

Thanks, everybody.