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

Great. Okay. Well, good morning, everybody. Thank you for joining our next session. It's my pleasure to welcome Scott Nuttall, KKR's Co-CEO. Over the last several years, KKR has evolved into one of the most diversified global alternative asset managers with over $530 billion in AUM and robust capabilities across private equity, real assets and private credit. Despite what obviously has been a challenging backdrop for the industry, KKR has raised over $50 billion of capital over the last 12 months. And that's without any contribution from the firm's largest flagship products, putting the firm in a really strong position as you guys enter 2024. KKR also made a couple of important announcements just last week, buying the remaining stake of Global Atlantic, the firm's insurance partnership and enhancing its reporting and laying ground for demonstrating more recurring earnings growth. And I think Scott will kick us off with a couple of slides, and then we'll jump into the Q&A.

Great. Thanks, Alex, and thanks, everybody, for coming. It's great to be back again.

Great to see you.

I appreciate you having me. I thought I'd quickly go through a handful of slides just to give you a little bit more context for what we announced literally a week ago today. So we made 4 announcements last week, a series of changes that will go into effect at the beginning of the year. I wanted to explain a little bit why we're making these changes and what they are. First, as Alex said, we're acquiring the 37% stake in Global Atlantic we don't already own. So we'll own 100% on a going-forward basis. Bottom line, we think full alignment will allow us to capture more of the synergies that we found in our first 3 years together and be able to grow even faster. Second, we're creating this new strategic holdings segment. Over the last few years, we've been talking with our shareholders about the fact that our balance sheet, actually the biggest investment is in something we call core private equity. Think long-term assets, more recession-resistant, highly recurring. Those are starting to pay us cash dividends now. So for the first time, we're breaking that out into a third segment of the firm and sharing that. And then we shared some numbers as to what we expect those dividends to be going forward. The next change is we're modifying our compensation ratio. By way of background, we shifted in this direction at the beginning of 2021. We used to have a 40% or so comp load across all 3 forms of our revenue: fees, carry and balance sheet. At the beginning of '21, we broke into 3 ranges. What we're really doing this time is we're changing those ratios a bit, reducing the comp ratio further on fees, which drives more fee-related earnings, making an offsetting increase on carry. So think net neutral to our overall dollars of compensation but giving shareholders more of what they want and creating even more alignment. And lastly, we're creating a new framework for how we report. So we think we now have 3 forms of recurring income: FRE, our new strategic holdings segment and insurance. We're going to report on that basis going forward and share something called total operating earnings and combine the three. So we'll share all three and then what it looks like aggregated. If you look at the right-hand side of this slide, you can see 10% to 20% accretive across all of our metrics. We also increased our target in terms of 2026 FRE per share from $4 plus to $4.50 plus. To give you context, our last 12 months actual roughly $2.55. So we're expecting quite a bit of growth over the next few years. And as I said, this total operating earnings metric combines the three most recurring aspects of our earnings profile. We expect that to be 70% plus of our total pretax income on a go-forward basis. So I thought I'd hit real quick three topics: our asset management business, our insurance business and our strategic holdings segment, give you a little bit more context for what we've been working on and why last week's announcements were so meaningful for us. First, in asset management, a little bit of background. We have been growing and diversifying KKR quite meaningfully, in particular, post the financial crisis. So this gives you a sense of what the firm looked like in 2010, four different products, investing businesses. Today, if you look at the right-hand side of the slide, you can see a bit over 40 different businesses. Our AUM has grown meaningfully. You can see that on the chart, and it's become meaningfully more diversified. And you can see the breakdown on the right-hand side in terms of how we now look. Biggest business by assets if you aggregate it is credit followed by private equity then followed by real assets. And with real assets, we mean real estate and infrastructure. And this is what's a bit different about us. We've been around 47 years. But if you actually look at KKR as a company, most of the businesses that we're in are very, very young. So we look at the life cycle of a platform. So if you think about the 40 or so different businesses that I mentioned, here's how they break down. You can see very few of our businesses are actually scaled. We have a lot of businesses that we're still building. And in our business, it takes 10 to 15 years to get to scale. So think of it is we have a lot of businesses that are getting close to that inflection part of the curve. And I thought an example of what that looks like in reality might actually help a little bit. This is our infrastructure business, okay? So we started this business in 2011, $2 billion of AUM. You can see it went to 5, went to 13, then 40, then 56. So there's a dynamic in our business, CapEx flows through the income statement, right? You got to bring in the talent to build business before the assets show up. You can't create a 10-year track record in less than 10 years. I'm sure everybody is familiar with that dynamic. And so in our business, you can meaningfully scale these businesses after you make that investment of time. But then look at the management fees and how they scale and then the capital markets fees as we integrate across the firm. And then the carry starts to show up, and the investment income starts to show up. So if you look at the bottom of the slide, you can see what I'm talking about. Started the business, $1 million of revenue, 2011, now pushing $700 million of cash revenue for the firm. If you look back at that slide I mentioned in terms of where we are in the life cycle, we have over 50% of the AUM of KKR not yet scaled. Meaning well over 30 of those 40 businesses are experiencing that life cycle that I just walked through with infrastructure. So part of the reason that we're so optimistic is we have this dynamic in the firm. We have a lot of these businesses that were earning the right to scale meaningfully from here. And we have a lot of line of sight. We have over 30 strategies coming to the market in the next 12 to 18 months. And there's a lot of different ways to grow the firm, Asia climate infrastructure, insurance, private credit, private wealth. These are all things we've been building over the last several years that are now starting to have a really big impact on the firm. And so that's part of the reason you hear such optimism from us. In our business, it takes a long time to get a business going. But we made a big investment of time and effort over the last 10, 15 years to create all these ways to grow. And that's why we said last week and we're saying again today, we think it's easier to double from here, where $500-plus billion of AUM. We think getting actually from $500 billion to $1 trillion was easier than getting from 100 to 500. And so that's part of the reason you hear the optimism. I get asked all the time, why are you guys so optimistic? Fundraising environment is tough. Macro, strange. World is a weird place. And part of it is this dynamic of we have so many businesses in the firm that are just earning that right to scale. We've been seeing it, feeling it. My oldest son's 19, and he just ran the New York Marathon. And I was thinking, wouldn't it be great to be 19 again and be able to run the marathon. I'm 51. Our firm is about 50. And in a weird way, the way I explain this to people is imagine you had the wisdom and experience of a 50-year-old and the body of a 19-year-old. That's a little bit what our asset management feels like at KKR right now, which is why we're so optimistic. We've seen a lot, we've done a lot, but we've got all these ways to grow and a ton of road ahead. Now let's switch to insurance. GA is in two big businesses, individual markets, so think retail, $10-plus billion, 200 distribution partners, banks, broker-dealers in the U.S. and institutional markets. So think block, flow, PRT to pension risk transfer. We do funding agreements, $25 billion of volume on the right-hand side, $10-plus billion of volume on the left-hand side. So a real established base business with lots of different ways to grow. When we announced the Global Atlantic transaction in mid-2020, $72 billion of invested assets, that number is now $158 billion, grown much faster than we expected. And you can see a lot of different ways that growth has shown up. We've helped GA grow with a lot of origination. We've helped them raise a lot of capital, and we've created a bunch of new commercial relationships together. We've also got an asset management synergy here that's very meaningful. You can see these are just a few of the businesses that GA has helped us grow. Bottom left, it's been hugely meaningful for our ABF business, grown from $6 billion to $47 billion. Upper right, real estate credit, very meaningful as well. And at the same time, we've been building our third-party insurance AUM because we've been coming even better at investing for insurers because we now have one as part of the enterprise. But there's more that we can do together. What we've learned in the first few years is we got the general sense right that there was plenty for us to do to help GA grow and GA could help KKR grow faster. But there's a lot more things we couldn't quite get to with two sets of shareholders. A couple of these examples we mentioned on the call. We think there's big distribution synergies we can work with the GA distribution team to sell our private wealth products as we build our own retail product and presence. We can help GA grow their third-party capital in terms of institutional investors. We think there's a lot we can do in terms of capturing the capital market synergy, especially on the asset-based finance side. And there's little things like we have a big presence in Asia. There is less competition for what Global Atlantic does in Asia, in particular, in the block business. And so what we told the co-investors in GA is we wouldn't change the strategy. The strategy up to that point had been to not take FX risk. There's a lot of opportunities in Japan is just one example. Well, GA on its own or with co-investors in making that promise wasn't going to take that yen risk. We at KKR have big business in Japan. We have lots of ways to naturally hedge some of those exposures now that we have one set of consolidated shareholders. We think we can grow even faster outside of the U.S. than we were able to do with some co-investors alongside us. So lots of different ways that we can do even more. Core private equity. This really starts from something we've been observing for the last 30 years. This is on this slide. If you aggregate the market capitalization of all public asset managers globally, you get to about $740 billion. This is Berkshire Hathaway, $777 billion give or take. When my partner, Joe Bae and I joined KKR, Berkshire Hathaway's market cap was $41 billion. It's the power of large dollar long-term compounding. That's 12% a year for 27 years. Our market cap is now $65-plus billion as a firm. Our job as a management team is to figure out how to double that and then double that again. As just an asset manager mindset, that's hard to do. And there's some extraordinary companies on the left-hand side of the slide. It's just very difficult to do when all you do is manage other people's money. And so one of the things we've observed is that there's very few that get to $100-plus billion market cap in the asset management business. You have to have more ways to win. You have more ways to grow, and you have to have more ways to compound earnings on a permanent basis. And that's a little bit of a backdrop for the thinking around core private equity. So we've been investing part of our capital base in these businesses. So think probably a slightly lower return than private equity, over time, less leverage but businesses that are less disruptable. You can see on the left-hand side [ 1 800 ] contacts. These are recession-resistant businesses around the world. And so what we've done is we built a portfolio of 19 of these now. We started this 6, 7 years ago. We own on average about 20% of these companies on the KKR balance sheet. We also happen to have a big 30 party asset management business alongside. So we're one of the biggest investors in this, and we make fee and carry from other people's capital. The business overall is about $35 billion of AUM. We're the biggest in this market by some margin. And these businesses, we've been living with for the last several years have been growing really well. And we've been able to see them now through COVID, through a massive increase in interest rates, through whatever it is we're going through right now. And the businesses have continued to perform very nicely. You can see 16% annualized like-for-like growth across the portfolio. And this is just our share. So think of KKR as balance sheet share, not the overall business, over $3 billion of revenue and now over $770 million of EBITDA just for our piece on a look-through basis. So it's gotten to be quite a big portfolio. This does not show up in KKR's earnings today, right, because we report on a realized cash basis. So this isn't flowing through our bottom line. So this is an embedded earnings power for our firm over time. And what we basically announced if you look at the right-hand side of the slide, it is now that these businesses are maturing, they're delevering. They're going to be paying us cash dividends that are going to start to be very meaningful. And these characteristics of these businesses are very attractive, given the recession resistance and the attractive growth that we've seen. So if you think about the dividend yield of the S&P 500 and you think about our ability to get to $300 billion, $600 billion plus a year of cash dividends, we don't need more people at KKR to create that. The opportunity's already in the portfolio. So the flow-through is really, really attractive. Lastly, as we think about the firm today, part of the reason we're so optimistic, we have these three engines for growth. As I said, we can double our asset management business from here with a lot of confidence. We think together, we can double GA from here with a lot of confidence. And then the strategic holdings business gives us another way to win and allows us to further increase our margins from here. So that's the high level and why we're so optimistic and why we made those announcements last week.

Well. Perfect. I might have to use one of the metaphor, the way you described an asset management in maybe one of my notes at some point of time. That was a good one. So look, I hear a lot of confidence, of course, around your growth targets. Let's go back to some of the things you've announced, some of the win over just now as well, starting with GA. Clearly, you guys had a very successful partnership with them for several years now. You've outlined some of the synergies that are likely to happen from here by you owning -- that's actually 100% of the business versus 60% of the business or so. How quickly do you think you guys can execute on the things that you can now do together by being 100% owner versus a partial owner in the past?

Well, I think it's going to play out over the next 2 to 3 years. Some of this is right in front of us, right, for the sort of the Global Atlantic sales force is getting a license to be able to sell KKR product. Some of that's already happened. So I think we'll start to see some of that as the team gets up the curve. And hopefully, we're able to integrate some of those relationships. I think there are some things that we'll be able to do in terms of helping GA raise third-party capital. We've already seen it. We raised IV 2. IV is the term we use for the third-party capital alongside GA. I think the efforts are being integrated there as well. And so I think when we get to IV 3, IV 4, you'll start to see that show up. But over the next 2 to 3 years, I think we'll have some very meaningful proof points to be able to share with you.

Great. Let's talk about fundraising. It's probably still the #1 important sort of value creation metric for the asset management industry, not just the alternative managers and the asset management industry. So you guys are on a cusp of raising substantial amount of capital across a number of flagship funds. You briefly highlighted that as well, infrastructure being the first and then a series of other large one down the road in '24, '25. We've heard a lot about challenges in fundraising environment, but you've also expressed a lot of optimism in infrastructure, in particular, but maybe we could start there and what the fundraising efforts are looking like there today. And then I would love to get your perspective on private equity also. While it's a smaller part of the business today than it was 10 years ago, but it's still an important one. So given the challenges in private equity fundraising, how are you thinking about the next year, so North America, Europe, Asia?

Sure. First on infra. Look, I think it's an asset class. There's a lot of interest in it. And it kind of depends on who you're talking to around the world in terms of the maturity of their program. But most folks created an infrastructure program in the last 10 years, and they're still working to get up to their allocation to the asset class. So there's a lot of interest in it just broadly. It's a developing younger asset class than private equity. So we've got that benefit. We're also one of the largest in the space. Despite you can see how quickly the business has grown over the last 10 years, we're already in the top handful globally. And so we've got real credibility. The other thing I would point to is in this environment, people love the inflation protection element. The real assets, you get a current return, and you got an inflation hedge. And so it kind of fits what people want right now. So we're really quite optimistic about our infrastructure effort. Also, the other thing that kind of presides over all of the answers here is over the last 2 to 3 years, we've grown our sales force within the firm from 100 people to better 270, 280. And so we've been creating more relationships on top of that. We know the private wealth opportunity. It doesn't show the flagship numbers, but it shows up meaningfully for the firm overall. So there's plenty of growth. So we don't put out targets per se. But let's just say from an infrastructure standpoint, it feels like the wind's at our back, and then we'll get the benefit of all this investment we've made in the firm. Private equity, as we meet with people around the world, I think there's a little bit overdone. There's some segments, usually the U.S. pensions that have the more mature programs that have been pushing up against their allocation as the public markets traded down. The public markets are doing a bit better. IPO markets starting to open back up. They're going to start to get more cash back. There's a cyclicality to fundraising. But we're reasonably optimistic about PE as well. Our flagship funds this last round, 23% IRR. We've had really good performance. I think we viewed the -- have been judicious about capital allocation. We really leaned in, in 2020. We leaned back in 2021. We've been trying to be really thoughtful on portfolio construction and pacing. So we'll see how we do, but we've got some optimism there, too, because a smaller percentage of the investor base are those with the mature programs. Sovereign wealth funds, Asia, Middle East, they have capital they wanted to put to work. We actually have a good amount of interest from insurance companies in PE increasingly. There's family offices that are real investors like they know this is a good time to invest. And we're leaning in right now as a firm. We've got $99 billion of dry powder as we sit here today, and we're investing in this environment. We think these are going to be really strong vintage years. So our earnings 3 to 5 years from now will be much stronger, given what the market is going through and has been through. And so we've been optimistically investing as a firm.

Yes. Speaking of the markets and the cycle, there's definitely some signs of optimism with respect to '24 and the capital markets activity, both when it comes to realization and deployment activity. Talk just a little bit at a high level, how are you thinking about '24 with respect to both of those, returning capital back to shareholders as well as deploying more capital?

Yes. So on deployment first, the pipeline have been picking up. It takes a while for buyers and sellers to find each other after the markets adjust. Beginning of last year, markets corrected. It usually takes 12 to 18 months. Most CEOs need them more in the net worth they thought they had. There's a little bit of that dynamic that needs to work its way through. That's largely done. We've been particularly busy on public to privates. And there's a lot of companies. Everybody focuses on the larger indices. Most of the deals we're doing are $1 billion to $5 billion enterprise value. And so in that part of the market, there hasn't been as much of a correction. I think companies are focused on getting out of the public markets. We benefited from that. Also as a public company CEO, if you have noncore subsidiaries and you're explaining those, that complexity is not helpful to you. So we've been buying noncore subs. And remember, our business is very global. So we've been particularly active in Japan buying noncore subsidiaries. That market will continue to open up. It's a market that benefits from inflation, rising interest rates. And so there's plenty for us to do around the world. So the pipeline has been building, and we've been trying to lean into it. So I think you'll see deployment go up. As a firm in the last couple of years, we've been deploying $70 billion, $75 billion a year. This year, it will be somewhere between 40 and 50. So despite the effort to lean in, there's been fewer people that want to engage on the other side. I think that number is going to start to move back up as we head into next year. In terms of monetizations, as the IPO markets open up, as the markets go up and strategic buyers come back, I think you'll see that move up, too. Our hope and expectation is that will likely correlate with around the time we're coming back to these flagship funds, which will change the mood around the overall fundraising environment even from those that have much more mature programs.

Do you think the lack of cash returns back to [indiscernible] has been a bigger issue more recently than the denominator effect at this point? Is that a bigger hurdle?

I think it's shifting, but also people learned a lot from the financial crisis here. Those that turned off and are kind of pulled back investing, they lost the exposure to some wonderful vintage years. I think even CalPERS came out and called it the lost decade. What would have happened if they kept their investment pace? So even those with more mature programs that we speak to, said look, we used to invest $3 billion to $4 billion a year. We're now going to commit 2 to 3, even though we're through our allocation because we don't want to miss what's coming. So I think the whole thought process in the industry has matured. But it was definitely a denominator effect a year ago. Now it's shifting a little bit. But as the public markets recover, I think some of that will abate [indiscernible].

Yes. Let's talk about the wealth channel as well. So like that's another very important growth initiative for the firm. You guys had quite a lot of success early on. You have a couple of products on the platforms now, fundraising at a pretty rapid pace on the infra side and the private equity side. Talk to us maybe a little bit about what '24 looks like, how many additional platforms you're hoping to get on? And what else is in the pipeline in terms of product development?

Sure. So for those of you that aren't aware, we've been working at this for the last 2 to 3 years trying to make sure that we could create products that allowed us to deliver what we're already doing at the firm. We didn't -- we kind of looked at it. We want to make sure as we develop these efforts that these are products that you want your parents to invest in. So we don't want to have to have people believe that we became good at something new. And so it took some time to design the products so they can invest alongside our institutional funds, but we were able to do that. And so we've launched some of these just earlier this year in the spring. So it's relatively young, and we're just getting going. We've been really pleased because we didn't know what to expect. We've been really pleased and are ahead of our expectations as we sit here today. But it's still ramping. If you look across -- we now have products for private equity and for real estate and credit. If you go back 2 years, we were on 10 platforms, some of the distribution partners. As we sit here today, we're on 40. As we get into next year, kind of first half of next year, we expect to be on 70 to 80. And so we're just getting started. We're at the pace of roughly $500 million a month in this environment, and it takes a while to get the systems on to spend time with financial advisers. But so far, we're really pleased with the early results but...

Total days, yes. Let's take a couple of minutes on private credit, clearly have been topic du jour all year. My sense will continue to be one for the next several years. KKR has developed meaningful capabilities in direct lending and asset-backed finance. You provided extra disclosure around that, which has been great. Lots of that growth has been fueled by Global Atlantic and what they've been able to do with you guys together. How are you thinking about growth in sort of third-party capital in the private credit business for KKR over the next several years?

I think it's a big opportunity for us. I mean our credit business is now a bit over $200 billion of our AUM. Roughly 120 of that is in leveraged credit so think traded mostly loans and bonds and then kind of 83 or so in private. If you look at the 83, everybody writes about direct lending. For us, actually $47 billion of that $83 billion is in asset-based finance, which is an even bigger market. So if you want to look at the size of market, direct lending, probably $1.5 trillion, give or take. The asset-based finance market is something like $4 trillion to $5 trillion on its way to $6 trillion to $7 trillion, massive opportunity to finance a bunch of assets that the banks used to finance. And we think we can continue to grow both. There's no doubt, digesting GA probably slowed down our organic non-GA growth because GA kind of turned on the origination, not just a little bit. But we ended up having to staff up and make sure that we were able to deliver for GA. But now that we've built out the sales force, and we've had -- we've got great track records in the last couple of fund cycles, we think we have an opportunity to grow organically and through GA. So it's been a little bit of probably more of a GA emphasis the last couple of years, and I think you're going to see the organic come back even more. Having said that, the organic growth has been 16-plus percent the last few years. So I think that number will continue to go up away from GA.

Got it. Great. So related to that, I want to spend a couple of minutes on your origination platforms. It's a concept that I think we use an investor base started talking more and more about, particularly related to Apollo and KKR because you guys have obviously provided more disclosure around that as well. 18 origination platforms, an important differentiator for you as you think about creating investments for GA and obviously other third-party clients as well. Help us understand a little bit how much in production you do across those 18 platforms? How do you scale that further? And the paper that gets generated by those platforms, how does that trickle down? How much does it go GA over time, what goes to a third party, what gets indicated?

So there's really two parts of the firm where we have these origination platforms. So we have 2,400 people at KKR just to give you just context. But we have created these partnerships with a number of different teams around the world to focus on originating specific types of assets that we think the [risk award] could be very attractive in. So we have an asset base finance. And there we have -- we do have 18 platforms, 7,000 employees across those platforms, originating roughly $20 billion a year. That $20 billion has been growing 20-plus percent per year. We expect that to continue. So -- and to the second part of your question, roughly speaking, that $20 billion that comes in, about half will go to non-Global Atlantic funds, separate accounts, probably 25% goes to GA, and 25% syndicated to our capital markets effort, roughly speaking. We also happen to have another 16 platforms in our real estate business, which we haven't talked about as much. We'll spend more time on this next year, but explaining what we're doing there. But there's another 16 platforms. They already have 1,000 people across those platforms. And that group of entities is helping to originate a good portion of the $20-plus billion we're deploying in real estate per year as well. So there's another -- those two parts of the firm where we've used that model to good effect.

Great. Great. Let's hit on Japan for a second, and that comes through a couple of different ways. You guys had a longstanding footprint in that market, and you talked about some of the deal opportunity that's coming out of there as well. You entered into a partnership with Japan Post Insurance I believe earlier this year. What does that partnership mean for both KKR and GA, especially now that you own 100% of GA, maybe there's more things you guys can do together?

Look, I think from our standpoint, you're right. We've been in Japan since '06 and have had a real presence on the ground, historically, private equity. We bought a large J-REIT managers or a manager of REITs permanent capital in Japan last year. And then this insurance opportunity, we think, is significant. So the relationship with Japan Post Insurance really covers a couple of different fronts. One, they're investors with us in our IV complex. So they're looking to gain more exposure outside of the United States, and we're working with them as a partner to do that. We are also thinking about other ways to scale whether it be partnerships on the retail side to ways that we can work together and leverage their access and flow in Japan. It's early days, but we think there's ways we can help both outside of Japan, and they can help us in Japan. And we think together, we can get a lot done.

All right. One more question for me, and then we'll turn it over to the audience, but I'd like to go back to the new framework in terms of how you guys are reporting. And from my seat, I think from a lot of investor seats, the goal was partially to underscore the more recurring nature of a larger part of your earnings base. That's the reason of introducing the dividend from the core PE that's on balance sheet without compensation attached to it, by the way, right? So that's a nice additional source of cash flows. You kind of segment it into an operating earnings base and kind of shown as the recurring streams from that. How are you thinking about return of capital to shareholders from this point? Should we be thinking larger payout off of that operating earnings base? How do you think about dividends versus buybacks from here? Just your thoughts on that.

We've had a dividend policy that has been more modest in terms of the contractual promise payout. And we've been redeploying our capital base into largely the last few years, insurance, M&A, core and buybacks. So we are not changing that approach. We think a huge part of our job is allocating our capital across the firm. We are the largest shareholder still as a group of executives at KKR. And so we approach it as with the shareholder, where can we get the highest return on a per share basis. That's how we think about it. We'll continue to look in that direction. But you should expect us to continue to invest across those four areas. And we really look at is how are we going to create the most per share value as we make that incremental kind of capital allocation decision. That hasn't changed. What has changed is we're telling our shareholders, we think we have more recurring earnings. We've got more line of sight to those earnings. And we think by packaging everything the way I described, we'll be able to grow sustainably for a very long period of time. What typically happens in our industry once asset managers get to a certain size, the growth slows down. Because we have these three engines for growth, we do not expect that to happen to us. Redeploying our capital in very thoughtful ways will allow us to make sure we deliver on that and hopefully exceed expectations.

Great. Okay. Well, we've got about a minute left or so. So there are questions in the room. [Operator Instructions]

Could you spend a second one on the strategic holdings assets? Are these being done in an evergreen fund? Are these assets that you're never going to sell? Just give us a little more on that.

Yes, absolutely. So the basic background is we had become aware of the fact there's a bunch of businesses that we would want to own for 10, 15, 20-plus years. And we didn't have a part of our enterprise where we could do that because the traditional private equity fund is more of a 5- to 7-year-old model. And there wasn't a lot of capital in the world that woke up to think about really attractive, maybe more mid-teens type return businesses that you'd want to own through cycles. And so you said, well, that's strange. We have the ability to source it. We're already sourcing these through our existing businesses. Let's have an ability to actually own those. So absolutely right. Not only are they more recurring and really attractive franchises that are less disruptable, but the view is we want to hold this for a very long period of time. And so we just had a handful of partners alongside us in that $35 billion of overall AUM I mentioned, and they've got the same mindset. If we can just compound for a long period of time, dividends, overall earnings of those businesses, wouldn't that be a nice thing to wake up to January 1 every year and be able to count on that. That's a bit of the thought process.

So the goal is still to compound them over a period of time.

That's exactly right, and we'll continue to add to the portfolio. We'll prune from time to time, but the idea is that we will on balance on these for a very long period of time.

Got it. Great. Well, we are out of time. So Scott, thank you so much.

Thank you.