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

Welcome, everyone, to our next session. I'm Ben Budish, Barclays analyst covering the brokers, asset managers and exchanges. With us today from KKR is Raj Agrawal, Global Head of Infrastructure. Raj, thank you so much for joining us.

Thank you for having me. I thought we might try -- I know we're doing a lot of firesides, so we'll do that in a minute. I thought I might try something a little bit different. Appreciate you having us at the conference, but we thought we'd try something different this year. Infrastructure is in the Asset Management division of KKR, and so we thought we'd do a deep dive on the infrastructure business. Infrastructure is one of the largest and fastest-growing businesses that we have at the firm. So this -- get going with it, infrastructure, when people think of it, is thought of as being airports, toll roads, but it's a lot more. Water -- water utilities, power generation, energy transition. In modern day, digital infrastructure, right? The cloud is actually big physical buildings, data centers, fiber, towers that connect the cloud. It's really everything that you need physically to make modern day life possible. And so what do they have in common? They're essential assets. They're often, in terms of revenue model, contracted or regulated with very well-established market positions. These tend to be critical assets. They don't have replacements. And there's a tremendous need for them. Depending on the estimate, some $100 trillion dollars required in incremental investment in infrastructure through 2040. That really underlies the growth. The interesting thing financially, if you focus on the left-hand side of this page for a moment, by their very nature of being essential, critical, must-use assets, they tend to have downside protection. If you could have downside protection in these sectors that inherently have a lot of growth, right? It's hard to imagine higher growth sectors in the data center, the data industry, mobility, traffic, usage. It's hard to imagine a faster growth sector than energy transition. You can think of the trillions of dollars of capital required to decarbonize the global economy. Protect capital, get in high-growth sectors, own platforms that you can grow, manage actively like with a private equity mindset, that gives you the potential for exceptional risk return. Protect your capital, but still have tremendous equity upside. It makes it financially very interesting. Alongside that, there's inherent inflation protection in infrastructure assets. Oftentimes, the contracts underneath these assets provide for annual inflation escalators -- annual pricing escalators tied directly to inflation. Consistent cash yield, the sector typically provides 4%, 5% annual cash yield. And inherent diversification across the various sectors that I mentioned. This is very interesting, especially in the context of equity market volatility, worries maybe today about yield falling, worries about persistent inflation, having these characteristics is very attractive. And so if you look at institutional investor allocations to infrastructure, it's been steadily increasing. This is the -- this is your institutional investors, their overall portfolio, how much of it is allocated to private infrastructure, going up every year since 2018. And if we did -- 18 years prior to this, it would also be up and to the right. In fact, the biggest jump we saw from '22 to '23. And we think this will continue going forward. Based on this survey, 89% expected to increase their infrastructure -- increase or maintain their infrastructure allocations in 2024 and 96% expect to maintain or increase their allocations in infrastructure in the long term. The KKR infrastructure business has been outperforming its peer set, both on the capital protection side of the mandate as well as the delivering upside, delivering interesting equity returns. On the capital protection side of the mandate, our overall realized multiple of money, so they put a $1 in, you get $2.1 out. That's our overall. What that masks is that of the 50 investments we've made in our Global Infrastructure franchise, our single -- our worst 2 performing investments, we still got 90% of our money back on each of them. That capital protection is working. It's working in a big way. In the first quarter of 2020, in the last 10 years, it's the worst financial quarter that we've seen where the markets were down 25%, 30%, KKR infrastructure was up 6.7% in that quarter, right? And we run inherently with today, the measure is about 44% leverage in our companies. Very low risk, experientially incredibly protective in the downside even when times are tough. And we've delivered well on the return side. The biggest part of our infrastructure business, and I'll get to our infrastructure business in a moment, our biggest part, the Global Infrastructure business has mid-teens target return, mid-teens gross IRR. Our first fund, these are returns as they developed over time at the 1, 3, 5 and 7-year marks with the diamond being current or final. But our first fund, 2011 vintage, that fund is complete. And that delivered a 17.6% gross IRR to its investors relative to a mid-teens return. Our second fund is not yet complete, but it's running at higher. It's running at a 19.5% gross IRR. It's nearly complete. Our third fund still is kind of midlife right now. and it's running at 15.7%, which is right in the range of where funds 1 and 2 were. So very consistent performance. But most interestingly, if you look at our fourth fund, which we just finished investing, so it's very much early in its life in terms of realizations. Our fourth fund today is running at 13.6% IRR at 7.8% at the 1-year mark, 13.6%. We're about 3 years in since the first investment. That's higher than any of the predecessor funds. So even as our business has scaled, performance has continued or even increase as our business has scaled. And this is really at the heart of growth. I talked about our Global Infrastructure business. The fundamentals around protecting capital and performing are also true in our Asia infrastructure business and our core infrastructure business, right? What we do in Global Infrastructure, we have the same business, Global is really Europe and North America. Asia is really the same business, just Asia dedicated. We have the largest fund series in that region and it's performing in line or above expectations. Core infrastructure is lowest of low risk. So these are -- think of them as utilities or 30-year contracted assets. One of the largest, top-5 players in the world in that space also performing ahead of expectations. And from that performance comes growth. Actually, just maybe one little side note. Performance, the ability to protect capital and everything, what we do, but still deliver interesting mid-teens plus returns, that doesn't come easy. You need to do something difficult to make that happen, right? If we were working -- if we were just buying businesses from the Barclays investment banking team or Morgan Stanley or JPMorgan, you couldn't get mid-teens returns while protecting capital in all environments. We have to create our deals. We have to do something difficult. And how KKR does that is through an unfair advantage. We have a tool set that's bigger than anyone's. We have a dedicated Capital Markets team that helps us get financing done when times are difficult. We have a dedicated Operations team in Capstone that is looking to help us set up deals the right way and improve value over time. Or a dedicated Public Policy team, international -- as we make international investments can help us make sure that the stakeholders are all aligned. But we can't -- we couldn't buy partner with Telecom Italia to own the dominant fiber position in Italy, jointly with Telecom Italia, really historically nationally owned company, unless we have the help of Capstone to find the fiber that Telecom Italia owns and carve it out and put it in a new business, unless we have the KKR Capital Markets team that helped us in 2020 when COVID was striking Italy and Italy was the worst-hit country, helped us raise $4 billion of debt and equity capital in Italy. And we couldn't have done it without our Public Policy team that helped us get approvals from President, both sides of the Congress, Treasury group, it's really an all-hands effort. And it is not enough to just have the tools. We've got tools I'll put up against anyone, but you need the culture as well to use the tools. And KKR is very much a we culture, right? We want to win, but we want to win as a team. I'm from California. It's like the Golden State Warriors. You want to win as a team, at least the way Warriors used to be a few years ago. But that's critical. This is -- fundamentally, we're trying to deliver better-than-market risk return. Protect capital, but still deliver interesting returns. And this is the key tool set that lets us to do that. And we've done this consistently now for 15 years in the infrastructure business and many more years in the private equity business. But that performance is what underlies the growth, right? The Global Infrastructure business, what we started with, we started with $1 billion fund in 2010. Protect capital, perform, protect capital, perform. And that's what has made us from $1 billion in 2010, the most recent fund that we finished investing was Fund IV at $17 billion. That is ultimately what drove that growth, right? At $17 billion, that makes us 1 of the top 3 in the industry. When we started, we were maybe #50 in the industry. And it is this growth, which is what drives financial performance for KKR. This is a snapshot in infrastructure. We have other businesses that are doing similar things. Many other businesses that are earlier in their stage of growth. This is why we're diving deep into infrastructure. How did we do it in infrastructure. But if you look at the revenue contribution that we picked the same years, the revenue contribution to KKR's financials over the years and you see even faster growth to that revenue contribution line. And what's most interesting is that it doesn't stop here. We are now operating under our Fund V. It's not yet finished. But if you look at the realm -- the numbers in the realm of Fund IV, $17 billion, and you assume Fund V is closer to that realm, we already raised $10 billion in Fund V than to the Fund I, Fund II realm. As we raise new funds, they turn on. The fees for those funds turn on. As old funds sunset, and we sell the companies from them, they turn off. And so if you look at the financial power of turning on of Fund V, we turned it on in July, while we sell companies from Fund II and that one sunsets. There's massive, embedded growth in financials just from this business. And then you add to it the relatively new businesses, right? The Global Fund series has been around for 16 years now. We started our Asia infrastructure business just 4 years ago. In its first iteration, it was the largest fund ever raised in Asia at $4 billion. We've got quite a franchise in Asia. We raised 2 years later, a second fund, $6 billion. This is early in its cycle, right? We have here -- you ought to have both, the growth in this business, but also the layering effect of turning on larger funds, turning off smaller funds. Diversified Core Infrastructure as well, we started that just 4 years ago, early in this growth cycle. The growth embedded within the Global Infrastructure business and then growth in each of these seeds that we've laid just a few years ago. And then growth from new strategies, right? We had a pattern of taking our strength, laying new seeds that we did a few years ago, and we're today laying seeds that we think will be future growth. The 2 main seeds we're laying or have laid in the last year to 2 years is climate. We have a new climate strategy that we have started investing out of. Still raising capital for. This strategy, there's a huge need for climate capital to decarbonize the world economy. And a lot of that capital historically has gone in at the low end of the risk-return spectrum, like buying operating solar assets, incredibly low risk, not much fancy about it. It's a very low return on capital. There's a lot of capital going in, there's maybe $200 billion of capital chasing the low end. There's probably 200 firms that are pursuing breakthrough technologies, venture capital, high growth equity in climate. What's missing is the middle, and we are positioned to attack the middle. That's what the team that we've built, the investments that we've made so far. Climate, we think, is a massive growth opportunity for us, as is high net worth, right? The wealth products. So K-Series, we have products across the franchise, private equity, real estate, credit and infrastructure. And the individual investor is massively underpenetrated in alternatives and even more underpenetrated in infrastructure investing. And so there's another massive leg of growth, we think. Just to put it all together for a second, and then we'll have a little chat, when we use the whole firm, as you've seen, we can do exceptional things, deliver exceptional risk return. But when we use the whole firm and deliver exceptional things, we can also deliver exceptional financial performance for the rest of the firm. CyrusOne, right? If you look back, we acquired this business. It's one of the largest data center companies in the world. We acquired it in 2022. We did that on the back of our global data infrastructure team, led by my partner, Waldemar Szlezak. We put this team up against anyone, right? They're the deepest in knowledge, transaction experience in data infrastructure. This team originated the deal and it's been a great investment so far, knock on wood. When we involved our Capital Markets team, they helped us a lot in getting this deal. Our Capital Markets team in the last 3 years has worked on roughly $20 billion of financings -- debt and equity financings related to CyrusOne. And then that process generated nearly $100 million of Capital Markets fees, including $20 million in a recent warehouse facility that will hit Q3 2024. So incredibly helpful. The Capital Markets team has brought a lot of innovation and done financings for CyrusOne that had not been done in the data center business before. Incredibly helpful to unlock value for CyrusOne and to help promote growth with CyrusOne. Good for the company, good for the Capital Markets business. And then you add GA to the equation. We now have GA under 100% ownership. The most recent financing that we did for CyrusOne was an $8 billion warehouse facility. It turns out that's a terrific asset for GA to hold against its liabilities. And so GA underwrote a big piece of that and helped us structure it. So it was good for insurance. And now it turns out we had something structured well for insurance. We can take that paper, we did, and have the Capital Markets team place that to third-party insurers, thereby generating more fees. So it's a business. We take -- we do exceptional things. We use the whole firm. It allows us to really deliver exceptional results for the rest of the firm. And that's really the model coming together. So with that, maybe we'll do a little bit of questions.

Great. And thanks so much for the presentation. That was great.

Thank you.

So maybe just kind of starting with a macro question. Can you talk a bit about what you're seeing more recently in the environment as it relates to infrastructure in particular? Do you expect to see any disruption in terms of deployment, realizations related to the upcoming election? And what are your thoughts around a series of rate cuts or sort of the implications there for your business?

Yes. So look, the macro is really good for infrastructure. Whenever there's equity market volatility, there's a lot of concern, are we at the right equity market level? Could there be a big downdraft? Or maybe I want to stay invested because when you worry about equity market volatility, you're worried about inflation maybe being persistent or yield going down if inflation subsides, this is a great asset class to be in, right, to be able to protect your capital if you -- if the markets really have a big downdraft. But to be able to participate in the upside if the markets continue to rip, that's a great space. So we're seeing a lot of interest. On the -- absolutely, transaction level has picked up. I would say it's picking up despite the elections coming. So very little -- in an election reference, very little of the infrastructure that we invest in is politically related. So less than 5% of the capital we've invested since inception has been in public assets. Digital infrastructure, energy infrastructure, renewables, industrial infrastructure, these are all privately owned, privately transacted. And so this is a very little direct influence to the government.

Got it. Maybe digging a little bit more deeply into deployment. Can you talk a bit about your main investment themes? Where do you see the biggest opportunities globally?

Yes, for sure. So deployment for us, big picture, has increased dramatically. We -- in the last 3 years, we've gone from roughly less than $40 billion of assets under management to nearly $80 billion of assets under management, or $75 billion of assets under management in the infrastructure business. And deployment has mirrored that trajectory. So if you look at deployment for us, take 2020, 4 years ago, we would have deployed roughly $2 billion a year in 2020, probably in 2019 as well. In the last 12-month period, we've deployed $8 billion of equity. The deployment has picked up a lot, and a lot of that has been on the back of our business. 2023 was certainly a slow year in deployment, but you've seen a ton of activity pick up. I would say the 3 main themes where we're investing actively, number one, would be digital infrastructure, which I covered to some extent. It's towers for sure. And so if you look back 5 or 10 years ago, it was mostly towers. The rate of return on towers now has been beaten down. It's pretty much -- it's hard to really add value to that business. So -- but we still -- especially in our core infrastructure business, we buy towers. The main areas we're playing right now would be in fiber connectivity, really bringing high-speed access around the world, one of the largest investors in that, and of course, the data center business, massive tailwinds of growth as we talked about. So that's one key theme we're investing in globally. Second is energy transition. We have -- since 2010, we've invested $35 billion behind climate and sustainability. And that's not slowing down. That's accelerating. The move towards energy transition has accelerated. The capital need, our capital formation around energy transition has accelerated and what we're planning on doing going forward. Both of those very active. The third, we've been less active in historically, but I think it's the next big thing in infrastructure, that's industrial infrastructure. So if you just look through the Fortune 500 as an example, there's a large amount of embedded processing, storage, transportation, logistics that's required by industrial companies. It's required for production, but it's not intellectual property. It's not the highest value add. In the Fortune 500, rationalizing their balance sheet, rationalizing their assets and selling, partnering to -- they don't need to own them. And I think that's a big opportunity for the industry. That's a big opportunity for us, especially given our 50-year history investing in private equity and the deep corporate relationships we have, I think that's a really high growth area going forward.

Great. Can you maybe dig a little deeper into AI, demand for data centers? I mean you talked about CyrusOne in your presentation, a little bit on digital infrastructure just there. So how else are you kind of pursuing this opportunity globally?

Yes, for sure. So look, I would say we feel like we are -- we've been doing this for a long time. AI has just come to the scene, but in terms of investing in digital infrastructure and in data centers, we've been doing that for quite a long time. We think there's a few key factors required here for success. And one of them is capital. The capital needs are massive. You think about all the capital we have in the infrastructure business, capital in our real estate business, core private equity, Global Atlantic, all those pools of capital can play in data centers, depending on the risk return, right? And if you add all that together, you're talking hundreds of billions of dollars of capital that KKR has that is relevant to those themes. We've got capital in a big way. Power expertise is the biggest constraint right now, if you talk to hyperscalers. The biggest constraint to growth is power. How do I get the power connectivity? How do I get interconnection? How do I get the capacity? How do I get consistent power that's not interrupted? We've been investing in power for 20 years. We have platforms globally, Asia, Europe, North America. Renewable power, conventional power, power transmission, we're all over that part. Fuel, sometimes the constraint's not power, but fuel. How I'm going to get, whether it's renewables, battery, backup, natural gas at the end of the day. We're seeing some data centers now think about hydro location in Canada or Texas or the Marcellus basin. We have an energy business and energy colleagues. We've owned fuel for -- fuel sources for 20 years. We're very experienced in that. So you start putting these together, and we've got deep capabilities in all the key things that are potential constraints, but you need to understand for growth. And bringing the very few players in the world that have the capital, the expertise, the ability to bring it all together, we're one of them. And so it's been a big theme for us. I think we're one of probably 1 or 2 or 3 players that have capital, that are well positioned accordingly and having these discussions. Our current platform in AI, we currently have 4 companies that we own that run data centers. There's 2 in Asia, 1 in Europe, 1 in North America. And to give you a sense of how big this could be, if you put them together and you take the enterprise value, let's assume 100% basis, we don't own 100% of all of them, but on a 100% basis, if you take the enterprise value of everything they own today that's running of their contracted pipeline so data centers that are not yet built but will be built, they're under contract today. And then you look at their qualified pipeline. So all the material, concrete proposals that they have customers today, if you put it all together, that's over $150 billion of enterprise value. It's a massive opportunity. It's going to take -- it's an all-hand effort at KKR in terms of capital and expertise.

Got it. Maybe kind of pivoting just a little bit but still on the deployment side. Can you talk a little bit about your carve-out capabilities? You recently closed this large Telecom Italia transaction. Are you seeing other opportunities like that? And then maybe from a Capital Markets perspective, what was the financial impact? I know the guidance given as of the last earnings call was Q3 should be quite healthy. So how should we be thinking about that kind of capability?

Yes, for sure. If I step back just for a moment, in order to deliver exceptional risk return, right, or better-than-market return for the risk that we're taking because we talked about you need to do complicated things. If you just bought a business in auction, that -- it's hard to get exceptional risk return. You're likely to get a market rate of return for that risk. But we're trying to do exceptional things. We're trying to do really complicated things. If you can do complicated things that have barriers, that opens up the possibility of getting exceptional risk return. And there are a few things that are more complicated than a corporate partnership. In a corporate partnership, very often, they're still owners with you. They are oftentimes a big customer of the asset. They care about timing. They care about confidentiality, speed, certainty, flexibility. It's hard to anticipate everything, reputation, so many variables that they care about. And so bringing that all together, delivering on those fronts, crafting something creatively that addresses what their needs are, their corporate needs, incredibly complicated. And so if you look back since inception, about 40% of the investments we've made have been in corporate partnerships. So it's a big deal. It's a big -- it's one of the big things that we do to try to deliver exceptional risk return. I would say that -- so the Telecom Italia, you asked about the impact of that, a couple of impacts. So we've had an active investing year. Telecom Italia was -- as we closed that 1, that 1 happened to be the straw that broke the camel's back. And so what we did in connection with that is we ended the investment period in Fund IV, and we turned on the investment period in Fund V, right? And so that's -- that really accelerated that. And so today, as of early July, early in Q3, we're now starting -- Fund V has turned on. We're collecting fees off of that one. Also hitting Q3 would be the Capital Markets transaction fees. And so we expect that Q3 will be -- ought to be a pretty robust quarter from a transaction-fee perspective. But most importantly is that we think that these corporate partnerships in TI in particular, will lead to great investment results, right, just given that -- having navigated through the complexity.

Okay. Well, you mentioned Fund V, maybe switching over to the fundraising. So you're in the market with your flagship infrastructure fund. What is investor sentiment been? Have you seen allocations respond to the environment? How are they kind of setting up for infrastructure in general?

Yes. Look, we're still actively in the market, raising our capital right now. So with private placement rules, I'm limited in what I can say. We updated the market in July in our Q2 earnings call. And we -- and so in July, we said we ended the investment period in Fund IV, and we turned on the investment period in Fund V. And at that point, we had raised $10 billion in July. Just as a reminder, our Fund IV was a $17 billion fund. So I think I'll leave the comments at that one.

Understood. What about your climate strategy, you're in market with the climate fund as well. Similarly, can you talk about the opportunity you see here and what investor sentiment has been like?

Yes. Look, as part of our firm strategy, we're not doing a whole lot of new things, right? We think that we're in a lot of businesses that have a ton of running room to scale. Climate is one of the only new things that we're doing. And the reason we're doing it is because it's a multitrillion dollar opportunity over the next 3, 4 decades. We think this in its own right could have a story, hopefully, looking back in 10, 20 years, could have a story much like infrastructure. So in the last year, 1.5 years, we've been looking at actively putting capital to work. We currently have 3 investments that we've made in the strategy. And this is really -- it is infrastructure. It's hard assets, it's protected, but it's high growth infrastructure. And so with that high growth comes a slightly higher risk profile, but a meaningfully higher return potential as well. And so we -- this is one of the key drivers for putting it in its own strategy. It's -- we're happy with our portfolio today. We think it's got a lot of running room for growth. And we also, in the 2, 3 years prior, we put together what we think is one of the leading teams. So we're excited about what this business can become for us.

I want to ask about private wealth, but maybe one question I meant to ask earlier, just on the realization front, since we're talking about fundraising, this is clearly top of mind for LPs. So how does the monetization environment look currently? What would reasonable expectations be for the next several quarters? Again, thinking about infrastructure in particular.

Yes, it's picked up. So there's no doubt, 2023 was a slow year in terms of monetizations. So in 2023, you basically had public markets that had declined meaningfully and hence, willingness to pay, which mirrored the valuation change in the public markets, but you had private market, owners that had 2021, 2022 valuations in mind. And so there was a pretty big bid-ask in terms of getting realizations or even getting deal activity. As the public markets have increased and as private owners have -- their expectations have come down from where they were in '21, '22, we've seen deal activity pick up, and we've seen monetization activity pick up much closer to what people -- what we think are long-term historical norms and so we've seen that also in our own business. In Q2, we closed -- we had an oil pipeline business, ADNOC, in the Middle East. We closed the sale of that in Q2. That was a carry-generating event for us and for the financials. So this feels like we're frankly back to normal in terms of deployment and monetization, much more active. To give you a sense, in a typical fund that we have in years 1 through 4, we're deploying capital. Capital goes out the door. And if you look at our Funds I and II in our Global Infrastructure business, we had returned -- capital is going out the door from years 1 through 4. We returned all of the capital invested by year 7. There's still more capital to come in terms of the gain but sending dollars out the door years 1 through 4, all dollars come back by year 7. If I look at our Asia series, in Asia, we just signed 4 sale agreements. These will close in the next couple of quarters, but we just signed 4 asset sale agreements. Asia is on pace to be similar or better than that 7-years all dollar back. If I look at our Global Infrastructure franchise as well and what's been signed or what's nearly going to be signed, again, I think we're on pace or even faster than the 7 years to get capital back. So I think we're back to a good regular period and have good prospects.

Great. Maybe pivoting to private wealth now. Can you maybe give us an update on the current status of your distribution, magnitude of flows for infrastructure and more broadly, how are you feeling about the momentum? And how is competition now that sort of more peers are in the space with also a pretty full product set?

Yes. Maybe just to give you a little bit of a sense, of the $600 billion-ish of assets under management at KKR, we have about $75 billion of private wealth assets that we manage. Some of that is listed vehicles. Some of that is in just our direct family office platform or ultra-high net worth platform. And then some of that is through the K-Series product that we now have across private equity, real estate, infrastructure and credit. The K-Series portion of that, which is maybe the newest portion, the K-Series portion of that of the $75 billion today is $11 billion is through K-Series capital. Of the $11 billion, about $3.5 billion of that is infrastructure capital and infrastructure has been raising for the last 1.5 years. So we're getting, I think, very good reception. If you kind of do the math on the annual flows, we're quite pleased with where we are. And that has -- largely, the capital raised today, it has come on the back of massively expanding distribution. So across all K-Series today, we're on about 70 high net worth platforms. And what I would say is that we're just scratching the surface on those platforms. So the next key leg of growth will come from education. As you know, the high net worth investor is massively under allocated to alternatives, right? Think of a 1% to 5% allocation instead of an institutional maybe 30% allocation or 20%-plus allocation. So the education of what is the role of alternatives in their portfolio will be a big driver for penetration across the platforms. That's especially true in infrastructure as we think we're under-allocated in alternatives, we're even further unallocated in infrastructure. And so a big piece will be education. There is competition -- there's existing competition and more coming. With respect to infrastructure, I'll tell you, I think the competition actually could be a good thing because it pushes the education further. The more we -- the more firms we have out there that are talking about the benefits of alts, the benefits of infrastructure as part of the portfolio, the more interest that we'll get, and that's the biggest barrier to adoption.

Great. Let's maybe pivot over to Global Atlantic with the little bit of the time we have left. So on the last earnings call, you announced a number of first, including a first infrastructure investment. You talked about that a little bit earlier in your presentation as well. Can you just give us a little bit more color to start on how the infra platform is working with GA?

Yes. Look, it's unlocked a lot, right? If you just think back, some of the reasons why we wanted to own 100% of GA, one was investment collaboration, for sure, right? GA, for example has always been an investor in infrastructure, it's always been an investor in real estate. We have infrastructure in real estate. So part of that is just getting collaboration going. Capital Markets, another big driver. So in the Capital Markets business, if -- ultimately, as we've said before on calls, ultimately, if we can structure product that makes sense for GA, makes sense for other insurance firms, our ability to go place that product could be itself a driver of a couple of hundred million dollars of annual placement fees. Asia, KKR is big in Asia, having GA grow out there, another big opportunity in distribution. So multiple opportunities. We're already starting to see early wins here. So with infrastructure, as an example, 2 things: Number one, we bought a business, really a power transmission line that takes renewable energy, hydro energy from Northeastern Canada and brings it down to North America. We've been investing in assets like this for a long time, having GA's appetite for long-live relatively low-return assets to match its liabilities, it gave us an ability to act on this when we previously didn't have that, right? And so there's a meaningful collaboration to do that, which we wouldn't have been able to do a couple of years ago. Second thing is that again, I made reference to this financing we recently did with CyrusOne. Again here, it was great for CyrusOne, the warehouse that we did, $8 billion has not been done before. GA took a piece of it, which was great for -- against their liabilities. And then the Capital Markets team was able to take the rest of it and go place it with other insurance, which is a fee [ generator ]. So we're just starting here. I think the potential is tremendous.

Maybe a question just on your Capital Markets business more broadly. It sounds like there's a lot more we'll be seeing over time in terms of GA's involvement. But just kind of high level for KCM, you've indicated in the past when markets were healthy, the business was doing about $200 million in revenues per quarter. The platform is much, much larger now, including a much larger infrastructure platform. So given the current environment, what next year may look like, how should we think about how that business evolves into next year? And the true like longer-term potential of the Capital Markets business?

Yes. Look, I think the growth in Capital Markets is real and the potential is real. Just to give you a sense in infrastructure, infrastructure accounted for about $30 million of Capital Markets fees for our KCM business in 2019. In the last 12-month period, it is $110 million. So the growth is real. Near term, I would say, Q2, as we've discussed, was probably our highest Capital Markets fees-generation quarter in the last couple of years. Q3, we think will be one of our highest fee-generation quarters in Capital Markets business ever. So that bodes well. Longer term, if you look backwards for a minute. In 2021, we generated $850 million of Capital Markets fees, but that was in a very buoyant market. So we can't always expect a buoyant market. But if you look at our business, KKR's overall business since then, we've grown massively in terms of assets under management, which is a precursor to fees, we've grown -- we've diversified tremendously. Just look at infrastructure and its contributions today, Global Atlantic now, owning that. So long -- the third-party business is real. And we think that really is a new part of the story. So longer term, we're very bullish. And so we do -- we're feeling good. But if you kind of think about how our business has grown, even absent buoyant markets, we think that there's a lot of runway for growth.

Great. Well, unfortunately, we're just about out of time. So we'll have to leave it there. But Raj, thank you so much. Pleasure to have you here. I appreciate it.

Thank you. Thank you.