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

Ladies and gentlemen, thank you for standing by. Welcome to KKR's Second Quarter 2026 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following management's prepared remarks, the conference will be open for questions. [Operator Instructions]. I will now hand the call over to your host, Craig Larson. Partner and Head of Investor Relations for KKR. Craig, please go ahead

Thank you, operator. Good morning, everyone, and welcome to our Second Quarter 2026 Earnings Call. This morning, as usual, I'm joined by Rob Lewin, our Chief Financial Officer; and Scott Nuttall, our Co-Chief Executive Officer. . We would like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our press release, which is available on the Investor Center section at kkr.com. And as a reminder, we report our segment numbers on an adjusted share basis. This call will contain forward-looking statements, which do not guarantee future events or performance, please refer to our earnings release and our SEC filings for cautionary factors about these statements. This quarter, Rob is going to begin by reviewing our key growth drivers as a firm and how those are impacting our results. And afterwards, I will review our Q2 results in more detail. And so with that, I'd like to hand the call over to Rob. .

Great. Thanks a lot, Craig, and thank you, everyone, for joining our call this morning. We have been in an environment with a lot of volatility and noise around our space. So I wanted to take a step back today and go through how we are seeing things. As a firm, we feel better positioned than ever to drive differentiated earnings growth. Our confidence here comes from 4 key secular and structural growth drivers. What is particularly encouraging -- and what I will walk you through in the second part of my remarks is that we continue to see these drivers play out in our operating results as well as our financial performance. But let me first start by laying out our framework. First, we are fortunate to operate in high-growth industries with multiple megatrends. The alternative asset management industry has been growing at a healthy rate, and we expect that to continue well into the future. We are in the midst of a global CapEx cycle, AI, digital and energy infrastructure, defense, industrial, so massive needs here for capital on a global basis, which makes our industry increasingly relevant. From a geographic perspective, we continue to see significant opportunity in Asia. The Asia Pac region today is 1 of the most dynamic parts of the world and represents roughly 60% of of the expected global GDP growth. It is the area where alternatives are the least penetrated relative to the U.S. and Europe, creating an enormous opportunity across private equity, infrastructure, real estate, private credit and insurance. Simultaneously, we are experiencing significant demographic shifts with an aging population that is in need of retirement solutions. The number of people aged 65 and up around the world is expected to roughly double between now and 2050, and more individuals are investing for their own retirement. Second, we are well positioned against that backdrop with multiple identifiable growth avenues across our platform. Just to take you through a few of them. We have 1 of the largest infrastructure platforms in the world at approximately $120 billion of AUM. We are benefiting from that demographic shift and need for retirement solutions in both our insurance and our wealth businesses. In GA, we see significant opportunity to grow both in the U.S. and internationally, especially in markets like Japan. And in wealth, we remain bullish around the likelihood of individual investors allocating more to alternatives over time and believe we are still in the earliest days of this theme playing out. We have a differentiated presence and track record in Asia. We are the largest private equity player. We're the largest infrastructure player. We have rapidly growing real estate and credit businesses and we see a huge opportunity in insurance. We have built a platform over the past 20 years that cannot be replicated overnight, given our track record, our geographic coverage, our brand, as well as our existing footprint, which includes 9 offices and nearly 1,000 people on the ground in the region. Over 200 of whom are sitting in Tokyo. And I could really go on here. We have a world-class private equity business that continues to grow rapidly. We have a leading asset-based finance platform. We are seeing increased demand in private investment grade and are incredibly well positioned for that opportunity. And with our acquisition of Arctos, we believe we can scale KKR solutions to over $100 billion of AUM over time. The third driver is our differentiated business model. We have been very purposeful in building a business model that allows us to meaningfully grow our earnings and share price over the long term without requiring us to significantly increase our headcount or sacrifice our culture in order to do so. In our Asset Management business, there is substantial growth in front of us, and we have been intentional about creating additional ways to take full advantage of the broader KKR ecosystem over the next 10 to 20 years. That is why we also have an insurance business and strategic holdings. Both of those segments leverage many of the core competencies that we have built up in asset management over the past 50 years, including our investing acumen, our access to differentiated capital, certainly our brand and our collaborative culture, which brings me finally to that unique culture and how it could be a real accelerator of growth. We run KKR as 1 firm with 1 compensation approach. Relationships travel, ideas travel, lessons learned travel. Our culture creates much of our investing alpha, which is why we have built a business model that allows us to keep the firm small and maintain that competitive advantage. Importantly, KKR employees also own approximately 30% of our shares. For context, the other companies in the S&P 500 have an average of approximately 2% insider ownership. So it's that ownership mentality that fundamentally shapes how we think about capital allocation and long-term value creation. We are incredibly well aligned with our shareholders. Now I will walk you through some examples of how these drivers are showing up in our results. Let me first start with an example of a secular tailwind and how we are positioning ourselves. AI and the need for infrastructure build-out behind it will require trillions of dollars of investment over the coming decade. To date, we have committed and invested over $75 billion across digital infrastructure and power. However, our existing infrastructure funds carry diversification guidelines that limit how much we can dedicate to a single theme relative to the scale of that opportunity. So we formed Helix digital infrastructure, which we announced in June, with over $10 billion of initial long-duration committed capital. Helix is an AI infrastructure company that delivers coordinated data center, power and connectivity to hyperscalers. It is a perpetual open-ended vehicle that adds to our perpetual capital base where KKR will earn management fees and performance fees. Alongside our infrastructure team, Helix is led by Adam Selipsky, who is the former CEO of Amazon Web Services. Adam brings firsthand experience scaling the world's largest cloud business and deep insight into hyperscaler priorities. NVIDIA and Vistra joined us as important strategic partners and together with Kuwait Investment Authority and KKR as founding investors. Current, KKR track record here and our expertise with the execution capabilities at Helix. We believe that we have unique positioning against what is a mega trend. Turning to our Asset Management growth avenues and fundraising. The execution here has been tangible. At our April 2024 Investor Day, we set out a 3-year $300 billion fundraising target. That was an ambitious number for us at the time, given our size. Since the beginning of 2024 through June 30 of this year, we have raised $305 billion of capital, with $34 billion coming in, in Q2, so beating our 3-year target in just 2.5 years. In those 2.5 years, we have seen significant AUM growth across our platform. Private equity increased approximately 45%. Infrastructure has doubled. Our credit business is up roughly 35%. Asia increased over 35%. Third-party insurance is up over 50%. Wealth increased 6x, and we are still in the earliest of days. And with the closing this quarter, we now manage approximately $20 billion of capital through Arc dose with significant upside in front of us. Alongside investment performance, an important driver of our broad-based fundraising success relates to capital returns. A common narrative that investors hear is that our industry isn't returning capital to investors. This is just not accurate from a KKR perspective. We've actually had an acceleration in exit activity. The second quarter was the largest monetization quarter in our history. Let me turn your attention to Page 21 of our earnings release. Here, you see some of the activity in just this quarter alone as well as transactions that we've announced but have not yet closed. Importantly, exits have been diversified across strategies, regions and ecotype and reflect strong returns with multiples ranging from 2x to up to 20x of our invested capital. Our success here speaks to the quality and maturity of our portfolio, the strength of our operational teams and the collaborative culture that I mentioned earlier. And despite our heightened level of monetization activity over the last 3 years, the remaining unrealized gains in our portfolio have continued to grow and today stands at roughly $18 billion. Now let me address our differentiated business model and some of the impacts that we are seeing in our results. In Q2, our FRE margin was 70% and has been over 65% for the last 10 consecutive quarters, and we do not view that as a ceiling. The reason for that goes back to our business model. We have no ambition to be all things to all people and asset management. Rather, we want to be great in the areas that we are already present. So if we are successful at executing on our business plan, and we have a lot of confidence as a management team that we will be, we are going to continue to grow our revenue at a pace that meaningfully exceeds our head count and expense growth. We're starting to see that operating leverage flow through our financials. And when we look to future earnings growth, we saw significant latent earnings within our asset management, insurance and Strategic Holdings segments. Let's go through them. Within Asset Management first. We have a record amount of capital on which we are not yet earning fees with $72 billion committed, and that is up almost 30% since this time last year. And it has a weighted average management fee of about 90 basis points that turns on when the capital is either invested or enters its investment period. And second, our average annual performance income eligible deployment over the past 5 years has more than doubled versus the prior 5-year period. And it is that more recent deployment that is going to drive future performance-related income. So significant visibility into future earnings growth. In insurance, there's embedded growth that hasn't shown up in our P&L given we report largely based on cash outcomes. As a reminder, we've been focused on elongating GA's liability profile and in turn growing our alternatives portfolio, which we are showing on a cash outcomes basis versus mark-to-market. Including the impact of mark-to-market, insurance operating earnings would have been north of $600 million year-to-date. I'm looking at strategic holdings. Our existing portfolio and activity gives us confidence that we could scale strategic holdings operating earnings from $187 million over the LTM period, to $1.1-plus billion by 2030. Finally, on our alignment. As we disclosed in our intra-quarter press release in late June, this quarter, we made an important structural change to how we report our K-Series private equity vehicle. We are now reporting realized performance fees earned from this vehicle within fee-related performance revenues, within our segment earnings, which is subject to a 15% to 20% compensation rate. Historically, these fees were included within realized performance income and were subject to a 70% to 80% compensation rate. We feel this change conforms to current industry practice and enhances comparability for investors. And -- given the compensation rate impact, all else equal, this change structurally increases CAGR's forward earnings per share, and I think further reflects our commitment to alignment. As owners of approximately 30% of KKR stock, we do think like shareholders first. We have tremendous confidence in our forward monetization pipeline and our ability to generate differentiated performance outcomes, which gives us the confidence to make changes like this to enhance long-term earnings per share growth. Putting this all together, multi-decade secular tailwinds, multiple growth avenues across geographies and asset classes, a business model that allows us to compound earnings over a long period of time and a culture built on alignment and long-term outcomes. We are confident in our ability to drive differentiated earnings growth for many years to come. With that, I'm going to hand the call back over to Craig, and he's going to walk you through our record Q2 results in some additional detail.

Thanks, Rob. In short, you're seeing continued performance at a very high level across KKR. First, for the quarter, we're reporting record results across all 3 of our headline financial metrics, fee-related earnings, total operating earnings and adjusted net income per share. Over the trailing 12 months, LTM results for all 3 of these metrics also set historic highs. And in terms of our key operating metrics, new capital raised over the LTM as well as capital invested over the LTM also hit all-time highs, outpacing again any other 12-month period in our history. Looking more specifically at Q2 FRE per share came in at $1.32. That is up 34% on a year-over-year basis. Total operating earnings of $1.68 per share are up 27% year-over-year and adjusted net income per share of $1.63 are up 38% year-over-year. Going into the P&L in a little more detail. Management fees and management fee growth continues to be strong. For Q2, management fees were $1.2 billion. That's up 26% year-over-year. Excluding catch-up fees in both periods, management fee growth was 18%. This activity has been driven by both our fundraising success really across all of our asset classes alongside continued healthy deployment. So spending a minute on these 2 topics. First, on fundraising. As Rob mentioned a moment ago, we raised $34 billion of new capital in the quarter with demand really widespread across asset classes and geographies and that brings capital raise over the LTM $133 billion. It's worth beginning with infrastructure and taking a step back for a moment. You've seen us raise approximately $45 billion of capital for our latest vintage funds and new initiatives as the platform continues to expand. That includes Infra 5 and Asia infra 3, which as of June 30, are at $25 billion accounting on a combined basis, plus Helix, which Rob touched on a few moments ago, our global climate transition strategy, as well as capital raised over the LTM at our K Series infra vehicles and our diversified core Infra strategy. Ultimately, these figures highlight the breadth and depth of our infrastructure platform. You're seeing capital raise for different geographies, different risk reward and through different distribution channels as well as crucially our track record of delivering on behalf of our clients. In wealth, Inflows across our K series have rebounded nicely after the April lows seen across the industry. In total, we brought in $3 billion of capital in Q2, and K-Series AUM now stands at $42 billion compared to approximately 25 a year ago, so up almost 70% year-over-year. So despite all of the noise around wealth in our industry and all the headlines, KKR has experienced healthy net inflows with total K-Series AUM year-to-date through June 30, up over 20%. And also of note, we're reaching new milestones within Arctos where we had the final close of the inaugural Keystone fund at over $6 billion. That's the largest first-time fund in the broader GP solutions space, and the first fund closed since KKR completed its acquisition of Arctos back in May. On the investing side, we deployed $24 billion of capital in Q2, bringing us to $104 billion of capital invested over the LTM, so healthy investment activity this quarter really diversified again across our segments. Turning back now to the P&L. Total transaction and monitoring fees were $221 million, excuse me, in the quarter. Capital markets fees were 178 and fee-related performance revenues were $255 million. Fee-related performance revenues are up meaningfully year-over-year, driven by our offshore infrastructure and private equity K Series vehicles. And as Rob walked through, this is the first quarter that the crystallization from private equity wealth is sitting within FRPR. Fee-related compensation was again right at the midpoint of our guided range, which, as a reminder, is 17.5%. Other operating expenses for the quarter came in at $210 million. So in total, fee-related earnings were $1.2 billion or the $1.32 per share figure that I mentioned a few moments ago and our FRE margin came in just above 70%. Spending a few moments on insurance. Segment operating earnings came in at $288 million in Q2. Three things of note here. First, we had approximately $40 million of net realization activity in our alternatives book in the quarter. We've noted historically on these calls how we report based on cash outcomes for the alternatives portfolio at GA and over time, as the portfolio seasons and realizations occur, you should expect to see gains run through the P&L and provide a lift to our reported operating earnings. And that's what you saw this quarter. Now we don't think that $40 million is a quarterly run rate figure for us as the alts portfolio is still quite young and it's maturing, but it's certainly a positive sign of a trajectory that we see over time. Second, as a reminder, Insurance segment operating earnings alone do not capture the impact of GA, recognizing the economics that are part of asset management. And this is really important. Slide 17 of our earnings release outlines our total insurance economics. So alongside insurance operating earnings, we received management fees under our investment management agreement, fees from IV-related vehicles, where we have $62 billion of AUM, up from approximately $50 billion just a year ago as well as GA related capital markets fees, which we think can reach hundreds of millions annually over time. So considering all of these pieces, total insurance economics were $2 billion net of compensation over the LTM that's up 13% versus the prior period, and that growth rate would have been higher, including the impact of mark-to-market on our office portfolio. And finally, it's worth emphasizing how well GA is positioned strategically because of our ability to bring together liability origination and asset origination at scale. On the liability side, our decades of experience and well-established insurance franchise provides a differentiated base of long-duration liabilities across products and geographies, complemented by access to third-party insurance side car capital. And on the asset side, KKR's origination engine, including 20 proprietary ABF platforms with more than 7,000 employees alongside of our globally integrated investment teams allows us to originate and tailor bespoke solutions. And we also believe we can scale our insurance business globally, particularly in Asia, where our brands track record and distribution capabilities position us well to increase our presence. Turning now to Strategic Holdings operating earnings. We earned $37 million in the quarter. Perhaps more importantly, we continue to have a lot of confidence in the $350-plus million of strategic holdings operating earnings for 2026 with that activity, as we've expressed previously, more back-end weighted over the course of 2026. So altogether, total operating earnings or the more recurring components of our earnings streams, were $1.68 per share. That's up 27% year-over-year. And over the last 12 months, 84% -- again, 84% of our total pretax segment earnings were driven by these more recurring earnings streams, which again, we feel demonstrates the durability of our business model. Moving to investing earnings within our Asset Management segment. We had the highest monetization quarter in our history with realized performance income of $848 million and realized investment income of $220 million, which includes $30 million of investment gains generated from our strategic holdings segment. As Rob ran through, we added Slide 21 to our earnings release to highlight all of our activity here. And even with all of the realization activity, total remaining unrealized gains -- so again, that's gross carry together with the gains that sit on our balance sheet across asset management and strategic holdings stand at $18.2 billion as of June 30. After interest expense and taxes, adjusted net income was just about $1.5 billion for Q2 or the $1.63 per share figure I mentioned at the beginning of my remarks. Turning to investment performance. Page 10 of the release highlights the broad-based performance we continue to generate across our portfolio. Within traditional PE, our portfolio appreciated 4% in the quarter and 9% over the last 12 months. Performance was led by our Americas portfolio with strong appreciation across both our public and private investments. Across the remainder of the platform, our infrastructure portfolio appreciated 1% in the quarter and 8% over the last 12 months. Opportunistic real estate was down modestly in the quarter, but remained positive over the trailing 12 months while both our leverage credit and alternative credit composites generated positive returns in the quarter and appreciated 5% over the last year. So in summary, we had a strong Q2, and we have a great deal of momentum as we enter the second half of the year. And with that, Scott, Rob and I are happy to take your questions.

At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Alex Blostein with Goldman Sachs.

Thanks, everybody, a bit of a high-level question first for you guys. So when we think about management fee growth trajectory, really strong 2026, obviously, on the back of a number of larger flagships kind of hitting the run rate. As you look forward into '27, maybe it would be helpful to just take a step back and talk through some of the biggest drivers of management fee growth into next year given the tough comps from 2026? And how do you think about the kind of multiyear management fee growth algorithm in the business broadly?

Great. Alex. It's Rob. Why don't I start and maybe Scott will add on. I think you hit on a real strong point for us in management fees and we've said this on these calls before, but I think repeating. I think you'd be hard-pressed to find another asset management firm that's combined our scale, our diversity of management fees, as a reminder, roughly 1/3 of our management fees come from each of our 3 business lines and also the growth rate that we've had on management fees. So it's been a real strong suit for us. And as we think about the forward, we've got a lot of momentum 30-plus products over the next 12 to 18 months, you're seeing some record fundraising numbers for us over the past 12 months. It's going to drive future capital raising. The amount of committed capital that is not yet bearing fees is at a record level for us as well. So again, a great forward indicator as it relates to future management fees -- and there's certain parts of our business, including now KKR solutions, where we're just getting going, and we see lots of opportunity in front of us. So as we think about that multiyear outlook for management fees, we continue to see a lot of upside going forward.

Alex, it's Scott. Maybe I'll take the opportunity of your question to just maybe give a broader sense, not just management fees, but how we're just feeling overall and how we're seeing things. We've been public 17 years. Joe and I have been here 30. As you and I have talked about, our space is subject to periodic bouts of external pessimism. And periodic balance of optimism. In our time here, I don't recall a period of time where the external perception is so disconnected from the operating fundamentals and how it feels inside the firm. And in our experience, the best response to pessimism is performance. And so we're largely inclined to let the numbers do the talking. But we also recognize all the external narrative. We sympathize with how hard it must be to try to decipher what's what. So I just want to spend a second going through kind of what we hear anyway as some of the sources of pessimism that you may be getting barraged by and kind of how it feels inside the firm. There seem to be, I put it in 5 buckets. First is private credit anxiety about that space. For us, we expect a record third-party credit fundraising year. Second area of concern in tends to be private wealth. We've all seen a lot of articles about redemptions, anxiety about the forward opportunity and whether it's different than everybody thought a year or 2 ago. As the guys mentioned, private wealth AUM up 70% last 12 months, even more importantly, over 20% in the first half, and we've seen a meaningful rebound from the April lows. What you don't read about in the articles is the inflows. But we're up 20% net year-to-date. Third bucket of concern tends to be private equity monetizations aren't happening. You saw the results or the narrative record monetization year for us. Fourth is software -- it's all going to be disrupted by AI. It's about 6% of our AUM. We sold one stream, which is a software business for 4.5x our cost earlier this year, and we're still seeing high single-digit LTM revenue and EBITDA growth. And then the fourth -- the fifth thing I would say is the 4 big buckets of anxiety lead to an overall concern that is going to slow down fundraising. And year-to-date, we're ahead of expectations, record LTM fundraising. We expect a record fundraising year for the firm. and our momentum feels like it's accelerating. So you put all that together, net income up 40% in the quarter, 30% in the first half. So acknowledging not everything is perfect everywhere all the time, but I wanted to share kind of a little bit about it feels inside the firm right now. Our industry is increasingly K-shaped. And most of the external focus is going to be on the unhappy part of the K. We find ourselves on the happy part of the K, and that's what's showing up in the numbers.

Our next question comes from Craig Seigenthaler with Bank of America.

Scott, Rob, Craig. Hope everyone is doing well. And Scott, I really appreciate your perspective on that last one. Our question is on global anic. It's a 2-parter -- how is GA's organic growth outlook evolved across retail annuities, flow reinsurance blocks and the institutional channel? And can you also provide an update on the ROE trajectory just given higher competition than prior years? .

Thanks, Craig. -- do you want to take. Yes. I'll go. I appreciate the question, Craig, in part, those questions are related. Listen, we talked about it last quarter, I continue to talk about it this quarter. We have seen heightened competition. We've made the determination that we're going to allocate a little bit less capital to insurance based on what we're seeing in the market today. But interestingly, if you look at what we did in Q2, very consistent with the evolution of the business. and the liabilities that we did originate in the second quarter, 99% of those liabilities were at least 5 years in duration, approximately 80% of those liabilities were 7 years in duration. So it's allowed us then to, in turn, start to lean in a little bit more on the alternative side. And so that would be .1 that I'd reference that we -- a lot of the time spent in our insurance business here. Of course, we're day-to-day optimizing results and frankly, repricing our book of liabilities week-to-week based on the market. So it's hard to give a forward outlook as organic growth because honestly, it's going to be a function of where the markets are. But importantly, where I think we're incredibly well positioned here is in a world where we see heightened volatility, I think you're going to have less competition on the asset side. Of course, spreads are going to expand. And we think in turn, that is probably going to lend itself to less competition on the liability side. And so from our perspective, we spent a ton of time figuring out how is it that that we can make sure that we are competitively advantaged in that market where ROEs structurally are going to be materially higher. And when you think about how we set ourselves up, longer duration liabilities, real linkage between liability origination and asset origination. And I think most importantly and differentiated our amount of third-party capital where we've got $6 billion of dry powder that we think translates to north of $60 billion of buying power on the liability side. Not a lot of insurance companies in the world are able to do that. We think in combination, we're incredibly well positioned for that more volatile environment. And that's why when you think about ROEs and insurance, we think it makes sense to look at that through a cycle. And we're at a period of time here where we think ROEs are structurally low given the competition on both the asset side, where spreads are and on the liability side.

Our next question comes from Glenn Schorr with Evercore.

Scott, I want to follow up on your first comment in the opening remarks was about in the midst of a mega CapEx megacycle and AI power. I think a lot of us agree, but the market, certain days like yesterday and the day before, feels more like we're overbuilt were priced in spending come down, cash flow is going to come down. So I think it has that schizophrenia in terms of where we are in that cycle. So curious on, a, what you think of that; and b, how does that impact, if any, what risk you hold for clients and on balance sheet as you think about this next industrial revolution and fully monetizing the way versus managing that risk?

I appreciate the question, Glenn. And you're right. There is a bit of a schizophrenia out there. I'd say that answer for us is we actually think this is a huge opportunity for us as a firm. But as ever, when you have these kind of mega themes, there's ways to do it well. And there's ways to do it less well. And so we're focused, as a reminder, not so much on investing in what's going to be the next chip company or the next LLM, it's more about the opportunities around this development, in particular from an infrastructure and real estate and credit standpoint. So it's kind of around the space -- and maybe I'll ask Craig to kind of give you some of the details on what we've been up to in particular in power and data centers and how we've kind of thought about navigating what's going on right now.

Yes. I think Glenn, things I'd add on to that. And you're right, we are at this very interesting moment in time. So hyperscaler data center spreads have widened pretty meaningfully just over the last couple of weeks. That stands in contrast to the broader IG markets, which, again, still pretty much remain at their tights. And we've had year-to-date this flurry of jumbo deals. I saw a note a day or 2 ago, I think we've had more $25-plus billion deals year-to-date than the last 5 or 6 years combined. And so it does, it feels like there's indigestion. And sort of just echo what Scott said. I know our team is going to be consistent. I think all the things that you're going to see from us are going to recur to what we said historically. We're going to care about our counterparty, we're going to care about contract terms, and it allows us to be selective -- and in that context, the volatility we're seeing, we think is helpful for us. And while the data center piece does get a lot of the press, again, the digital teams are much broader, fiber networks, mobile infrastructure. We've been very active across renewables. Again, Rob gave you some of the stats earlier. And that's in addition, speaking about our infrastructure more broadly, around things like electricity and gas transmission and wastewater networks, et cetera. So again, there's -- it just feels like there's a lot to do even in spite of the volatility that we're seeing.

Our next question comes from Devin Ryan with Citizens Bank.

I want to ask a question on Arctos. Obviously, some really nice momentum kind of after the transaction closed and with Keystone I think just kind of an early example of kind of seeing the benefits of KKR distribution and kind of the broader client network. Would love to just kind of more broadly think about the potential for the business as you think about kind of the next sports kind of flagship. And then just more broadly, just how it connects to the path to kind of getting that solutions over $100 billion of AUM. .

Great. Thanks, Devin. Listen, I think there's a multiple different paths for growth. What I'd say is that the first couple of months post closing, the opportunity feels even more significant and more real than we would have thought 3 months ago on this call, for sure. You hit on some of it. Artis is the clear leader on the sports side. The opportunity for us, both in terms of sports 3, but more broadly, around sports-related investment across our entire ecosystem is substantial. What we're building in Keystone, north of $6 billion of capital and a first-time fund raise, I think, speaks to the credibility of the team. . And then as you think about the opportunity in the secondary space, the people, the connectivity and what the Arctos team brings to the table combined with what we bring to the table on the KKR side between relationships and industry expertise, we believe that we can build a really world-class GP-led business. And so we're spending real time thinking about that. And then finally, the opportunity that maybe is a little bit more hidden, but we think is very real, is the opportunity for the Arctos ecosystem to create flow for Global Atlantic, very important. It was a very important part of our investment thesis. I'm sure we would have talked about it when we announced the transaction. But when you combine all of that, we feel really good about the target of $100-plus billion of AUM from our solutions business over time and feel great in the early days of how we're coming together culturally and how we're working together to be able to make sure that we are optimizing the combined footprint of both the Arctos team and the KKR team. .

Yes. Devin, it's Scott. Just the way I think about it, you got 3 businesses. Sports fast-growing incumbent already the largest player, but the space is young. GP solutions were on Fund -- we have a differentiated model seems like there's a ton of opportunity and growth ahead, pipeline is big. And then we have a third space secondaries, which is the startup in a very large TAM. I don't know how the $100-plus billion is going to break down, but we see lots of different ways to get there. .

Our next question comes from Steven Chubak with Wolfe Research.

Rob, Craig. I hope you're all well and wanted to ask on the retail strategy. I know you touched on this a bit in the prepared remarks, K-Series, private equity and vehicles continue to generate really strong flows you're benefiting from being less indexed to credit where fundraising headwinds have been more acute. But given the elevated redemptions year-to-date commentary suggesting that redemptions have also been more concentrated across the subset of international investors whether the recent turmoil has reshaped your approach to expanding retail distribution abroad? If you could speak to the pipeline of new distribution platforms and how it informs the outlook for retail flows over the next 6 to 12 months, that would be great. .

Steven, it's Scott. I'll take a shot. So yes, you're right. I mean, we've been reading all the news articles as well. As I mentioned before, I mean we're -- they tend not to mention the inflows -- so that's kind of the fact we're up over 20% year-to-date net is usually lost from an external standpoint, but those are the numbers. And we see a lot of momentum. I mean I think there's a couple of things going on with us. We've kind of roughly 85% of K Series is in private equity and infrastructure today. So that's maybe a bit different than what others have in terms of exposure. We are continuing to build out our Asia and Europe platform and relationships. We probably on the margin have a bit less from those markets, although it's roughly 40% of kind of what we've been doing as of late from outside the United States. But in terms of the build of the team and the relationships, those are still building outside the U.S., and we think there's lots of opportunity ahead. The short answer to your question is that it has not changed our perspective on investing in growth. I actually think this is long term, very healthy that advisers and clients understand what these products are and are not. And most people are experiential learners. So I think this is great news that while it is a very small percentage of our firm, a fast-growing small percentage of our firm. I'd rather people learn, while it's this size as it pertains to our space as opposed to a very large percentage of our space. And so I kind of view this as a healthy educational period -- and if anything, because of that, we would be more comfortable investing even more and having it be a larger percentage of the firm down the road than I would have been if these lessons had not been learned.

Our next question comes from Brennan Hawken with BMO Capital Markets. .

I know that you reiterated the earnings target for strategic holdings in your prepared remarks. But at this point, and you also said back-end loaded, but it really is quite hockey stick looking really. So I'd love to know what drives the confidence. Moreover, some investors have expressed concerns that the investments you have in that portfolio could be at risk from AI? And VA risk, I know you touched on software, but business services, we see a lot of sectors trading as though they have some disruption risk there. So if you take a wider lens about the air risk, how would you address those concerns sitting in that portfolio? .

Great. Brennan, thanks a for the question. Maybe I'll take you back a couple of years when we first introduced the strategic holdings segment. We were probably -- and we talked about it then a little premature in introducing that segment given the scale of the business, but we thought it was appropriate to do so alongside some other large firm announcements, including buying in the remainder of Global Atlantic. And what we said at the time was in the early years, you're going to see more quarter-to-quarter variability of income. And as we build to that $1.5 billion plus of operating earnings by 2030, that's when you're going to start to see more quarter-to-quarter stability of earnings. And you hit on it when we came into this year, we talked about strategic holdings being more back-end weighted from an operating earnings perspective, and that has played out. And as we look to the back half of the year, we've got a lot of confidence that what we need to get done to generate the operating earnings will get done. Still some work to do, of course, to make that happen, but we feel good about that as a team and continually re-underwrite that. As it relates to the portfolio, it continues to perform at a high level. But I'd also stress the word portfolio. We've got roughly 20 businesses there with differentiated exposures. And so while you may have some businesses that are more impacted over time, we think across the portfolio, we're in very good shape. And I think you could go back in some respects, even to that monetization slide on Page 21. And this is not necessarily the point as it relates to strategic holdings. But in a world where investors are nervous about potential losses on the go forward, I think they need to be also taking into context with winners as well in the portfolio, where we think we've got many both across our traditional private equity business, but also inside of our Strategic Holdings segment as well. .

Our next question comes from Michael Cyprys with Morgan Stanley. .