KKR is paying people $1.1m, supplementing carried interest with secondaries

Private equity firm KKR’s Q3 results came out today. On paper, things looks pretty great. For the firm’s employees, they probably feel just as great.

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The firm’s most senior employees are probably feeling the greatest, however. The firm’s realized assets grew by $4.9bn, from $191bn to $196bn. $5bn was therefore up for grabs in carried interest, which senior employees take the lion’s share of.

The catch? The firm itself admitted that carried interest growth in the third quarter was driven “primarily by traditional private equity secondary sales.”

Secondary sales occur when private equity funds are bought out of an investment they made early by some other investor. That "other investor", however, could even be the private equity fund itself.

Secondaries have been popular in the industry recently, as high interest rates have made the traditional private equity business model somewhat untenable. A secondary sale, therefore, is a bit of an admission of failure from a private equity fund.

Still, there’s much to celebrate this year for the firm’s employees. Although KKR doesn’t report employee numbers quarterly, its compensation bill has grown by 68% in the first nine months of 2024 compared to the same period in 2023.

If headcount figures are similar to the start of the year, that means that the firm is on track to pay an average of $1.1m in salaries and bonuses (which don’t include carried interest) to its nearly 5,000 employees.

Although private equity is the bulk of KKR’s business activity and formed the bulk of the $4.9bn increase in realized assets, it was the least performant of its business sections, growing only 1.8% in Q3. “Real assets”, an asset class that is most synonymous with real estate, grew by 7.6% in the same period. “Credit and liquid strategies” (private credit) grew by 2.1%.

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