Ladies and gentlemen, thank you for standing by, and welcome to the KKR Q1 2020 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star and zero. I would now like to hand the conference over to your speaker today, to Mr. Craig Larson, Head of Investor Relations for KKR. Thank you. Please go ahead, sir.
Thank you, operator. Welcome to our first quarter 2020 earnings call. As usual, I'm joined this morning by Scott Nuttall, our Co-President and Co-COO, and by Rob Lewin, our CFO. We'd 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. The call will contain forward-looking statements which do not guarantee future events or performance. Please refer to our SEC filings for cautionary factors related to these statements. Like previous quarters, we've also posted a supplementary presentation on our website that we'll be referring to over the course of the call. Before we get into the results, we want to start by recognizing the extremely challenging times that we're all experiencing, and we hope that everyone on the call are safe and healthy.
Our thoughts, of course, are with those most affected by COVID-19, particularly those on the front line. As a firm, our priority during the pandemic has been the health and safety of our employees, while at the same time continuing to provide best-in-class investment services. Like many of you, we've largely been working remotely over the last several weeks, yet thanks to the tremendous efforts of our technology and operations teams, it's felt like connectivity across the firm has actually increased. Similarly, the dialogue we've been having across our LP base has also increased as we've looked, if anything, to over-communicate given volatility. In terms of helping those in need during the pandemic, we established KKR's Global Relief Fund, and we're also incredibly proud of all that our portfolio companies are doing in support of COVID-19. Now turning to our results.
We're going to begin on page two of our supplement. AUM for the quarter came in at $207 billion, compared to $218 billion as of 12/31, and $200 billion one year ago. New capital raised in Q1 totaled $7 billion, driven by fundraising in our real estate and Asia infrastructure strategies, as well as within private equity. Driven by asset growth, management fees for the quarter, as well as the trailing 12 months, are up 14%. We reported after-tax distributable earnings of $355 million for the first quarter, or $0.42 on a per adjusted share basis. Looking on a trailing LTM basis, we generated after-tax DE of approximately $1.4 billion. Book value per share, which is mark-to-market every quarter, came in at $16.52.
As Rob will talk about in a few minutes, investment performance over the past 12 months has been nicely ahead of both equity and fixed income indices, so our book value is down only modestly over the trailing 12 months. Finally, touching on a topic we introduced last quarter, inclusion in Russell's benchmark indices continues to be a priority for us. We've been meaningfully engaged with FTSE Russell over the last couple of months, and while any decision on something like index inclusion is obviously FTSE Russell's and not ours, we believe we meet Russell's requirements. With that, I'm pleased to turn things over to Rob.
Thanks a lot, Craig. Hello, everyone. Really glad to be speaking with all of you today and hope that you and your families are safe and healthy. Beginning with the quarter's financial performance. We've reported solid results, especially when you consider how challenged the operating and monetization environment was from mid-February on. Looking at our distributable earnings P&L on page three of the supplement and starting with our operating revenue. Total fees came in at $426 million for the quarter. Of those fees, approximately 75% are management fees, which are up 14% versus last year. Our management fees are largely driven by commitments to our funds and the invested cost of our assets, as opposed to the NAVs of our funds, which is a real financial benefit that our industry affords during periods of market dislocation.
Our realized performance income came in at just over $370 million for the quarter, driven by the sale of PURE Group, and in South Korea, the sale of KCF Technologies. In total, carry-generating exits in Q1 on a blended basis were done at three and a half times our invested cost. Finally, realized investment income for the quarter totaled $145 million. In aggregate, our revenues grew by 11% this quarter compared to a year ago. Moving to expenses. Compensation and benefits totaled $377 million, while non-compensation expenses totaled $94 million. One thing to note here. Our total compensation ratio, including equity-based comp, came in at 40% for the quarter.
As you think about your go-forward models, you should continue to expect our total compensation ratio to remain variable and in the low 40% range for the remainder of 2020. Finally, our operating margin came in at 50% for the quarter, with an increase in our after-tax distributable earnings per share of 11%. Looking forward, we actually have reasonably good line of sight on future carried interest and total realized investment income from transactions that have closed since 331 or have been signed and are expected to close. As of today, that number is in excess of $400 million. While a small number of those transactions still rely on various regulatory approvals to close, so there is some uncertainty around achieving 100% of that figure, it is definitely helpful to go into the next couple of quarters with a solid base of additional revenue.
As a point of reference, a year ago on this call, that same number was a little over $200 million. In a quarter with tremendous volatility, all three forms of our revenue increased, our margins were maintained, our distributable earnings per share increased by 11%, and our visibility into our near-term earnings has meaningfully improved relative to a year ago. However, this quarter clearly did bring its share of adverse impacts to our financial profile as well. You can see that most clearly in our book value per share, where all of our investments are mark-to-market every quarter, as that came in at $16.52 at March 31st. Specific to our balance sheet, investment performance for the quarter was down 14%, compared to down 20% for the S&P 500. For the trailing 12 months, balance sheet investment performance was down 2%, compared to down 7% for the S&P 500.
While our book value per share decreased 14% since the end of December, it is still relatively close to flat from this time last year. Turning more specifically to our broad investment performance for the quarter, please go to page four of the supplemental presentation. While you can see that many of the asset classes where we invest have been affected by the market downturn this quarter, our performance remains positive over the last 12 months. Our most recent flagship private equity funds were down 6% in the quarter, and our entire PE portfolio is down 12%, compared to down 21% for the MSCI World Index. Outperformance was driven both by our modest exposure to areas directly impacted by the pandemic. As an example, direct energy is less than 2% of the private equity portfolio, alongside greater exposure to a number of technology and online-oriented investments that performed quite well.
Turning to real assets, our flagship real estate funds depreciated 1% over the quarter, while our infrastructure flagship fund appreciated by 18% in the quarter, which was driven by a significant exit that was at a valuation well in excess of its carrying value. While our energy returns are not shown in the supplement this quarter because we have an AUM threshold for what appears on this page, we know it's a front-of-mind topic right now. Our direct energy funds in aggregate were down 33% in the quarter. As a reminder, this is only 1% of our total AUM. On the public market side, alternative credit and leverage credit depreciated by 16% and 13% respectively. This compares to the LSTA and the high yield bond indices that were both down around 13% in the quarter.
We do believe that the combination of our continued strong relative investment performance, especially in our flagship funds, as well as a 44-year history of operating through market cycles, will hold us in good stead with our clients. While undoubtedly some investing clients have slowed down their pace of new commitments, we are also finding that there are others looking for ways to invest into the dislocation. As an example, in the two-month window from March 1st through May 1st, we have closed on or are in legal documentation on over $10 billion of new commitments across our fund platform. In terms of what this all means for our fundraising outlook, it's a little too early to say.
We've grown our management fees over the last three years by approximately 50%, and we've shared in the last couple of quarters that given the funds we have coming to the market, that we felt we could do that again from 2019 through 2022. We are still confident in our trajectory, but our best judgment sitting here today is that the three-year path can now take us a few additional quarters to achieve. The destination is very much the same. It may just take us a little longer to get there. This is obviously a dynamic environment, so we'll keep you updated to the extent our views change. Two final points before I hand it off to Scott. The first relates to liquidity. During the first quarter, we opportunistically raised $500 million of 30-year senior notes priced at three and five-eighths.
We knew at the time that was valuable capital to raise, but it certainly feels quite differentiated in this environment. In April, we thought it made sense to take advantage of an opening in the investment-grade markets for an additional $250 million of 3.75% senior notes that mature in 2029. Taken together, we have $2.5 billion of cash and short-term investments in addition to our undrawn revolver capacity, providing significant liquidity and financial flexibility. The weighted average maturity of our debt portfolio today is over 15 years. The second point relates to our share buyback activity. Since the last earnings call, we have retired 11 million shares at an average price of just over $23 per share. Looking at our buyback program since inception, in total, we've used over $1.3 billion to retire shares at a weighted average cost of just under $19 per share.
We are confident that the shares we repurchased in Q1 will be a very good use of capital as we look forward over the next several years. As you would have seen in our press release, we have increased our share repurchase authorization back up to $500 million. With that, I would like to turn it over to Scott.
Thank you, Rob. Hello, everybody. Thanks for joining our call today. I hope you and your families are safe and healthy, and that you're doing as well as can be expected during this strange time. The first thing I want to do is acknowledge how much the world has changed since our last call with you. It's pretty remarkable. I'm sure you're all working to process it just like we are. I thought today I would spend some time telling you how we are approaching the crisis as a firm and what we think it means for us. Before I do that, let me go back to the global financial crisis, because it was formative for our firm. At the time of the GFC, KKR was a smaller, more narrowly focused firm. We had a private equity franchise alongside a young U.S.-centric credit business.
Our capital markets business was nascent, and we did not have a balance sheet. As we went through that crisis, we focused first on defense and our portfolio companies. We repositioned companies where we had to, and we were laser-focused on capital structures and debt maturity profiles. We were not forced sellers. On balance, our teams did a very good job during that period. We also made some good new investments, largely in PE, and we raised our first third-party capital in credit. During this time, we also took advantage of market dislocation and merged our then private asset management business into one of our public permanent capital vehicles, creating KKR as you think of it today. We found during and immediately after the GFC that our businesses and footprint were not relevant to many of the very interesting investment opportunities we were seeing.
We became frustrated by that and that frustration helped set us on a course to make sure that the next time there was a crisis or a meaningful investment opportunity, we would have the ability to invest more flexibly in any risk-reward we found interesting. In short, we wanted to feel as good about our offense as we did about our defense. We've spent the last 10 years since that crisis building KKR based on that formative experience. Over that time, we've gone from a few hundred million of balance sheet assets to $20 billion. We have dramatically increased our capital markets capabilities. We've also meaningfully expanded and diversified our business. Since the last crisis, we've gone from two investing businesses to 24, 10 offices to 21, and $45 billion of AUM to $207 billion.
Because of all this, we now have the ability to invest in opportunities we like anywhere in the world. Looking back, the last crisis was critical developmentally for us. We made some great investments. We made large and important moves for the firm strategically. It was an inflection point that drove us to meaningfully expand our business in the years post-crisis. We're viewing this crisis as providing similar opportunities, but off a larger base of capital, AUM, and capabilities to work with. The possibilities from here are greater, too. We find ourselves in the fortunate position of being ready as a firm this time to not only play defense but also play more offense. We've been doing a lot of both over the last several weeks. I thought I would share a bit of color on what we're doing on both fronts.
Before I do that, let me remind you why our business model positions us well for periods of volatility. Our model provides a significant amount of stability and visibility. About 80% of our capital is committed for an average of eight years or more. We have $58 billion in dry powder waiting to be called for new investments. When you have contractually committed capital that cannot be taken away and a liquid balance sheet, it is good news when asset prices get cheaper. Also, our management fees are largely calculated on committed or invested capital and not influenced by marks. Our management fees are very steady. As an example, our fees actually grew year-over-year in both 2008 and 2009. Plus, we have a lot of committed capital on which we're not yet earning fees.
$19 billion committed with a weighted average management fee rate of about 100 basis points that turns on when the capital is invested or enters its investment period. We have nice stability of management fees and visibility on how they will grow. We're also global. As you heard from Rob, the visibility of our near-term exit pipeline remains high. That is due in some part to our Asia portfolio, where, of course, the virus hit first and where we've seen some economies reopen ahead of Europe and the U.S. As we've discussed, we also have a large and liquid balance sheet. During times like this, we can use our balance sheet to be aggressive for new investments, for strategic acquisitions, and for buying our own stock. We view our balance sheet as a critical strategic tool, never more so than now.
Having said all that, there is no doubt this crisis is impacting our business. We've been playing a good amount of defense over the last several weeks, largely focused on protecting what we have. Most of our people around the world are working from home. We're finding that it's actually going quite well. Hats off to our technology team. We're very well connected as a firm, and our teams are functioning at a high level. We're also focused on our portfolio companies. We were fortunate from a portfolio construction standpoint as we've been quite underweight direct energy, retail, and hospitality. Those account for only 2%, 4%, and 1% of our global investments, respectively.
Now, to be clear, we definitely have a number of tough situations to manage, but it's a relatively small percentage of the total right now, and much smaller than it could have been with a different approach to portfolio construction. The firm is operating well through this, and while we have a lot to manage, it is manageable. While defense is taking some of our time, we're spending at least as much time on offense. We've been using our business model and dry powder to invest into these markets. As I explained, we've been preparing for an environment like this for over a decade.
More recently, as we've mentioned on prior calls, starting a couple of years ago, we repositioned our distressed and private equity teams to be closer together and created target lists or shopping lists for debt and equity that we would want to buy if and when dislocation occurred. This preparation has helped us. Since the crisis began, which we mark as when the market started to be more volatile on February 21st, we've invested or committed approximately $8 billion of capital as a firm. This amount includes dollars invested by our leverage credit teams in the traded loan and high-yield markets. Of the $8 billion, approximately $5 billion has been in credit of some type, and $3 billion has been in equity. We are using the target list we've been building over the last few years and investing into companies we know and like at risk-reward levels we find attractive.
We're also finding opportunities for our portfolio companies to pursue M&A and to invest behind former portfolio companies like we recently did with US Foods. We are looking at non-core subsidiary sales from companies looking to de-lever or buy back stock. There's plenty to do on new investments. We're also spending even more time than usual with our clients. Part of this is making sure they know what's happening with their portfolios. A lot of it is discussing how to invest into these markets and ways we can work together. We're encouraged by those conversations, which have helped lead to 40 first-time clients committing capital to us since the beginning of the year. Hopefully, that gives you some color. We've been busy on both defense and offense. The firm is incredibly well connected through this. There's no doubt the near-term path ahead is uncertain.
There are several critical areas where we have clarity. We expect to continue to be successful at raising and deploying capital. We expect to continue to be able to generate returns well above what's available in the public markets. We expect to be able to use this crisis, as we did the last one, to evolve and grow our business aggressively through and coming out of this, and to create the next inflection point for our firm. Thank you for joining our call. We're happy to take your questions.
Thank you, sir. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Due to the absence of time, we ask that you please limit yourselves to one question and one follow-up. Please stand by while we compile the Q&A roster. I show our first question comes from Alex Blostein from Goldman Sachs. Please go ahead.
Good morning. Thanks for the call. Thanks for taking the questions. First, wanted to start with the outlook on fundraising. The path taking a little bit longer makes sense given obviously lots of near-term uncertainty. I wonder if you guys can talk a little bit about how the composition of that fundraising pipeline may change relative to your original expectations. Which products could be smaller, which products could be larger, where you could continue to be pretty active versus the areas that could actually take a little bit longer.
Hey, Alex its Craig. Why don't I begin with that, and I'll let Scott add on at the end.
Just to give you a sense of where we're fundraising currently, because the breadth is something that I think you'll see in this. In Asia, we're fundraising for our private equity strategy, also outside of private equity and real assets. In Europe, that includes fundraising for opportunistic real estate and direct lending. Also fundraising across our dislocation, Americas opportunistic real estate, real estate credit, and core plus real estate strategies. At the same time, that's going to continue areas that you're going to see on a more continuous basis, including our CLO business. We had issued a new CLO actually a few weeks ago, as well as areas like our BDCs and the hedge fund partnerships. I think it continues to be a very active list of areas where we're fundraising. Scott, anything you'd add on top of that?
Yeah. Thanks for the question, Alex. A couple things. One, I'd just overall say we remain very optimistic on the go forward when it comes to fundraising. In terms of your question about composition, no material change to the composition in terms of where we see ourselves accessing capital. Maybe just a little bit of color for you. There's just been a lot of dialogue, and engagement with our clients, easily two to three times the usual. It's everything from comparing notes on the environment, explaining what we're seeing through our portfolio, especially in Asia, given our large Asia portfolio, where we started to see recovery ahead of the rest of the world. A lot of questions on that. We're talking to them about their portfolios, but basically every conversation then pivots to offense and where to lean in.
I think we have a lot of clients around the world that invested into the recovery post GFC and are looking for ways to play offense. We hit a couple of these in the prepared remarks, but 40 new LPs since year-end, $10 billion raised in the last two months. In particular, we're seeing high net worth and retail lean in addition to institutional capital. There's no change in expectation for our outcomes. The commentary around it may just take additional few quarters as our best guess. As the markets continue to recover, we may shorten that over time, but it's highly path dependent, but no change in composition.
Great. Of course, that makes sense. My follow-up question is around the $10 billion number that Rob and Scott, you both just mentioned. $10 billion over the last two months. Can you give us a sense what was in May? What kind of strategies drove that fundraising over the course of May? Give us maybe a sense on the sort of timing when that actually is going to come in into management fees. Thanks.
Great. Thanks, Alex. What we were trying to do with the $10 billion was not guide quarter-to-quarter in terms of where our fundraising is, but instead to give a good sense to the investor community that we're still raising capital despite the volatility in the markets. The best example we could give is the $10 billion of closed commitments or commitments that we have in legal documentation, that we expect to close as opposed to trying to parse it, whether that's going to be Q1 or Q2 or Q3 fee paying AUM.
Got you. All right. Thanks very much.
Thank you.
Thank you. Our next question comes from Bill Katz from Citigroup. Please go ahead.
Okay. Thank you very much. Hope everyone is doing okay during this crisis, and thanks for the really well thought out prepared commentary. A couple hot button topics that seem to be going through the alt space through this earnings season is some of the composition of CLOs as well as potential clawback risk, just given performance metrics in the quarter. I was wondering if you could address both maybe on the CLOs, how much of your revenues come from base management fees versus maybe subordinated or performance fees, and then how we should think about any clawback risk, if at all, against the carry. Thank you.
Yeah. Hey, Bill, it's Rob. I'll handle both questions. On our CLOs, just to put it into context, we do about $17 million a quarter of management fees across our CLO complex. A little more than $10 million of the $17 million are subordinated management fees, so more at risk. Across that $17 million, we see de minimis impact in Q2. We're in compliance today or at the end of 3/31 with all of our OC tests. Based on what we see today with downgrades coming through our portfolio as well as where we are in the market, we could see some impact in Q3 and Q4. Right now we don't think that that's a material impact. As things change over the course of the quarter, we'll make sure to update everybody on our Q2 call.
On the second part of that question, Bill, was around clawbacks. Today we've got roughly $90 million of clawback exposure through KKR, that's a few small clawbacks in a number of different funds globally. It's not something that's an irregular part of our business. What we shoot for is to have our accrued carry certainly be north of any clawback liabilities in a material way, that's really how we present our numbers. The $1.26 billion of accrued carry that we have on our balance sheet is net of the $90 million of clawback liabilities that we have spread across the firm in a bunch of different and smaller ways. Again, that's pretty normal course for us, to have some form of clawback liability in our business, as of now, it's relatively contained.
Great. If I could get in my follow-up, even though that first one was a two-parter. Just, Scott, you had mentioned using your capital for both investments as well as potential M&A. I just sort of wondered, was that a generic comment or is there an opportunity here to potentially pick up some distressed assets at the strategic level? If so, where might you be thinking?
Thanks for the question, Bill. As you know, we're always looking for opportunities, and we continue to look in this environment. They may provide some strategic opportunities that we find interesting. We're going to have a really high bar, just like we always do. In terms of areas where we may be looking, I would point you to some of the younger areas for us, whether it's real assets, which is a place that we've been building businesses around the world, as one potential opportunity. We're also thinking about opportunities on the distribution front. Nothing specific that I would point you to right now, just an observation that in a given period like this, sometimes opportunities come our way that we find especially interesting.
Okay, thank you.
Thank you.
Operator, if we could just ask everyone to please limit themselves to actually to one question, that would just be really helpful as we look to work our way through the queue. If you have a follow-up, feel free, of course, to then get back in, and we can circle back around. We appreciate it.
Thank you, sir. I show our next question comes from Chris Kotowski from Oppenheimer. Please go ahead.
Yeah, good morning, and thank you. Scott, I thought the color you gave on the investments that you're making was really interesting. Just a couple of things around that. One is when you said the $5 billion of credit investment, does that include investments made by your portfolio companies themselves to retire debt at a discount? I'm curious, is there a lot of that kind of activity, or was the window where they were distressed too short? Secondly, you mentioned you did an investment in US Foods, and I was curious, since it's a publicly traded company, was that equity or debt? I guess why would you invest in a publicly traded company in a private equity portfolio?
Thanks for the questions, Chris. First, on the $5 billion, no, that does not include activity by our portfolio companies themselves in terms of buying their own debt at a discount. There was some of that activity, but not extensive activity. That $5 billion I mentioned was just for the firm's account specifically. In terms of the US Foods investment, that was a convert. It was a convert in a company we know well.
Thank you. Our next question comes from Craig Siegenthaler from Credit Suisse. Please go ahead.
Thanks, and good morning, everyone.
Morning.
I wanted your-
Morning, Craig.
updated thoughts on FRE stability in 2020 from current levels. Given your previous comments to Bill's question on CLO subordinated fees, and also some other source of risk, including mark-to-market on NAV-based funds, which I think is a small component for you guys, capital markets transaction fees, which are actually already quite low. I'm forgetting if you include any FRE performance fees, including from your BDC business, Franklin Square, and FRE too. Maybe just unpack other sources of risk that could maybe develop throughout the year. Of course, that would be offset by shadow AUM deployment and fundraising, too. Just, I wanted to unpack those sources of risk there.
Great. Thanks a lot, Craig. It's Rob. Maybe the best way to do this is to take our FRE in component parts. The first and most important are our management fees, as you know, which are roughly 75% of our total fees this quarter. Even with the potential impact of CLO subordinated fees, it's a fairly minor part of our overall business. As you said, our NAV-based funds is also pretty minor. As we look at our management fee component, we think it's both stable and has significant growth in front of it. The best example of that is being up 14% year-over-year this quarter. On top of that, we've also guided that we expect to grow our management fees by greater than 15% over the next three and change years.
The other 25% of our fees today are made up of a combination of transaction and monitoring fees that I think over time are probably biased to go up based on the overall size of KKR and how it grows, as well as our capital markets business, which we think is a long-term growth engine for us, and in normalized environments, really should be able to take some additional share with the business model we set up and the people that we have. Maybe the last component is the margin piece of it. What we've indicated in the past is that if we're able to achieve the management fee growth trajectory that we think we can do over the next few years, that we would expect to see some margin expansion flow through our business.
While we haven't guided to a specific FRE number, we do think that when you break down all of the component parts, that it would suggest two things: one, a meaningful amount of stability, and two, some real upside from there.
Thank you. I show our next question comes from Devin Ryan from JMP Securities. Please go ahead.
Hey, good morning, everyone. Thanks for taking my question. Would love to maybe dig in a little bit more about the investing playbook from here. I heard the comments about moving the distressed team closer to the PE team. Just trying to think about whether you guys are going to be looking at maybe opportunities in areas that you've shied away from because valuations weren't interesting, but now we're getting to some maybe pretty severe distress. That could be more attractive. Is it more focusing on the same, I guess, maybe areas that you have been focused on, but just potentially getting a little bit more attractive valuation. Just trying to think about what distress define what it look like to you guys and just the investing playbook in that.
Hey, Devin. Thanks for the question. It's Scott. I would say we're kind of seeing this rolling out in a few different waves, and there's probably four big themes as we see how this unfolds from an investment opportunity standpoint. I'd say the first wave was investing in dislocated traded credit and equities. We were particularly busy on that front over the last couple of months. The commentary we gave around the target lists that we had created were very helpful in that regard. There were a number of companies that we were tracking, both credit and equity, where, frankly, the prices were too high, but we had a target price. We'd done the work, and we were able to buy on the back of that work when the dislocation first showed up.
Some of those opportunities were very short-lived, so we were able to move quickly by virtue of that. That was kind of wave one. We continue to see opportunities there. Spreads are still wide, and we continue to put capital into that opportunity set. The second wave we've seen is providing liquidity to companies that are in need. Those tend to take the form of either structured equity or credit. We've got the firm working very well together across both PE credit, real estate, infrastructure, where appropriate. Basically making sure that all hands are on deck. When we have companies that we know and like that are looking for liquidity, we can move quickly. US Foods is one example of that, but we have several other opportunities like that that we're working on with the firm right now.
The third big theme would be around portfolio companies making acquisitions. We're starting to see opportunities of that type emerge now and are working with several of our portfolio companies that are looking to grow and be consolidators through this time. There again, probably a lot of those conversations had been going on for months or years, but it was not of the mind, but valuation opportunity in times like this is perhaps everybody becomes a little more economic around what can get done, and the synergies are even more powerful relative to the base of earnings. We're busy there. The fourth theme I would mention is around companies, both public and private, that are looking to sell non-core subs. They're doing that to delever or to buybacks, or in some cases, a little bit of both.
That wave is starting to show up. What we've seen generally is it started in the traded markets and now has moved into more of the private markets. We're busy on all of those fronts as we sit here today. That's part of the reason we're so enthusiastic about the deployment opportunity ahead of us and the return opportunity on the deployed capital. Yes, to your questions, some of those are in areas that we may have shied away from in the past because valuations were too high, and they've started to come back our way.
Thank you. Our next question comes from Patrick Davitt from Autonomous Research. Please go ahead.
Hey, good morning, everyone. Thanks for the industry exposure breakout detail there. A lot of the other firms have also been giving us more color around what percentage of the portfolio they view as particularly stressed or exposed to this recession. I believe you have one high-profile one that's been in the press that doesn't fit into the three buckets you gave. Could you maybe frame your view of the portfolio risk from that standpoint and the percent of exposed companies? That you maybe have bucketed into a meaningful stress category, and then conversely, perhaps the percent that has been categorized as more okay or maybe even benefiting from this environment.
Sure. Thanks, Patrick. It's Rob, and I'll take that question. We're not going to disclose how we rate companies into different buckets, but what we can tell you, and this is what Scott mentioned on the call, and I'll expand on a little bit more, is we feel really good about our relative portfolio construction, and it's going to be a combination of our limited exposure in energy, retail, travel, hospitality, and leisure through our portfolio. On the upside, I think we've become overweight over the last number of years in online e-commerce businesses, which have held up quite well over the last couple of months. The last point around portfolio construction for us is we obviously have a fair bit of weighting towards Asia as a firm.
North of 30% of our private equity portfolio today is exposed to Asia or directly exposed to the Asian market, which has held up on a relative basis better than the U.S. and Europe. Overall, we feel good about our portfolio. As Scott mentioned on the call, we certainly have our companies that are going to need some additional support through this period of time. We think the overall construction of our portfolio and the health of our companies is part of the reason why you would have seen our investment performance hold up pretty good in our private equity businesses over the last quarter, and especially if you look over the last 12 months.
Thank you. Our next question comes from Glenn Schorr from Evercore. Please go ahead.
Hi. Thanks. That's a good lead-in to the question. I want to talk a little bit more about the Asia franchise. I want to ask both the short-term and the long-term. Short-term, meaning besides holding up better, what can you use in terms of those markets being ahead of us and opening up, and what can you learn from that across the franchise where the opportunities are? Longer term is a little tougher because right now there's a little more China-related friction and nationalism everywhere in the world. I don't know if that has any implications on your thought process about the Asia franchise because it's such an important part of who you are. Thanks.
Hey, thanks for the question, Glenn. It's Scott. First, on the short term, it's been hugely helpful having such a broad platform in Asia and such a big portfolio in Asia, because obviously we were able to see several of those countries and markets be impacted by the crisis ahead of Europe and the U.S. We've started to see a lot of those markets now bottom and start to see some improvement. Just to give you a little bit of color, when the crisis started, we moved to kind of a daily call with the top people in the firm from all around the world, including in Asia. The Asia team was sharing its insights from what they were seeing with our portfolio and on the ground very early.
We've been able to kind of learn from that as we adjust our approach in Europe and the U.S. on the back of those learnings. We are seeing slow improvement across a number of our portfolio companies. We started to see it in Asia. Most manufacturing facilities are kind of now operating at 70%-100% of capacity. We're starting to see that also occur in parts of Europe. We're actually seeing some markets even in the U.S. starting to see a bit of bottoming. Now, to be clear, it's more like an elevator down, escalator up type set of charts that we're seeing across the portfolio. We started to see that happen in Asia over the last few weeks, and now it's showing up in the rest of the world. It's been very helpful to us as we've navigated all this.
In terms of longer term, we feel great about our Asia franchise and the opportunity we have in front of us. As a reminder, we have eight of our 22 offices there. Two of those are in China, six outside. We see a big opportunity to grow our business. As you know from prior discussions, we started in Asia n private equity, and have now really been bringing the rest of KKR's businesses to Asia across real estate, infrastructure, credit, just to name some examples. Growth technology we're also bringing to Asia. We continue to see a big opportunity to expand our platform in that part of the world. Regardless of what happens with the China dialogue, we still feel quite good about the opportunity ahead for the firm.
Glenn, one additional point that's relevant. We've talked a lot about Japan carve-outs over the last number of quarters, how that's been a real strategy for us there. We actually had our first exit of one of our carve-outs that we announced in March, the sale of AlphaTheta. That closed in April around three times multiple of money for us, you'll see a little bit of it in our Q2 financials. That was a nice win for that strategy for us in Japan.
Thank you. I show our next question comes from Mike Carrier from Bank of America. Please go ahead.
Morning, thanks for taking the question. I just have a question on performance fees and investment income. Your level of carry eligible AUM seem to dip less than some firms. Your ratio of paying carry is above 60%, unlikely higher post the April rally. You mentioned the $400 million pipeline. Curious on the outlook of performance fees, maybe a bit further out and realize it's tough to predict, but on one hand, it still seems like a fairly challenging backdrop depending on the type of recovery. Some of these stats make it look a bit better than feared. Any additional color you can provide, including the stability of interest income and dividends from the balance sheet. Thanks.
Sure. I'll cover both of those. Listen, there's a lot about the environment that's difficult to predict right now, and realized carried interest, that would certainly be at the top of that list, I think, for all of us. As you said, there are some encouraging statistics we have that 60% of our total carry eligible AUM today would be in carry paying mode on a liquidation value basis. Our crude carry still stands at north of $1 billion. I think the most critical thing, and what we try and do every quarter, is to give you visibility in terms of what we actually do know on our carried interest and our realized balance sheet earnings, which is the $400+ million number that I mentioned in the prepared remarks.
As it relates to our interest and dividends, those have been elevated over much of the last three quarters for largely the same reason. We have a margin loan against our Pfizer shares, and we've used that margin loan, fairly low LTV margin loan, to take a dividend in Q3, Q4, and Q1. That represented about two-thirds of our interest and dividends this quarter. Think that the other third of that is relatively stable. Albeit with interest rates now near zero, we'll probably take a little bit of a hit on our cash balance on our interest line item. The overall line should be reasonably stable going forward.
Thank you. Our next question comes from Robert Lee from KBW. Please go ahead.
Great. Thanks for taking my questions, and I hope everyone is doing well in this crazy environment. I have a question on the capital markets business. I guess, thinking about it would make sense that at least in the near term, that business would slow. By the same token, to the extent that maybe investment activity or opportunities kind of maybe pick up or remain healthy, there's actually some near-term opportunity for that business to be more resilient. How should we think about the capital markets business over the coming quarters?
It's Rob, and I'll take that question. Q1 was an interesting quarter for us. $60 million of revenue, sort of in line with the $50 million-$70 million of baseline revenue that we had suggested on our last call. About half of our business in Q1 was from third-party business. It's pretty meaningful, especially in a quarter where KKR didn't have a lot of deployment across our organization. Listen, we continue to feel in capital markets environments that are stable, that we should be able, in ordinary course, to generate $50 million-$70 million a quarter, and then have the upside potential from some large transactions that have been a regular occurrence as part of that business. Which is exactly why we've averaged closer to in that business over the last few years.
As it relates to the near term, I'm not sure we're yet in a normalized capital market type environment. For Q2, we might be on the lower end of that $50 million-$70 million range. It's certainly too early to say, and there's a lot of the quarter left to go. We do think that business in market opportunities when capital is scarce is where that business can really shine around some of the larger transactions that continue to come through our pipeline.
Thank you. Our next question comes from Brian Bedell from Deutsche Bank. Please go ahead.
Great. Thanks. Good morning, folks. Actually, a good follow-on right to Rob's question. In this environment, maybe you just cover up if you can characterize the deployment capabilities in terms of anything getting delayed with the COVID-19 crisis, and how you're thinking that might project out for the rest of the year, certainly if we get more contagion or a second wave. How you see both your capital markets business and your balance sheet being used to help get deals done that a lot of other firms can't do to that extent.
Thanks for the question, Brian. It's Scott, I'll take that. In terms of the deployment opportunities being delayed, I'd say there's probably a bit of a pause that went on, especially during the first several weeks of the crisis as people were trying to process what was happening. We've actually started to see our pipelines pick up around the world. Some of it was in the areas that I mentioned in terms of some of the providing capital to companies in need of liquidity, the rescue-type opportunities. We are also seeing some larger scale private markets opportunities begin to reemerge. As an example, our pipeline in Asia is very active right now. I don't think that's going to have a big impact over the long term.
It's all path dependent, obviously, but we are starting to see pipelines pick up on the back of some improvement, maybe in the visibility in terms of timing. We'll keep you posted on that, but no big long-term change. Just a few things may get bumped into the back half that might've been in the first half. In terms of KCM and the balance sheet, it's a great question. We really view our model as providing us with a real advantage in times like this. Some of the deals that we've been able to get done during periods of dislocation have been because we have been able to use the balance sheet and our capital markets business to access financing, both equity and debt, when others couldn't.
We've had several situations over time, including recently, where we were not necessarily the highest bidder, but we were the only bidder that could actually access the capital and have financing certainty. We view, as in prior periods like this, are viewing KCM and the balance sheet as providing us with a real strategic tool to be able to do that again. Good question, and we are focused on making sure that we've got liquidity on the balance sheet, and the capital markets team is really welcoming teams to make sure that we can do that well in a time like this.
Thank you.
Brian, it's Craig. Just one tangential point as it relates to capital markets and its value add. Certainly, its strategic value is greater in periods like this. Sometimes people ask that question in the framework of our own portfolio companies. One thing that I think it is helpful just to understand is how active the capital markets team has been to position us and allow us to be in a position of strength entering this volatility. When we look across the private equity portfolio in whole, we really have very few near-term maturities. When we look at the maturities of our portfolio companies and what we see in 2020 and 2021, that represents only about 4% of the quantum of that long-term debt that we have.
I think given the strength of capital markets, it does allow us to be front-footed when there is periods of volatility. I think it has also been very helpful in positioning us well as we enter this period.
Thank you. I show our next question.
Operator, are you there? We can't hear anything.
Thank you. I show our next question comes from Chris Harris from Wells Fargo.
Thanks, guys. Can you give us an update on where things stand with respect to the ownership of your stock by index and long-only investors? Related to that, what do you anticipate the potential Russell Index might do to that number?
Hey, Chris, it's Craig. I think we've seen a nice increase as it relates to not only index buying and that index ownership, but also as it relates to mutual funds who do look at those benchmark indices as they make their investment decisions. It's really been our experience there that has really influenced our decision as it relates to Russell. In terms of when we look at ETFs and that passive amount, that's been in the mid-60s. Between 60 and 70 million shares that have been owned by those index providers. As it relates to Russell, first there are those ETFs and strategies that are directly linked to those indices, like the Russell 1000 and Russell 3000. I think that math is pretty straightforward. A lot of you have done that math.
I think it would suggest a teens million in the teens as it relates to those more formulaic strategies. Really the second piece that has really most interested us are those mutual funds that are benchmarked against those industries, indices, and our ability to market ourselves through to those institutions and increase our mind share. As we've looked at it, we think that second piece should even be more powerful than the first. Recognizing that, we've spent a fair amount of time, as you'd expect, looking at Russell. They publish a pretty detailed construction and methodology document. Within that they review a whole series of considerations for public equities, domicile, market cap, float structure, a whole series of items.
Of course, we've reviewed that document pretty closely, and alongside of that, as we mentioned earlier, have meaningfully engaged directly with FTSE Russell over the last couple of months. As we stated earlier, while any decision on index inclusion is obviously their decision and not ours, we believe we meet Russell's requirements.
Thank you. Our last question comes from Michael Cyprys from Morgan Stanley. Please go ahead.
Hey, good morning. Thanks for taking the question. Just wanted to ask around LP demand, and certainly heard you on the $10 billion of new commitments coming in the door. I just hope you could talk a little bit more around how you see LP demand for the private markets evolving in this backdrop. On one hand, you have the denominator effect that drives the allocations higher and lower distributions from the asset class, probably. That means LPs have to fund the commitments and the allocations from elsewhere on their portfolio, which could be a challenge. You have low rates and so maybe there's more demand. I'm just curious how you see these sort of pieces and LPs navigating through these dynamics and the impact it could have on the asset class.
Do we see more secondary activity, and is that a part of the marketplace that you'd like to have more of a presence in?
Thanks, Michael. Scott, I'll take those. It's a great question, and maybe a bit early, honestly, to be able to give you a definitive answer on it. I think you're right. There's going to be some gives and takes, right? There is going to be questions for some of the institutional investors around the denominator effect and what happens with the rest of their portfolio and their allocations to alternatives. Frankly, we've started to see the public markets rebound. I think what were initial questions about that, now there's a little bit of uncertainty as to whether the denominator effect will be a big consideration or not. I think we're just going to have to give that a bit of time to see how that settles out.
The last time that happened, what we saw was not a big reduction in allocation to alternatives, but actually an increase in the allocation to alternatives so that institutional investors could actually keep invested in the asset class. We'll see what happens here, but it's pretty path dependent. I think on the flip side of that, you're entirely right. I think even the conversation the last handful of weeks with CIOs around the world, there is a real recognition that a low rate environment is equivalent to a virtually no rate environment, and they need to keep looking for ways to generate returns. The dialogue around alternatives continues, which is why those conversations, I think, pivot pretty quickly from defense to offense. We take that as encouraging.
We think investors around the world are going to continue to look to the private markets for returns as they're expecting less and less out of their traditional fixed income and public equities portfolios. We think that's great for us. We're also finding, just as an incremental piece of color, that during this period of time, there continues to be a lot of interest from the insurance space, which tends to be quite liquid and conservative in its approach. We've been quite active in our dialogue with insurance companies over this period of time. From the high net worth and retail markets, we're seeing them lean into this from an offense standpoint as well. There's lots of twos and threes in all of that. Overall, we think it bodes well for our business, that there's going to be an even greater need for return.
If you think about the power of the illiquidity premium that the alternative space provides, the lower the overall normal market return is, the greater that illiquidity premium is as a percentage of the total return. There's even more interest in what we do, we think, coming out of this. In terms of your question on the secondary market, it's a space that we continue to spend time on and have looked at from time to time. I think there will be opportunities for the secondary space to continue to grow, and that's one of the areas that we look to periodically as we think about other opportunities for us strategically. Nothing to report today on that front.
Thank you. This concludes our Q&A session. At this time, I'd like to turn the call back over to Mr. Craig Larson for closing remarks. Please go ahead.
Thank you, operator, for your help, and thank you, everybody, for joining our call. We look forward to giving you an update next quarter. For any follow-up items, of course, please feel free to reach out to Anna Thomas or me directly. Thank you once again.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.