Ladies and gentlemen, thank you for standing by. Welcome to KKR's Q3 2022 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following management prepared remarks, the conference will be open for questions. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this call is being recorded. I will now hand the call over to Craig Larson, Head of Investor Relations for KKR. Craig, please go ahead, sir.
Thank you, operator. Good morning, everyone. Welcome to our Q3 2022 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'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. 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. I'm gonna begin the call by spending a few minutes walking through the quarter. We look at our results and think they really highlight the resiliency of our business model.
Our management fees for the quarter were $671 million. That's up 20% compared to Q3 of last year. Management fee growth for the quarter, as well as over the last twelve months, has been most meaningful within our real assets business, which, as you'll recall, we began reporting separately last quarter. Net transaction and monitoring fees were $168 million for the quarter, with capital markets contributing $116 million. To go through our expenses, our fee-related compensation margin, consistent with prior quarters, was 22.5%. Other operating expenses increased modestly from last quarter, coming in at $146 million. In total, our fee-related earnings grew to $542 million or $0.61 per share, with an FRE margin of 61%.
This is now the eighth consecutive quarter that our FRE margin has exceeded 60%. Next, realized performance income was $498 million, with realized carried interest driven by monetizations of CHI Overhead Doors, Fiserv, as well as Max Healthcare. Realized investment income was $285 million, driven by similar monetization events. Adding these two lines together, so looking at realized performance income together with realized investment income, really to get a complete picture of our monetization activities. Total realized gains for the first nine months of the year are 10% ahead of last year. Given all of the volatility experienced across markets in 2022, we think this speaks to the breadth of our platform and again, the resiliency of our business model.
Overall, our asset management operating earnings were $959 million, and our insurance segment had another very strong quarter, generating $127 million of operating earnings. Together, this resulted in after-tax distributable earnings of $824 million or $0.93 per share. Turning to investment performance, you can see the details of the quarter and the LTM period on page seven of the press release. Just looking at this page, the traditional private equity portfolio was down 4% in the quarter compared to broad indices that were down 5%-6%. Over the last twelve months, the PE portfolio was -8% compared to the S&P 500 and MSCI World indices that were down 15% and 19%, respectively. In real assets, our portfolios continued to perform again in a quarter with a lot of volatility.
The opportunistic real estate portfolio was -1% in the quarter and +11% over the last twelve months, while the infra portfolio was up 1% in the quarter and is +5% LTM. On the leveraged credit side, the portfolio was up 1% in the quarter and down 5% over the last twelve months. Our alternative credit portfolio was down 1% for the quarter and up 3% in the LTM. There's been meaningful volatility in the credit markets over these periods as well. The high yield index declined 1% in the quarter and is off 15% over the last twelve months, just as a point of comparison. In terms of our balance sheet investments, investment performance was flat in the quarter and down 5% over the last twelve months.
Core Private Equity, which Rob will touch on in a moment and is still our largest allocation, was up 2% in the quarter and it's up 8% over the LTM. Turning to fundraising in the quarter, we raised $13 billion, bringing new capital raised to $65 billion year to date. With that, our assets under management increased to $496 billion, and fee paying AUM now totals $398 billion. To help put these figures into perspective, over the past two years, both our AUM and our fee paying AUM have more than doubled. We also continued to deploy capital with $16 billion invested in Q3. Credit strategies invested $7 billion in the quarter, with the remainder of the quarter's deployment roughly split between real assets and private equity. With that, I'm pleased to turn the call over to Rob.
Thanks a lot, Craig, and good morning, everyone. Let me start by saying a few words on the operating environment. As you know, the Q3, and really the first nine months of 2022, were very challenging across markets. High levels of inflation are clearly impacting global consumers, while the sharp increase in interest rates has had multiple knock-on effects that will invariably slow much of the global economy. In turn, equity and bond indices have been very volatile, and virtually all of them are down significantly year to date. Capital markets activity has meaningfully slowed. Global equity and credit issuance is significantly below historical norms. Now despite all of this volatility and uncertainty, the overall mood and sentiment across KKR is quite positive, and we thought it would be worthwhile this morning to go through five key reasons why we feel the way we do.
First, let me remind you why our business model positions us well for periods like this one. There are a few key reasons why. About 90% of our capital is perpetual or committed for an average of eight years or more from inception. Our management fees are largely calculated on committed or invested capital and as a result are more insulated from fluctuating NAVs of our funds. Therefore, much of our management fees are highly predictable, and that visibility in turn provides us with the continued ability to invest back into the firm for growth. We also have $43 billion of committed capital yet to turn on that has a weighted average management fee rate of about 100 basis points.
Finally, and maybe most critical in moments like these, we have $113 billion of uncalled capital from our investors that we can use to invest into the current dislocation. While those statistics are all meaningful in their own right, I think it's also helpful when viewed in comparison to where we were as a firm even a short while back. Two and a half years ago, March 31, 2020, so right as we entered COVID, we had $57 billion of dry powder with $19 billion of committed capital yet to earn management fees. That compares to the $113 billion and $43 billion I mentioned a moment ago. Both of these figures have doubled more or less over the last two and a half years.
When you consider our relative positioning as a firm, those numbers don't account for the significant increase we have had in perpetual capital, largely due to our partnership with Global Atlantic and our acquisition of KJRM, as well as the meaningful increase in the diversification of our business, both by geography and strategy. This brings me to my second reason for optimism. We're fortunate, due to our fundraising success and definitely a bit of luck on timing, that we are in a position to deploy a significant amount of dry powder with asset prices more dislocated and while capital is quite scarce. As a result, we are starting to become a lot more constructive on our opportunity sets. We are already finding opportunities across the credit landscape. Our real estate and corporate credit teams are all very active.
More exciting is our outlook for the coming 12-18 months across all asset classes and geographies. We are mobilizing our teams and resources against what we see as a growing opportunity to put our client capital to work. Take, for example, in private equity. Oftentimes, our best vintages result from investments made during periods of market distress. Think the early 2000s, the GFC, or what we went through a couple of years ago. We think 2023 could present such an opportunity. The key here is that we have really set ourselves up to be able to outperform in this environment, given our expertise and breadth across geographies, industries, and asset classes. Most importantly, our culture really incentivizes our people to work across the firm to ensure that both information and capability travel and that we can make each other better.
As a result, we are uniquely positioned to find creative and attractive investment opportunities. Turning now to performance, which is my third point. Please turn to page 8 of the earnings release. As Craig went through, every quarter, we report our investment performance for the quarter and trailing 12-month period across our major asset classes. This really, though, only tells part of the story as it doesn't capture investment returns since inception. These funds all continue to outperform their comparable public indices. Our clients, really in all channels, rely on us to produce differentiated outcomes compared to what they can achieve in traditional asset classes. That is just what we've been doing. Now to be clear, we certainly have today and will in the future a handful of more difficult situations to manage.
Our thematic approach, which we have talked about many times, and our focus on portfolio construction are two critical reasons why you see this kind of outperformance. Which brings me to my fourth point. The strength of our fund performance continues to allow us to raise capital from our investors. Q3 new capital raised of $13 billion brings year-to-date fundraising to $65 billion. To put that number in perspective, that's already our second-best year of fundraising ever, and we still have a quarter to go. Even more notably, this was against a much more challenging fundraising backdrop than the past few years and without many of our largest flagships in the market. Looking ahead over the next 12-18 months, we continue to have a really active calendar and remain constructive about the outlook for scaling our strategies that are coming to market.
Finally, I want to turn to my fifth point and focus on the competitive differentiation that our balance sheet creates in periods like these. There's not a corporate that I know that doesn't wish they had more capital availability right now. We are very confident in our ability to deploy our excess capital in opportunities that can both generate compelling investment returns and also help build and scale the firm at the same time. Part of what generates this confidence is the strength of our existing investment portfolio. Our focus on asset allocation and really where the puck is going has served us well. While the S&P 500 declined 15% over the last 12 months, our balance sheet was off only 4.7%. Over the last three and five years, our annual returns have been 16% and 14%.
Several hundred basis points ahead of the S&P over these periods. One of the key drivers of this outperformance is the shift that we made a few years ago to increase our exposure to real assets. The fair value of our real assets investments have increased from $2.4 billion two years ago to $4.2 billion as of September 30, and today represent almost a quarter of our investment portfolio. Our largest allocation on the balance sheet remains Core Private Equity, and this really gets into business building and how the balance sheet allows us to play offense. As a reminder, Core PE is a long duration investment strategy where we expect to hold these investments for 10-15+ years and believe they carry a more modest risk-return profile compared to our traditional private equity model.
We're looking for mid to high teens gross IRRs that we can compound for north of a decade. These are businesses we believe have strong secular tailwinds with defensible market positions, solid cash flow dynamics, and as a result, benefit from a more stable earnings profile. From a standing start six years ago, we've put together this really incredible global portfolio of 17 companies with $32 billion of AUM that is both third-party capital together with balance sheet capital. We believe we have the largest core PE asset management business in the world. As shareholders, we are all participating in core PE through the compounding of value on our balance sheet alongside the management fees, capital markets revenue, fee-related earnings, and carried interest that is generated over time. That combination is incredibly powerful.
Our acquisition of Global Atlantic in July 2020, right on the heels of COVID, is perhaps the best example of how our balance sheet positioned us to play offense when others could not during that period of severe dislocation. We have deep conviction that GA can be a long-term compounder of capital, much like Core Private Equity. We are partnered here with a first-rate management team. So far, GA has been performing exceptionally well. Over the last 12 months, they have generated an ROE of about 21%, well ahead of our expectations. While AUM has increased from approximately $70 billion at announcement to over $130 billion as of September 30, really helping to also drive our asset management economics. Core Private Equity and Global Atlantic are great examples, but they're just two of many.
We know that our model will continue to allow us to find ways to use the balance sheet where we can simultaneously generate compelling investment returns and also use it to grow and scale the firm at the same time. We have also created a liability structure on our balance sheet that allows for playing real offense in this environment. We have very intentionally funded ourselves with long-dated liabilities that have fixed cost of capital. The average maturity of our recourse debt is around 20 years, and it has a weighted average fixed coupon of approximately 3% after tax. Obviously, that just isn't replicable today and represents a huge asset for us right now. With all of this, hopefully it's clear why we remain so excited about our long-term opportunities. In summary, number one, our model is durable and diverse with significant recurring revenues.
Two, the next 12-18 months should present great deployment opportunities, and we are extremely well-positioned to invest into them. Number three, we are generating excellent investment performance on behalf of our clients. Four, our fundraising success has been notable, especially given the backdrop, and we remain very well positioned to achieve growth from here. Finally, number five, our balance sheet is a strategic differentiator whose value is even more meaningful in moments like these. The opportunity set in front of us over the next five-10 years is immense, and we have never felt better positioned competitively. That's why the tone inside the firm is so constructive right now. Our long-term goals that we have articulated for 2026 are unchanged, and we have a great deal of confidence in our ability to achieve them.
With that, Scott, Craig, and I are happy to take any questions that you have.
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. We ask that all analysts limit themselves to one question. You may re-enter the queue by pressing star one if you would like to ask a follow-up. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Our first question is from Alex Blostein with Goldman Sachs. Please proceed with your question.
Hey, everybody. Good morning. Thanks for the question. Apologies for a two-parter, but promise they're kind of related. Just starting with private equity. Financing costs are obviously up pretty meaningfully, you know, growth slower, credit spreads are widening. I hear the optimism to deploy capital, but curious how you're thinking about deployment and private equity specifically, and how the return profile of where you could deploy money today varies versus what you could have done a couple of years ago. In other words, are you still underwriting to, you know, high teens to 20% IRRs? And I guess, are the lower multiples, the lower entry multiples enough to offset both the growth headwinds as well as high financing costs.
I had a quick follow-up just on the growth and private equity management fees for the next 12-18 months.
Hey, Alex, thank you for the multiple parter. Why don't I start? Look, a couple of observations just on deployment. One, public market and why don't we start there. Public market valuations have obviously come down very meaningfully. You know, our macro team does this work every quarter where they look across a breadth of markets and asset classes and look at current valuations versus a 20-year average, and Japanese equities, as an example, are at 8% of their long-term average. That's just one example. That's a pretty remarkable statistic. At the same point in time, capital is obviously very precious, as you noted. I think the combination of markets coming down together with capital being very precious is a great thing for us.
We have lots of tools at our disposal in terms of finding ways to be relevant. I expect you remember our deployment history during COVID, again, in a period which even arguably was more dramatically dislocated and more dramatically shut down. I think we feel great about the connectivity that we had as a firm and the opportunities that we were able to find in terms of deploying capital in private equity and private markets broadly. I guess the final thought that I'd make, just as it relates to the financing market, is, you know, look, we have 70 people globally in our capital markets business, and the strategic value of this business increases during periods of volatility and distress.
I think as it relates to our ability to finance transactions, given our position, the best-in-class talent we have here on a global basis, our ability to access and finance the capital markets during periods of distress is actually something that we think of as being a real competitive advantage of ours.
Hey, Alex, it's Scott. Just a couple of things I'd add on to what Craig said. You're right, financing costs are up. I'd say multiples, generally speaking, are down more than financing costs are up. If you look, kind of over time and you run out the math, paying a little bit more to get the financing in place doesn't have that large an impact on returns as long as you've got the right asset, the right thematic, and you're able to make the company better while you own it. The bottom line is we are still pricing the IRRs to where we were before. It's just a bit of a different mix.
Alex, switching to your question as it relates to management fees across private equity and growth from here. Obviously, as you know, a couple of our big flagships we got done over the last 12-24 months, but we continue to raise a number of adjacent products that we're excited about that are in their scaling phase. Also remember that our Core Private Equity business is a business that generates management fees as capital is deployed, as opposed to committed capital at the onset of the fund. As we continue to deploy capital in Core Private Equity, you should see some natural growth there as well. We're constructive, as it relates to growth in our private equity management fees over the coming quarters.
Obviously, you know, at some point there in the future, we'll have a re-raise of our flagship strategies.
Our next question comes from Craig Siegenthaler with Bank of America. Please proceed with your question.
Thanks. Good morning, everyone.
Good morning.
My question is on Global Atlantic. I wanted to see how early-stage credit quality metrics have trended inside of GA in 3Q. We know it's coming off very strong levels, but have you seen a pickup in delinquencies, non-approvals, criticized assets, OTTIs? You know, if the U.S. does enter an economic recession next year, or at least if the economy does slow a lot, do you expect to see a pickup in OTTIs next year off of a, you know, a very, very low base currently?
Great. Hey, Craig. Thanks for the question. The short answer is that we have not seen any deterioration of credit quality across Global Atlantic. As you look forward and as you look at different sensitivities, we feel really good with how that book is positioned. I would note that their NAIC rated assets, that 95%+ of them are NAIC one or two, so investment grade in nature. We feel really good about the underlying strength of the book at Global Atlantic.
Great. Thank you, Rob.
Thanks, Craig.
Our next question comes from Jerry O'Hara with Jefferies. Please proceed with your question.
Great. Thanks for taking a question this morning. Just kind of circling back, I guess, on some comments made in some of the recent quarters, just around the expansion of platform distribution for some of the democratized retail products. Hoping we could get an update there. Perhaps any kind of commentary around flows in the quarter would also be helpful. Thank you.
Thanks, Jerry. It's Craig. I'm glad you asked about why don't I start? First, just to your specific question on flows. We did see new capital raise in the quarter slow versus Q2. With volatility in the quarter, I guess we're not really terribly surprised by that. New capital raise across all of our democratized products was about $500 million in the quarter, and KREST would have been about half of that. Now, what that doesn't tell you is all that's going on under the hood, because there's quite a lot. I think first, just as it relates to KREST and distribution, there are three main wirehouses in the U.S., as you know. We've been on one of those since we launched 15 months ago, and we're really pleased with our market share and our positioning there.
We were added to a second warehouse in August and then launched on the third right at the very end of September. With all the volatility in the quarter and the timing of these launches, you're not really seeing the impact of that in our September 30 numbers. The breadth of our distribution there certainly increased in the quarter. Second, we did make a series of filings, as you may have seen, on our infrastructure product. Now, unfortunately, now that we have an active registration statement on file, there isn't a lot of additional detail we can give you here because of the SEC's private placement rules, but wanted to highlight that as something noteworthy. Third, we have made additional filings on additional private equity as well as credit products in the quarter.
Fourth, we continue to hire and onboard and build a team that's focused on this opportunity for us. I think the main takeaways, if you were to kind of step back from the 90-day period, if you will, is, you know, we expect to have democratized products across our four main asset classes, real estate, infrastructure, private equity, and credit. This continues to be a real priority for us. The great news for us, one, this is a huge end market. It's a massive opportunity, and in many ways, it's all upside for us, and it continues to feel like we're really wonderfully well-positioned against this just enormous opportunity.
Yeah. The only thing I would add, Jerry, it's Scott, is, you know, Rob mentioned that we continue to feel great about what we shared with you in terms of our growth plan through 2026. We had very little on private wealth in those numbers. So to Craig's point, this is all in front of us and upside for us relative to what's in the firm today, and hopefully it'll provide, upside to the trajectory we shared with you at our Analyst Day, amongst other, quarterly calls.
Our next question is with Patrick Davitt with Autonomous Research. Please proceed with your question.
Hey, good morning, everyone. Could you give us an update on the announced but not closed realizations for 4Q? Maybe taking a step back, any updated broader thoughts on, you know, the potential for realized cash flow to come down, you know, over the next few quarters into next year, given the decrease in net accrued carry and, you know, more difficulty getting deals done.
Yeah, sure. Hey, Patrick. Thanks for the question. Based on transactions that have happened or where we have deals that have either been signed up or we expect that have closed or we expect to close this quarter, we've got approximately $350 million of realized performance revenue and realized investment revenue that we feel good about. Continued momentum on the monetization front in spite of the environment. If we achieve those numbers, this part's important, ballpark around 30% comes from carried interest and the balance from realized investment income and incentive fees that will come in at that lower comp range, so a higher flow through on monetizations, at least what we've got quarter to date. In respect of realized monetization revenue in the future.
Listen, of course, you know, some of this is gonna be impacted by the environment. I've said this before. You know, we don't need straight line up markets. What we need are periods of time where volatility is down and pockets of time where volatility is down to be able to monetize our portfolio. While you're right, we've taken some marks as an industry and as a firm. We still have approximately $9 billion of embedded revenue that sits on the balance sheet across our carried interest line item as well as our balance sheet. That's the fair value of those assets relative to their cost.
That gives us a good bit of visibility in terms of generating, you know, meaningful revenue in the future when we do get those pockets or opportunities to be able to monetize our portfolio.
Our next question is from Bill Katz with Credit Suisse. Please proceed with your question.
Okay. Excuse me. Thank you very much for taking the question this morning. Circling back to the insurance platform. Just wondering if you could talk a little bit about the implications of higher interest rates as it relates to any kind of lapse or surrender dynamics and/or block opportunities. Thank you.
Yeah. Hey, Bill. It's Rob. I'll take this or I'll start. Overall, the punchline is we think GA should be a net beneficiary of a rising rate environment, for a couple reasons, and I'll touch on surrenders at the end. One, flows should be better both on the individual as well as on the institutional side of that business. I think on the individual side, it's just easier to be able to sell and distribute a 4% annuity than it is a 1.5% annuity. Then on the institutional side, you reference blocks. You know, we should benefit here, and we're seeing this in our pipeline, because all things equal, our reinsurance clients are gonna realize lower losses in a higher rate environment.
I think that's why you're seeing our pipeline pick up on the blocks.
As it relates to the balance sheet specifically, your assets and liabilities are pretty tightly matched at GA as you know, so we don't expect much impact here. We definitely do have some floating rate exposure, and so overall, we should be doing better on the balance sheet in a higher rate environment. You mentioned surrenders at the end. It's still early, of course, but so far in 2022, as well as in Q3 of 2022, we've experienced lower surrenders than what we were expecting. We attribute a good part of this to the design of our products, which disincentivize policyholders from surrendering before they're expected to do so.
As you think about Global Atlantic and our policies, 75% of those policies either have surrender charges or aren't able to be surrendered. Again, back to product design and why we you know feel like we got our arms around that kind of a risk in a rising rate environment. Of course, something that we continue to watch. The punchline is, we think in this kind of a rising rate type of environment that we're in right now, GA should be a net beneficiary.
Our next question is from Brian Bedell with Deutsche Bank. Please proceed with your question.
Great. Thanks. Good morning, folks. My question's on fundraising, the $13 billion for 3Q. Can you unpack the real asset component of the fundraising? I could only get about a third or so of that from the fund tables within that $6 billion in that segment. Then also, if you can sort of comment on the pension plan appetite and your view on that channel given rising long-term rates. Then just one comment on the fundraising so far year to date being the second best year. I imagine it's still a challenging environment near term at least.
Just wanna be sure that you're not expecting fundraising to exceed the, you know, 2021, which of course was a record year with flagships.
Hey, Brian, it's Craig. Why don't I start? I'll start on your last point first. Look, I think with market volatility, the tone of the fundraising market has become more challenging. To be clear, we feel great about the body of work here. As Rob noted, and as you mentioned a second ago, new capital raise for the first nine months of $65 billion. Again, through nine months, already the second most active fundraising year in our history without a lot of flagships in the market. When I think back to where consensus estimates were for us at the beginning of this year, that number for 2022 for the full year was in that $55 billion-$60 billion range.
Again, we've already raised more capital relative to what was expected at the outset of the year, and that's been accomplished in a more difficult fundraising environment, and we've still got another quarter to go. Look, I think again, we feel great about everything that we've accomplished. A couple of other thoughts. One, you know, you mentioned the fundraising that we've had in some of the real assets areas. When I think of activity for us in strategies like infrastructure, real estate, and credit, so strategies that can or should participate in a rising rate environment or are inflation protected, that's been two-thirds of the capital that we've raised over the trailing twelve months.
Finally, I think also in terms of innovation, over half of the capital we raised in the trailing twelve months again were in strategies that didn't exist within KKR five years ago. In real assets, one of those contributors to the quarter is a great example. Our Asia infrastructure strategy is a great example of this. Asia was outside of the mandate of our flagship fund series, the first generation fund. Again, we feel great about performance, and that was certainly one of the contributors to real assets in the quarter. That would have been the largest piece as it relates to the infrastructure component. Within real estate, you had a handful of components, the largest of which would have included GA's contribution within our real estate footprint.
Again, I think the main takeaway, we feel really great about everything that we've done so far this year.
Yeah. The only thing I would add, Brian, to your pension plan question. Look, there's no doubt some U.S. pension plans are getting their bearings right now, and trying to figure out, you know, where the market's gonna go. You know, we're having a lot of very productive conversations, to Craig's point, around anything that's got an inflation protection element or yield. Think credit, infrastructure, real estate. We're having a lot of good dialogues on those fronts, even with some of those that are still getting their bearings and may be more active early part of next year than the end of this year. Remember, we're spending a lot of time with institutions we've never spent time with before. You know, insurance companies globally are trying to figure out how to navigate the rate environment.
Sovereign wealth funds have a different dynamic entirely, as do family offices and, you know, high net worth investors. We're having more dialogue than we've ever had before about the markets and the macro and introducing what we're doing. I think to the bigger, broader point, and you referenced this in your question, we were incredibly fortunate. We raised over $120 billion last year. Our large flagships have been in the market over the last couple years before, you know, the more recent, more challenged markets. We really got a bit lucky with our timing, and that's why we have the $113 billion of dry powder to put to work. In an environment like this, companies still need capital. We find private capital tends to have less competition at a time like this.
Public markets are more difficult. Corporate M&A is more challenged. We've got a lot of capital to put to work. Companies still need it.
Our next question is with Arnaud Giblat with BNP. Please proceed with your question.
Good morning. My question is regarding capital deployment in infrastructure. You hopefully give us quite an update on private equity. I'm just wondering if you could zoom in for a second on infra. Other key players out there have been broadly unaffected by the macro environment deploying quite quick. I'm just wondering specifically how you see the outlook in terms of deployment in infrastructure, and should we be thinking of a similar timeframe as you've experienced in the past, and where the opportunity sets may lie in infra. Thank you.
Yes, Craig, why don't I start? Look, one, the main point, there is a massive need for infrastructure capital globally. Alongside of that massive need, you're really seeing a step function change in the footprint of our business. Whether that's our global infra fund series, Asian infra fund series, diversified core, AUM two years ago was $15 billion, and today we're at $50 billion. Alongside of that presence, you're seeing similarly a step function increase in terms of our deployment, and that team's remained among the busiest within KKR. You know, we've invested $11 billion of capital globally over the last 12 months in infrastructure. In 2020, that number was a little over $2 billion.
Again, you've seen a big ramp in that activity, and that's something that I think we'd expect you should continue to see for us. One of our largest deployments in the quarter was a take private of a French renewables business. We have another take private that is announced and scheduled to close in Q4. I think the take private dynamic is actually also something that's just worth mentioning. It's true in infrastructure. It's also true more broadly. You know, we've closed on four take privates this year with a fifth set to close in Q4. Again, the main takeaway on infra is a high level of activity for us.
Yeah. Arnaud, it's Scott. I'd say the punchline is consistent with your comment. Our pipeline is strong across both value add and core infrastructure. We've been announcing deals, and we continue to have a full pipeline.
Our next question is from Michael Cyprys with Morgan Stanley. Please proceed with your question.
Great. Thanks. Maybe just continuing with the real asset theme there. Can you talk a little bit about how you're expanding your capacity to invest in real assets? Where are you looking to expand the platform as you look out over the next year or two? Where are you hiring? Can you also talk about the sort of added benefit on the transactional revenue side as real asset deployment continues to come up? It looked like that was pretty strong on the quarter there as well. Just a cleanup question for Rob, if you could just mention the investments and realizations off the balance sheet in the quarter. Thank you.
You wanna start with realizations?
Sure. In the quarter, Mike, thanks for the question. About $800 million of deployment and modernization, so it's a little bit north of $400 million off of the balance sheet.
Mike, why don't I start on the first part? I'll let Scott add in. Look, I think if you look at, you know, a statistic to kind of help frame the growth and the presence in the marketplace, you know, we had $118 billion of AUM in real assets at the end of the quarter. Two years ago, that number was $30 billion. Naturally, in the evolution of these businesses, you know, your CapEx runs through your income statement. You hire people, you need to bring on world-class talent to then have the opportunity to raise capital. You're looking to earn your right to grow, build, and scale both those funds themselves, as well as where you see opportunities to expand into other areas where you can be relevant.
I think we feel great about the progress that we've made, but our hockey sticks aren't in the air, as I think we see the opportunity set ahead of us, and look where the leading one or two providers are in some of those businesses. It just feels like there's a tremendous opportunity for us to continue to build and grow and scale off of all of the growth that you've already begun to see.
Yeah, just a couple other thoughts, Mike. Thanks for the question. You know, on just take real estate, we'll take the two pieces of real assets in turn. Real estate, a few things I'd call out. One is Asia. We continue to expand the team.
You saw the acquisition that we completed in Japan of the platform now called KJRM. We have 160 people now in Tokyo focused on what is the second-largest real estate market in the world. That's a J-REIT platform, as a reminder. Asia would be one thing I'd call out. We've also expanded the platform. We started in opportunistic, but we've also now expanded to core plus. We're raising capital across U.S., Europe, and Asia, core plus. That'd be a second area I'd call out. Third would be credit. Right now, we think the real estate credit opportunity is very attractive, as those financing markets have become more challenged in the traditional format. We're seeing excess return and a very strong pipeline across all we do in real estate credit.
That platform, as a reminder, is now approaching $30 billion of AUM, and that's all on top of the regular way opportunistic funds, where we remain highly thematic, and we're raising capital and continuing to build the teams. In infrastructure, similar set of themes I'd call out again Asia, our Asia infrastructure platform. Rob referenced it from a fundraising standpoint, but we continue to see a lot of opportunity there and frankly less on the ground competition. That platform has scaled meaningfully and quite quickly. We are also building out our core infrastructure business. Moving from value add into core in a bigger way. Per the discussion earlier about some of the take privates, I'd say Europe would be another area that I called out.
There's just a lot of activity and a lot of opportunity in particular lately on the renewable and energy transition front. A lot going on.
Our next question comes from Rufus Hone with BMO Capital Markets. Please proceed with your question.
Great. Good morning. Thanks very much. I was hoping to get your thoughts around the trajectory of fee-related performance revenues, and you had a fairly big increase this quarter from the real assets business. Can you give us a bit more detail about how we might think about the growth of that line item looking at a year or two? Perhaps if you take a normalized view on investment performance and growth of some of the democratized products. Thank you.
Yeah. Rufus, you hit on it there at the end. As we think about that line item in our P&L, that is gonna be largely driven by our open-ended and more perpetual vehicles that are more yield-based in nature. As you would have heard a couple of times already on this call, we have a lot of conviction that we can scale that part of our business. We've got a lot of conviction that we continue to perform on behalf of that client base. As you combine those two things, you know, our view as you look over the coming quarters and years, you're gonna see a real ramp-up in that line item over time.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Chris Kotowski with Oppenheimer & Co. Please proceed with your question.
Yeah. I wonder if you could give us your thoughts on, you know, the financing markets. You know, I guess Twitter has done, Tenneco got European approval, so the banks are in fact kind of perhaps have some inventory to work through. I'm wondering if you can talk a bit about, you know, how long do you think that is going to be an obstacle, you know, for financing transactions in the public markets? How much is that an obstacle for you know, to pursue public to privates in general?
Hey, Chris, it's Craig. Why don't I start? Look, the financing markets have become more challenging, certainly relative to a year ago and six months ago. We look at that honestly as an opportunity for us. We mentioned it earlier. If you go back to 2020, we very creatively were able to find lots of ways to deploy capital in very dislocated environments. I'm not at all trying to minimize your thoughts or points of view on the banks, et cetera. You've seen a lot of the impacts of that in broad statistics.
When you see that, you know, the broadly syndicated market in Q3 was at its lowest level since the global financial crisis, you know, that gives you a sense of how dislocated, you know, markets are and what that means and how things can become more challenging in financing in the broadly syndicated markets. Now, there is a flip side to that coin, obviously, as it relates to private credit. I think we look at the environment in private credit currently, and we are very, very constructive. When syndicated markets are challenged, and as Scott mentioned earlier, companies still need capital. That's a really interesting opportunity for us. Base rates are higher, spreads are higher, protections are better.
The risk reward just feels like it feels very attractive to us at this moment in time. The opportunity for us in our direct lending business is not only gonna be in new transactions and new deals like the ones that you referenced, but historically, around half of our deployment has traditionally come from companies where we're the incumbent lender. In markets like these where volumes are down and there's uncertainty, that percentage is even gonna be higher. If you look more recently, that number would be at about 70%. I think there are two sides of that coin, again, on the topic broadly.
Yeah, Chris, it's Scott. Just a couple other things. One, I, you know, use the word obstacle. I think first it's important to understand that we think it's a real opportunity for us. To Craig's point, private credit deployment, real estate credit deployment, we are seeing dramatically more interesting risk reward than we saw even a few months ago. I'd also point to mezzanine. We think this is gonna be a really interesting opportunity for mezz. New transactions with sponsors in particular tend to be over-equitized in this type of environment, and you've got a more attractive risk reward there. Opportunistic credit fundraising. Every time the high yield market trades below 85, the one-year returns tend to be in the high 20s.
We're having really productive dialogue with investors all around the world who are looking to pivot into the leverage credit markets on the traded side in addition to the private side. You're right. New deals are harder to finance. It's part of the reason we built the capital markets business, and we have that team sitting in the middle of the firm that can talk directly to debt investors, so we can place our own capital structures. You may lean a bit more on the private credit market in this environment, maybe some portable capital structures, but we're finding ways to get deals done. I think as we sit here today, we're finding ourselves incredibly enthusiastic about the opportunity that this environment represents for a large part of the firm across our credit platforms.
It appears that there are no further questions at this time. I would now like to turn the floor back over to Craig Larson for closing comments.
We'd just like to thank everybody for your time, and interest in KKR, and we look forward to connecting next quarter. Thank you so much.
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