Okay. Good morning, everyone. Second day two of our inaugural BMO Financials Conference. Thanks everyone for joining. Brennan Hawken, I am the Head of Diversified Financials Research for Bank of Montreal. Pleased to say joined by Rob Lewin, CFO of KKR. Rob, thanks so much for joining today. Would love to start on capital allocation. It is a big topic for KKR. As far as balance sheet strategy, KKR has opted for a more capital-intensive approach. You know this is sort of a thing for me. You and I, since we began speaking, I have actually asked about this. Insurance and Strategic Holdings in particular, that is someplace that is different for you all. More recently, I have run into more dialogue and questions from investors around these two segments.
Could you, from a philosophical perspective, maybe explain why you guys opted for the balance sheet dense approach and why you think that that is the way to create more value?
Well, good morning, everyone, and Brennan, thanks for having me and us at your inaugural conference. Great to be here. This discussion between capital heavy and capital light is one that we do not have inside the four walls of KKR. From our perspective, this is entirely tied to capital allocation. One, we think capital allocation is a core competency of our management team. We believe if you look back in history, you will see we have created a lot of value for our shareholders from capital allocation. Two, we have really developed a business model around trying to get more out of our core competencies and our ecosystem, such that we can perpetuate our revenue growth at a pace that meaningfully exceeds our operating complexity and our headcount across the firm.
The reason for that is we know what creates a lot of our investment alpha today, and that is our small collaborative culture. We have literally built a business model that will allow us to extend our core competencies and get more out of our existing ecosystem. That is why we have an insurance business, that is why we have Strategic Holdings, and that is why we allocate capital to each of them, because we believe because of who we are, our people, our access to capital, our brand, our regional coverage, that we are able to allocate capital in such a way to generate both high ROEs and even more recurring and growth-oriented earnings for our shareholders. We come to this capital allocation decision in a highly aligned way. KKR employees own roughly 30% of KKR, and we know that this is the right model for us.
We look at our asset management business. This is very much an and, not an or. We look at our asset management business today, and it is every bit as capital light as any of our competitors. We are just making a distinctly different choice as it relates to how we allocate a marginal dollar of free cash flow. One of the things that we benefit, we all benefit in our industry from today, is high secular growth of our space. I believe that secular growth is going to last for quite some time, but we also know for certain is that secular growth at these kind of rates will not last forever.
I do think there will come a point in time when maybe the question is flipped, Brennan, and we are getting asked less the question on why we have allocated capital in such a manner, because when that growth is slowed, we are going to have other sources of revenue, whether that be insurance, strategic holdings, or otherwise, that are not as dependent-
Yeah
as what will be at some point a constrained addressable market. Maybe that question gets flipped, and some of our peers who have chosen a different approach that is dependent on asset management will be asked why they did not invest back into their business, take advantage of their brands, their people, their access to capital, their geographic coverage when they had the chance to do so. That is why we have the business model. It is the right business model for us. We know that it is going to generate better outcomes for our shareholders. We know that it will allow us to keep KKR small, retain that collaborative culture, keep that investment alpha that is better for our clients.
Ultimately, we believe that we are going to generate a lot more revenue than the operating complexity and people required to achieve it, and we will be able to generate increasing amounts of operating leverage for our shareholders as well.
That's great. Thanks for that. Thanks for the patience with the annoying question. On the topic of balance sheet, you guys just had, you have announced a big deal, the sale of USI out of strategic holdings. It's going to generate $3.3 billion of profit, after tax, over $2 per share of ANI. Your capital allocation framework historically, which we just talked about, utilized share buybacks, strategic M&A, and reinvestment into strategic holdings. How do you plan to prioritize the deployment of the USI capital?
Yeah. Just to clarify, it's north of $3 billion of liquidity, not profit, north of $2 billion of profit. The-
Thank you.
The question is, let's start with this. A lot of questions as it relates to why we decided to monetize USI as our largest investment in strategic holdings. Fundamentally, we believe that by generating $3-plus billion of liquidity, that we could take that liquidity, reinvest it back into our business, and generate even more earnings per share and more growth attached to those earnings per share. That's why we made the decision to monetize. In terms of how we go redeploy that capital, we have outlined from a capital allocation perspective four key areas in our toolkit that we think provide an ability to invest back across our ecosystem and generate high ROEs and ultimately high levels of durable earnings. One is strategic holdings, two is insurance, three is strategic M&A, and four is share buybacks.
In terms of how we think about deploying that capital, it is going to be a function of variables across those opportunity sets at that point in time. We have no fixed percentage that is going to go into any one of those four buckets by design. It is all about how we allocate that marginal dollar of free cash flow that will generate the best outcome for shareholders. As you think about where we are situated today, relative to when we made that decision to monetize USI in August, in fact, if anything, the market has come in our direction. You look at one of the areas in our toolkit, share buyback. We have been really active in share buybacks, over $900 million allocated to that year to date. Average share price that we bought back stocks, roughly $92 a share.
I think we are going to look back at this moment in time and feel really good about that capital allocation. When we made the decision to sell USI, we were at, I think, roughly $110 per share. We are lower than that today, in the 90s, so I think as we think about the opportunity set, it is definitionally better on share buyback. In terms of strategic holdings, over the past several weeks, we have announced three new acquisitions for strategic holdings, Integer, Gen II Fund Services, A1 Garage Door, all three businesses and industries we know incredibly well at KKR. We are really excited about those transactions, so the market has moved to our benefit there as well. Then insurance, we talked about this on our earnings call yesterday.
We have seen opportunities to deploy back into insurance at higher levels of ROE in September and October, and we have taken advantage of that. We have got, really in a lot of ways, had the market coming to us relative to where we were in August when we made the decision to monetize, and at the time, we felt really good about our decision. I think it is fair to say, Brennan, a couple months in, we feel even better about that decision.
Yeah, that is clear. The order of operations, you laid out the four, I take it that order is dynamic based upon where the opportunity sits.
Entirely dynamic and by design, there is going to be moments in time when it makes sense to deploy more into strategic holdings, more into share buybacks, less into insurance. In the first half of this year, we were very open. The return environment in insurance was such that we did not want to be allocating a lot of capital there, and we took our foot off the pedal a bit. In September and October, as rates rose, fixed income spreads came out a bit, we saw a better opportunity to deploy, and we were very dynamic in allocating capital there.
Again, back to where we started this conversation, we really believe that capital allocation is a core competency of our leadership team, and we think it is absolutely in the best interest of our shareholders to be allocating that capital back against our ecosystem in a way that is really accretive.
That is really clear. The USI deal is a great deal. You showed that you can monetize at the level, with all the chatter about marks, clearly that got put aside there. But it did contribute about 40% of the operating earnings for strategic holdings, or it is expected to in 2026. You just talked about some redeployment that you have done.
Yep.
Really curious about how you are thinking about that $1.1 billion target by 2030, and how should we be thinking about the math around the operating earnings and the rest of the businesses that you hold there?
Yeah. Good questions, and I will take them in turn. You referenced this. We got a lot of questions over the past 12 or 18 months with the advent of AI and the insurance brokerage space, and whether or not we had USI marked right, and questions about the concentration of USI. The price at which we monetized USI was at a 33% premium to its unaffected mark. Now some of the questions in turn go to, well, why did you monetize USI? Again, the very simple way for me to be able to explain this actually is if you look at the three strategic holdings investments that I just referenced that we have made over the past several weeks, we believe that those three investments will largely replace USI's foregone operating earnings contribution to KKR by 2030. USI has not even closed yet.
We're committing less capital to those three transactions than what we freed up with the sale of USI. We've largely replaced its 2030 earnings, and we've created even more growth orientation of those earnings post-2030 with a more diversified portfolio. That's the simplest way to understand why we think this is an accretive monetization for us-
Yeah
as we think about that redeployment opportunity and why we have confidence in our ability to scale Strategic Holdings from $350 million-plus of operating earnings in 2026 to $1.1 billion-plus of operating earnings by 2030. It sounds like a lot of growth, but we have roughly 20 businesses in Strategic Holdings and quite a lot of visibility where that growth is going to come from.
Great. That's clear. But for what it's worth, I know investors do a lot of what have you done for me lately, but in private dialogue with investors, people really gave you guys credit for that monetization. Shifting gears a little bit, one of the exciting parts of the industry is around wealth and the wealth opportunity. You guys have seen remarkable growth in your K-Series, so I'd love to chat about that a little. You recently changed the method of reporting for the performance fees. You went to the industry standard of FRPR, comp ratio down to a 15%-20% level. So, it aligns with the peers, but it was something you avoided for a while. So I'd love to understand the thought process around making that change, and is it a precursor for other changes to reporting treatment within other K-Series vehicles?
Yeah. Maybe first let's start on what the opportunity set is in K-Series, and then we can rotate to the accounting question. The private wealth opportunity for our space, we think is a very substantial one. The individual investor has somewhere between 1%-2% allocated to alternatives. We think over the next decade, that number is going to go to the mid-single digits. If it does, that's several trillion dollars of addressable market. We don't think there's that many competitors that can go compete multi-asset class for that capital, and we believe we're really well-positioned with our platform, with our brand, with our 50-year track record of delivering for clients. Our North Star as it relates to our K-Suite vehicles is to be able to build products and vehicles that we are really proud of 10-plus years from now.
That is going to mean great investment returns, that is going to mean a great client experience. If we are able to do both those things, we know AUM will follow. So far, it has been, we are only really three years into it. We have got roughly $45 billion of AUM in K-Series. That number is up 55% year-on-year, so a good amount of growth in spite of a lot of negative headlines across our space. At some point, I would hope those headlines will abate a bit, which if anything, should help the market environment as it relates to distribution in the private wealth space. So far, we are on plan, we are delivering from a return perspective, I think we are delivering from a client experience perspective, and the AUM has followed.
One of the big, I think, differentiations and selling points of what we are building in K-Suite, you look at what we are doing in private equity and infrastructure, those vehicles are invested alongside the same deals that our institutional funds invest in, and I think that is a big point of differentiation. We are not out there looking for white space deals. We are not going to have different sets of exposures between what we are doing for our individual investors and our institutional investors. Our wealth vehicles are in the waterfall alongside our institutional vehicles, and we think that is a really important differentiator and selling point. Reputationally, we think it avoids a scenario where we are delivering for one set of clients and not the others, and we set it up very much on purpose that way.
I think a lot of good things going on as it relates to the K-Suite build-out. Definitely you have seen the market slow with the headlines around adoption, but even with that, 50 %+ year-on-year growth in our vehicles, and we are very much on track, if not ahead of plan for what we set out to build a few years ago when we really started in earnest around our K-Suite vehicles. Your next question relates to accounting, and we made the decision at the beginning of the year to move the incentive allocation piece of our private equity K-Suite vehicles from realized performance revenue up to fee-related performance revenue. We made that decision, Brennan, honestly, as we looked across the industry, and the industry has been evolving. This is all relatively new for the industry.
Yep.
Private equity vehicles for most of the industry is one to two years old. We watched what our peers were doing, and we thought it made sense to conform from a consistency perspective across the industry, and that is why we made the decision. You referenced this, but I want to spend a minute on the piece around compensation, because I think it is an important one, and I think it does show, amongst other examples, our alignment between making sure we have got the right amount of compensation to recruit, retain, and set the best people at what they do, with also delivering maximum amount of flow-through of our revenue to shareholders. The example here is, by virtue of now having all of our K-Suite incentive allocation and fee-related performance revenue, it is subject to our 15%-20% comp load. Before, that number was 70%-80%.
There's roughly a 60% differential in compensation load by virtue of that accounting decision. This year, we'll do plus or minus $550 million of K-Suite incentive fee-related performance revenue. Take that $550 million times roughly 60%, you're at roughly $300 million of what otherwise could have been in the comp pool that is now flowing through to shareholders. That's not the only example. I think if you look at KKR and our history, where we've tried to balance the dynamic between making sure we've got comp available for the best people at what they do and to deliver for shareholders, you'd know, Brennan, over the past several years, we've made multiple adjustments to drive more compensation around our variable forms of income and less compensation against our more stable fees. I think that's shareholder-friendly.
I think we've made decisions on how we've allocated equity incentives to our senior employees, that for the past several years, the vast majority of those allocations have come with very high share price targets. In fact, our most recent grants to senior employees are only fully allocated in a world where KKR trades at north of $250 a share, and also have long-term cliff vesting. I think that all comes from this point that we also own 30% of the business, and I do think it really helps balance the alignment between making sure we get compensation right and make sure we get flow-through to our shareholders right too. It's a balance I know all corporates struggle with. I think it's an easier one and an easier approach, especially when your senior employees own a lot of the stock.
Right. It is a big focus for folks. Your profitability is remarkable, so since we're on that topic, I'd love to chat a little further on it. FRE margins at 70%. There are very few companies that I cover that have that kind of level of profit margin. Is further operating leverage feasible, and are you able to continue to invest enough to continue the growth that we all like so much in this business?
Yeah. I'll go back to where we started this conversation on capital allocation. We do not want to be all things to all people in asset management. That is not our business model. If all we were was an asset management firm, definitionally, you'd almost have to be doing that. Our strategy is predicated on being great in the things that we are already doing, and only starting something new if it's got a move-the-needle type of addressable market, and we think we can be great in that. The bar is incredibly high for starting something new, and it's got to have real scale attached to it. If you follow that through to this margin point, I've said that we can sustainably operate KKR at a mid-60% FRE margin. More recently, we've been closer to 70%.
But I've also said those areas, or those levels rather, aren't a cap for us. The reason why they're not a cap goes back to our business model, because if we're successful at executing on our business model, and we've got a lot of conviction as a management team that we will be able to do so, we're going to scale our revenue at a pace that meaningfully exceeds our operating complexity, and our headcount growth required to achieve it. In turn, that's going to generate real operating leverage for our shareholders. To be clear, that is not an input to our business model. We do not have the business model we have in order to generate maximum FRE margin, but it is a really nice output of our business model. You could see that in our history, in our numbers.
Since 2022, and we touched on this on our earnings call yesterday, but I think it bears repeating. Since 2022, our management fees have compounded at a CAGR of roughly 17%, our total fees at a CAGR of roughly 18%. Our operating expenses compounded while investing back into our firm at a rate of 10%. I think you can look across our largest peers, and in no cases will you see operating leverage between management fees and operating expense. Layer on top of that, our fee-related compensation is compounded at a CAGR of 2%. A lot in our space gets talked about around management fee growth and that single line item. Our business model, I think, will generate a lot of management fee growth, but it is not designed to generate maximum management fee growth. Our business model is designed to generate maximum FRE growth.
I think the relationship between management fee growth and how that flows through to the bottom line is one that sometimes I think gets lost in earnings discussions, in analyst or shareholder meetings. But that's how we evaluate our level of success in delivering for shareholders. It is really the translation of what we create on the top line and how that flows through to bottom line earnings results.
That makes a lot of sense. We were touching on insurance before. Related to that is ABF. There's been a lot of attention around direct lending, but really, as far as KKR goes, ABF is much larger, about $91 billion compared to $48 billion, in corporate private credit. So, when you think about operating the 20 proprietary platforms, 7,000 employees, how does risk return and asset velocity of the ABF profile look? You spoke to some changes that have happened in the insurance market recently. How should we think about the asset side for that business?
ABF is an area where we have got real leadership and growth. I think about five years ago, that business was less than half the size it is today. We think scale is a massive differentiator. In asset-based finance, you need to show up with scaled capital to create origination opportunities. The ABF market today is a $5-plus trillion addressable market. In the U.S., much of that market still sits on regional bank balance sheets, and so we think we are in the earliest of innings of a continual migration of that capital from really against on-demand deposit liabilities to very long duration liabilities, which is an area where our industry, I think, has got a real core competency. We think there is a lot of secular growth. We have got real leadership. We have got both a high-grade business, and you asked about returns.
The targets, somewhere between 100 - 250 basis points north of corporates. We have got an opportunistic ABF business that is more of a mid-teens business. Direct lending, depending on whether you are talking levered or unlevered, can kind of sit somewhere in between those two goalposts. We think we have got a lot of moat around what we have built out in asset-based finance, 20 origination platforms, 7,000 employees around the world originating assets for our platform. You also asked about velocity. It could be short duration, and so you think about a PayPal receivables financing could be 45 days. It could be aircraft leasing, which could be much longer duration. The key is to be able to have flexible capital to be able to take advantage of differentiated forms of origination. With 20 platforms, risk-return across any point in the cycle is going to make for different levels of risk-return.
We have situated our platform to be able to move our ABF capital around to where the opportunity is across those origination platforms. We are not required to take down any amount of risk in any one platform. It is really around how our investment committees and our teams determine we can allocate that capital in a way to generate the best results for our clients. It is a big reason why we have created leadership in this space, and we think there is a lot of growth in front of us in the asset-based finance.
Yes. One of the things, as someone who sort of learned and started to analyze financials through the financial crisis, one of the things that always makes me a little nervous about origination platforms is that they are there to do a job. They originate sort of regardless about where the risk curve is. When you guys are finding it less attractive, does that mean that the origination platform then would largely just sell to third parties and you wouldn't retain? How does that work?
Or they do less business. I think, and I don't want to. You tell me if I've got this wrong. I think if you're looking at any single origination platform and that is the business, well then, yes, they need to be originating in all markets. If you're thinking about having the ability to allocate across 20 origination platforms that you own and control, that is very different than thinking about one origination platform that has got an equity value attached to it. That's not our model, and it's not how we think about origination. I think if there's a certain sector that, for whatever reason, risk is priced at a level that we don't think meets an appropriate cost of capital or we're able to allocate capital in a way where we're able to achieve much higher levels of risk-return, then that's where we're going to go.
Makes sense. So when we think about the private credit and the reinvestment, KKR's credit and markets leadership recently highlighted an under-discussed structural shift in private credit, right? Rather than drawing cash distributions, institutional and insurance LPs are increasingly electing to reinvest their income back into the credit funds. But isn't that pretty typical? We hear a lot about DRIPs. How do your LPs' reinvestment rates differ from other asset classes and the average rates across the industry?
Yeah. In the alternative space, it's actually historically hasn't been that typical. When you think about how the insurance, excuse me, the alternative space has grown up, it's been with these drawdown closed-end vehicles where you generate monetizations, and then those monetizations get returned back to clients. That business model is a wonderful one in a lot of ways. There's a lot of dry powder associated with it, typically long lockups. But definitionally, if you have a really good realization outcome the next day, your institution makes less revenue. What we're seeing in aspects of the credit market is you're starting to see a base of clients who really value the ability to take their earnings and redeploy it in these open-ended vehicles back into origination opportunities.
We're seeing that as a newer trend that exists in credit that wouldn't have existed as much in our space five to 10 years ago.
Okay. That makes sense.
I think that is what the team was getting at in that comment.
Got it. It is more about the evergreen evolution and the appreciation of the vehicle.
I think that is exactly what they were getting at, and we are definitely seeing more clients opt in for that.
Right.
When you think, like, at the extreme, when you think about what we're building in K-Suite, it is that, right? There are these perpetual vehicles where if you have really great realization monetization outcomes, definitionally, the next day, there's more capital and more opportunity to generate revenue, which is distinct from your drawdown closed-end fund.
Right. Right. Got it. I want to make sure we have enough time to touch on a couple of these.
Yeah.
I'm going to bounce around a little bit.
I'll try and go quicker.
No, no, no. This is great. AI has become. The infrastructure is a huge topic, and it has only become more so in the past week. You guys have a unique digital infrastructure platform in Helix, so I would love to talk about that. How is that offering resonating in the marketplace given how long many competitors have been focused on that financing opportunity? Are you guys behind given you have come to market more recently, and how do you ensure that you are generating sufficient returns given how competitive that market is?
Yeah. So maybe a big step back. Our infrastructure platform, one of the leaders in the world, $120 billion of AUM. The business was started roughly 15 years ago with $2 billion of AUM. Digital infrastructure, data centers have been a big part of our infrastructure build-out. As we think about our infrastructure funds around the world, we have got concentration limits relative to what we think the opportunity is around AI-related infrastructure. We made the determination earlier this year to raise a dedicated vehicle that we are calling Helix, that is really meant to be an AI infrastructure, or is an AI infrastructure business that combines data center capabilities, power, connectivity, and capital for the benefit of hyperscalers all in one place. We think it is a very unique offering to the market. The business is run by Adam Selipsky.
Adam was the former CEO of Amazon Web Services, so he obviously is very well tuned to the needs of hyperscalers around the world. We raised $10 billion of founding equity capital middle of the year. You may have seen recently Samsung just came in for an additional $1 billion. As we see the cost of capital going up around AI infrastructure and the dry powder we have, we think it is actually an even better return opportunity go forward than what we envisioned when we set out to introduce this vehicle. So we are really excited for what it can become. We will continue to invest across digital infrastructure and AI infrastructure in our $120 billion infrastructure business.
This part of our business, Helix, is going to be much more concentrated for investors who want that level of concentration in the AI infrastructure build, and we think we have got an offering that is very unique in the marketplace for the benefit of hyperscalers, that ultimately we think we are going to be able to generate really great outcomes for our clients. To be clear, while this really is meant to be this open-ended business, it is structured in such a way where KKR makes a management fee and has the opportunity to make an incentive allocation, much like most of our other products-
Sure
in our infrastructure business.
Sure. Has there been any change after the election around, and it is probably too early, but are you sensing any change in tone or thoughts around the costs for that infrastructure and how that might need to adjust?
Yeah. It is definitely too early to have any perspective. However, to the extent that costs go up and cost of capital goes up for the opportunity, sitting on now 10 plus billion dollars of dry powder in this dedicated vehicle, we think positions us very well for that type of environment.
Yeah. Okay. About six months ago, you guys closed the acquisition of Arctos.
Yep.
Could you give us maybe an update on the progress you are seeing through the integration, how this fits into your strategic M&A framework, which we touched on in the beginning? Also, it would be great to understand how you are thinking about KKR Solutions and growing that into a $100 billion business over time.
Yeah. First, what Arctos is today, and then we can go into how it fits. Arctos is the leading institutional investor in the sports space. They are the only institutional investor that has approval to be able to invest across the four big sports leagues in North America. I think that is a pretty big barrier to entry. We think there is a lot more to do in the sports and sports adjacent space, including sports adjacent real estate. Next part of their business is Keystone, which is really a solutions provider to general partners around the world. Keystone closed roughly $6 billion of capital earlier this year, our largest inaugural fund in this space. We think the addressable market here is sizable, and we already have a real leadership in the industry and are excited for what that part of the business can become.
Next part of the business has not been built yet, but is really very much consistent with the heritage of the leadership team and management team at Arctos, is really around the secondary space. Maybe that is a good segue into how we think about strategic M&A. Really from our perspective, first and foremost, we are looking for very large addressable markets that can move the needle for KKR, and where we do not have the ability or confidence that we can build it out in a best in class fashion organically. Two, we are looking to back teams that are best in class, that can be the best in the world at what they do. Three, this one is a really hard one from the asset manager strategic M&A lens, but is one that we have been consistent on for some time.
We want to use strategic M&A to diversify and elongate our source of capital. Already 93% of our capital is perpetual or locked up for 8+ years, so extending the duration of our capital is difficult to do. But Arctos has got as close to permanent capital as it comes in our space, big differentiator. We want to make sure we can create more origination for our platforms around the world, more origination for GA, and then lastly, it needs to be really culturally compatible. We have known the leadership team at Arctos for a very long period of time, and they fit in incredibly well at KKR. We are six months in. Things are ahead of plan. We are out raising capital for the third vintage of our sports strategy.
As I mentioned, just closed on $6 billion of capital for Keystone. We are likely to launch a GP-led secondary strategy in 2027, an area where you combine Arctos' platform and team and brand, and our capabilities, obviously on the asset selection side. We believe we have got a real right to win in that space. Early days, but we are really pleased with how things are going. We have talked about building a $100 billion plus business with the acquisition of Arctos. To be very clear, we would not have done the acquisition if we did not think we can do that. I know the founders of Arctos, Ian Charles, Doc O'Connor, I do not think they would have done the deal with us if they did not think the combination would allow them to be a part of that type of build either.
I think both sides have got a lot of conviction that we are going to be able to create something that is unique and creates real scale across our business and real relevance. We are excited by the early results, but a lot more work to go for sure.
Sure. That part of the market is really interesting. I agree with that. Would love to touch on Global Atlantic. That has been a really good source of growth for you. You touched on a little bit earlier rates and how the rate backdrop has changed. That can have a really profound impact on that business. Would love to hear about what you are seeing in that market more recently and where maybe the puck is going that could be a little bit more compelling for you guys when you think about deploying capital.
Yeah. The reason why we own an insurance business, and I know we are coming to time soon, I think this is, again, very much related to the beginning of this discussion on capital allocation. It is because we believe when you look at Global Atlantic's expertise and leadership in being able to create liabilities that have long duration and predictability to them, combined with the things that we already have inside of KKR today, we believe we can build the best-in-class insurance business that can generate durable and significant earnings growth. What do we bring to the table on the KKR side? I think the area that is most easily well-understood is the investment capability and our investment footprint around the world. I would take our investment capabilities globally up against anybody's.
But I think there's a couple of other synergies here that I think are a little bit less well-understood. A second one is distribution. We are raising third-party capital at Global Atlantic that invests across the assets and liabilities of Global Atlantic, and we are distributing that to the same investors that invest in KKR's private equity, infrastructure, real estate, and credit products. We are able to leverage the several hundred-person distribution team for the benefit of creating third-party capital for our insurance business. T here's not that many insurance businesses in the world, maybe only one, that is able to do that. Today, we sit on $6 billion of dry powder of third-party capital. All of it pays management fees, some of it pays carried interests. That has not yet been drawn down.
Once it gets drawn down, we think with the operating leverage of an insurance business, that $6 billion of dry powder translates to north of $60 billion of fee-paying assets, right? Relative to where we are today, that is almost 10% of KKR's overall fee-paying assets across the firm. We think that's a real sizable opportunity for ROE. That positions us really well to draw down that capital in a downturn where things are more interesting from a returns perspective. That would be synergy two. Our geographic coverage. KKR's got the leading alternatives platform in Asia. We are able to create local denomination assets. We've already done 10 deals in Asia since we bought Global Atlantic. We've created a big strategic partnership with Japan Post. I think all of that happens because of our integrated ownership.
Those are just some of the reasons why we feel really great about allocating capital to an insurance business, because we believe that by virtue of the different capabilities at Global Atlantic and KKR, we can create something that is best in class and durable over time. Listen, the return environment in the insurance space is going to be a function of two things. It's going to be how competitive the market is for pricing liabilities, and it's going to be how competitive is the market on the asset side, and that's really where our fixed income spreads. The reality is, for the past couple years, we've been in a very tight market on both sides. We don't think that persists forever.
Interestingly, I think when assets sell off and you see fixed income spreads blow out, that's the same time when you're going to see pricing on the liability side probably be less competitive, and that's the type of market that I think we're really well-situated to do well in. As you think about ROEs in the insurance space, it's very important to consider those through a cycle. It's why you saw us leaning out of insurance origination and capital flow in the first half of the year and starting to lean back in in September and October when the market started to come to a place that we thought was more sensible from a return perspective.
That's great. We're at time, so please join me in thanking Rob for his time today.
Great. Thank you.
Thanks, Rob.
Really appreciate it.
Yeah.
Thank you.