Greenhaven Road Capital, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. The Fund returned about -33% in the second quarter, bringing its total decline to approximately -51% in the first half of the year. This has been the U.S. market’s worst start to a year in over a half-century and, unfortunately, the fund’s losses were quite outsized during the period, largely due to its concentrated, long-term bets in growth areas. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, Greeenhaven Road Capital mentioned KKR & Co. Inc. (NYSE:KKR) and explained its insights for the company. Founded in 1976, KKR & Co. Inc. (NYSE:KKR) is a New York, New York-based investment management company with a $56.0 billion market capitalization. KKR & Co. Inc. (NYSE:KKR) delivered a -32.89% return since the beginning of the year, while its 12-month returns are down by -21.12%. The stock closed at $50.00 per share on September 13, 2022.
Here is what Greeenhaven Road Capital has to say about KKR & Co. Inc. (NYSE:KKR) in its Q2 2022 investor letter:
“Asset manager KKR, a longtime Top 5 holding, also has a very stable demand profile. As of their last earnings, forty-three percent of fee-paying AUM is “permanent capital” that effectively cannot be redeemed and is contractually bound to pay management fees for the foreseeable future. That is the definition of a forced buyer. On top of that, KKR has over $100B of “uncalled capital” which will become fee-paying when it is called. The decision of when to call it is up to KKR, not to the investors, and in times of distress (a recession), they are generally more likely to accelerate their investment pace, calling capital to take advantage of cheaper asset prices. We can argue about KKR’s fundraising prospects or the future returns of their existing funds, but for the foreseeable future, management fees are contractually guaranteed to continue to flow.
Is KKR a healthy business? I believe it is. As of their last earnings, they have raised $132 billion in the last 12 months, AUM was up 30% year-over-year, and uncalled capital increased by 66% year-over-year. Now, AUM growth will likely slow due to the law of large numbers and a weaker fundraising environment, but KKR also has large opportunities in products targeting insurance businesses (as a result of their 2021 Global Atlantic acquisition) and products targeted at highnet-worth individuals. To give you a sense of the potential success at targeting individuals, KKR competitor Blackstone’s
“BREIT” (Blackstone REIT) product has been raising in excess of $500M per WEEK. KKR does not have a comparable product with a comparable fundraising track record, but they are investing heavily in the high-net-worth channel. More important for the near term, KKR is fundraising for some large strategies and, given the growth in their LP base, AUM will almost certainly rise… it is just a question of by how much…” (Click here to see the full text)
Our calculations show that KKR & Co. Inc. (NYSE:KKR) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. KKR & Co. Inc. (NYSE:KKR) was in 51 hedge fund portfolios at the end of the second quarter of 2022, compared to 54 funds in the previous quarter. KKR & Co. Inc. (NYSE:KKR) delivered a 6.16% return in the past 3 months.
In August 2022, we also shared another hedge fund’s views on KKR & Co. Inc. (NYSE:KKR) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.
Disclosure: None. This article is originally published at Insider Monkey.
