KKR co-founders Henry Kravis and George Roberts each earned more than $100mn in 2021 as buoyant financial markets caused the private equity group’s profits to soar.
The hauls of Kravis and Roberts disclosed in KKR’s annual report on Monday came from about $67mn in “carried interest” pay that each received and over $40mn in dividends because of their ownership of about 10 per cent of the group’s shares.
Their payout paled in comparison to Stephen Schwarzman, the founder of KKR rival Blackstone Group, who received a record $1.1bn in 2021. But it far surpassed the pay of bosses at top Wall Street banks, underscoring a shift in money and power towards fast-growing alternative asset management firms.
Kravis and Roberts co-founded KKR in 1976 and helped pioneer the buyout industry. When they stepped down as co-chief executives in October they passed management of KKR to co-chief executives Joe Bae and Scott Nuttall.
As part of that succession, Bae and Nuttall were granted stock awards whose value was marked at about $450mn at year-end because of an 85 per cent increase in KKR’s share price. The award could exceed $1bn over the next several years if the share price continues to soar.
Bae and Nuttall in 2021 each received over $55mn from carried interest, bonuses of $24.7mn and over $9mn in dividends on their stakes in KKR.
Top executives at private equity firms typically receive salaries that are modest compared with their right to receive carried interest, a share of profits on successful investments. Founders like Kravis and Roberts are also large shareholders, meaning that they receive dividend income.
The dividend income and carried interest pay of KKR’s top executives greatly exceeded the total pay and income earned last year by bank chief executives such as JPMorgan Chase’s Jamie Dimon and Goldman Sachs’s David Solomon.
However, their haul was far less than at Blackstone Group, the largest private equity firm by assets under management. Schwarzman and the firm’s president Jonathan Gray received dividends of $941mn and $167mn, in part reflecting different financial policies at Blackstone and KKR.
Blackstone pays out about 85 per cent of its distributable profits in the form of dividends to shareholders. It increased its payout 80 per cent in 2021 as buoyant financial markets and inflows of assets caused profits to swell.
KKR’s after-tax distributable profits soared 121 per cent in 2021 to nearly $4bn, but the group paid out less than 15 per cent of those profits in the form of dividends.
New York-based KKR, which has $471bn in assets under management, prefers to retain the majority of its profits to reinvest in its funds and make acquisitions. The group holds over $25bn in net assets on its balance sheet, a significant portion of its overall $50bn-plus market capitalisation. KKR announced it would increase its dividend 8 per cent in 2022.