Big name private equity firms including KKR and Carlyle are increasingly pivoting from their traditional buyout strategies to the private credit sector as they look to combat a prolonged slump in dealmaking, according to a report by Bloomberg.
The report cites KKR’s latest results, which were announced on Tuesday, as revealing that the firm’s credit business helped offset weaker private equity results, while Carlyle has also recently signalled that it intends to increase its private credit activity while also looking to cut operating costs in a bid to boost fee earnings.
Despite their efforts though, both firms have seen their distributable earnings fall from the same quarter last year.
The significance of the shift in focus is illustrated by the fact that KKR has raised $24bn of organic new capital for direct lending strategies in the first nine months of the year, which amounts to six times the total raised for private equity investments.
The company has also profited from a 24% gain in operating earnings from its insurance division Global Atlantic, despite reporting a 6.6% decline in earnings overall.