UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
     
 
Form 10-Q
ý     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 20182019  
 
Oror

o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Transition period from           to           . 
Commission File Number 001-34820
kkrlogoa01.jpg
KKR & CO. L.P.INC.
(Exact name of Registrant as specified in its charter) 
Delaware 26-0426107
(State or other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification Number)

  9 West 57th Street, Suite 4200
New York, New York 10019
Telephone: (212) 750-8300
(Address, zip code, and telephone number, including
area code, of registrant’sregistrant's principal executive office.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company,”" and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer xý
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
Emerging growth company o
(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Class A Common StockKKRNew York Stock Exchange
6.75% Series A Preferred StockKKR PR ANew York Stock Exchange
6.50% Series B Preferred StockKKR PR BNew York Stock Exchange

As of May 7, 2018,2, 2019, there were 496,891,815 Common Units543,943,670 shares of Class A common stock of the registrant outstanding.
 


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KKR & CO. L.P.
INC.
FORM 10-Q
For the Quarter Ended March 31, 20182019
INDEXTABLE OF CONTENTS
  Page No.
 
PART I -— FINANCIAL INFORMATION
 
   
Item 1.
Financial Statements
Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Financial Condition (Unaudited) as of March 31, 2019 and December 31, 2018
5
   
Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2019 and 2018
7
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2019 and 2018
8
Condensed Consolidated Statements of Changes in Equity (Unaudited) for the Three Months Ended March 31, 2019 and 2018
9
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2019 and 2018
11
Notes to Financial Statements (Unaudited)
13
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
5856
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
126106
   
Item 4.
Controls and Procedures
126106
   
 
PART II -— OTHER INFORMATION
 
   
Item 1.
Legal Proceedings
127107
   
Item 1A.
Risk Factors
127107
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
129108
   
Item 3.
Defaults Upon Senior Securities
130109
   
Item 4.
Mine Safety Disclosures
130109
   
Item 5.
Other Information
130109
   
Item 6.
Exhibits
133109
   
SIGNATURES
135110


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as "outlook," "believe," "expect," "potential," "continue," "may," "should," "seek," "approximately," "predict," "intend," "will," "plan," "estimate," "anticipate," the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. Without limiting the foregoing, statements regarding the declaration and payment of distributions on common or preferred units of KKR or, after converting from a limited partnership to a corporation, dividends on common or preferred stock of KKR, the timing, manner and volume of repurchases of common units or common stock pursuant to a repurchase program, and the expected synergies and benefits from acquisitions, reorganizations or strategic partnerships, may constitute forward-looking statements. Forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements or cause the anticipated benefits and synergies from transactions to not be realized. We believe these factors include those described under the section entitled "Risk Factors" in this report and in our Annual Report on Form 10-K for the year ended December 31, 2017.2018 (our "Annual Report"). These factors should be read in conjunction with the other cautionary statements that are included in this report, our Annual Report and in our other filings with the U.S. Securities and Exchange Commission (the "SEC"). We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

   


In this report, references to "KKR," "we," "us,""us" and "our" and "our partnership" refer to (i) KKR & Co. Inc. and its subsidiaries following the conversion from a Delaware limited partnership named KKR & Co. L.P. into a Delaware corporation named KKR & Co. Inc. on July 1, 2018 (the "Conversion") and (ii) KKR & Co. L.P. and its consolidated subsidiaries prior to the Conversion, in each case, except where the context requires otherwise. Prior to KKR & Co. L.P. becomingbecame listed on the New York Stock Exchange ("NYSE") on July 15, 2010 KKR Group Holdings L.P. ("Group Holdings") consolidatedunder the financial results ofsymbol "KKR." KKR Management Holdings L.P. and, KKR Fund Holdings L.P. (together, the "KKR Group Partnerships") and their consolidated subsidiaries. On August 5, 2014, KKR International Holdings L.P. became a KKRare together referred to in this report as the "KKR Group Partnership.Partnerships." Each KKR Group Partnership has an identical number of partner interests and, when held together, one Class A partner interest in each of the KKR Group Partnerships together represents one "KKR Group Partnership Unit." In connection with KKR's issuance ofthe 6.75% Series A Preferred UnitsStock ("Series A Preferred Units"Stock") and 6.50% Series B Preferred UnitsStock ("Series B Preferred Units"Stock") of KKR & Co. Inc., the KKR Group Partnerships issuedhave outstanding preferred units with economic terms designed to mirror those of the Series A Preferred UnitsStock and Series B Preferred Units,Stock, respectively. References to our Class A common stock, Series A Preferred Stock or Series B Preferred Stock for periods prior to the Conversion mean the common units, Series A preferred units and Series B preferred units of KKR & Co. L.P., respectively.

References to our "Managing Partner"the "Class B Stockholder" are to KKR Management LLC, which acts asthe holder of the sole share of our general partnerClass B common stock, and unless otherwise indicated, references to equity interests in KKR's business, or to percentage interests in KKR's business, reflect the aggregate equity interests in the KKR Group Partnerships and are net of amounts that have been allocated to our principals and other employees and non-employee operating consultants in respect of the carried interest from KKR's business as part of our "carry pool" and certain minority interests. References to "principals" are to our senior employees and non-employee operating consultants who hold interests in KKR's business through KKR Holdings L.P. ("KKR Holdings") and references to our "senior principals" are to our senior employees who hold interests in our Managing Partner entitling them to vote for the election of its directors.Class B Stockholder.

References to "non-employee operating consultants" include employees of KKR Capstone, who are not employees of KKR. KKR Capstone refers to a group of entities that are owned and controlled by their senior management. KKR Capstone is not a subsidiary or affiliate of KKR. KKR Capstone operates under several consulting agreements with KKR and uses the "KKR" name under license from KKR.

Prior to October 1, 2009, KKR's business was conducted through multiple entities for which there was no single holding entity, but were under common control KKR is in the process of senior KKR principals, and in which senior principals and KKR's other principals and individuals held ownership interests (collectively, the "Predecessor Owners"). On October 1, 2009, we completed theevaluating a potential acquisition of all of the assets and liabilities of KKR & Co. (Guernsey) L.P. (f/k/a KKR Private Equity Investors, L.P) ("KPE") and, in connection with such acquisition, completed a series of transactions pursuant to which the business of KKR was reorganized into a holding company structure. The reorganization involved a contribution of certain equity interests in KKR's business that were held by the Predecessor Owners to the KKR Group Partnerships in exchange for equity interests in the KKR Group Partnerships held through KKR Holdings. We refer to the acquisition of the assets and liabilities of KPE and to our subsequent reorganization into a holding company structure as the "KPE Transaction."

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Capstone.

In this report, the term "GAAP" refers to accounting principles generally accepted in the United States of America.

We disclose certain financial measures in this report that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholdersstockholders in assessing the overall performance of KKR's businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP, if available. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial

3
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measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, where applicable, are included within Note 14 "Segment Reporting" to our condensed consolidated financial statements and under "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Segment and Other Operating and Performance Measures" and "—Segment Balance Sheet."

This report uses the terms assets under management ("AUM"), fee paying assets under management ("FPAUM"), economic net income ("ENI"),after-tax distributable earnings, fee related earnings ("FRE"), distributable earnings, capital invested, syndicated capital, and book value. You should note that our calculations of these financial measures and other financial measures may differ from the calculations of other investment managers and, as a result, our financial measures may not be comparable to similar measures presented by other investment managers. These and other financial measures are defined in the section "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Segment and Other Operating and Performance Measures" and "—"Management's Discussion and Analysis of Financial Condition and Results of Operation—Segment Balance Sheet."

References to our "funds" or our "vehicles" refer to investment funds, vehicles and accounts advised, sponsored or managed by one or more subsidiaries of KKR, including collateralized loan obligations ("CLOs") and commercial real estate mortgage-backed securities ("CMBS") vehicles, unless the context requires otherwise. They do not include investment funds, vehicles or accounts of any hedge fund manager with which we have formed a strategic partnership where we have acquired a non-controlling interest.

Unless otherwise indicated, references in this report to our fully exchanged and diluted Class A common unitsstock outstanding, or to our Class A common unitsstock outstanding on a fully exchanged and diluted basis, reflect (i) actual shares of Class A common unitsstock outstanding, (ii) shares of Class A common unitsstock into which KKR Group Partnership Units not held by us are exchangeable pursuant to the terms of the exchange agreement described in this report,our Annual Report, (iii) shares of Class A common unitsstock issuable in respect of exchangeable equity securities issued in connection with the acquisition of Avoca Capital ("Avoca"), all of which have been exchanged as of December 31, 2018, and (iv) Class A common unitsstock issuable pursuant to any equity awards actually granted from the Amended and Restated KKR & Co. L.P.Inc. 2010 Equity Incentive Plan (our(the "2010 Equity Incentive Plan") or the KKR & Co. Inc. 2019 Equity Incentive Plan (the "2019 Equity Incentive Plan" and, together with the 2010 Equity Incentive Plan, our "Equity Incentive Plan"Plans"). Our fully exchanged and diluted Class A common unitsstock outstanding dodoes not include (i) shares of Class A common unitsstock available for issuance pursuant to ourthe Equity Incentive PlanPlans for which equity awards have not yet been granted and (ii) shares of Class A common unitsstock that we have the option to issue in connection with our acquisition of additional interests in Marshall Wace LLP (together with its affiliates, "Marshall Wace"). 

The use of any defined term in this report to mean more than one entities, persons, securities or other items collectively is solely for convenience of reference and in no way implies that such entities, persons, securities or other items are one indistinguishable group. For example, notwithstanding the use of the defined terms "KKR," "we" and "our" in this report to refer to KKR & Co. Inc. and its subsidiaries, each subsidiary of KKR & Co. Inc. is a standalone legal entity that is separate and distinct from KKR & Co. Inc. and any of its other subsidiaries.


4
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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
KKR & CO. L.P.INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(Amounts in Thousands, Except UnitShare Data)
March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
Assets 
  
 
  
Cash and Cash Equivalents$1,880,834
 $1,876,687
$1,808,368
 $1,751,287
Cash and Cash Equivalents Held at Consolidated Entities868,114
 1,802,372
911,450
 693,860
Restricted Cash and Cash Equivalents59,316
 56,302
66,950
 196,365
Investments42,101,905
 39,013,934
45,795,254
 44,907,982
Due from Affiliates565,681
 554,349
734,195
 657,189
Other Assets2,103,303
 2,531,075
2,687,802
 2,536,692
Total Assets$47,579,153
 $45,834,719
$52,004,019
 $50,743,375
      
Liabilities and Equity 
  
 
  
Debt Obligations$22,041,271
 $21,193,859
$22,262,369
 $22,341,192
Due to Affiliates265,190
 323,810
254,781
 275,584
Accounts Payable, Accrued Expenses and Other Liabilities3,503,754
 3,654,250
3,279,028
 2,743,990
Total Liabilities25,810,215
 25,171,919
25,796,178
 25,360,766
      
Commitments and Contingencies
 


 
      
Redeemable Noncontrolling Interests690,630
 610,540
—
 1,122,641
      
Equity 
  
Series A Preferred Units
(13,800,000 units issued and outstanding as of March 31, 2018
and December 31, 2017)
332,988
 332,988
Series B Preferred Units
(6,200,000 units issued and outstanding as of March 31, 2018
and December 31, 2017)
149,566
 149,566
KKR & Co. L.P. Capital - Common Unitholders
(489,242,042 and 486,174,736 common units issued and outstanding
as of March 31, 2018 and December 31, 2017, respectively)
6,918,185
 6,703,382
Total KKR & Co. L.P. Partners' Capital7,400,739
 7,185,936
Stockholders' Equity (1)
 
  
Series A and B Preferred Stock, $0.01 par value. 13,800,000 and 6,200,000 shares, respectively, issued and outstanding as of March 31, 2019 and December 31, 2018.482,554
 482,554
Class A Common Stock, $0.01 par value. 3,500,000,000 shares authorized, 533,922,902 and 534,857,237 shares, issued and outstanding as of March 31, 2019 and December 31, 2018, respectively.5,339
 5,349
Class B Common Stock, $0.01 par value. 1 share authorized, 1 share issued and outstanding as of March 31, 2019 and December 31, 2018.—
 —
Class C Common Stock, $0.01 par value. 499,999,999 shares authorized, 298,645,285 and 299,081,239 shares, issued and outstanding as of March 31, 2019 and December 31, 2018, respectively.2,987
 2,991
Additional Paid-In Capital8,145,133
 8,106,408
Retained Earnings726,312
 91,953
Accumulated Other Comprehensive Income (Loss)(39,954) (39,645)
Total KKR & Co. Inc. Stockholders' Equity9,322,371
 8,649,610
Noncontrolling Interests13,677,569
 12,866,324
16,885,470
 15,610,358
Total Equity21,078,308
 20,052,260
26,207,841
 24,259,968
Total Liabilities and Equity$47,579,153
 $45,834,719
$52,004,019
 $50,743,375
(1)See Note 1 "Organization."

See notes to condensed consolidated financial statements.


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KKR & CO. L.P.INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (Continued) (UNAUDITED)
(Amounts in Thousands)
 
The following presents the portion of the consolidated balances presented in the condensed consolidated statements of financial condition attributable to consolidated variable interest entities ("VIEs") as of March 31, 20182019 and December 31, 2017.2018. KKR's consolidated VIEs consist primarily of (i) certain collateralized financing entities ("CFEs") holding collateralized loan obligations ("CLOs") and commercial real estate mortgage-backed securities ("CMBS") and (ii) certain investment funds. With respect to consolidated VIEs, the following assets may only be used to settle obligations of these consolidated VIEs and the following liabilities are only the obligations of these consolidated VIEs. The noteholders, limited partners and other creditors of these VIEs have no recourse to KKR's general assets. Additionally, KKR has no right to the benefits from, nor does KKR bear the risks associated with, the assets held by these VIEs beyond KKR's beneficial interest therein and any income generated from the VIEs. There are neither explicit arrangements nor does KKR hold implicit variable interests that would require KKR to provide any material ongoing financial support to the consolidated VIEs, beyond amounts previously committed, if any.
March 31, 2018March 31, 2019
Consolidated CFEs Consolidated KKR Funds and Other Entities TotalConsolidated CFEs Consolidated KKR Funds and Other Entities Total
Assets   
     
  
Cash and Cash Equivalents Held at Consolidated Entities$594,873
 $250,516
 $845,389
$641,685
 $84,032
 $725,717
Restricted Cash and Cash Equivalents—
 27,309
 27,309
—
 35,692
 35,692
Investments16,063,337
 11,550,688
 27,614,025
15,021,345
 15,294,693
 30,316,038
Due from Affiliates—
 5,919
 5,919
—
 11,181
 11,181
Other Assets185,800
 223,436
 409,236
166,373
 224,172
 390,545
Total Assets$16,844,010
 $12,057,868
 $28,901,878
$15,829,403
 $15,649,770
 $31,479,173
   
     
  
Liabilities   
     
  
Debt Obligations$15,251,646
 $984,199
 $16,235,845
$14,472,392
 $1,024,369
 $15,496,761
Accounts Payable, Accrued Expenses and Other Liabilities875,365
 388,732
 1,264,097
576,009
 70,232
 646,241
Total Liabilities$16,127,011
 $1,372,931
 $17,499,942
$15,048,401
 $1,094,601
 $16,143,002
 

December 31, 2017December 31, 2018
Consolidated CFEs Consolidated KKR Funds and Other Entities TotalConsolidated CFEs Consolidated KKR Funds and Other Entities Total
Assets   
     
  
Cash and Cash Equivalents Held at Consolidated Entities$1,467,829
 $231,423
 $1,699,252
$428,850
 $176,264
 $605,114
Restricted Cash and Cash Equivalents—
 21,255
 21,255
—
 174,057
 174,057
Investments15,573,203
 9,408,967
 24,982,170
14,733,423
 15,585,629
 30,319,052
Due from Affiliates—
 23,562
 23,562
—
 11,832
 11,832
Other Assets176,572
 168,003
 344,575
148,221
 223,054
 371,275
Total Assets$17,217,604
 $9,853,210
 $27,070,814
$15,310,494
 $16,170,836
 $31,481,330
   
     
  
Liabilities   
     
  
Debt Obligations$15,586,216
 $770,350
 $16,356,566
$13,958,554
 $1,392,987
 $15,351,541
Accounts Payable, Accrued Expenses and Other Liabilities923,494
 243,660
 1,167,154
579,408
 126,333
 705,741
Total Liabilities$16,509,710
 $1,014,010
 $17,523,720
$14,537,962
 $1,519,320
 $16,057,282

See notes to condensed consolidated financial statements.

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KKR & CO. L.P.INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in Thousands, Except UnitShare Data)

Three Months Ended March 31,Three Months Ended March 31,
2018 20172019
2018
Revenues      
Fees and Other$394,394
 $380,179
$372,548
 $394,394
Capital Allocation-Based Income78,212
 387,576
814,932
 78,212
Total Revenues472,606
 767,755
1,187,480
 472,606
      
Expenses      
Compensation and Benefits298,136
 402,963
544,562
 298,136
Occupancy and Related Charges14,215
 14,851
14,690
 14,215
General, Administrative and Other124,250
 122,200
169,515
 124,250
Total Expenses436,601
 540,014
728,767
 436,601
      
Investment Income (Loss)      
Net Gains (Losses) from Investment Activities472,800
 506,645
1,203,878
 472,800
Dividend Income33,064
 9,924
22,625
 33,064
Interest Income298,256
 280,980
358,511
 298,256
Interest Expense(219,590) (186,854)(249,088) (219,590)
Total Investment Income (Loss)584,530
 610,695
1,335,926
 584,530
      
Income (Loss) Before Taxes620,535
 838,436
1,794,639
 620,535
      
Income Taxes17,641
 40,542
Income Tax Expense (Benefit)167,593
 17,641
      
Net Income (Loss)602,894
 797,894
1,627,046
 602,894
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests25,674
 20,933
—
 25,674
Net Income (Loss) Attributable to Noncontrolling Interests398,777
 509,277
917,727
 398,777
Net Income (Loss) Attributable to KKR & Co. L.P.178,443
 267,684
Net Income (Loss) Attributable to KKR & Co. Inc.709,319
 178,443
      
Net Income Attributable to Series A Preferred Unitholders5,822
 5,822
Net Income Attributable to Series B Preferred Unitholders2,519
 2,519
Series A Preferred Stock Dividends5,822
 5,822
Series B Preferred Stock Dividends2,519
 2,519
      
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$170,102
 $259,343
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders$700,978
 $170,102
      
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit   
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock   
Basic$0.36
 $0.57
$1.31
 $0.36
Diluted$0.32
 $0.52
$1.27
 $0.32
Weighted Average Common Units Outstanding   
Weighted Average Shares of Class A Common Stock Outstanding   
Basic487,704,838
 453,695,846
533,892,474
 487,704,838
Diluted535,918,274
 496,684,340
550,046,440
 535,918,274

See notes to condensed consolidated financial statements.

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KKR & CO. L.P.INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(Amounts in Thousands)
Three Months Ended March 31,Three Months Ended March 31,
2018 20172019 2018
Net Income (Loss)$602,894
 $797,894
$1,627,046
 $602,894
      
Other Comprehensive Income (Loss), Net of Tax:      
      
Foreign Currency Translation Adjustments3,624
 16,576
2,366
 3,624
      
Comprehensive Income (Loss)606,518
 814,470
1,629,412
 606,518
      
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests25,674
 20,933
—
 25,674
Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests398,050
 520,109
920,359
 398,050
      
Comprehensive Income (Loss) Attributable to KKR & Co. L.P.$182,794
 $273,428
Comprehensive Income (Loss) Attributable to KKR & Co. Inc.$709,053
 $182,794
 
See notes to condensed consolidated financial statements.

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KKR & CO. L.P.INC.
CONDENSEDCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Amounts in Thousands, Except UnitShare Data)
The statement below for the three months ended March 31, 2018 represents KKR & Co. Inc. as a partnership prior to the Conversion:
             
 KKR & Co. L.P.      
 
Common
Units
Capital -
Common
Unitholders
Accumulated
Other
Comprehensive
Income (Loss)
Total
Capital -
Common
Units
Capital -
Series A
Preferred
Units
Capital -
Series B
Preferred
Units
 
Noncontrolling
Interests
 
Total
Equity
 
Redeemable
Noncontrolling
Interests
Balance at January 1, 2018486,174,736
$6,722,863
$(19,481)$6,703,382
$332,988
$149,566
 $12,866,324
 $20,052,260
 $610,540
Net Income (Loss) 
170,102
 
170,102
5,822
2,519
 398,777
 577,220
 25,674
Other Comprehensive Income (Loss)- Foreign Currency Translation (Net of Tax) 
 
4,351
4,351
   (727) 3,624
  
Exchange of KKR Holdings L.P. Units and Other Securities to KKR & Co. L.P. Common Units3,067,306
51,221
(132)51,089
   (51,089) —
  
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and Other 
4,205
17
4,222
    
 4,222
  
Equity-Based and Other Non-Cash Compensation 
67,796
 
67,796
   32,695
 100,491
  
Capital Contributions 
  
—
   1,270,723
 1,270,723
 56,950
Capital Distributions 
(82,757) 
(82,757)(5,822)(2,519) (839,134) (930,232) (2,534)
Balance at March 31, 2018489,242,042
$6,933,430
$(15,245)$6,918,185
$332,988
$149,566
 $13,677,569
 $21,078,308
 $690,630
See notes to financial statements.

             
             
 KKR & Co. L.P.      
 
Common
Units
Capital -
Common
Unitholders
Accumulated
Other
Comprehensive
Income (Loss)
Total
Capital -
Common
Units
Capital -
Series A
Preferred
Units
Capital -
Series B
Preferred
Units
 
Noncontrolling
Interests
 
Total
Equity
 
Redeemable
Noncontrolling
Interests
Balance at January 1, 2017452,380,335
$5,506,375
$(49,096)$5,457,279
$332,988
$149,566
 $10,545,902
 $16,485,735
 $632,348
Net Income (Loss) 
259,343
 
259,343
5,822
2,519
 509,277
 776,961
 20,933
Other Comprehensive Income (Loss)- Foreign Currency Translation (Net of Tax) 
 
5,744
5,744
   10,832
 16,576
  
Changes in Consolidation   —
   (71,657) (71,657)  
Transfer of interests under common control
(See Note 15 "Equity")
 12,269
(1,988)10,281
   (10,281) —
  
Exchange of KKR Holdings L.P. Units and Other Securities to KKR & Co. L.P. Common Units3,190,630
43,564
(388)43,176
   (43,176) —
  
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units 
1,802
167
1,969
    
 1,969
  
Equity-Based and Other Non-Cash Compensation 
49,943
 
49,943
   61,093
 111,036
  
Capital Contributions 
  
—
   528,833
 528,833
 128,499
Capital Distributions 
(72,381) 
(72,381)(5,822)(2,519) (262,361) (343,083) (352)
Balance at March 31, 2017455,570,965
$5,800,915
$(45,561)$5,755,354
$332,988
$149,566
 $11,268,462
 $17,506,370
 $781,428




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 KKR & Co. L.P.      
 
Common
Units
Capital -
Common
Unitholders
Accumulated
Other
Comprehensive
Income (Loss)
Total
Capital -
Common
Units
Capital -
Series A
Preferred
Units
Capital -
Series B
Preferred
Units
 
Noncontrolling
Interests
 
Total
Equity
 
Redeemable
Noncontrolling
Interests
Balance at January 1, 2018486,174,736
$6,722,863
$(19,481)$6,703,382
$332,988
$149,566
 $12,866,324
 $20,052,260
 $610,540
Net Income (Loss) 
170,102
 
170,102
5,822
2,519
 398,777
 577,220
 25,674
Other Comprehensive Income (Loss)- Foreign Currency Translation (Net of Tax) 
 
4,351
4,351
   (727) 3,624
  
Exchange of KKR Holdings L.P. Units and Other Securities to KKR & Co. L.P. Common Units3,067,306
51,221
(132)51,089
   (51,089) —
  
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and Other 
4,205
17
4,222
    
 4,222
  
Equity-Based and Other Non-Cash Compensation 
67,796
 
67,796
   32,695
 100,491
  
Capital Contributions 
  
—
   1,270,723
 1,270,723
 56,950
Capital Distributions 
(82,757) 
(82,757)(5,822)(2,519) (839,134) (930,232) (2,534)
Balance at March 31, 2018489,242,042
$6,933,430
$(15,245)$6,918,185
$332,988
$149,566
 $13,677,569
 $21,078,308
 $690,630


KKR & CO. INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) (Continued)
(Amounts in Thousands, Except Share Data)
The statement below represents KKR & Co. Inc. as a corporation subsequent to the Conversion for the three months ended March 31, 2019:
 
Three Months Ended
March 31, 2019
 Amounts Shares
Preferred Stock   
Beginning of Period482,554
 20,000,000
End of Period482,554
 20,000,000
Class A Common Stock   
Beginning of Period5,349
 534,857,237
Exchange of KKR Holdings Units4
 435,954
Repurchases of Class A Common Stock(14) (1,370,289)
End of Period5,339
 533,922,902
Class B Common Stock   
Beginning of Period—
 1
End of Period—
 1
Class C Common Stock   
Beginning of Period2,991
 299,081,239
Cancellation of Class C Common Stock(4) (435,954)
End of Period2,987
 298,645,285
Additional Paid-In Capital   
Beginning of Period8,106,408
  
Exchange of KKR Holdings Units7,137
  
Tax Effects Resulting from Exchange of KKR Holdings Units and Other5,255
  
Repurchases of Class A Common Stock(28,552)  
Equity-Based Compensation54,885
  
End of Period8,145,133
  
Retained Earnings   
Beginning of Period91,953
  
Net Income (Loss) Attributable to KKR & Co. Inc.709,319
  
Series A Preferred Stock Dividends ($0.421875 per share)
(5,822)  
Series B Preferred Stock Dividends ($0.406250 per share)
(2,519)  
Common Stock Dividends ($0.125 per share)(66,619)  
End of Period726,312
  
Accumulated Other Comprehensive Income (Loss)   
Beginning of Period(39,645)  
Foreign Currency Translation(266)  
Exchange of KKR Holdings Units to Class A Common Stock(43)  
End of Period(39,954)  
Total KKR & Co. Inc. Stockholders' Equity9,322,371
  
Noncontrolling Interests (See Note 15 "Equity")16,885,470
  
Total Equity$26,207,841
  
See notes to condensed consolidated financial statements.

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KKR & CO. L.P.INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in Thousands)
Three Months Ended March 31,Three Months Ended March 31,
2018 20172019 2018
Operating Activities 
  
 
  
Net Income (Loss)$602,894
 $797,894
$1,627,046
 $602,894
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities:

  


  
Equity-Based and Other Non-Cash Compensation96,227
 111,036
78,268
 96,227
Net Realized (Gains) Losses on Investments(30,380) (146,164)(129,781) (30,380)
Change in Unrealized (Gains) Losses on Investments(442,420) (360,481)(1,074,097) (442,420)
Capital Allocation-Based Income(78,212) (387,576)(814,932) (78,212)
Other Non-Cash Amounts74,156
 37,860
(12,111) 74,156
Cash Flows Due to Changes in Operating Assets and Liabilities:

  


  
Change in Consolidation and Other—
 (1,254)(137,498) —
Change in Due from / to Affiliates(71,686) (48,964)(100,529) (71,686)
Change in Other Assets420,004
 539,623
68,077
 420,004
Change in Accounts Payable, Accrued Expenses and Other Liabilities(41,480) 310,776
381,421
 (41,480)
Investments Purchased(9,515,686) (8,345,252)(5,301,227) (9,515,686)
Proceeds from Investments6,829,083
 6,341,592
5,571,641
 6,829,083
Net Cash Provided (Used) by Operating Activities(2,157,500) (1,150,910)156,278
 (2,157,500)
      
Investing Activities 
  
 
  
Purchase of Fixed Assets(8,670) (21,384)
Purchases of Fixed Assets(19,455) (8,670)
Development of Oil and Natural Gas Properties—
 (177)(451) —
Net Cash Provided (Used) by Investing Activities(8,670) (21,561)(19,906) (8,670)
      
Financing Activities 
  
 
  
Distributions to Partners(82,757) (72,381)
Preferred Stock Dividends(8,341) (8,341)
Common Stock Dividends(66,619) (82,757)
Distributions to Redeemable Noncontrolling Interests(2,534) (352)—
 (2,534)
Contributions from Redeemable Noncontrolling Interests56,950
 128,499
—
 56,950
Distributions to Noncontrolling Interests(839,134) (262,361)(856,086) (839,134)
Contributions from Noncontrolling Interests1,263,774
 520,269
1,194,815
 1,263,774
Preferred Unit Distributions(8,341) (8,341)
Repurchases of Class A Common Stock(28,566) —
Proceeds from Debt Obligations3,588,463
 2,160,958
1,581,043
 3,588,463
Repayment of Debt Obligations(2,750,750) (1,154,415)(1,806,203) (2,750,750)
Financing Costs Paid(7,500) (5,790)(2,795) (7,500)
Net Cash Provided (Used) by Financing Activities1,218,171
 1,306,086
7,248
 1,218,171
      
Effect of exchange rate changes on cash, cash equivalents and restricted cash20,902
 7,680
1,636
 20,902
      
Net Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash(927,097) 141,295
145,256
 (927,097)
Cash, Cash Equivalents and Restricted Cash, Beginning of Period3,735,361
 4,345,815
2,641,512
 3,735,361
Cash, Cash Equivalents and Restricted Cash, End of Period$2,808,264
 $4,487,110
$2,786,768
 $2,808,264
 
See notes to condensed consolidated financial statements.

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KKR & CO. L.P.INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
(Amounts in Thousands)

Three Months Ended March 31,Three Months Ended March 31,
2018 20172019 2018
Supplemental Disclosures of Cash Flow Information 
  
 
  
Payments for Interest$207,703
 $197,242
$240,889
 $207,703
Payments for Income Taxes$19,295
 $9,687
$8,901
 $19,295
Payments for Operating Lease Liabilities$12,291
 $—
Supplemental Disclosures of Non-Cash Investing and Financing Activities

  


  
Equity-Based and Other Non-Cash Contributions$100,491
 $111,036
$78,003
 $100,491
Non-Cash Contributions from Noncontrolling Interests$6,949
 $8,564
$—
 $6,949
Debt Obligations - Net Gains (Losses), Translation and Other$(11,724) $(78,860)$(148,312) $(11,724)
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of KKR & Co. L.P. Common Units$4,222
 $1,969
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of Class A Common Stock$5,255
 $4,222


  

  
Change in Consolidation and Other

  

  
Investments$—
 $(70,403)$(1,014,813) $—
Noncontrolling Interests$—
 $(71,657)
   
Due From Affiliates$1,642
 $—
Other Assets$(19,703) $—
Accounts Payable, Accrued Expenses and Other Liabilities$(47,731) $—
Redeemable Noncontrolling Interests$(1,122,641) $—
      
March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
Reconciliation to the Condensed Consolidated Statements of Financial Condition      
Cash and Cash Equivalents$1,880,834
 $1,876,687
$1,808,368
 $1,751,287
Cash and Cash Equivalents Held at Consolidated Entities868,114
 1,802,372
911,450
 693,860
Restricted Cash and Cash Equivalents59,316
 56,302
66,950
 196,365
Cash, Cash Equivalents and Restricted Cash, End of Period$2,808,264
 $3,735,361
$2,786,768
 $2,641,512
 
See notes to condensed consolidated financial statements.


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KKR & CO. L.P.INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(All Amounts in Thousands, Except Unit Per Unitand Share Data, and Except Where Noted)

1. ORGANIZATION
 
KKR & Co. L.P.Inc. (NYSE: KKR), together with its consolidated subsidiaries ("KKR"), is a leading global investment firm that manages multiple alternative asset classes including private equity, energy, infrastructure, real estate and credit, with strategic manager partnershipspartners that manage hedge funds. KKR aims to generate attractive investment returns for its fund investors by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with KKR's portfolio companies. KKR invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business.

On July 1, 2018, KKR & Co. L.P. converted from a Delaware limited partnership to a Delaware corporation named KKR & Co. Inc. (the "Conversion"). Because the Conversion became effective on July 1, 2018, the prior period amounts in the accompanying condensed consolidated financial statements for the three months ended March 31, 2018, reflect KKR as a limited partnership and not a corporation. In this report, references to KKR & Co. Inc. for periods prior to the Conversion mean KKR & Co. L.P., and references to KKR's Class A common stock, Series A Preferred Stock and Series B Preferred Stock for periods prior to the Conversion mean common units, Series A preferred units and Series B preferred units of KKR & Co. L.P., respectively, in each case, except where the context requires otherwise. As a result of the Conversion, the financial impact to the condensed consolidated financial statements contained herein consisted of (i) reclassifications from partnership equity accounts to equity accounts reflective of a corporation and (ii) a partial step-up in the tax basis of certain assets resulting in the recognition of a net income tax benefit.

KKR & Co. L.P. was formed as a Delaware limited partnership on June 25, 2007 and its general partner is KKR Management LLC (the "Managing Partner"). KKR & Co. L.P.Inc. is the parent company of KKR Group Limited,Holdings Corp., which is the non-economic(i) a general partner of KKR GroupFund Holdings L.P. ("GroupFund Holdings"), and KKR & Co.International Holdings L.P. is("International Holdings") and (ii) the sole limitedstockholder of KKR Management Holdings Corp. (the general partner of Group Holdings. Group Holdings holds a controlling economic interest in each of (i) KKR Management Holdings L.P. ("Management Holdings") through KKR Management Holdings Corp., a Delaware corporation which is a domestic corporation for U.S. federal income tax purposes, (ii) KKR Fund Holdings L.P. ("Fund Holdings") directly and through KKR Fund Holdings GP Limited a Cayman Island limited company which is a disregarded entity for U.S. federal income tax purposes,(the other general partner of Fund Holdings and (iii) KKR International Holdings). Fund Holdings, L.P. ("International Holdings", and together with Management Holdings and FundInternational Holdings are collectively referred to as the "KKR Group Partnerships") directly and through KKR Fund Holdings GP Limited. Group Holdings also owns certain economic interests in Management Holdings through a wholly owned Delaware corporate subsidiary of KKR Management Holdings Corp. and certain economic interests in Fund Holdings through a Delaware partnership of which Group Holdings is the general partner with a 99% economic interest and KKR Management Holdings Corp. is a limited partner with a 1% economic interest. KKR & Co. L.P., through its indirect controlling economic interests in the KKR Group Partnerships, is the holding partnership for the KKR business.Partnerships."
 
KKR & Co. L.P.Inc. both indirectly controls the KKR Group Partnerships and indirectly holds Class A partner units in each KKR Group Partnership (collectively, "KKR Group Partnership Units") representing economic interests in KKR's business. The remaining KKR Group Partnership Units are held by KKR Holdings L.P. ("KKR Holdings"), which is not a subsidiary of KKR.KKR & Co. Inc. As of March 31, 2018,2019, KKR & Co. L.P.Inc. held approximately 59.5%64.1% of the KKR Group Partnership Units and principals through KKR Holdings held approximately 40.5%35.9% of the KKR Group Partnership Units. The percentage ownership in the KKR Group Partnerships will continue to change as KKR Holdings and/or principals exchange units in the KKR Group Partnerships for shares of Class A common stock of KKR & Co. L.P. common unitsInc. or when KKR & Co. L.P.Inc. otherwise issues or repurchases shares of Class A common stock of KKR & Co. L.P. common units.Inc. The KKR Group Partnerships also have outstanding equity interests that provide for the carry pool and preferred units with economic terms that mirror the preferred unitsstock issued by KKR & Co. L.P.Inc.

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Notes to Financial Statements (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of KKR & Co. L.P.Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”("GAAP") for interim financial information and the instructions to Form 10-Q. The condensed consolidated financial statements (referred to hereafter as the “financial statements”"financial statements"), including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) such that the financial statements are presented fairly and that estimates made in preparing the financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The December 31, 2017 condensed2018 consolidated balance sheet data was derived from audited consolidated financial statements included in KKR & Co. L.P.’sKKR's Annual Report on Form 10-K for the year ended December 31, 2017, which include all disclosures required by GAAP. These2018, filed with the Securities and Exchange Commission (the "SEC") on February 15, 2019, and the financial statements should be read in conjunction with the audited consolidated financial statements included therein. Additionally, in KKR & Co. L.P.’s Annual Report on Form 10-K for the year ended December 31, 2017 filed withaccompanying financial statements the Securitiescondensed consolidated statements of financial condition are referred to hereafter as the “consolidated statements of financial condition”; the condensed consolidated statements of operations are referred to hereafter as the “consolidated statements of operations”;  the condensed consolidated statements of comprehensive income (loss) are referred to hereafter as the “consolidated statements of comprehensive income (loss)”; the condensed consolidated statements of changes in equity are referred to hereafter as the “consolidated statements of changes in equity”; and Exchange Commission (“SEC”).

the condensed consolidated statements of cash flows are referred to hereafter as the “consolidated statements of cash flows."
KKR & Co. L.P. consolidates the financial results of the KKR Group Partnerships and their consolidated subsidiaries,entities, which include the accounts of KKR's investment management and capital markets companies, the general partners of certain unconsolidated investment funds, general partners of consolidated investment funds and their respective consolidated

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Notes to Condensed Consolidated Financial Statements (Continued)

investment funds, and certain other entities including CFEs. References in the accompanying financial statements to "principals" are to KKR's senior employees and non‑employeenon-employee operating consultants who hold interests in KKR's business through KKR Holdings.
All intercompany transactions and balances have been eliminated.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and investment income (loss) during the reporting periods. Such estimates include but are not limited to (i) the determination of the income tax provision and (ii) the valuation of investments and financial instruments. Actual results could differ from those estimates, and such differences could be material to the financial statements.
Principles of Consolidation
The types of entities KKR assesses for consolidation include (i) subsidiaries, including management companies, broker-dealers and general partners of investment funds that KKR manages, (ii) entities that have all the attributes of an investment company, like investment funds, (iii) CFEs and (iv) other entities, including entities that employ non-employee operating consultants. Each of these entities is assessed for consolidation on a case by case basis depending on the specific facts and circumstances surrounding that entity.

Pursuant to its consolidation policy, KKR first considers whether an entity is considered a VIE and therefore whether to apply the consolidation guidance under the VIE model. Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities ("VOEs") under the voting interest model.

KKR's funds are, for GAAP purposes, investment companies and therefore are not required to consolidate their investments in portfolio companies even if majority-owned and controlled. Rather, the consolidated funds and vehicles reflect their investments at fair value as described below in "Fair Value Measurements."

An entity in which KKR holds a variable interest is a VIE if any one of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk (as a group) lack either the direct or indirect ability through voting rights or similar rights to make decisions about a legal entity's activities that have a significant effect on the success of the legal

14
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Notes to Financial Statements (Continued)

entity or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some investors are disproportionate to their obligation to absorb the expected losses of the legal entity, their rights to receive the expected residual returns of the legal entity, or both and substantially all of the legal entity's activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Limited partnerships and other similar entities where unaffiliated limited partners have not been granted (i) substantive participatory rights or (ii) substantive rights to either dissolve the partnership or remove the general partner ("kick-out rights") are VIEs under condition (b) above. KKR's investment funds that are not CFEs (i) are generally limited partnerships, (ii) generally provide KKR with operational discretion and control, and (iii) generally have fund investors with no substantive rights to impact ongoing governance and operating activities of the fund, including the ability to remove the general partner, and, as such, the limited partners do not hold kick-out rights. Accordingly, most of KKR's investment funds are categorized as VIEs.

KKR consolidates all VIEs in which it is the primary beneficiary. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in a VIE. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (i) whether an entity in which KKR holds a variable interest is a VIE and (ii) whether KKR's involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (for example, management and performance related fees), would give it a controlling financial interest. Performance of that analysis requires the exercise of judgment. Fees earned by KKR that are customary and commensurate with the level of effort required to provide those services, and where KKR does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, would not be considered variable interests. KKR factors in all economic interests including interests held through related parties, to determine if it holds a variable interest. KKR determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion periodically.


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Notes to Condensed Consolidated Financial Statements (Continued)

when facts and circumstances change.
For entities that are determined not to be VIEs, these entities are generally considered VOEs and are evaluated under the voting interest model. KKR consolidates VOEs it controls through a majority voting interest or through other means.

The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE depends on the facts and circumstances surrounding each entity and therefore certain of KKR's investment funds may qualify as VIEs whereas others may qualify as VOEs.

With respect to CLOs (which are generally VIEs), in its role as collateral manager, KKR generally has the power to direct the activities of the CLO that most significantly impact the economic performance of the entity. In some, but not all cases, KKR, through its residual interest in the CLO may have variable interests that represent an obligation to absorb losses of, or a right to receive benefits from, the CLO that could potentially be significant to the CLO. In cases where KKR has both the power to direct the activities of the CLO that most significantly impact the CLO's economic performance and the obligation to absorb losses of the CLO or the right to receive benefits from the CLO that could potentially be significant to the CLO, KKR is deemed to be the primary beneficiary and consolidates the CLO.

With respect to CMBS vehicles (which are generally VIEs), KKR holds unrated and non-investment grade rated securities issued by the CMBS, which are the most subordinate tranche of the CMBS vehicle. The economic performance of the CMBS is most significantly impacted by the performance of the underlying assets. Thus, the activities that most significantly impact the CMBS economic performance are the activities that most significantly impact the performance of the underlying assets. The special servicer has the ability to manage the CMBS assets that are delinquent or in default to improve the economic performance of the CMBS. KKR generally has the right to unilaterally appoint and remove the special servicer for the CMBS and as such is considered the controlling class of the CMBS vehicle. These rights give KKR the ability to direct the activities that most significantly impact the economic performance of the CMBS. Additionally, as the holder of the most subordinate tranche, KKR is in a first loss position and has the right to receive benefits, including the actual residual returns of the CMBS, if any. In these cases, KKR is deemed to be the primary beneficiary and consolidates the CMBS vehicle.

Redeemable Noncontrolling Interests
Redeemable Noncontrolling Interests represent noncontrolling interests of certain investment funds and vehicles that are subject to periodic redemption by fund investors following the expiration of a specified period of time (typically one year), or may be withdrawn subject to a redemption fee during the period when capital may not be otherwise withdrawn. Fund investors interests subject to redemption as described above are presented as Redeemable Noncontrolling Interests in the accompanying condensed consolidated statements of financial condition and presented as Net Income (Loss) Attributable to Redeemable Noncontrolling Interests in the accompanying condensed consolidated statements of operations.
When redeemable amounts become legally payable to fund investors, they are classified as a liability and included in Accounts Payable, Accrued Expenses and Other Liabilities in the accompanying condensed consolidated statements of financial condition. For all consolidated investment vehicles and funds in which redemption rights have not been granted, noncontrolling interests are presented within Equity in the accompanying condensed consolidated statements of financial condition as noncontrolling interests.

Noncontrolling Interests
Noncontrolling interests represent (i) noncontrolling interests in consolidated entities and (ii) noncontrolling interests held by KKR Holdings.
Noncontrolling Interests in Consolidated Entities
Noncontrolling interests in consolidated entities represent the non-redeemable ownership interests in KKR that are held primarily by:
(i)third party fund investors in KKR's funds;
(ii)third parties entitled to up to 1% of the carried interest received by certain general partners of KKR's funds that have made investments on or prior to December 31, 2015;
(iii)certain former principals and their designees representing a portion of the carried interest received by the general partners of KKR's private equity funds that was allocated to them with respect to private equity investments made during such former principals' tenure with KKR prior to October 1, 2009;

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Notes to Condensed Consolidated Financial Statements (Continued)

(iv)certain principals and former principals representing all of the capital invested by or on behalf of the general partners of KKR's private equity funds prior to October 1, 2009 and any returns thereon;
(v)third parties in KKR's capital markets business; and
(vi)holders of exchangeable equity securities representing ownership interests in a subsidiary of a KKR Group Partnership issued in connection with the acquisition of Avoca Capital ("Avoca").

On January 16, 2018, KKR Financial Holdings LLC ("KFN") completed the redemption of all of its outstanding 7.375% Series A LLC Preferred Shares.

Noncontrolling Interests held by KKR Holdings
Noncontrolling interests held by KKR Holdings include economic interests held by principals in the KKR Group Partnerships. Such principals receive financial benefits from KKR's business in the form of distributions received from KKR Holdings and through their direct and indirect participation in the value of KKR Group Partnership Units held by KKR Holdings. These financial benefits are not paid by KKR & Co. L.P. and are borne by KKR Holdings.
The following table presents the calculation of noncontrolling interests held by KKR Holdings:
 Three Months Ended March 31,
 2018 2017
Balance at the beginning of the period$4,793,475
 $4,293,337
Net income (loss) attributable to noncontrolling interests held by KKR Holdings (1)
121,002
 216,432
Other comprehensive income (loss), net of tax (2)
3,143
 4,920
Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units (3) 
(33,775) (35,904)
Equity-based and other non-cash compensation32,695
 61,093
Capital contributions39
 37
Capital distributions(57,167) (56,637)
Transfer of interests under common control and Other (See Note 15 "Equity")—
 7,919
Balance at the end of the period$4,859,412
 $4,491,197
(1)Refer to the table below for calculation of net income (loss) attributable to noncontrolling interests held by KKR Holdings.
(2)Calculated on a pro rata basis based on the weighted average KKR Group Partnership Units held by KKR Holdings during the reporting period. 
(3)Calculated based on the proportion of KKR Holdings units exchanged for KKR & Co. L.P. common units pursuant to the exchange agreement during the reporting period. The exchange agreement provides for the exchange of KKR Group Partnership Units held by KKR Holdings for KKR & Co. L.P. common units.
Net income (loss) attributable to KKR & Co. L.P. Common Unitholders and KKR Holdings, with the exception of certain tax assets and liabilities that are directly allocable to KKR Management Holdings Corp., is attributed based on the percentage of the weighted average KKR Group Partnership Units held by KKR and KKR Holdings, each of which holds equity of the KKR Group Partnerships. However, primarily because of the (i) contribution of certain expenses borne entirely by KKR Holdings, (ii) the periodic exchange of KKR Holdings units for KKR & Co. L.P. common units pursuant to the exchange agreement and (iii) the contribution of certain expenses borne entirely by KKR associated with the KKR & Co. L.P. 2010 Equity Incentive Plan ("Equity Incentive Plan"), equity allocations shown in the condensed consolidated statement of changes in equity differ from their respective pro rata ownership interests in KKR's net assets.

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The following table presents net income (loss) attributable to noncontrolling interests held by KKR Holdings:
 Three Months Ended March 31,
 2018 2017
Net income (loss)$602,894
 $797,894
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests25,674
 20,933
Less: Net income (loss) attributable to Noncontrolling Interests in
consolidated entities
277,775
 292,845
Less: Net income (loss) attributable to Series A and Series B Preferred Unitholders8,341
 8,341
Plus: Income tax / (benefit) attributable to KKR Management Holdings Corp.6,068
 19,160
Net income (loss) attributable to KKR & Co. L.P. Common Unitholders
and KKR Holdings
$297,172
 $494,935
    
Net income (loss) attributable to Noncontrolling Interests held by
KKR Holdings
$121,002
 $216,432

Investments
Investments consist primarily of private equity, real assets, credit, investments of consolidated CFEs, equity method, carried interest and other investments. Investments denominated in currencies other than the entity's functional currency are valued based on the spot rate of the respective currency at the end of the reporting period with changes related to exchange rate movements reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Security and loan transactions are recorded on a trade date basis. Further disclosure on investments is presented in Note 4 "Investments."

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The following describes the types of securities held within each investment class.
Private Equity - Consists primarily of equity investments in operating businesses, including growth equity investments.
Credit - Consists primarily of investments in below investment grade corporate debt securities (primarily high yield bonds and syndicated bank loans), originated, distressed and opportunistic debt, real estate mortgage loans, and interests in unconsolidated CLOs.

Investments of Consolidated CFEs - Consists primarily of (i) investments in below investment grade corporate debt securities (primarily high yield bonds and syndicated bank loans) held directly by the consolidated CLOs and (ii) investments in originated, fixed-rate real estate mortgage loans held directly by the consolidated CMBS vehicles.

Real Assets - Consists primarily of investments in (i) energy related assets, principally oil and natural gas producing properties, (ii) infrastructure assets, and (iii) real estate, principally residential and commercial real estate assets and businesses.
Equity Method - Other - Consists primarily of (i) certain direct interests in operating companies in which KKR is deemed to exert significant influence under GAAP and (ii) certain interests in partnerships and joint ventures that hold private equity and real estate investments.
Equity Method - Capital Allocation - BasedAllocation-Based Income - Consists primarily of (i) the capital interest KKR holds as the general partner in certain investment funds, which are not consolidated and (ii) the carried interest component of the general partner interest, which are accounted for as a single unit of account.

Other - Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets, credit or investments of consolidated CFEs.


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Investments held by Consolidated Investment Funds

The consolidated investment funds are, for GAAP purposes, investment companies and reflect their investments and other financial instruments, including portfolio companies that are majority-owned and controlled by KKR's investment funds, at fair value. KKR has retained this specialized accounting for the consolidated funds in consolidation. Accordingly, the unrealized gains and losses resulting from changes in fair value of the investments and other financial instruments held by the consolidated investment funds are reflected as a component of Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations.

Certain energy investments are made through consolidated investment funds, including investments in working and royalty interests in oil and natural gas producing properties as well as investments in operating companies that operate in the energy industry. Since these investments are held through consolidated investment funds, such investments are reflected at fair value as of the end of the reporting period. 

Investments in operating companies that are held through KKR's consolidated investment funds are generally classified within private equity investments and investments in working and royalty interests in oil and natural gas producing properties are generally classified as real asset investments.

Energy Investments held directly by KKR

Certain energy investments are made by KKR directly in working and royalty interests in oil and natural gas producing properties and not through investment funds. Oil and natural gas producing activities are accounted for under the successful efforts method of accounting and such working interests are consolidated based on the proportion of the working interests held by KKR. Accordingly, KKR reflects its proportionate share of the underlying consolidated statements of financial condition and consolidated statements of operations of the consolidated working interests on a gross basis and changes in the value of these working interests are not reflected as unrealized gains and losses in the condensed consolidated statements of operations. Under the successful efforts method, exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. Costs that are associated with the drilling of successful exploration wells are capitalized if proved reserves are found. Lease acquisition costs are capitalized when incurred. Costs associated with the drilling of exploratory wells that do not find proved reserves, geological and geophysical costs and costs of certain nonproducing leasehold costs are charged to expense as incurred.

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Expenditures for repairs and maintenance, including workovers, are charged to expense as incurred.
The capitalized costs of producing oil and natural gas properties are depleted on a field-by-field basis using the units-of production method based on the ratio of current production to estimated total net proved oil, natural gas and natural gas liquid reserves. Proved developed reserves are used in computing depletion rates for drilling and development costs and total proved reserves are used for depletion rates of leasehold costs.
Estimated dismantlement and abandonment costs for oil and natural gas properties, net of salvage value, are capitalized at their estimated net present value and amortized on a unit-of-production basis over the remaining life of the related proved developed reserves.

Whenever events or changes in circumstances indicate that the carrying amounts of oil and natural gas properties may not be recoverable, KKR evaluates oil and natural gas properties and related equipment and facilities for impairment on a field-by-field basis. The determination of recoverability is made based upon estimated undiscounted future net cash flows. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a discounted cash flow analysis, with the carrying value of the related asset. Any impairment in value is recognized when incurred and is recorded in General, Administrative, and Other expense in the condensed consolidated statements of operations.


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Fair Value Option
For certain investments and other financial instruments, KKR has elected the fair value option. Such election is irrevocable and is applied on a financial instrument by financial instrument basis at initial recognition. KKR has elected the fair value option for certain private equity, real assets, credit, investments of consolidated CFEs, equity method - other and other financial instruments not held through a consolidated investment fund. Accounting for these investments at fair value is consistent with how KKR accounts for its investments held through consolidated investment funds. Changes in the fair value of such instruments are recognized in Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Interest income on interest bearing credit securities on which the fair value option has been elected is based on stated coupon rates adjusted for the accretion of purchase discounts and the amortization of purchase premiums. This interest income is recorded within Interest Income in the condensed consolidated statements of operations.

Equity Method

For certain investments in entities over which KKR exercises significant influence but which do not meet the requirements for consolidation and for which KKR has not elected the fair value option, KKR uses the equity method of accounting. The carrying value of equity method investments, for which KKR has not elected the fair value option, is determined based on the amounts invested by KKR, adjusted for the equity in earnings or losses of the investee allocated based on KKR's respective ownership percentage, less distributions.

For equity method investments for which KKR has not elected the fair value option, KKR records its proportionate share of the investee's earnings or losses based on the most recently available financial information of the investee, which in certain cases may lag the date of KKR's financial statements by no more than three calendar months. As of March 31, 2018,2019, equity method investees for which KKR reports financial results on a lag include Marshall Wace LLP ("Marshall Wace"). KKR evaluates its equity method investments for which KKR has not elected the fair value option for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.

The carrying value of investments classified as Equity Method - Capital Allocation - BasedAllocation-Based Income investments approximateapproximates fair value, because the underlying investments of the unconsolidated investment funds are reported at fair value.

Financial Instruments held by Consolidated CFEs
KKR measures both the financial assets and financial liabilities of the consolidated CFEs in its financial statements using the more observable of the fair value of the financial assets and the fair value of the financial liabilities which results in KKR's consolidated net income (loss) reflecting KKR's own economic interests in the consolidated CFEs including (i) changes in the fair value of the beneficial interests retained by KKR and (ii) beneficial interests that represent compensation for services rendered.

For the consolidated CLOs, KKR has determined that the fair value of the financial assets of the consolidated CLOs is more observable than the fair value of the financial liabilities of the consolidated CLOs. As a result, the financial assets of the consolidated CLOs are being measured at fair value and the financial liabilities are being measured in consolidation as: (1) the

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sum of the fair value of the financial assets and the carrying value of any nonfinancial assets that are incidental to the operations of the CLOs less (2) the sum of the fair value of any beneficial interests retained by KKR (other than those that represent compensation for services) and KKR's carrying value of any beneficial interests that represent compensation for services. The resulting amount is allocated to the individual financial liabilities (other than the beneficial interests retained by KKR).

For the consolidated CMBS vehicles, KKR has determined that the fair value of the financial liabilities of the consolidated CMBS vehicles is more observable than the fair value of the financial assets of the consolidated CMBS vehicles. As a result, the financial liabilities of the consolidated CMBS vehicles are being measured at fair value and the financial assets are being measured in consolidation as: (1) the sum of the fair value of the financial liabilities (other than the beneficial interests retained by KKR), the fair value of the beneficial interests retained by KKR and the carrying value of any nonfinancial liabilities that are incidental to the operations of the CMBS vehicles less (2) the carrying value of any nonfinancial assets that are incidental to the operations of the CMBS vehicles. The resulting amount is allocated to the individual financial assets.


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Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.date under current market conditions. Except for certain of KKR's equity method investments (see "Equity Method" above in this Note 2 "Summary of Significant Accounting Policies")above) and debt obligations (as described in Note 10 "Debt Obligations"), KKR's investments and other financial instruments are recorded at fair value or at amounts whose carrying values approximate fair value. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation techniques are applied. These valuation techniques involve varying levels of management estimation and judgment, the degree of which is dependent on a variety of factors.

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments and financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:

Level I - Pricing inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date. The types of financial instruments included in this category are publicly-listed equities and securities sold short.

Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the measurement date, and fair value is determined through the use of models or other valuation methodologies. The types of financial instruments included in this category are credit investments, investments and debt obligations of consolidated CLO entities, convertible debt securities indexed to publicly-listed securities, less liquid and restricted equity securities and certain over-the-counter derivatives such as foreign currency option and forward contracts.

Level III - Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments generally included in this category are private portfolio companies, real assets investments, credit investments, equity method investments for which the fair value option was elected and investments and debt obligations of consolidated CMBS entities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. KKR's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset.

A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representative of fair value because in such market conditions there may be increased instances of

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transactions that are not orderly. In those circumstances, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value.
The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, and current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by KKR in determining fair value is greatest for instruments categorized in Level III. The variability and availability of the observable inputs affected by the factors described above may cause transfers between Levels I, II, and III, which KKR recognizes at the beginning of the reporting period.
 
Investments and other financial instruments that have readily observable market prices (such as those traded on a securities exchange) are stated at the last quoted sales price as of the reporting date. KKR does not adjust the quoted price for these investments, even in situations where KKR holds a large position and a sale could reasonably affect the quoted price.

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Management's determination of fair value is based upon the methodologies and processes described below and may incorporate assumptions that are management's best estimates after consideration of a variety of internal and external factors.

Level II Valuation Methodologies
Credit Investments: These instruments generally have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that KKR and others are willing to pay for an instrument. Ask prices represent the lowest price that KKR and others are willing to accept for an instrument. For financial assets and liabilities whose inputs are based on bid-ask prices obtained from third party pricing services, fair value may not always be a predetermined point in the bid-ask range. KKR's policy is generally to allow for mid-market pricing and adjusting to the point within the bid-ask range that meets KKR's best estimate of fair value.

Investments and Debt Obligations of Consolidated CLO Vehicles: Investments of consolidated CLO vehicles are reported within Investments of Consolidated CFEs and are valued using the same valuation methodology as described above for credit investments. Under ASU 2014-13, KKR measures CLO debt obligations on the basis of the fair value of the financial assets of the CLO.
Securities indexed to publicly-listed securities: The securities are typically valued using standard convertible security pricing models. The key inputs into these models that require some amount of judgment are the credit spreads utilized and the volatility assumed. To the extent the company being valued has other outstanding debt securities that are publicly-traded, the implied credit spread on the company's other outstanding debt securities would be utilized in the valuation. To the extent the company being valued does not have other outstanding debt securities that are publicly-traded, the credit spread will be estimated based on the implied credit spreads observed in comparable publicly-traded debt securities. In certain cases, an additional spread will be added to reflect an illiquidity discount due to the fact that the security being valued is not publicly-traded. The volatility assumption is based upon the historically observed volatility of the underlying equity security into which the convertible debt security is convertible and/or the volatility implied by the prices of options on the underlying equity security.

Restricted Equity Securities: The valuation of certain equity securities is based on an observable price for an identical security adjusted for the effect of a restriction.

Derivatives: The valuation incorporates observable inputs comprising yield curves, foreign currency rates and credit spreads.

Level III Valuation Methodologies
Investments and financial instruments categorized as Level III consist primarily of the following:

Private Equity Investments: KKR generally employs two valuation methodologies when determining the fair value of a private equity investment. The first methodology is typically a market comparables analysis that considers key financial inputs and recent public and private transactions and other available measures. The second methodology utilized is typically a discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputs used in this methodology include the weighted average cost of capital for the investment and assumed inputs used to calculate terminal values, such as exit EBITDA multiples. In certain cases the results of the discounted cash flow approach can be significantly

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impacted by these estimates. Other inputs are also used in both methodologies. In addition, when a definitive agreement has been executed to sell an investment, KKR generally considers a significant determinant of fair value to be the consideration to be received by KKR pursuant to the executed definitive agreement.
Upon completion of the valuations conducted using these methodologies, a weighting is ascribed to each method, and an illiquidity discount is typically applied where appropriate. The ultimate fair value recorded for a particular investment will generally be within a range suggested by the two methodologies, except that the value may be higher or lower than such range in the case of investments being sold pursuant to an executed definitive agreement.
When determining the weighting ascribed to each valuation methodology, KKR considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis, the expected hold period and manner of realization for the investment, and in the case of investments being sold pursuant to an executed definitive agreement, an estimated probability of such sale being completed. These factors can result in different weightings among investments in the portfolio and in certain instances may result in up to a 100% weighting to a single methodology.

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When an illiquidity discount is to be applied, KKR seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments. KKR then evaluates such private equity investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include (i) whether KKR is unable to freely sell the portfolio company or conduct an initial public offering of the portfolio company due to the consent rights of a third party or similar factors, (ii) whether the portfolio company is undergoing significant restructuring activity or similar factors, and (iii) characteristics about the portfolio company regarding its size and/or whether the portfolio company is experiencing, or expected to experience, a significant decline in earnings. These factors generally make it less likely that a portfolio company would be sold or publicly offered in the near term at a price indicated by using just a market multiples and/or discounted cash flow analysis, and these factors tend to reduce the number of opportunities to sell an investment and/or increase the time horizon over which an investment may be monetized. Depending on the applicability of these factors, KKR determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time KKR holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by KKR in its valuations.

In the case of growth equity investments, enterprise values may be determined using the market comparables analysis and discounted cash flow analysis described above. A scenario analysis may also be conducted to subject the estimated enterprise values to a downside, base and upside case, which involves significant assumptions and judgments. A milestone analysis may also be conducted to assess the current level of progress towards value drivers that we have determined to be important, which involves significant assumptions and judgments. The enterprise value in each case may then be allocated across the investment's capital structure to reflect the terms of the security and subjected to probability weightings. In certain cases, the values of growth equity investments may be based on recent or expected financings.
Real Asset Investments: Real asset investments in infrastructure, energy and real estate are valued using one or more of the discounted cash flow analysis, market comparables analysis and direct income capitalization, which in each case incorporates significant assumptions and judgments.
Infrastructure investments are generally valued using the discounted cash flow analysis. Key inputs used in this methodology can include the weighted average cost of capital and assumed inputs used to calculate terminal values, such as exit EBITDA multiples.
Energy investments are generally valued using a discounted cash flow analysis.approach, and where applicable, a market approach using comparable companies and transactions. Key inputs used in this methodology that require estimatesour valuations include (i) the weighted average cost of capital. In addition, the valuations of energy investments generally incorporate bothcapital, (ii) future commodity prices, as quoted on indices and long-term commodity price forecasts, which may be substantially different from commodity prices on certain indices for equivalentand (iii) the asset’s future dates. Certain energy investments do not include an illiquidity discount. Long-term commodity price forecasts are utilized to capture the value of the investments across a range of commodity prices within the energy investment portfolio associated with future development and to reflect a range of price expectations. operating performance.
Real estate investments are generally valued using a combination of direct income capitalization and discounted cash flow analysis. Certain real estate investments are valued by KKR based on ranges of valuations determined by an independent valuation firm. Key inputs used in such methodologies that require estimates include an unlevered discount rate and current capitalization rate. The valuations of real assets investments also use other inputs.

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Notes to Financial Statements (Continued)

Credit Investments: Credit investments are valued using values obtained from dealers or market makers, and where these values are not available, credit investments are generally valued by KKR based on ranges of valuations determined by an independent valuation firm. Valuation models are based on discounted cash flow analyses, for which the key inputs are determined based on market comparables, which incorporate similar instruments from similar issuers.

Other Investments: With respect to other investments including equity method investments for which the fair value election has been made, KKR generally employs the same valuation methodologies as described above for private equity investments when valuing these other investments.

Investments and Debt Obligations of Consolidated CMBS Vehicles: Under ASU 2014-13, KKR measures CMBS investments, which are reported within Investments of Consolidated CFEs on the basis of the fair value of the financial liabilities of the CMBS. Debt obligations of consolidated CMBS vehicles are valued based on discounted cash flow analyses. The key input is the expected yield of each CMBS security using both observable and unobservable factors, which may include recently offered or completed trades and published yields of similar securities, security-specific characteristics (e.g. securities ratings issued by nationally recognized statistical rating organizations, credit support by other subordinate securities issued by the CMBS and coupon type) and other characteristics.
Key unobservable inputs that have a significant impact on KKR's Level III investment valuations as described above are included in Note 5 "Fair Value Measurements." KKR utilizes several unobservable pricing inputs and assumptions in

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determining the fair value of its Level III investments. These unobservable pricing inputs and assumptions may differ by investment and in the application of KKR's valuation methodologies. KKR's reported fair value estimates could vary materially if KKR had chosen to incorporate different unobservable pricing inputs and other assumptions or, for applicable investments, if KKR only used either the discounted cash flow methodology or the market comparables methodology instead of assigning a weighting to both methodologies.
Revenues
Level III Valuation ProcessFor the three months ended March 31, 2019 and 2018, respectively, revenues consisted of the following:    

 Three Months Ended March 31,
 2019 2018
Management Fees$188,408
 $187,727
Fee Credits(103,477) (29,053)
Transaction Fees188,203
 158,653
Monitoring Fees25,651
 17,586
Incentive Fees—
 13,805
Expense Reimbursements44,060
 20,211
Oil and Gas Revenue13,175
 14,507
Consulting Fees16,528
 10,958
Total Fees and Other372,548
 394,394

   
Carried Interest694,383
 62,747
General Partner Capital Interest120,549
 15,465
Total Capital Allocation-Based Income814,932
 78,212
    
Total Revenues$1,187,480
 $472,606
The valuation process involvedFees and Other
Fees and Other, as detailed above, are accounted for Level III measurementsas contracts with customers. Under the guidance for contracts with customers, KKR is completed onrequired to (a) identify the contract(s) with a quarterly basis and is designed to subjectcustomer, (b) identify the valuation of Level III investments to an appropriate level of consistency, oversight, and review.

For Private Markets investments classified as Level III, investment professionals prepare preliminary valuations based on their evaluation of financial and operating data, company specific developments, market valuations of comparable companies and other factors. These preliminary valuations are reviewed by an independent valuation firm engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR's valuations annually for all Level III investments in Private Markets and quarterly for investments other than certain investments, which have values less than pre-set value thresholds and whichperformance obligations in the aggregate comprise less than 5% ofcontract, (c) determine the total value of KKR's Level III Private Markets investments. The valuations of certain real asset investments are determined solely by an independent valuation firm withouttransaction price, (d) allocate the preparation of preliminary valuations by our investment professionals, and instead such independent valuation firm relies principally on valuation information availabletransaction price to it as a broker or valuation firm. For credit investments and debtthe performance obligations of consolidated CMBS vehicles, an independent valuation firm is generally engaged by KKR with respect to investments classified as Level III. The valuation firm either provides a value or provides a valuation range from which KKR's investment professionals select a point in the range to determinecontract, and (e) recognize revenue when (or as) KKR satisfies its performance obligation. In determining the preliminary valuation or performs certain procedures in order to assess the reasonableness and provide positive assurance of KKR's valuations. After reflecting any input from the independent valuation firm, the valuation proposals are submitted for review and approval by KKR's valuation committees.

transaction price, KKR has included variable consideration only to the extent that it is probable that a global valuation committee that is responsible for coordinating and implementing the firm's valuation process to ensure consistencysignificant reversal in the applicationamount of valuation principles across portfolio investments and between periods. The global valuation committeecumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is assisted by the asset class-specific valuation committees that exist for private equity (including growth equity), real estate, energy and infrastructure, and credit. The asset class-specific valuation committees are responsible for the review and approval of all preliminary Level III valuations in their respective asset classes on a quarterly basis. The members of these valuation committees are comprised of investment professionals, including the heads of each respective strategy, and professionals from business operations functions such as legal, compliance and finance, who are not primarily responsible for the management of the investments. For periods prior to the completion of the PAAMCO Prisma transaction, when Level III valuations were required to be performed on hedge fund investments, a valuation committee for hedge funds reviewed these valuations.
All Level III valuations are also subject to approval by the global valuation committee, which is comprised of senior employees including investment professionals and professionals from business operations functions, and includes one of KKR's Co-Presidents and Co-Chief Operating Officers and its Chief Financial Officer, General Counsel and Chief Compliance Officer. When valuations are approved by the global valuation committee after reflecting any input from it, the valuations of Level III investments, as well as the valuations of Level I and Level II investments, are presented to the audit committee of the board of directors of the general partner of KKR & Co. L.P. and are then reported to the board of directors.resolved.

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RevenuesThe following table summarizes KKR's revenues from contracts with customers:

For the three months ended March 31, 2018 and 2017, respectively, revenues consisted of the following:    
 Three Months Ended March 31,
 2018 2017
Management Fees$187,727
 $161,182
Transaction Fees158,653
 243,658
Monitoring Fees17,586
 13,504
Fee Credits(29,053) (88,078)
Incentive Fees13,805
 273
Expense Reimbursements20,211
 23,265
Oil and Gas Revenue14,507
 17,273
Consulting Fees10,958
 9,102
Total Fees and Other (1)
394,394
 380,179

   
Carried Interest62,747
 335,773
General Partner Capital Interest15,465
 51,803
Total Capital Allocation-Based Income78,212
 387,576
    
Total Revenues (2)
$472,606
 $767,755
Revenue TypeCustomerPerformance Obligation
Performance Obligation Satisfied Over Time or
Point In Time (1)
Variable or
Fixed Consideration
Payment TermsSubject to Return Once Recognized
Classification of Uncollected Amounts (2)
Management FeesInvestment funds, CLOs and other vehiclesInvestment management servicesOver time as services are renderedVariable consideration since varies based on fluctuations in the basis of the management fee over timeTypically quarterly or annually in arrearsNoDue from Affiliates
Transaction FeesPortfolio companies and third party companiesAdvisory services and debt and equity arranging and underwritingPoint in time when the transaction (e.g. underwriting) is completedFixed considerationTypically paid on or shortly after transaction closesNo
Due from Affiliates (portfolio companies)

Other Assets (third parties)
Monitoring Fees
Recurring FeesPortfolio companiesMonitoring servicesOver time as services are renderedVariable consideration since varies based on fluctuations in the basis of the recurring feeTypically quarterly in arrearsNoDue from Affiliates
Termination FeesPortfolio companiesMonitoring servicesPoint in time when the termination is completedFixed considerationTypically paid on or shortly after termination occursNoDue from Affiliates
Incentive FeesInvestment funds and other vehiclesInvestment management services that result in achievement of minimum investment return levelsPoint in time at the end of the performance measurement period (quarterly or annually) if investment performance is achievedVariable consideration since contingent upon the investment fund and other vehicles achieving more than stipulated investment return hurdlesTypically paid shortly after the end of the performance measurement periodNoDue from Affiliates
Expense ReimbursementsInvestment funds and portfolio companiesInvestment management and monitoring servicesPoint in time when the related expense is incurredFixed considerationTypically shortly after expense is incurredNoDue from Affiliates
Oil and Gas RevenuesOil and gas wholesalersDelivery of oil liquids and gasPoint in time when delivery has occurred and title has transferredFixed considerationTypically shortly after deliveryNoOther Assets
Consulting FeesPortfolio companies and other companiesConsulting and other servicesOver time as services are renderedFixed considerationTypically quarterly in arrearsNoDue from Affiliates
(1)Fees and Other presentedFor performance obligations satisfied at a point in time, there were no significant judgments made in evaluating when a customer obtains control of the table above, except for oil and gas revenue and certain transaction fees earned by KKR's Capital Markets business, are earned from KKR investment funds and portfolio companies. promised service.
(2)SeeFor amounts classified in Other Assets, see Note 14 "Segment Reporting" for disaggregated revenues by reportable segment8 "Other Assets and a reconciliation of such segment revenues to revenues recordedAccounts Payable, Accrued Expenses and Other Liabilities." For amounts classified in the condensed consolidated statements of operations.Due from Affiliates, see Note 13 "Related Party Transactions."

Fees and Other

Management Fees

KKR provides investment management services to investment funds, CLOs, and other vehicles in exchange for a management fee. Management fees are recognized in the period during which the related investment management services are rendered in accordance with the contractual terms of the related agreement. Management fees are determined quarterly based on an annual rate and are generally based upon a percentage of the capital committed or capital invested during the investment period. Thereafter, management fees are generally based on a percentage of remaining invested capital, net asset value, gross assets or as otherwise defined in the respective contractual agreements. ManagementSince some of the factors that cause the fees to fluctuate are outside of KKR's control, management fees are generally billed quarterly or annually underconsidered to be constrained and are therefore not included in the terms oftransaction price. Additionally, after the related agreement.contract is established there are no significant judgments made when determining the transaction price.
Management fees earned from KKR's consolidated investment funds, CLOs, and other vehicles are eliminated in consolidation. However, because these amounts are funded by, and earned from, noncontrolling interests, KKR's allocated share of the net income from the consolidated investment funds, CLOs, and other vehicles is increased by the amount of fees that are eliminated. Accordingly, the elimination of these fees does not impact the net income (loss) attributable to KKR or KKR partners' capital.
In the Private Markets segment, management fees earned from private equity funds generally range from 1% to 2% of committed capital during the fund's investment period and are generally 0.75% to 1.25% of invested capital after the expiration of the fund's investment period with subsequent reductions over time. Typically, an investment period is defined as a period of up to six years. The actual length of the investment period is often shorter due to the earlier deployment of committed capital. Management fees earned from growth equity, real assets, and core investment strategy funds generally range from 0.5% to 2.0% and are generally based on the investment fund's average net asset value, capital commitments, or invested capital.stockholders' equity.

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InFee Credits
Under the Public Markets segment,terms of the management agreements with certain of its investment funds, KKR is required to share with such funds an agreed upon percentage of certain fees, including monitoring and transaction fees earned from creditportfolio companies ("Fee Credits"). Investment funds earn Fee Credits only with respect to monitoring and othertransaction fees that are allocable to the fund's investment vehiclesin the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain costs incurred in connection with pursuing potential investments that do not result in completed transactions ("broken-deal expenses") and generally rangeamount to 80% for older funds, or 100% for newer funds, of allocable monitoring and transaction fees after broken-deal expenses are recovered, although the actual percentage may vary from 0.33%fund to 1.75%. Such rates may be based onfund. Fee Credits are recognized and owed to investment funds concurrently with the recognition of monitoring fees, transaction fees and broken-deal expenses. Since Fee Credits are payable to investment funds, amounts owed are generally applied as a reduction of the management fee that is otherwise billed to the investment fund's average net asset value, capital commitments, or invested capital. Management fees earned from CLOs include senior collateral management fees and subordinate collateral management fees. When combined, senior collateral management fees and subordinate collateral management feesfund. Fee credits are determined based on an annual rate ranging from 0.40% to 0.50%recorded as a reduction of collateral. If amounts distributable on any payment date are insufficient to pay the collateral management fees according to the priority of payments, any shortfall is deferred and payable on subsequent payment dates. KKR has the right to waive all or any portion of any collateral management fee. For the purpose of calculating the collateral management fees, collateral, the payment dates, and the priority of payments are terms definedrevenues in the management agreements.
Management fees recognized but not received fromconsolidated statement of operations. Fee credits owed to investment funds CLOs and other vehicles are recorded in Due fromto Affiliates on the condensed consolidated statements of financial condition (Seecondition. See Note 13 "Related Party Transactions").Transactions."
Transaction Fees
KKR (i) arranges debt and equity financing, places and underwrites securities offerings, and provides other types of capital markets services for companies seeking financing in its Capital Markets segmentbusiness line and (ii) provides advisory services in connection with successful Private Markets and Public Markets portfolio company investment transactions, in each case, in exchange for a transaction fee. Transaction fees are separately negotiated for each transaction and are generally based on (i) in our Capital Markets segment,business line, a percentage of the overall transaction size and (ii) for Private Markets and Public Markets transactions, a percentage of either total enterprise value of an investment or a percentage of the aggregate price paid for an investment. Transaction feesAfter the contract is established, there are recognizedno significant judgments made when the underlying services rendered are completed in accordance with the terms ofdetermining the transaction and advisory agreements, which is typically when the transaction closes. Transaction fees are generally paid on or shortly after the closing of a transaction. Transaction fees from our Private Markets and Public Markets businesses recognized but not received from portfolio companies are recorded in Due from Affiliates on the condensed consolidated statements of financial condition (See Note 13 "Related Party Transactions"). Transaction fees from our Capital Markets business recognized but not received from third parties are recorded in Other Assets on the condensed consolidated statements of financial condition (See Note 8 "Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities").price.
Monitoring Fees
KKR agrees to provideprovides services in connection with monitoring portfolio companies in exchange for a fee. MonitoringRecurring monitoring fees are recognized in the period during which the related services are rendered in accordance with the contractual terms of the related agreement. Monitoring fees are determined quarterly and are generally paid based on a fixed periodic schedule by the portfolio companies either in advance or in arrears and are separately negotiated for each portfolio company. In addition, certain monitoring fee provisionsarrangements may provide for a termination payment following an initial public offering or change of control as defined in the contractual terms of the related agreement. These termination payments are recognized in the period when the related transaction closes. Monitoring fees recognized but not received from portfolio companiesAfter the contract is established, there are recorded in Due from Affiliates onno significant judgments made when determining the condensed consolidated statements of financial condition (See Note 13 "Related Party Transactions").
Fee Credits

Under the terms of the management agreements with certain of its investment funds, KKR is required to share with such funds an agreed upon percentage of certain fees, including monitoring and transaction fees earned from portfolio companies ("Fee Credits"). Investment funds earn Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund's investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain costs related to investment transactions that were not consummated (“broken deal costs”) and generally amount to 80% for older funds, or 100% for our newer funds, of allocable monitoring and transaction fees after broken deal costs are recovered, although the actual percentage may vary from fund to fund. Fee Credits are recognized and owed to investment funds concurrently with the recognition of monitoring fees, transaction fees and broken deal costs. Since Fee Credits are payable to investment funds, amounts owed are generally applied as a reduction of the management fee that is otherwise billed to the investment fund. Fee credits owed to investment funds are recorded in Due to Affiliates on the condensed consolidated statements of financial condition (See Note 13 "Related Party Transactions").


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price.
Incentive Fees

KKR provides investment management services to certain investment funds, CLOs and other vehicles in exchange for a management fee as discussed above and, in some cases an incentive fee when KKR is not entitled to a carried interest. Incentive fees are recognized based on fund performance, subject to the achievement of minimum return levels, and/or high water marks, in accordance with the respective terms set out in each governing agreement. Incentive fee rates generally range from 5% to 20% of investment gains. KKR does not record performance‑based incentiveIncentive fees are considered a form of variable consideration as these fees are subject to reversal, and therefore the recognition of such fees is deferred until the end of each fund's measurement period (which is generally one year) when the performance‑basedperformance-based incentive fees become fixed and determinable. Incentive fees are generally paid within 90 days of the end of the investment vehicles' measurement period. Incentive fees recognized but not received from investment funds, CLOs and other vehiclesAfter the contract is established, there are recorded in Due from Affiliates onno significant judgments made when determining the condensed consolidated statements of financial condition (See Note 13 "Related Party Transactions").transaction price.
Expense Reimbursements

In connection with the (i)Providing investment management services provided to investment funds and (ii) the monitoring ofKKR’s portfolio companies require KKR receives reimbursementto arrange for certain expenses incurredservices on behalf of these entities that have been determined by KKR to be additional compensation to satisfy its performance obligation. For these expense reimbursementsthem. In those situations where KKR is consideredacting as an agent on behalf of its investment funds or portfolio companies, it presents the cost of services on a net basis as a reduction of Revenues. In all other situations, KKR is primarily responsible for fulfilling the services and is therefore acting as a principal under the agreements and recordsfor those arrangements for accounting purposes. As a result, the expense and related reimbursement revenueassociated with those services is presented on a gross basis.Costs incurred are classified as General, Administrative and OtherExpenses and reimbursements of such costs are classified as Expense Reimbursements within Revenues on the condensed consolidated statements of operations. Expense reimbursements recognized but not received from investment funds and portfolio companiesAfter the contract is established, there are recorded in Due from Affiliates onno significant judgments made when determining the condensed consolidated statementstransaction price.

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Table of financial condition (See Note 13 "Related Party Transactions").Contents
Notes to Financial Statements (Continued)

Oil and Gas Revenue

OilKKR directly holds certain working and royalty interests in oil and natural gas revenuesproducing properties that are recognized when production is sold to a purchaser at fixed or determinable prices, when delivery has occurred and title has transferred and collectability of the revenue is reasonably assured.not held through investment funds. Oil and gas revenue is recognized but not receivedwhen the performance obligation is satisfied, which occurs at the point in time when control of the product transfers to the customer. Performance obligations are typically satisfied through the monthly delivery of production. Revenue is recognized based on KKR's proportionate share of production from third partiesnon-operated properties as marketed by the operator. After the contract is established, there are recorded in Other Assets onno significant judgments made when determining the condensed consolidated statements of financial condition (See Note 8 "Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities").

transaction price.
Consulting Fees
Certain consolidated entities that employ non-employee operating consultants provide consulting and other services to portfolio companies and other companies in exchange for a consulting fee. Consulting fees are recognized in the period during which the related advisory services are rendered in accordance with the contractual terms of the related agreement. Consulting fees are separately negotiated with each portfolio company for which services are provided and are not shared with KKR. Consulting fees recognized but not received from portfolio companiesAfter the contract is established, there are recorded in Due from Affiliates onno significant judgments made when determining the condensed consolidated statements of financial condition (See Note 13 "Related Party Transactions").transaction price.
Capital Allocation-Based Income
Capital allocation-based income is earned from those arrangements where KKR has a general partner capital interest and is entitled to a disproportionate allocation of investment income (referred to hereafter as “carried interest”"carried interest"). KKR accounts for its general partner interests in capital allocation-based arrangements as financial instruments under ASC 323, Investments - Equity Method and Joint Ventures (“("ASC 323”323") since the general partner has significant governance rights in the investment funds in which it invests, which demonstrates significant influence. In accordance with ASC 323, KKR records equity method income based on the proportionate share of the income of the investment fund, including carried interest, assuming the investment fund was liquidated as of each reporting date pursuant to each investment fund's governing agreements. Accordingly, these general partner interests are accounted for outside of the scope of ASC 606. Other arrangements surrounding contractual incentive fees through an advisory contract are separate and distinct and accounted for in accordance with ASC 606. In these incentive fee arrangements, accounted for in accordance with ASC 606, KKR’s economics in the entity do not involve an allocation of capital. See “Incentive Fees”"Incentive Fees" above.
Carried interest is allocated to the general partner based on cumulative fund performance to date, and where applicable, subject to a preferred return to the funds' limited partners. At the end of each reporting period, KKR calculates the carried interest that would be due to KKR for each investment fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as carried interest to reflect either (a) positive performance resulting in an increase in the carried interest allocated to the general

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partner or (b) negative performance that would cause the amount due to KKR to be less than the amount previously recognized, resulting in a negative adjustment to carried interest allocated to the general partner. In each case, it is necessary to calculate the carried interest on cumulative results compared to the carried interest recorded to date and to make the required positive or negative adjustments. KKR ceases to record negative carried interest allocations once previously recognized carried interest allocations for an investment fund have been fully reversed. KKR is not obligated to make payments for guaranteed returns or hurdles and, therefore, cannot have negative carried interest over the life of an investment fund. Accrued but unpaid carried interest as of the reporting date is reflected in Investments in the condensed consolidated statements of financial condition.
Prior to January 1, 2018, to the extent an investment fund was not consolidated, KKR accounted for carried interest within Fees and Other separately from its general partner capital interest, which was included in Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Effective January 1, 2018, the carried interest component of the general partner interest and the capital interest KKR holds in its investment funds as the general partner are accounted for as a single unit of account and reported in capital allocation-based income within Revenues in the condensed consolidated statements of operations. This change in accounting has been applied on a full retrospective basis. For the three months ended March 31, 2017, $335.8 million and $51.8 million were reclassified from Fees and Other and Net Gains (Losses) from Investment Activities, respectively, to Capital Allocation-Based Income in the condensed consolidated statements of operations.
Cash and Cash Equivalents Held at Consolidated Entities

Cash and cash equivalents held at consolidated entities represents cash that, although not legally restricted, is not available to fund general liquidity needs of KKR as the use of such funds is generally limited to the investment activities of KKR's investment funds and CFEs.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents primarily represent amounts that are held by third parties under certain of KKR's financing and derivative transactions. The duration of this restricted cash generally matches the duration of the related financing or derivative transaction.

Recently Issued Accounting Pronouncements
Revenue from Contracts with Customers

The FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) in May 2014 and subsequently issued several amendments to the standard. ASU 2014-09, and related amendments, provide comprehensive guidance for recognizing revenue from contracts with customers. Entities will be able to recognize revenue when the entity transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The guidance includes a five-step framework that requires an entity to: (i) identify the contracts with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contracts, and (v) recognize revenue when the entity satisfies a performance obligation. The guidance in ASU 2014-09, and the related amendments, is effective for KKR beginning on January 1, 2018, and KKR adopted this guidance on that date. KKR has implemented ASU 2014-09 and its related amendments and there were no changes to KKR's historical pattern of recognizing revenue. See the accounting policy for Revenues above.

Cash Flows

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which amends the guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amended guidance adds or clarifies guidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application of the predominance principle. The guidance is effective for KKR beginning on January 1, 2018, and KKR adopted this guidance on that date. This adoption did not have a material impact on KKR's condensed consolidated statements of cash flows.


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In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which amends the guidance to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The amended guidance requires the following: (i) restricted cash and restricted cash equivalents should be included in the cash and cash-equivalents balances in the statement of cash flows; (ii) changes in restricted cash and restricted cash equivalents that result from transfers between cash, cash equivalents, and restricted cash and restricted cash equivalents should not be presented as cash flow activities in the statement of cash flows; (iii) a reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents; and (iv) the nature of the restrictions must be disclosed for material restricted cash and restricted cash equivalents amounts. The guidance is effective for KKR beginning on January 1, 2018, and KKR adopted this guidance on that date. Upon adoption, (i) Restricted Cash and Cash Equivalents and (ii) Cash and Cash Equivalents Held at Consolidated Entities were (a) included in the cash and cash-equivalents balances in the condensed consolidated statements of cash flows and (b) disclosed in a reconciliation between the condensed consolidated statements of financial condition and the condensed consolidated statements of cash flows. This guidance has been applied on a full retrospective basis. For the three months ended March 31, 2017, $32.5 million of cash provided by operating activities and $83.3 million of cash provided by investing activities were removed from net cash provided (used) by operating activities and net cash provided (used) by investing activities, respectively, and included in net increase/(decrease) in cash, cash-equivalents and restricted cash in the condensed consolidated statements of cash flows.

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance requires the recognition of lease assets and lease liabilities for those leases classified as operating leases under previous GAAP. The guidance retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases under previous GAAP. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not changed significantly from previous GAAP. For operating leases, a lessee is required to do the following: (a) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial condition, (b) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis, and (c) classify all cash payments within operating activities in the statement of cash flows. The guidance is effective for fiscal periods beginning after December 15, 2018. Early application is permitted. KKR is currently evaluating the impact of this guidance on the financial statements.

Equity-Based Compensation

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"), which amends the scope of modification accounting for share-based payment arrangements. ASU 2017-09 provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective for fiscal years and interim periods beginning after December 15, 2017. This guidance has been adopted as of January 1, 2018 and did not have a material impact to KKR.

Income Taxes
KKR & Co. Inc. is a corporation for U.S. federal income tax purposes and thus is subject to U.S. federal, state and local corporate income taxes at the entity level on KKR’s share of net taxable income. In addition, the KKR Group Partnerships and certain of their subsidiaries operate in the United States as partnerships for U.S. federal income tax purposes and as corporate entities in certain non-U.S. jurisdictions. These entities, in some cases, are subject to U.S. state or local income taxes or non-U.S. income taxes.
Prior to the Conversion, KKR & Co. L.P.’s investment income and carried interest generally were not subject to U.S. corporate income taxes. Subsequent to the Conversion, all income earned by KKR & Co. Inc. is subject to U.S. corporate income taxes.
See Note 11 "Income Taxes" for further information on the financial statement impact of the Conversion.

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Leases
At contract inception, KKR determines if an arrangement contains a lease by evaluating whether (i) the identified asset has been deployed in the contract explicitly or implicitly and (ii) KKR obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. Additionally, at contract inception KKR will evaluate whether the lease is an operating or finance lease. Right-of-use (“ROU”) assets represent KKR’s right to use an underlying asset for the lease term and lease liabilities represent KKR’s obligation to make lease payments arising from the lease.
ROU assets and the associated lease liabilities are recognized at the commencement date based on the present value of the future minimum lease payments over the lease term. The discount rate implicit in the lease is generally not readily determinable. Consequently, KKR uses its incremental borrowing rate based on the information available including, but not limited to, collateral assumptions, the term of the lease, and the economic environment in which the lease is denominated at the commencement date in determining the present value of the future lease payments. The ROU assets are recognized as the initial measurement of the lease liabilities plus any initial direct costs and any prepaid lease payments less lease incentives received, if any. The lease terms may include options to extend or terminate the lease which are accounted for when it is reasonably certain that KKR will exercise that option.
Operating lease expense is recognized on a straight-line basis over the lease term and is recorded within Occupancy and Related Charges in the accompanying consolidated statements of operations. The ROU assets are included in Other Assets and the lease liabilities are included in Accounts Payable, Accrued Expenses and Other Liabilities in the accompanying consolidated statements of financial condition. See Note 8 "Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities."
Recently Issued Accounting Pronouncements
Adopted in 2019
Leases
In OctoberFebruary 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-entity Transfers of Assets Other Than Inventory2016-02, Leases ("ASU 2016-16"ASC 842"), which removed the prohibition in ASC 740 against the immediatehas subsequently been amended. This guidance, among other items: (i) requires recognition of lease assets and lease liabilities for those leases classified as operating leases under previous GAAP, ASC 840; (ii) retains a distinction between finance leases and operating leases; and (iii) includes the currentclassification criteria for distinguishing between finance leases and deferred income tax effectsoperating leases that are substantially similar to the classification criteria for distinguishing between capital leases and operating leases under ASC 840.
The only material lease activity KKR is engaged in is the leasing of intra-entity transfersoffice space where KKR is the lessee under the terms of lease agreements, which have been determined to be operating leases. For operating leases, a lessee is required to: (a) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the consolidated statement of financial condition; (b) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis, and (c) classify all cash payments within operating activities in the consolidated statement of cash flows.
KKR adopted this guidance on the effective date, January 1, 2019, using the modified retrospective approach and electing the "Comparatives Under ASC 840 Approach." The Comparatives Under ASC 840 Approach allows an entity to elect not to recast its comparative periods in the period of adoption when transitioning to ASC 842. In doing so, KKR has provided the disclosures required by ASC 840 for the comparative periods. Additionally, KKR has elected the practical expedient package transition election for all leases. The practical expedient package under the new standard allows an entity not to have to reassess its prior conclusions about lease identification, lease classification and initial direct costs.
Upon adoption, KKR recorded ROU assets other than inventory. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. This guidance has been adoptedof $153.3 million and lease liabilities of $162.9 million, resulting in no cumulative-effect adjustment to retained earnings as of January 1, 2018 and did not have a material impact to KKR.2019.

Clarifying the Definition
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Premium Amortization on Purchased Callable Debt Securities
In JanuaryMarch 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805)2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Clarifying the Definition of a BusinessPremium Amortization on Purchased Callable Debt Securities ("ASU 2017-01"2017-08"). This guidance amends the definition ofamortization period for certain purchased callable debt securities held at a business and providespremium. The guidance requires the premium to be amortized to the earliest call date. The guidance does not require an accounting change for securities held at a threshold which mustdiscount; the discount continues to be consideredamortized to determine whether a transaction is an asset acquisition or a business combination.maturity. ASU 2017-012017-08 is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted for transactions (i.e. acquisitions or dispositions) that occurred before the issuance date or effective date of the standard if the transactions were not reported in financial statements that have been issued or made available for issuance.2018. This guidance has been adopted as of January 1, 2019 and did not have a material impact to KKR.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the fourth quarterFASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of 2017.Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02"). Under ASC 740-10-45-15, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of tax expense for the period in which the law was enacted, even if the assets and liabilities related to items of accumulated other comprehensive income ("OCI"). ASU 2018-02 allows entities to elect to reclassify from accumulated OCI to retained earnings stranded tax effects that relate to the Tax Cuts and Jobs Act, which was enacted in December 2017 (the "2017 Tax Act") from the change in federal tax rate for all items accounted for in OCI. Entities can also elect to reclassify other stranded tax effects that relate to the 2017 Tax Act, but do not directly relate to the change in the federal tax rate. Tax effects that are stranded in OCI for other reasons may not be reclassified. In the period of adoption, entities that elect to reclassify the income tax effects of the 2017 Tax Act from accumulated OCI to retained earnings must disclose that they made such an election. Entities must also disclose a description of other income tax effects related to the 2017 Tax Act that are reclassified from accumulated OCI to retained earnings, if any. The guidance is effective for fiscal periods beginning after December 15, 2018, and interim periods within those fiscal years. This guidance has been adopted as of January 1, 2019 and did not have a material impact to KKR. KKR did not elect to reclassify stranded tax effects that relate to the 2017 Tax Act from accumulated OCI to retained earnings for all items accounted for in OCI. KKR's policy for releasing income tax effects from accumulated OCI is when all related units of account are liquidated, sold or extinguished.

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Effective on January 1, 2020
Goodwill

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance simplifies the accounting for goodwill impairments by eliminating the second step from the goodwill impairment test. The ASU requires goodwill impairments to be measured on the basis of the fair value of a reporting unit relative to the reporting unit's carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. The ASU also (i) clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment;impairment and (ii) clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The guidance is effective for fiscal periods beginning after December 15, 2019. Early adoption is allowed for entities as of January 1, 2017, for annual and any interim impairment tests occurring after January 1, 2017. KKR is currently evaluating the impact of this guidance on the financial statements.

Premium Amortization on Purchased Callable Debt Securities

Implementation Costs Incurred in a Cloud Computing Arrangement
In March 2017, the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities ("ASU 2017-08"). This guidance amends the amortization period for certain purchased callable debt securities held at a premium. The guidance requires the premium to be amortized to the earliest call date. The guidance does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years and interim periods beginning after December 15, 2018. Early adoption is permitted and the guidance when adopted should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. KKR is currently evaluating the impact of this guidance on the financial statements.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In FebruaryAugust 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income2018-15, which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement ("CCA") that is a service contract. The ASU 2018-02). Under ASC 740-10-45-15,aligns the effects of changes in tax rates and lawsaccounting for costs incurred to implement a CCA that is a service arrangement with the guidance on deferred tax balances are recorded as a component of tax expense related to continuing operations for the period in which the law was enacted, even if the assets and liabilities related to items of accumulated other comprehensive income ("OCI"). ASU 2018-02 allows entities to reclassify from accumulated OCI to retained earnings stranded tax effects related to the change in federal tax rate for all items accounted for in OCI. Entities can also elect to reclassify other stranded tax effects that relate to the Tax Cuts and Jobs Act, which was enacted in December 2017 and amended various aspects of U.S. federal income tax legislation (the "2017 Tax Act"), but do not directly relate to the change in the federal tax rate. Tax effects that are stranded in OCI for other reasons may not be reclassified. In the period of adoption, entities that elect to reclassify the income tax effects of the 2017 Tax Act from accumulated OCI to retained earnings must disclose that they made such an election. Entities must also disclose a description of other income tax effects related to the 2017 Tax Act that are reclassified from accumulated OCI to retained earnings, if any.capitalizing costs associated with developing or obtaining internal-use software. The guidance is effective for fiscal periods beginning after December 15, 2018, and interim periods within those fiscal years.2019. Early adoption is permitted for periods for which financial statement have not yet been issuedand this ASU can be applied on either a retrospective or made available upon issuance, including in the period the 2017 Tax Act was enacted. An entity that adopts ASU 2018-02 in an annual or interim periods after the period of enactment is able to choose whether to apply the amendments retrospectively to each period in which the effect of the 2017 Tax Act is recognized or to apply the amendments in the period of adoption.prospective basis. KKR is currently evaluating the impact of this guidance on the financial statements.


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Notes to Condensed Consolidated Financial Statements (Continued)

3. NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES
Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations consist primarily of the realized and unrealized gains and losses on investments (including foreign exchange gains and losses attributable to foreign denominated investments and related activities) and other financial instruments, including those for which the fair value option has been elected. Unrealized gains or losses result from changes in the fair value of these investments and other financial instruments during a period. Upon disposition of an investment or financial instrument, previously recognized unrealized gains or losses are reversed and an offsetting realized gain or loss is recognized in the current period.
The following tables summarizetable summarizes total Net Gains (Losses) from Investment Activities:
 
Three Months Ended
March 31, 2018
 Three Months Ended
March 31, 2017
 Net Realized
Gains (Losses)		 Net Unrealized
Gains (Losses)		 Total Net Realized
Gains (Losses)		 Net Unrealized
Gains (Losses)		 Total
Private Equity (1)
$16,253
 $158,369
 $174,622
 $106,813
 $3,288
 $110,101
Credit (1)
1,263
 58,150
 59,413
 (213,857) 247,139
 33,282
Investments of Consolidated CFEs (1)
(26,516) (48,403) (74,919) (1,103) 12,983
 11,880
Real Assets (1)
12,957
 59,297
 72,254
 3,060
 6,798
 9,858
Equity Method - Other (1)
9,210
 135,604
 144,814
 (287) 35,320
 35,033
Other Investments (1)
(244,199) 86,365
 (157,834) (8,264) 113,984
 105,720
Foreign Exchange Forward Contracts
     and Options (2)
(32,614) (63,118) (95,732) 9,986
 (58,263) (48,277)
Securities Sold Short (2)
275,949
 (29,874) 246,075
 246,787
 42,270
 289,057
Other Derivatives (2)
3,642
 (8,223) (4,581) (5,760) (4,847) (10,607)
Debt Obligations and Other (3)
14,435
 94,253
 108,688
 8,789
 (38,191) (29,402)
Net Gains (Losses) From Investment
     Activities
$30,380
 $442,420
 $472,800
 $146,164
 $360,481
 $506,645
 Three Months Ended
March 31, 2019		 Three Months Ended
March 31, 2018
 Net Realized
Gains (Losses)		 Net Unrealized
Gains (Losses)		 Total Net Realized
Gains (Losses)		 Net Unrealized
Gains (Losses)		 Total
Private Equity (1)
$68,568
 $919,625
 $988,193
 $16,253
 $158,369
 $174,622
Credit (1)
(17,876) 8,669
 (9,207) 1,263
 58,150
 59,413
Investments of Consolidated CFEs (1)
(10,530) 233,357
 222,827
 (26,516) (48,403) (74,919)
Real Assets (1)
29,547
 89,581
 119,128
 12,957
 59,297
 72,254
Equity Method - Other (1)
20,133
 156,906
 177,039
 9,210
 135,604
 144,814
Other Investments (1)
1,450
 (30,361) (28,911) (244,199) 86,365
 (157,834)
Foreign Exchange Forward Contracts
     and Options (2)
25,454
 54,789
 80,243
 (32,614) (63,118) (95,732)
Securities Sold Short (2)
14,426
 (80,772) (66,346) 275,949
 (29,874) 246,075
Other Derivatives (2)
1,465
 (13,405) (11,940) 3,642
 (8,223) (4,581)
Debt Obligations and Other (3)
(2,856) (264,292) (267,148) 14,435
 94,253
 108,688
Net Gains (Losses) From Investment
     Activities
$129,781
 $1,074,097
 $1,203,878
 $30,380
 $442,420
 $472,800
(1)See Note 4 "Investments."
(2)See Note 8 "Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities."
(3)See Note 10 "Debt Obligations."

4. INVESTMENTS
Investments consist of the following:
 March 31, 2019 December 31, 2018
Private Equity$8,522,282
 $7,349,559
Credit7,649,787
 9,099,135
Investments of Consolidated CFEs15,021,345
 14,733,423
Real Assets3,213,813
 3,157,954
Equity Method - Other4,472,692
 4,212,874
Equity Method - Capital Allocation-Based Income4,203,980
 3,584,415
Other Investments2,711,355
 2,770,622
Total Investments$45,795,254
 $44,907,982
 March 31, 2018 December 31, 2017
Private Equity$4,416,481
 $3,301,261
Credit8,308,887
 7,621,320
Investments of Consolidated CFEs16,063,337
 15,573,203
Real Assets2,876,531
 2,302,061
Equity Method - Other3,505,032
 3,324,631
Equity Method - Capital Allocation - Based Income4,086,218
 4,132,171
Other Investments2,845,419
 2,759,287
Total Investments$42,101,905
 $39,013,934
 
As of March 31, 20182019 and December 31, 2017,2018, there were no investments which represented greater than 5% of total investments. The majority of the securities underlying private equity investments represent equity securities.


       


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5. FAIR VALUE MEASUREMENTS
The following tables summarize the valuation of KKR's assets and liabilities measured and reported at fair value by the fair value hierarchy. Investments classified as Equity Method - Other, for which the fair value option has not been elected, and Equity Method - Capital Allocation-Based Income have been excluded from the tables below.
Assets, at fair value:
 March 31, 2019
 Level I Level II Level III Total
Private Equity$1,603,803
 $86,933
 $6,831,546
 $8,522,282
Credit—
 1,119,308
 6,530,479
 7,649,787
Investments of Consolidated CFEs—
 12,937,610
 2,083,735
 15,021,345
Real Assets—
 —
 3,213,813
 3,213,813
Equity Method - Other219,566
 47,938
 1,650,179
 1,917,683
Other Investments501,523
 145,882
 2,063,950
 2,711,355
Total Investments2,324,892
 14,337,671
 22,373,702
 39,036,265
        
Foreign Exchange Contracts and Options—
 205,900
 —
 205,900
Other Derivatives—
 1,786
 31,134
(1) 
32,920
Total Assets$2,324,892
 $14,545,357
 $22,404,836
 $39,275,085
 March 31, 2018
 Level I Level II Level III Total
Private Equity$994,496
 $333,574
 $3,088,411
 $4,416,481
Credit—
 2,490,032
 5,818,855
 8,308,887
Investments of Consolidated CFEs—
 10,804,938
 5,258,399
 16,063,337
Real Assets49,098
 —
 2,827,433
 2,876,531
Equity Method - Other52,555
 291,668
 1,085,725
 1,429,948
Other Investments858,120
 186,095
 1,801,204
 2,845,419
Total1,954,269
 14,106,307
 19,880,027
 35,940,603
        
Foreign Exchange Contracts and Options—
 70,032
 —
 70,032
Other Derivatives—
 32,425
 43,131
(1) 
75,556
Total Assets$1,954,269
 $14,208,764
 $19,923,158
 $36,086,191

December 31, 2017December 31, 2018
Level I Level II Level III TotalLevel I Level II Level III Total
Private Equity$1,043,390
 $85,581
 $2,172,290
 $3,301,261
$1,156,977
 $63,999
 $6,128,583
 $7,349,559
Credit—
 2,482,383
 5,138,937
 7,621,320
—
 2,334,405
 6,764,730
 9,099,135
Investments of Consolidated CFEs—
 10,220,113
 5,353,090
 15,573,203
—
 12,650,878
 2,082,545
 14,733,423
Real Assets50,794
 —
 2,251,267
 2,302,061
—
 —
 3,157,954
 3,157,954
Equity Method - Other60,282
 247,748
 1,076,709
 1,384,739
245,225
 43,943
 1,503,022
 1,792,190
Other Investments864,872
 134,404
 1,760,011
 2,759,287
480,192
 173,844
 2,116,586
 2,770,622
Total2,019,338
 13,170,229
 17,752,304
 32,941,871
Total Investments1,882,394
 15,267,069
 21,753,420
 38,902,883
              
Foreign Exchange Contracts and Options—
 96,584
 —
 96,584
—
 177,264
 —
 177,264
Other Derivatives—
 33,125
 51,949
(1) 
85,074
—
 3,879
 37,116
(1) 
40,995
Total Assets$2,019,338
 $13,299,938
 $17,804,253
 $33,123,529
$1,882,394
 $15,448,212
 $21,790,536
 $39,121,142
(1)Includes derivative assets that were valued using a third-party valuation firm. The approach used to estimate the fair value of these derivative assets was generally the discounted cash flow method, which includes consideration of the current portfolio, projected portfolio construction, projected portfolio realizations, portfolio volatility (based on the volatility, correlation, and size of each underlying asset class), and the discounting of future cash flows to the reporting date.


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Liabilities, at fair value:
March 31, 2018March 31, 2019
Level I Level II Level III TotalLevel I Level II Level III Total
Securities Sold Short$430,009
 $19,554
 $—
 $449,563
$582,608
 $—
 $—
 $582,608
Foreign Exchange Contracts and Options—
 304,940
 —
 304,940
—
 17,200
 —
 17,200
Unfunded Revolver Commitments—
 —
 33,530
(1) 
33,530
—
 —
 56,792
(1) 
56,792
Other Derivatives—
 20,775
 41,800
(2) 
62,575
—
 23,769
 17,200
(2) 
40,969
Debt Obligations of Consolidated CFEs—
 10,113,479
 5,138,167
 15,251,646
—
 12,557,821
 1,914,571
 14,472,392
Total Liabilities$430,009
 $10,458,748
 $5,213,497
 $16,102,254
$582,608
 $12,598,790
 $1,988,563
 $15,169,961
 December 31, 2017
 Level I Level II Level III Total
Securities Sold Short$692,007
 $—
 $—
 $692,007
Foreign Exchange Contracts and Options—
 260,948
 —
 260,948
Unfunded Revolver Commitments—
 —
 17,629
(1) 
17,629
Other Derivatives—
 27,581
 41,800
(2) 
69,381
Debt Obligations of Consolidated CFEs—
 10,347,980
 5,238,236
 15,586,216
Total Liabilities$692,007
 $10,636,509
 $5,297,665
 $16,626,181

 December 31, 2018
 Level I Level II Level III Total
Securities Sold Short$344,124
 $—
 $—
 $344,124
Foreign Exchange Contracts and Options—
 60,749
 —
 60,749
Unfunded Revolver Commitments—
 —
 52,066
(1) 
52,066
Other Derivatives—
 18,440
 17,200
(2) 
35,640
Debt Obligations of Consolidated CFEs—
 12,081,771
 1,876,783
 13,958,554
Total Liabilities$344,124
 $12,160,960
 $1,946,049
 $14,451,133
(1)These unfunded revolver commitments are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.
(2)Includes options issued in connection with the acquisition of the equity interest in Marshall Wace and its affiliates in November 2015 to increase KKR's ownership interest up to 39.9% in periodic increments from 2018 to 2019.increments. The option isoptions are valued using a Monte-Carlo simulation valuation methodology. Key inputs used in this methodology that require estimates include Marshall Wace's dividend yield, assets under management volatility and equity volatility. See Note 4 "Investments."


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The following tables summarize changes in investments and debt obligations measured and reported at fair value for which Level III inputs have been used to determine fair value for the three months ended March 31, 20182019 and 2017,2018, respectively: 
For the Three Months Ended March 31, 2018  For the Three Months Ended March 31, 2019  
Level III Investments 
Level III 
Debt Obligations
Level III Investments 
Level III 
Debt Obligations
Private
Equity
 Credit 
Investments of
Consolidated
CFEs
 Real Assets Equity Method - Other Other Investments Total 
Debt 
Obligations of
Consolidated
CFEs
Private
Equity
 Credit 
Investments of
Consolidated
CFEs
 Real Assets Equity Method - Other Other Investments Total 
Debt 
Obligations of
Consolidated
CFEs
Balance, Beg. of Period$2,172,290
 $5,138,937
 $5,353,090
 $2,251,267
 $1,076,709
 $1,760,011
 $17,752,304
 $5,238,236
$6,128,583
 $6,764,730
 $2,082,545
 $3,157,954
 $1,503,022
 $2,116,586
 $21,753,420
 $1,876,783
Transfers In / (Out) Due to Changes in Consolidation—
 —
 —
 —
 —
 —
 —
 —
—
 (1,598) —
 —
 —
 (42,864) (44,462) —
Transfers In—
 —
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 —
 —
Transfers Out—
 —
 —
 —
 —
 —
 —
 —
(56,029) —
 —
 —
 —
 —
 (56,029) —
Asset Purchases / Debt Issuances727,626
 890,113
 —
 540,898
 2,037
 64,757
 2,225,431
 —
409,621
 811,957
 —
 67,302
 137,909
 95,135
 1,521,924
 —
Sales / Paydowns(35,245) (230,144) (11,541) (34,237) (31,939) (36,218) (379,324) —
(99,603) (1,028,063) (38,295) (130,571) (41,126) (27,433) (1,365,091) —
Settlements—
 (53,825) —
 —
 —
 —
 (53,825) (11,541)—
 20,815
 —
 —
 —
 —
 20,815
 (2,731)
Net Realized Gains (Losses)15,312
 11,581
 —
 8,354
 9,348
 8,892
 53,487
 —
68,568
 (15,198) —
 29,547
 11,626
 2,121
 96,664
 —
Net Unrealized Gains (Losses)208,428
 77,715
 (83,150) 61,151
 29,570
 3,762
 297,476
 (88,528)380,406
 (24,806) 39,485
 89,581
 38,748
 (79,595) 443,819
 40,519
Change in Other Comprehensive Income—
 (15,522) —
 —
 —
 —
 (15,522) —
—
 2,642
 —
 —
 —
 —
 2,642
 —
Balance, End of Period$3,088,411
 $5,818,855
 $5,258,399
 $2,827,433
 $1,085,725
 $1,801,204
 $19,880,027
 $5,138,167
$6,831,546
 $6,530,479
 $2,083,735
 $3,213,813
 $1,650,179
 $2,063,950
 $22,373,702
 $1,914,571
                              
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities related to Level III Assets and Liabilities still held as of the Reporting Date$208,428
 $86,754
 $(83,150) $61,151
 $34,928
 $10,442
 $318,553
 $(88,528)$442,672
 $(31,282) $39,485
 $92,900
 $49,140
 $(79,347) $513,568
 $40,519

For the Three Months Ended March 31, 2017  For the Three Months Ended March 31, 2018  
Level III Investments Level III 
Debt Obligations		Level III Investments Level III 
Debt Obligations
Private
Equity
 Credit 
Investments of
Consolidated
CFEs
 Real Assets Equity Method - Other Other Investments Total 
Debt 
Obligations of
Consolidated
CFEs
Private
Equity
 Credit 
Investments of
Consolidated
CFEs
 Real Assets Equity Method - Other Other Investments Total 
Debt 
Obligations of
Consolidated
CFEs
Balance, Beg. of Period$1,559,559
 $3,290,361
 $5,406,220
 $1,807,128
 $570,522
 $1,767,573
 $14,401,363
 $5,294,741
$2,172,290
 $5,138,937
 $5,353,090
 $2,251,267
 $1,076,709
 $1,760,011
 $17,752,304
 $5,238,236
Transfers In / (Out) Due to Changes in Consolidation—
 (95,962) —
 —
 —
 —
 (95,962) —
—
 —
 —
 —
 —
 —
 —
 —
Transfers In—
 —
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 —
 —
Transfers Out—
 —
 —
 —
 —
 (1,496) (1,496) —
—
 —
 —
 —
 —
 —
 —
 —
Asset Purchases / Debt Issuances429,644
 596,862
 —
 250,278
 9,556
 15,119
 1,301,459
 —
727,626
 890,113
 —
 540,898
 2,037
 64,757
 2,225,431
 —
Sales / Paydowns(22,629) (168,858) (8,940) (21,677) (12,678) (8,128) (242,910) —
(35,245) (230,144) (11,541) (34,237) (31,939) (36,218) (379,324) —
Settlements—
 (11,075) —
 —
 —
 —
 (11,075) (8,940)—
 (53,825) —
 —
 —
 —
 (53,825) (11,541)
Net Realized Gains (Losses)—
 (9,243) —
 3,060
 —
 (19,530) (25,713) —
15,312
 11,581
 —
 8,354
 9,348
 8,892
 53,487
 —
Net Unrealized Gains (Losses)34,630
 280,039
 29,272
 6,798
 25,827
 52,843
 429,409
 27,769
208,428
 77,715
 (83,150) 61,151
 29,570
 3,762
 297,476
 (88,528)
Change in Other Comprehensive Income—
 20,899
 —
 —
 —
 —
 20,899
 —
—
 (15,522) —
 —
 —
 —
 (15,522) —
Balance, End of Period$2,001,204
 $3,903,023
 $5,426,552
 $2,045,587
 $593,227
 $1,806,381
 $15,775,974
 $5,313,570
$3,088,411
 $5,818,855
 $5,258,399
 $2,827,433
 $1,085,725
 $1,801,204
 $19,880,027
 $5,138,167
                              
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities related to Level III Assets and Liabilities still held as of the Reporting Date$34,630
 $280,039
 $29,272
 $6,798
 $25,827
 $52,843
 $429,409
 $27,769
$208,428
 $86,754
 $(83,150) $61,151
 $34,928
 $10,442
 $318,553
 $(88,528)

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Total realized and unrealized gains and losses recorded for Level III assets and liabilities are reported in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations.

The following table summarizes the fair value transfers between fair value levels for the three months ended March 31, 2018 and 2017:
 Three Months Ended March 31,
 2018 2017
Investments, at fair value:   
Transfers from Level III to Level I (1)
$—
 $1,496

(1)Transfers out of Level III into Level I are attributable to companies that are valued using their publicly traded market price.


The following table presents additional information about valuation methodologies and significant unobservable inputs used for investments and debt obligations that are measured and reported at fair value and categorized within Level III as of March 31, 2018:2019:
Fair Value
March 31,
2018
 
Valuation
Methodologies
 Unobservable Input(s) (1) 
Weighted
Average (2)
 Range 
Impact to
 Valuation
from an
Increase in
Input (3)
Fair Value March 31, 2019 
Valuation
Methodologies
 
Unobservable Input(s) (1)
 
Weighted
Average (2)
 Range 
Impact to
 Valuation
from an
Increase in
Input (3)
    
Private Equity$3,088,411
 $6,831,546
 
    
Private Equity$1,282,345
 Inputs to market comparables, discounted cash flow and transaction price Illiquidity Discount 9.1% 5.0% - 15.0% Decrease$4,322,213
 Inputs to market comparables and discounted cash flow and transaction price Illiquidity Discount 6.1% 5.0% - 15.0% Decrease
 
 Weight Ascribed to Market Comparables 47.7% 0.0% - 50.0% (4) 
 Weight Ascribed to Market Comparables 30.5% 0.0% - 50.0% (4)
 
 Weight Ascribed to Discounted Cash Flow 50.6% 25.0% - 100.0% (5) 
 Weight Ascribed to Discounted Cash Flow 69.4% 0.0% - 100.0% (5)
 
 Weight Ascribed to Transaction Price 1.7% 0.0% - 50.0% (6) 
 Weight Ascribed to Transaction Price 0.1% 0.0% - 100.0% (6)
 
 Market comparables Enterprise Value/LTM EBITDA Multiple 14.7x 7.9x - 28.0x Increase 
 Market comparables Enterprise Value/LTM EBITDA Multiple 14.2x 6.9x - 23.7x Increase
  Enterprise Value/Forward EBITDA Multiple 12.6x 6.0x - 20.4x Increase  Enterprise Value/Forward EBITDA Multiple 12.4x 6.2x - 17.2x Increase
 
 Discounted cash flow Weighted Average Cost of Capital 9.9% 6.9% - 14.9% Decrease 
 Discounted cash flow Weighted Average Cost of Capital 10.7% 5.6% - 14.6% Decrease
 
 Enterprise Value/LTM EBITDA Exit Multiple 10.6x 5.1x - 15.3x Increase 
 Enterprise Value/LTM EBITDA Exit Multiple 12.4x 6.0x - 15.0x Increase
    
Growth Equity$1,806,066
 Inputs to market comparables, discounted cash flow and milestones Illiquidity Discount 11.7% 10.0% - 20.0% Decrease$2,509,333
 Inputs to market comparables, discounted cash flow and milestones Illiquidity Discount 11.6% 5.0% - 20.0% Decrease
  Weight Ascribed to Market Comparables 19.7% 0.0% - 100.0% (4)  Weight Ascribed to Market Comparables 35.2% 0.0% - 100.0% (4)
  Weight Ascribed to Discounted Cash Flow 7.7% 0.0% - 75.0% (5)  Weight Ascribed to Discounted Cash Flow 15.3% 0.0% - 75.0% (5)
  Weight Ascribed to Milestones 72.6% 0.0% - 100.0% (6)  Weight Ascribed to Milestones 49.5% 0.0% - 100.0% (6)
  Scenario Weighting Base 54.9% 40.0% - 80.0% Increase  Scenario Weighting Base 61.4% 40.0% - 80.0% Increase
  Downside 21.3% 10.0% - 30.0% Decrease  Downside 16.0% 5.0% - 30.0% Decrease
  Upside 23.8% 10.0% - 40.0% Increase  Upside 22.6% 10.0% - 45.0% Increase
    
Credit$5,818,855
 Yield Analysis Yield 10.5% 1.0% - 30.8% Decrease$6,530,479
 Yield Analysis Yield 7.6% 3.5% - 23.4% Decrease
  Net Leverage 4.7x 0.5x - 30.6x Decrease  Net Leverage 2.1x 0.2x - 14.1x Decrease
  EBITDA Multiple 13.9x 0.1x - 29.7x Increase  EBITDA Multiple 9.7x 0.2x - 38.2x Increase
    
Investments of Consolidated CFEs$5,258,399
(9) $2,083,735
(9) 
 
Debt Obligations of Consolidated CFEs$5,138,167
 Discounted cash flow Yield 5.8% 2.6% - 26.0% Decrease$1,914,571
 Discounted cash flow Yield 5.8% 2.6% - 15.5% Decrease
    
Real Assets$2,827,433
(10)         $3,213,813
(10)         
    
Energy$1,606,595
 Discounted cash flow Weighted Average Cost of Capital 10.2% 9.4% - 16.3% Decrease$1,711,998
 Discounted cash flow Weighted Average Cost of Capital 10.6% 9.5% - 14.1% Decrease
  Average Price Per BOE (8) $41.47 $28.90 - $43.56 Increase  Average Price Per BOE (8) $44.62 $38.98 - $47.75 Increase
    
Real Estate$1,294,181
 Inputs to direct income capitalization and discounted cash flow Weight Ascribed to Direct Income Capitalization 32.2% 0.0% - 100.0% (7)
 
 Weight Ascribed to Discounted Cash Flow 67.8% 0.0% - 100.0% (5)
 
 Direct income capitalization Current Capitalization Rate 5.9% 0.4% - 9.5% Decrease
 
 Discounted cash flow Unlevered Discount Rate 8.0% 4.8% - 18.0% Decrease
  
Equity Method - Other$1,650,179
 Inputs to market comparables, discounted cash flow and transaction price Illiquidity Discount 9.5% 5.0% - 15.0% Decrease

 Weight Ascribed to Market Comparables 42.6% 0.0% - 75.0% (4)
 
 Weight Ascribed to Discounted Cash Flow 39.4% 0.0% - 100.0% (5)
 
 Weight Ascribed to Transaction Price 18.0% 0.0% - 100.0% (6)
 
 Market comparables Enterprise Value/LTM EBITDA Multiple 12.0x 6.9x - 15.2x Increase
  Enterprise Value/Forward EBITDA Multiple 11.2x 6.2x - 13.2x Increase
 
 Discounted cash flow Weighted Average Cost of Capital 9.0% 5.6% - 13.0% Decrease
 
 Enterprise Value/LTM EBITDA Exit Multiple 10.4x 6.0x - 12.5x Increase
  

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Notes to Condensed Consolidated Financial Statements (Continued)

 
Fair Value
March 31,
2018
 
Valuation
Methodologies
 Unobservable Input(s) (1) 
Weighted
Average (2)
 Range 
Impact to
 Valuation
from an
Increase in
Input (3)
            
Real Estate$1,014,158
 Inputs to direct income capitalization and discounted cash flow Weight Ascribed to Direct Income Capitalization 38.6% 0.0% - 100.0% (7)
  
  Weight Ascribed to Discounted Cash Flow 61.4% 0.0% - 100.0% (5)
  
 Direct income capitalization Current Capitalization Rate 5.9% 1.1% - 12.0% Decrease
  
 Discounted cash flow Unlevered Discount Rate 8.8% 4.5% - 18.0% Decrease
            
Equity Method - Other$1,085,725
 Inputs to market comparables, discounted cash flow and transaction price Illiquidity Discount 9.6% 5.0% - 10.0% Decrease
 
  Weight Ascribed to Market Comparables 42.8% 0.0% - 50.0% (4)
  
  Weight Ascribed to Discounted Cash Flow 42.8% 0.0% - 50.0% (5)
  
  Weight Ascribed to Transaction Price 14.4% 0.0% - 100.0% (6)
  
 Market comparables Enterprise Value/LTM EBITDA Multiple 12.3x 7.9x - 14.0x Increase
    Enterprise Value/Forward EBITDA Multiple 11.6x 6.0x - 12.7x Increase
  
 Discounted cash flow Weighted Average Cost of Capital 8.6% 6.2% - 11.1% Decrease
  
  Enterprise Value/LTM EBITDA Exit Multiple 10.6x 6.0x - 12.5x Increase
            
Other Investments$1,801,204
(11)Inputs to market comparables, discounted cash flow and transaction price Illiquidity Discount 10.4% 5.0% - 20.0% Decrease
   Weight Ascribed to Market Comparables 27.9% 0.0% - 100.0% (4)
    Weight Ascribed to Discounted Cash Flow 45.3% 0.0% - 100.0% (5)
    Weight Ascribed to Transaction Price 26.8% 0.0% - 100.0% (6)
   Market comparables Enterprise Value/LTM EBITDA Multiple 10.4x 0.1x - 13.3x Increase
    Enterprise Value/Forward EBITDA Multiple 9.4x 3.5x - 13.5x Increase
   Discounted cash flow Weighted Average Cost of Capital 13.1% 8.1% - 20.8% Decrease
    Enterprise Value/LTM EBITDA Exit Multiple 3.9x 1.9x - 9.0x Increase
            
 Fair Value March 31, 2019 
Valuation
Methodologies
 
Unobservable Input(s) (1)
 
Weighted
Average (2)
 Range 
Impact to
 Valuation
from an
Increase in
Input (3)
            
Other Investments$2,063,950
(11)Inputs to market comparables, discounted cash flow and transaction price Illiquidity Discount 10.2% 5.0% - 20.0% Decrease
   Weight Ascribed to Market Comparables 38.1% 0.0% - 100.0% (4)
    Weight Ascribed to Discounted Cash Flow 36.1% 0.0% - 100.0% (5)
    Weight Ascribed to Transaction Price 25.8% 0.0% - 100.0% (6)
   Market comparables Enterprise Value/LTM EBITDA Multiple 10.3x 1.3x - 14.6x Increase
    Enterprise Value/Forward EBITDA Multiple 9.1x 1.2x - 11.7x Increase
   Discounted cash flow Weighted Average Cost of Capital 17.2% 7.3% - 31.1% Decrease
    Enterprise Value/LTM EBITDA Exit Multiple 8.9x 6.5x - 9.1x Increase
            
(1)In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputs into account when valuing the investments and debt obligations. LTM means last twelve months and EBITDA means earnings before interest, taxes, depreciation and amortization.
(2)Inputs were weighted based on the fair value of the investments included in the range.
(3)Unless otherwise noted, this column represents the directional change in the fair value of the Level III investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.
(4)The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level III investments if the market comparables approach results in a higher valuation than the discounted cash flow approach and transaction price. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and transaction price.
(5)The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level III investments if the discounted cash flow approach results in a higher valuation than the market comparables approach, transaction price and direct income capitalization approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach, transaction price and transaction price.direct income capitalization approach.
(6)The directional change from an increase in the weight ascribed to the transaction price or milestones would increase the fair value of the Level III investments if the transaction price or milestones results in a higher valuation than the market comparables and discounted cash flow approach. The opposite would be true if the transaction price or milestones results in a lower valuation than the market comparables approach and discounted cash flow approach.
(7)The directional change from an increase in the weight ascribed to the direct income capitalization approach would increase the fair value of the Level III investments if the direct income capitalization approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the direct income capitalization approach results in a lower valuation than the discounted cash flow approach.
(8)The total energy fair value amount includes multiple investments (in multiple locations throughout North America) that are held in multiple investment funds and produce varying quantities of oil, condensate, natural gas liquids, and natural gas. Commodity price may be measured using a common volumetric equivalent where one barrel of oil equivalent or BOE,("BOE"), is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for the various investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 85%88% liquids and 15%12% natural gas.

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Table of Contents
Notes to Condensed Consolidated Financial Statements (Continued)

(9)KKR measures CMBS investments on the basis of the fair value of the financial liabilities of the CMBS vehicle. See Note 2 "Summary of Significant Accounting Policies."
(10)Includes one Infrastructure investment for $206.7$207.6 million that was valued using a discounted cash flow analysis. The significant inputs used included the weighted average cost of capital 7.2%6.8% and the enterprise value/LTM EBITDA Exit Multiple 12.0x.10.0x.
(11)Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets, credit, equity method - other or investments of consolidated CFEs.

In the table above, certain private equity investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value. In addition, certain valuations of private equity investments may be entirely or partially derived by reference to observable valuation measures for a pending or consummated transaction.
The various unobservable inputs used to determine the Level III valuations may have similar or diverging impacts on valuation. Significant increases and decreases in these inputs in isolation and interrelationships between those inputs could result in significantly higher or lower fair value measurements as noted in the table above.

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Table of Contents
Notes to Financial Statements (Continued)

6. FAIR VALUE OPTION

The following table summarizes the financial instruments for which the fair value option has been elected:
March 31, 2018 December 31, 2017March 31, 2019 December 31, 2018
Assets      
Private Equity$3,092
 $3,744
$3,235
 $2,977
Credit4,746,290
 4,381,519
4,519,000
 4,950,819
Investments of Consolidated CFEs16,063,337
 15,573,203
15,021,345
 14,733,423
Real Assets340,412
 343,820
309,105
 310,399
Equity Method - Other1,429,948
 1,384,739
1,917,683
 1,792,190
Other Investments308,391
 344,996
225,867
 235,012
Total$22,891,470
 $22,032,021
$21,996,235
 $22,024,820
      
Liabilities      
Debt Obligations of Consolidated CFEs$15,251,646
 $15,586,216
$14,472,392
 $13,958,554
Total$15,251,646
 $15,586,216
$14,472,392
 $13,958,554

The following table presents the net realized and net change in unrealized gains (losses) on financial instruments onfor which the fair value option was elected:
Three Months Ended
March 31, 2018
 
Three Months Ended
March 31, 2017
 Three Months Ended
March 31, 2019		 Three Months Ended
March 31, 2018
Net Realized
Gains (Losses)		 Net Unrealized Gains (Losses) Total Net Realized
Gains (Losses)		 Net Unrealized Gains (Losses) Total Net Realized
Gains (Losses)		 Net Unrealized Gains (Losses) Total Net Realized
Gains (Losses)		 Net Unrealized Gains (Losses) Total
Assets                       
Private Equity$71
 $316
 $387
 $—
 $362
 $362
 $—
 $194
 $194
 $71
 $316
 $387
Credit(28,867) 2,656
 (26,211) (239,098) 55,870
 (183,228) (23,153) 20,942
 (2,211) (28,867) 2,656
 (26,211)
Investments of Consolidated CFEs(26,516) (48,403) (74,919) (1,103) 12,983
 11,880
 (10,530) 233,357
 222,827
 (26,516) (48,403) (74,919)
Real Assets428
 (3,483) (3,055) (216) 6,788
 6,572
 703
 2,436
 3,139
 428
 (3,483) (3,055)
Equity Method - Other9,348
 66,093
 75,441
 —
 20,362
 20,362
 11,626
 17,084
 28,710
 9,348
 66,093
 75,441
Other Investments4,607
 (7,878) (3,271) (18,799) 17,281
 (1,518) 1,794
 3,987
 5,781
 4,607
 (7,878) (3,271)
Total$(40,929) $9,301
 $(31,628) $(259,216) $113,646
 $(145,570) $(19,560) $278,000
 $258,440
 $(40,929) $9,301
 $(31,628)
                       
Liabilities                       
Debt Obligations of Consolidated CFEs13,256
 93,654
 106,910
 4,825
 (11,058) (6,233) —
 (252,281) (252,281) 13,256
 93,654
 106,910
Total$13,256
 $93,654
 $106,910
 $4,825
 $(11,058) $(6,233) $—
 $(252,281) $(252,281) $13,256
 $93,654
 $106,910


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Notes to Condensed Consolidated Financial Statements (Continued)

7. NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P.INC. PER SHARE OF CLASS A COMMON UNITSTOCK
 
For the three months ended March 31, 20182019 and 2017,2018, basic and diluted Net Income (Loss) attributable to KKR & Co. L.P.Inc. per share of Class A common unitstock were calculated as follows:
 Three Months Ended March 31,
 2019 2018
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders$700,978
 $170,102
Excess of carrying value over consideration transferred on redemption of KFN 7.375% Series A LLC Preferred Shares—
 3,102
Net Income (Loss) Available to KKR & Co. Inc. Class A Common Stockholders$700,978
 $173,204
 Three Months Ended March 31,
 2018 2017
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$170,102
 $259,343
Excess of carrying value over consideration transferred on redemption of KFN 7.375% Series A LLC Preferred Shares3,102
 —
Net Income (Loss) Available to KKR & Co. L.P. Common Unitholders$173,204
 $259,343
    
Basic Net Income (Loss) Per Share of Class A Common Stock   
Weighted Average Shares of Class A Common Stock Outstanding - Basic533,892,474
 487,704,838
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock - Basic$1.31
 $0.36
Basic Net Income (Loss) Per Common Unit   
Weighted Average Common Units Outstanding - Basic487,704,838
 453,695,846
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Basic$0.36
 $0.57
Diluted Net Income (Loss) Per Common Unit    
Weighted Average Common Units Outstanding - Basic487,704,838
 453,695,846
Weighted Average Unvested Common Units and Other Exchangeable Securities48,213,436
 42,988,494
Weighted Average Common Units Outstanding - Diluted535,918,274
 496,684,340
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Diluted$0.32
 $0.52
Diluted Net Income (Loss) Per Share of Class A Common Stock   
Weighted Average Shares of Class A Common Stock Outstanding - Basic533,892,474
 487,704,838
Weighted Average Unvested Shares of Class A Common Stock and Other Exchangeable Securities16,153,966
 48,213,436
Weighted Average Shares of Class A Common Stock Outstanding - Diluted550,046,440
 535,918,274
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock - Diluted$1.27
 $0.32
Weighted Average Shares of Class A Common Units Outstanding—Stock Outstanding - Diluted primarily includes unvested equity awards that have been granted under the Amended and Restated KKR & Co. Inc. 2010 Equity Incentive Plan (the "2010 Equity Incentive Plan" and, together with the KKR & Co. Inc. 2019 Equity Incentive Plan (the "2019 Equity Incentive Plan"), the "Equity Incentive Plans"), as well as exchangeable equity securities issued in connection with the acquisition of Avoca. Vesting or exchanges of these equity interests dilute KKR & Co. Inc. and KKR Holdings pro rata in accordance with their respective ownership interests in the KKR Group Partnerships.

For the three months ended March 31, 20182019 and 2017,2018, KKR Holdings units have been excluded from the calculation of Net Income (Loss) Attributable to KKR & Co. L.P.Inc. Per Share of Class A Common UnitStock - Diluted since the exchange of these units would not dilute KKR's respective ownership interests in the KKR Group Partnerships.

 Three Months Ended March 31,
 2018 2017
Weighted Average KKR Holdings Units Outstanding335,016,218
 352,586,584

 Three Months Ended March 31,
 2019 2018
Weighted Average KKR Holdings Units298,858,418
 335,016,218
Additionally, for the three months ended March 31, 2018,2019, 5.0 million shares of KKR Class A common unitsstock subject to a market-price basedmarket price-based vesting condition ("Market Condition Awards") were excluded from the calculation of Net Income (Loss) Attributable to KKR & Co. L.P.Inc. Per Share of Class A Common UnitStock - Diluted since the vesting conditions have not been satisfied. See Note 12 "Equity Based Compensation."




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Notes to Condensed Consolidated Financial Statements (Continued)

8. OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES
Other Assets consist of the following:
 March 31, 2018 December 31, 2017
Unsettled Investment Sales (1)
$154,082
 $134,781
Receivables53,448
 138,109
Due from Broker (2)
331,830
 682,403
Oil & Gas Assets, net (3)
245,373
 252,371
Deferred Tax Assets, net131,361
 131,944
Interest Receivable244,547
 189,785
Fixed Assets, net (4)
368,957
 364,203
Foreign Exchange Contracts and Options (5)
70,032
 96,584
Intangible Assets, net (6)
124,514
 129,178
Goodwill (6)
83,500
 83,500
Derivative Assets75,556
 85,074
Deposits16,654
 16,330
Prepaid Taxes78,295
 83,371
Prepaid Expenses23,530
 25,677
Deferred Financing Costs12,552
 7,534
Other89,072
 110,231
Total$2,103,303
 $2,531,075
 March 31, 2019 December 31, 2018
Unsettled Investment Sales (1)
$129,141
 $101,789
Receivables64,802
 27,258
Due from Broker (2)
485,127
 396,512
Oil & Gas Assets, net (3)
210,865
 225,256
Deferred Tax Assets, net408,148
 538,161
Interest Receivable231,445
 241,547
Fixed Assets, net (4)
466,264
 451,206
Foreign Exchange Contracts and Options (5)
205,900
 177,264
Intangible Assets, net (6)
9,125
 9,863
Goodwill (7)
83,500
 83,500
Derivative Assets32,920
 40,995
Deposits7,284
 7,299
Prepaid Taxes73,054
 69,165
Prepaid Expenses27,106
 23,551
Operating Lease Right of Use Assets (8)
146,165
 —
Deferred Financing Costs13,458
 13,871
Other93,498
 129,455
Total$2,687,802
 $2,536,692
(1)Represents amounts due from third parties for investments sold for which cash settlement has not occurred.
(2)Represents amounts held at clearing brokers resulting from securities transactions.
(3)Includes proved and unproved oil and natural gas properties under the successful efforts method of accounting, which is net of impairment write-downs, accumulated depreciation, depletion and amortization. Depreciation, depletion and amortization amounted to $7,077$13.8 million and $5,864$7.1 million for the three months ended March 31, 20182019 and 2017,2018, respectively.
(4)Net of accumulated depreciation and amortization of $160,376$118.0 million and $156,859$113.5 million as of March 31, 20182019 and December 31, 2017,2018, respectively. Depreciation and amortization expense of $3,710$4.4 million and $4,197$3.7 million for the three months ended March 31, 20182019 and 2017,2018, respectively, is included in General, Administrative and Other in the accompanying condensed consolidated statements of operations.
(5)Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign currency denominated investments. Such instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 "Net Gains (Losses) from Investment Activities" for the net changes in fair value associated with these instruments.
(6)See Note 16 "GoodwillNet of accumulated amortization of $63.5 million as of March 31, 2019 and Intangible Assets."December 31, 2018. Amortization expense of $0.5 million and $5.0 million for the three months ended March 31, 2019 and 2018, respectively, is included in General, Administrative and Other in the accompanying consolidated statements of operations.
(7)As of March 31, 2019, the carrying value of goodwill is recorded and assessed for impairment at the reporting unit.
(8)KKR’s non-cancelable operating leases consist of leases for office space around the world. KKR is the lessee under the terms of the operating leases. For the three months ended March 31, 2019, the operating lease cost was $11.8 million.


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Accounts Payable, Accrued Expenses and Other Liabilities consist of the following:
 March 31, 2018 December 31, 2017
Amounts Payable to Carry Pool (1)
$1,176,070
 $1,220,559
Unsettled Investment Purchases (2)
945,940
 885,945
Securities Sold Short (3) 
449,563
 692,007
Derivative Liabilities62,575
 69,381
Accrued Compensation and Benefits107,401
 35,953
Interest Payable183,350
 168,673
Foreign Exchange Contracts and Options (4)
304,940
 260,948
Accounts Payable and Accrued Expenses111,519
 152,916
Deferred Rent16,322
 17,441
Taxes Payable23,331
 35,933
Uncertain Tax Positions Reserve58,370
 58,369
Other Liabilities64,373
 56,125
Total$3,503,754
 $3,654,250
 March 31, 2019 December 31, 2018
Amounts Payable to Carry Pool (1)
$1,089,045
 $922,977
Unsettled Investment Purchases (2)
507,731
 541,165
Securities Sold Short (3) 
582,608
 344,124
Derivative Liabilities40,969
 35,640
Accrued Compensation and Benefits166,294
 107,887
Interest Payable216,348
 212,969
Foreign Exchange Contracts and Options (4)
17,200
 60,749
Accounts Payable and Accrued Expenses108,170
 130,554
Taxes Payable55,355
 24,453
Uncertain Tax Positions67,374
 66,775
Unfunded Revolver Commitments56,792
 52,066
Operating Lease Liabilities (5)
152,073
 —
Other Liabilities219,069
 244,631
Total$3,279,028
 $2,743,990
(1)Represents the amount of carried interest payable to principals, professionals and other individuals with respect to KKR's active funds and co-investment vehicles that provide for carried interest.
(2)Represents amounts owed to third parties for investment purchases for which cash settlement has not occurred.
(3)Represents the obligations of KKR to deliver a specified security at a future point in time. Such securities are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 "Net Gains (Losses) from Investment Activities" for the net changes in fair value associated with these instruments.
(4)Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign currency denominated investments. Such instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying condensed consolidated statements of operations. See Note 3 "Net Gains (Losses) from Investment Activities" for the net changes in fair value associated with these instruments.


(5)KKR’s operating leases have remaining lease terms that range from one year to 14 years, some of which include options to extend the leases for up to three years. For the three months ended March 31, 2019, the weighted average remaining lease term and weighted average discount rate were 4.78 years and 2.64%, respectively.

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9. VARIABLE INTEREST ENTITIES
Consolidated VIEs
KKR consolidates certain VIEs in which it is determined that KKR is the primary beneficiary as described in Note 2 "Summary of Significant Accounting Policies" and which are predominately CFEs and certain investment funds. The primary purpose of these VIEs is to provide strategy specific investment opportunities to earn capitalinvestment gains, current income or both in exchange for management and performance based fees or carried interest. KKR's investment strategies for these VIEs differ by product; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of management and performance based fees andor carried interests.interest. KKR does not provide performance guarantees and has no other financial obligation to provide funding to these consolidated VIEs, beyond amounts previously committed, if any.
Unconsolidated VIEs
KKR holds variable interests in certain VIEs which are not consolidated as it has been determined that KKR is not the primary beneficiary. VIEs that are not consolidated predominantly include certain investment funds sponsored by KKR and certain CLO vehicles.
Investments in Unconsolidated Investment Funds
KKR.
KKR's investment strategies differ by investment fund; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of management and performance based fees andor carried interests.interest. KKR's maximum exposure to loss as a result of its investments in the unconsolidated investment funds is the carrying value of such investments, including KKR's capital interest and any unrealized carried interest, which was approximately $4.1 billion at March 31, 2018.interest. Accordingly, disaggregation of KKR's involvement by type of unconsolidated investment fund would not provide more useful information. For these unconsolidated investment funds in which KKR is the sponsor, KKR may have an obligation as general partner to provide commitments to such investment funds. As of March 31, 2018,2019, KKR's commitments to these unconsolidated investment funds was $2.0$2.3 billion. KKR has not provided any financial support other than its obligated amount as of March 31, 2018.
Investments in Unconsolidated CLO Vehicles
KKR provides collateral management services for, and has made nominal investments in, certain CLO vehicles that it does not consolidate. KKR's investments in the unconsolidated CLO vehicles, if any, are carried at fair value in the condensed consolidated statements of financial condition. KKR earns management fees, including subordinated collateral management fees, for managing the collateral of the CLO vehicles. As of March 31, 2018, combined assets under management in the pools of unconsolidated CLO vehicles were $0.7 billion. KKR's maximum exposure to loss as a result of its investments in the residual interests of unconsolidated CLO vehicles is the carrying value of such investments, which was $27.5 million as of March 31, 2018. CLO investors in the CLO vehicles may only use the assets of the CLO to settle the debt of the related CLO, and otherwise have no recourse against KKR for any losses sustained in the CLO structures.
2019.
As of March 31, 20182019 and December 31, 2017,2018, the maximum exposure to loss, before allocations to the carry pool and noncontrolling interests, if any, for those VIEs in which KKR is determined not to be the primary beneficiary but in which it has a variable interest is as follows:
March 31, 2018 December 31, 2017March 31, 2019 December 31, 2018
Investments$4,113,673
 $4,417,003
$4,203,980
 $3,610,502
Due from (to) Affiliates, net232,653
 176,131
490,990
 410,489
Maximum Exposure to Loss$4,346,326
 $4,593,134
$4,694,970
 $4,020,991

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10. DEBT OBLIGATIONS
KKR borrows and enters into credit agreements and issues debt for its general operating and investment purposes. Additionally, certainKKR consolidates and reports debt obligations of KKR Financial Holdings LLC ("KFN"), which are non-recourse to KKR beyond the assets of KFN.
Certain of KKR's consolidated investment funds borrow to meet financing needs of their operating and investing activities. KKR consolidates and reports KFN's debt obligations which are non-recourse to KKR beyond the assets of KFN.

Fund financing facilities have been established for the benefit of certain investment funds. When an investment fund borrows from the facility in which it participates, the proceeds from the borrowings are limited for their intended use by the borrowing investment fund. KKR's obligations with respect to these financing arrangements are generally limited to KKR's pro rata equity interest in such investment funds.

In certain other cases, KKR has majority-owned investment vehicles that make investments and purchase other assets with borrowings that are collateralized only by the investments and assets they own.
In addition, certain consolidated CFE vehicles issue debt securities to third-party investors which are collateralized by assets held by the CFE vehicle. Debt securities issued by CFEs are supported solely by the assets held at the CFEs and are not collateralized by assets of any other KKR entity. CFEs also may have warehouse facilities with banks to provide liquidity to the CFE. The CFE's debt obligations are non-recourse to KKR beyond the assets of the CFE.
KKR's borrowings consisted of the following:
 March 31, 2018 December 31, 2017 
 Financing Available Borrowing Outstanding Fair Value Financing Available Borrowing Outstanding Fair Value 
Revolving Credit Facilities:            
Corporate Credit Agreement$1,000,000
 $—
 $—
 $1,000,000
 $—
 $—
 
KCM Credit Agreement452,223
 —
 —
 487,656
 —
 —
 
KCM Short-Term Credit Agreement750,000
 —
 —
 750,000
 —
 —
 
Notes Issued:            
KKR Issued 6.375% Notes Due 2020 (1)
—
 498,536
 540,275
(13) 
—
 498,390
 549,000
(13) 
KKR Issued 5.500% Notes Due 2043 (2)
—
 491,581
 545,730
(13) 
—
 491,496
 580,000
(13) 
KKR Issued 5.125% Notes Due 2044 (3)
—
 990,466
 1,036,910
(13) 
—
 990,375
 1,107,100
(13) 
KKR Issued 0.509% Notes Due 2023 (4)
—
 234,004
 235,247
(13) 
—
 —
 —
 
KKR Issued 0.764% Notes Due 2025 (5)
—
 46,488
 47,052
(13) 
—
 —
 —
 
KKR Issued 1.595% Notes Due 2038 (6)
—
 95,921
 97,227
(13) 
—
 —
 —
 
KFN Issued 5.500% Notes Due 2032 (7)
—
 493,249
 523,647
 —
 493,129
 505,235
 
KFN Issued 5.200% Notes Due 2033 (8)
—
 118,407
 122,169
 —
 —
 —
 
KFN Issued Junior Subordinated Notes (9)
—
 236,385
 207,673
 —
 236,038
 201,828
 
Other Consolidated Debt Obligations:            
Fund Financing Facilities and Other (10)
1,676,423
 3,584,588
 3,584,588
(14) 
2,056,096
 2,898,215
 2,898,215
(14) 
CLO Senior Secured Notes (11)
—
 9,806,031
 9,806,031
 —
 10,055,686
 10,055,686
 
CLO Subordinated Notes (11)
—
 307,448
 307,448
 —
 292,294
 292,294
 
CMBS Debt Obligations (12)
—
 5,138,167
 5,138,167
 —
 5,238,236
 5,238,236
 
 $3,878,646
 $22,041,271
 $22,192,164
 $4,293,752
 $21,193,859
 $21,427,594
 
 March 31, 2019 December 31, 2018 
 Financing Available Borrowing Outstanding Fair Value Financing Available Borrowing Outstanding Fair Value 
Revolving Credit Facilities:            
Corporate Credit Agreement$1,000,000
 $—
 $—
 $1,000,000
 $—
 $—
 
KCM Credit Agreement434,395
 —
 —
 451,338
 —
 —
 
KCM Short-Term Credit Agreement750,000
 —
 —
 750,000
 —
 —
 
Notes Issued:            
KKR Issued 6.375% Notes Due 2020 (1)
—
 499,122
 523,900
(14) 
—
 498,975
 523,500
(14) 
KKR Issued 5.500% Notes Due 2043 (2)
—
 491,921
 537,235
(14) 
—
 491,836
 508,615
(14) 
KKR Issued 5.125% Notes Due 2044 (3)
—
 990,831
 1,030,140
(14) 
—
 990,740
 974,320
(14) 
KKR Issued 0.509% Notes Due 2023 (4)
—
 224,386
 223,695
(14) 
—
 226,895
 227,298
(14) 
KKR Issued 0.764% Notes Due 2025 (5)
—
 44,435
 45,402
(14) 
—
 44,923
 45,161
(14) 
KKR Issued 1.595% Notes Due 2038 (6)
—
 91,767
 96,510
(14) 
—
 92,817
 94,568
(14) 
KFN Issued 5.500% Notes Due 2032 (7)
—
 493,689
 502,524
 —
 493,568
 496,359
 
KFN Issued 5.200% Notes Due 2033 (8)
—
 118,321
 117,152
 —
 118,291
 115,582
 
KFN Issued 5.400% Notes Due 2033 (9)
—
 68,705
 69,689
 —
 68,683
 68,780
 
KFN Issued Junior Subordinated Notes (10)
—
 232,471
 197,478
 —
 232,142
 203,135
 
Other Debt Obligations:            
Financing Facilities of Consolidated Funds and Other (11)
4,216,970
 4,534,329
 4,534,329
 3,840,877
 5,123,768
 5,123,768
 
CLO Senior Secured Notes (12)
—
 12,155,621
 12,155,621
 —
 11,667,970
 11,667,970
 
CLO Subordinated Notes (12)
—
 402,200
 402,200
 —
 413,801
 413,801
 
CMBS Debt Obligations (13)
—
 1,914,571
 1,914,571
 —
 1,876,783
 1,876,783
 
 $6,401,365
 $22,262,369
 $22,350,446
 $6,042,215
 $22,341,192
 $22,339,640
 
(1)
$500 million aggregate principal amount of 6.375% senior notes of KKR due 2020. Borrowing outstanding is presented net of i)(i) unamortized note discount and ii)(ii) unamortized debt issuance costs of $0.9$0.6 millionand $1.0$0.7 million as of March 31, 20182019 and December 31, 2017,2018, respectively.
(2)
$500 million aggregate principal amount of 5.500% senior notes of KKR due 2043. Borrowing outstanding is presented net of i)(i) unamortized note discount and ii)(ii) unamortized debt issuance costs of $3.7$3.5 millionand $3.6 million as of March 31, 20182019 and December 31, 2017.2018, respectively.
(3)$1.0 billion aggregate principal amount of 5.125% senior notes of KKR due 2044. Borrowing outstanding is presented net of i)(i) unamortized note discount (net of premium) and ii)(ii) unamortized debt issuance costs of $8.2$7.9 million and $8.3$8.0 million as of March 31, 20182019 and December 31, 2017,2018, respectively.
(4)$235.3 million¥25 billion (or $225.6 million) aggregate principal amount of 0.509% senior notes of KKR due 2023. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.2 million and $1.3 million as of March 31, 2018.2019 and December 31, 2018, respectively. These senior notes are denominated in Japanese Yen ("JPY").

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(5)$47.1 million¥5.0 billion (or $45.1 million) aggregate principal amount of 0.764% senior notes of KKR due 2025. Borrowing outstanding is presented net of unamortized debt issuance costs of $0.6$0.7 million and $0.7 million as of March 31, 2018.2019 and December 31, 2018, respectively. These senior notes are denominated in JPY.
(6)$96.9 million¥10.3 billion (or $92.9 million) aggregate principal amount of 1.595% senior notes of KKR due 2038. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.0$1.2 million and $1.2 million as of March 31, 2018.2019 and December 31, 2018, respectively. These senior notes are denominated in JPY.

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(7)KKR consolidates KFN and thus reports KFN's outstanding $500.0 million aggregate principal amount of 5.500% senior notes due 2032. Borrowing outstanding is presented net of i)(i) unamortized note discount and ii)(ii) unamortized debt issuance costs of $4.6$4.3 million and $4.7$4.4 million as of March 31, 20182019 and December 31, 2017,2018, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.
(8)KKR consolidates KFN and thus reports KFN's outstanding $120.0 million aggregate principal amount of 5.200% senior notes due 2033. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.6$1.7 million and $1.7 million as of March 31, 2018.2019 and December 31, 2018, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.
(9)KKR consolidates KFN and thus reports KFN's outstanding $264.8$70.0 million aggregate principal amount of junior subordinated notes. The weighted average interest rate5.400% senior notes due 2033. Borrowing outstanding is 4.2%presented net of unamortized debt issuance costs of $1.3 million and 3.8% and the weighted average years to maturity is 18.5 years and 19.0 years$1.3 million as of March 31, 20182019 and December 31, 2017,2018, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.
(10)CertainKKR consolidates KFN and thus reports KFN's outstanding $258.5 million aggregate principal amount of junior subordinated notes. The weighted average interest rate is 5.2% and 5.0% and the weighted average years to maturity is 17.5 years and 17.8 years as of March 31, 2019 and December 31, 2018, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.
(11)Amounts include (i) borrowings at consolidated investment funds have entered intorelating to financing arrangements with major financial institutions, generally to enable such investment funds to make investments prior to or without receiving capital from fund limited partners.partners and (ii) borrowings by certain majority-owned investment vehicles that are collateralized only by the investments and assets they own. The weighted average interest rate is 4.3%4.9% and 4.2%4.6% as of March 31, 20182019 and December 31, 2017,2018, respectively. In addition, the weighted average years to maturity is 3.33.6 years and 3.63.3 years as of March 31, 20182019 and December 31, 2017,2018, respectively.
(11)(12)CLO debt obligations are carried at fair value and are classified as Level II within the fair value hierarchy. See Note 5 "Fair Value Measurements."
(12)(13)CMBS debt obligations are carried at fair value and are classified as Level III within the fair value hierarchy. See Note 5 "Fair Value Measurements."
(13)(14)The notes are classified as Level II within the fair value hierarchy and fair value is determined by third party broker quotes.
(14)Carrying value approximates fair value given the fund financing facilities' interest rates are variable.

Revolving Credit Facilities

KCM Credit Agreement

KKR Capital Markets maintains a revolving credit agreement with a major financial institution (the "KCM Credit Agreement") for use in KKR's capital markets business, which provides for revolving borrowings of up to $500 million with a $500 million sublimit for letters of credit. As of March 31, 20182019 and December 31, 2017,2018, no amounts were outstanding under the KCM Credit Agreement, however various letters of credit were outstanding in the amount of $47.8$65.6 million and $12.3$48.7 million, respectively, which reduce the overall borrowing capacity of the KCM Credit Agreement.
Notes Issuances

KKR Issued 0.509% Senior Notes Due 2023, 0.764% Senior Notes Due 2025, and 1.595% Senior Notes Due 2038

On March 23, 2018, KKR Group Finance Co. IV LLC ("KKR Group Finance IV"), an indirect subsidiary of KKR & Co. L.P., completed the offering of ¥40.3 billion, or $379.3 million, aggregate principal amount of its (i) ¥25.0 billion, or $235.3 million, 0.509% Senior Notes due 2023 (the "2023 Notes"), (ii) ¥5.0 billion, or $47.1 million, 0.764% Senior Notes due 2025 (the "2025 Notes"), and (iii) ¥10.3 billion, or $96.9 million, 1.595% Senior Notes due 2038 (the "2038 Notes" and, together with the 2023 Notes and the 2025 Notes, the "JPY Notes"). The JPY Notes are guaranteed by KKR & Co. L.P. and KKR Management Holdings L.P., KKR Fund Holdings L.P. and KKR International Holdings L.P., each an indirect subsidiary of KKR & Co. L.P. (collectively with KKR & Co. L.P., the "Guarantors").

The 2023 Notes bear interest at a rate of 0.509% per annum and will mature on March 23, 2023 unless earlier redeemed. The 2025 Notes bear interest at a rate of 0.764% per annum and will mature on March 21, 2025 unless earlier redeemed. The 2038 Notes bear interest at a rate of 1.595% per annum and will mature on March 23, 2038 unless earlier redeemed. Interest on the JPY Notes accrues from March 23, 2018 and is payable semiannually in arrears on March 23 and September 23 of each year, commencing on September 23, 2018 and ending on the applicable maturity date. The JPY Notes are unsecured and unsubordinated obligations of KKR Group Finance IV. The JPY Notes are fully and unconditionally guaranteed, jointly and severally, by each of the Guarantors. The guarantees are unsecured and unsubordinated obligations of the Guarantors.

The indenture, as supplemented by the first supplemental indenture, related to the JPY Notes includes covenants, including limitations on KKR Group Finance IV's and the Guarantors' ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or lease assets. The indenture, as supplemented, also provides for events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding JPY Notes may declare the JPY Notes immediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the JPY Notes

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and any accrued and unpaid interest on the JPY Notes automatically become due and payable. KKR Group Finance IV may redeem the JPY Notes at its option, in whole but not in part, at a redemption price equal to 100% of the principal amount of the JPY Notes to be redeemed, together with interest accrued and unpaid to, but excluding, the date fixed for redemption, at any time, in the event of certain changes affecting taxation as provided in the JPY Indenture.

KFN Issued 5.200% Notes Due 2033

On February 12, 2018, KFN issued $120.0 million aggregate principal amount of 5.200% Senior Notes due 2033 (the "KFN 2033 Senior Notes"). The KFN 2033 Senior Notes are unsecured and unsubordinated obligations of KFN, which do not provide for recourse to KKR beyond the assets of KFN. The KFN 2033 Senior Notes are not guaranteed by the Guarantors. The KFN 2033 Senior Notes will mature on February 12, 2033, unless earlier redeemed or repurchased. The KFN 2033 Senior Notes bear interest at a rate of 5.200% per annum, accruing from February 12, 2018. Interest is payable semi-annually in arrears on February 12 and August 12 of each year.
The indenture, as supplemented by a first supplemental indenture, relating to the KFN 2033 Senior Notes includes covenants, including (i) limitations on KFN's ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of certain of its subsidiaries or merge, consolidate or sell, transfer or lease assets, (ii) requirements that KFN maintain a minimum Consolidated Net Worth (as defined in the indenture) and (iii) requirements that KFN maintain a minimum Cash and Liquid Investments (as defined in the indenture). The indenture, as supplemented, also provides for events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding KFN 2033 Senior Notes may declare the KFN 2033 Senior Notes immediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the KFN 2033 Senior Notes and any accrued and unpaid interest on the KFN 2033 Senior Notes automatically becomes due and payable.
Beginning on February 12, 2023, KFN may redeem the KFN 2033 Senior Notes in whole, but not in part, at KFN's option, at a redemption price equal to 100% of the outstanding principal amount plus accrued and unpaid interest to, but excluding, the date of redemption. At any time prior to February 12, 2023, KFN may redeem the KFN 2033 Senior Notes in whole, but not in part, at KFN's option at any time, at a "make-whole" redemption price set forth in the KFN 2033 Senior Notes. If a change of control occurs, the KFN 2033 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to 101% of the aggregate principal amount of the KFN 2033 Senior Notes repurchased plus any accrued and unpaid interest on the KFN 2033 Senior Notes repurchased to, but not including, the date of repurchase.
Other Consolidated Debt Obligations

Debt Obligations of Consolidated CFEs
As of March 31, 2018,2019, debt obligations of consolidated CFEs consisted of the following:     
 
Borrowing
Outstanding
 
Weighted
Average
Interest Rate
 
Weighted Average
Remaining
Maturity in Years
Senior Secured Notes of Consolidated CLOs$9,806,031
 2.8% 11.8
Subordinated Notes of Consolidated CLOs307,448
 (1)
 12.1
Debt Obligations of Consolidated CMBS Vehicles5,138,167
 4.4% 26.4
 $15,251,646
  
  
 
Borrowing
Outstanding
 
Weighted
Average
Interest Rate
 Weighted Average Remaining Maturity in Years
Senior Secured Notes of Consolidated CLOs$12,155,621
 3.4% 11.5
Subordinated Notes of Consolidated CLOs402,200
 (1)
 11.7
Debt Obligations of Consolidated CMBS Vehicles1,914,571
 4.0% 24.5
 $14,472,392
  
  
(1)The subordinated notes do not have contractual interest rates but instead receive a pro rata amount of the net distributions from the excess cash flows of the respective CLO vehicle. Accordingly, weighted average borrowing rates for the subordinated notes are based on cash distributions during the period, if any.

Debt obligations of consolidated CFEs are collateralized by assets held by each respective CFE vehicle and assets of one CFE vehicle may not be used to satisfy the liabilities of another. As of March 31, 2018,2019, the fair value of the consolidated CFE assets was $16.8$15.8 billion. This collateral consisted of Cash and Cash Equivalents Held at Consolidated Entities, Investments, and Other Assets.


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Debt Covenants
Borrowings of KKR contain various debt covenants. These covenants do not, in management's opinion, materially restrict KKR's operating business or investment strategies as of March 31, 2018.2019. KKR is in compliance with its debt covenants in all material respects as of March 31, 2018.

2019.
        
11. INCOME TAXES
The consolidated entities of KKR are generally treated as partnerships or disregarded entities& Co. Inc. is a corporation for U.S. and non-U.S. tax purposes. The taxes payable on thefederal income generated by partnerships and disregarded entities are generally paid by the partners who beneficially own such partnerships and disregarded entities and are generally not payable by KKR. However, certain consolidated entities are treated as corporations for U.S. and non-U.S. tax purposes and are thereforethus is subject to U.S. federal, state and/and local corporate income taxes at the entity level on KKR’s share of net taxable income. In addition, the KKR Group Partnerships and certain of their subsidiaries operate in the United States as partnerships for U.S. federal income tax purposes and as corporate entities in certain non-U.S. jurisdictions. These entities, in some cases, are subject to U.S. state or local income taxes and/or non-U.S. taxesincome taxes.
The Conversion resulted in KKR obtaining a partial step-up in the tax basis of certain assets that will be recovered as those assets are sold or the basis is amortized. KKR's overall tax provision is based on, among other things, the amount of such partial step-up in tax basis that is derived from an analysis of the basis of its former unitholders in their ownership of KKR common units at June 30, 2018. On the entity-level. In addition, certain consolidated entities which are treated as partnerships for U.S.date of the Conversion, based on the information available to KKR at that time, KKR recorded an estimated net tax purposes are subjectbenefit and estimated net deferred tax asset of $257.1 million relating to this partial step-up in tax basis. Upon analysis of the New York City Unincorporated Business Tax or other local taxes.basis of KKR's former unitholders in their ownership of KKR common units at June 30, 2018, based on the additional information made available to KKR after December 31, 2018, the final determination of the amount of partial step-up in tax basisresulted in an additional tax benefit of approximately $45.0 million.

The effective tax rates were 2.84%9.34% and 4.84%2.84% for the three months ended March 31, 20182019 and 2017,2018, respectively. The effective tax rate differs from the statutory rate primarily due to the following: (i) a substantial portion of the reported net income (loss) before taxes is not attributable to KKR but rather is attributable to noncontrolling interests held in KKR’s consolidated entities by KKR Holdings or by third parties, and (ii) the tax benefit recognized as a significant portionresult of the final determination of the amount of the reported netpartial step-up in tax basis as a result of the Conversion. For periods prior to the Conversion, the effective rate also differs from the statutory rate as a result of investment income (loss) before taxes attributable to KKR is fromof certain entities and net carried interest of certain general partners of KKR investment funds that arewere not subject to U.S. federal state or local income taxes and/or non-U.S. taxes, and (iii) certain compensation charges attributable to KKR are not deductible for tax purposes.
On December 22, 2017, the 2017 Tax Act was enacted in the United States, which instituted fundamental changesprior to the taxation of multinational businesses. During the year ended December 31, 2017, the Company estimated that $96.4 million of deferred tax expense, recorded in connection with the remeasurement of certain deferred tax assets and liabilities at the reduced U.S. federal tax rate, and $1.5 million of expense, net of the reversal of the deferred tax liability related to unremitted foreign earnings, recorded in connection with the transition tax on the mandatory deemed repatriation of foreign earnings was a provisional amount and a reasonable estimate in accordance with Staff Accounting Bulletin 118 ("SAB 118"). As of March 31, 2018, the Company has not completed the accounting for the effects of the 2017 Tax Act and there have been no material changes to our estimated amounts. Accordingly, there has been no change to the provisional amounts previously recorded and there is no impact to the March 31, 2018 effective tax rate for such provisional amounts.

Conversion.
During the three months ended March 31, 2018,2019, there were no material changes to KKR’s uncertain tax positions and KKR believes there will be no significant increase or decrease to the uncertain tax positions within 12 months of the reporting date.

On May 3, 2018, KKR announced its decision to convert KKR & Co. L.P. from a Delaware limited partnership to a Delaware corporation effective July 1, 2018. See Note 19 "Subsequent Events."


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12. EQUITY BASED COMPENSATION
The following table summarizes the expense associated with equity-based and other non-cash compensation for the three months ended March 31, 2019 and 2018, and 2017, respectively.
 Three Months Ended March 31,
 2018 2017
Equity Incentive Plan Units$67,796
 $49,943
KKR Holdings Principal Awards27,282
 44,979
Total (1)
$95,078
 $94,922
 Three Months Ended March 31,
 2019 2018
Equity Incentive Plans$54,885
 $67,796
KKR Holdings Principal Awards23,666
 27,282
Total (1)
$78,551
 $95,078
(1)Includes $4,264$(0.3) million and $4.3 million of equity based chargescompensation for the three months ended March 31, 2019 and 2018 related to employees of equity method investees. Such amounts are included in Net Gains (Losses) from Investment Activities in the consolidated statements of operations.

Equity Incentive PlanPlans
On March 29, 2019, the 2019 Equity Incentive Plan became effective. Following the effectiveness of the 2019 Equity Incentive Plan, KKR will not make any further grants under the 2010 Equity Incentive Plan, and the 2019 New Equity Incentive Plan became KKR's only plan for providing new equity-based awards. Outstanding awards under the 2010 Equity Incentive Plan will remain outstanding, unchanged and subject to the terms of the 2010 Equity Incentive Plan and their respective equity award agreements, until the vesting, expiration or lapse of such awards in accordance with their terms. There are no significant differences in the expense recognition between the 2010 Equity Incentive Plan and the 2019 New Equity Incentive Plan.  
Under the 2019 Equity Incentive Plan, KKR is permitted to grant equity awards representing ownership interests in KKR & Co. L.P.Inc. Class A common units.stock. The total number of shares of Class A common stock that may be issued under the 2019 Equity Incentive Plan is equivalent to 15% of the aggregate number of the shares of Class A common stock and KKR Group Partnership Units (excluding KKR Group Partnership Units held by KKR & Co. Inc. or its wholly-owned subsidiaries), subject to annual adjustment. Vested awards under the Equity Incentive PlanPlans dilute KKR & Co. L.P.Inc. common unitholdersstockholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR Group Partnerships.

The total number of common units that may be issued under the Equity Incentive Plan is equivalent to 15% of the number of fully diluted common units outstanding, subject to annual adjustment. Equity awards have been granted under the Equity Incentive PlanPlans and are generally subject to service-based vesting, typically over a three to five year period from the date of grant. In certain cases, these awards are subject to transfer restrictions and/or minimum retained ownership requirements. The transfer restriction period, if applicable, lasts for (i) one year with respect to one-half of the interests vesting on any vesting date and (ii) two years with respect to the other one-half of the interests vesting on such vesting date. While providing services to KKR, if applicable, certain of these awards are also subject to minimum retained ownership rules requiring the award recipient to continuously hold shares of Class A common unitstock equivalents equal to at least 15% of their cumulatively vested awards that have the minimum retained ownership requirement.
Expense associated with the vesting of these awards is based on the closing price of the KKR & Co. L.P.Inc. Class A common unitsstock on the date of grant, discounted for the lack of participation rights in the expected distributionsdividends on unvested units. Beginning with the financial results reported for the first quarter of 2017, KKR's distribution policy has been to make equal quarterly distributions to common unitholders of $0.17 per common unit per quarter or $0.68 per year. Therefore, for units granted on or after January 1, 2017, the discount for lack of participation rights in the expected distributions on unvested units was based on the $0.68 annual distribution. See Note 19 "Subsequent Events" for update to KKR's distribution policy. KKR has made equal quarterly distributions to holders of its common units of $0.16 per common unit per quarter or $0.64 per year in respect of financial results reported for the first quarter of 2016 through the fourth quarter of 2016. Accordingly, for units granted subsequent to December 31, 2015 but before January 1, 2017, the discount for the lack of participation rights in the expected distributions on unvested units was based on the $0.64 annual distribution.shares. The discount range for awards granted prior to December 31, 2015 was based on management's estimates of future distributionsdividends that the unvested equity awards would not be entitled to receive between the grant date and the vesting date which ranged from 8% to 56%.
The following table presents information regarding the discount for the lack of participation rights in the expected dividends for shares granted subsequent to December 31, 2015:
Date of Grant 
Discount
per share (1)
January 1, 2016 to December 31, 2016 $0.64
January 1, 2017 to December 31, 2017 $0.68
January 1, 2018 to June 30, 2018 $0.68
July 1, 2018 to Present $0.50
(1)Represents the annual discount for the lack of participation rights on expected dividends. The total discount on any given tranche of unvested shares is calculated as the discount per share multiplied by the number of years in the applicable vesting period.

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Expense is recognized on a straight line basis over the life of the award and assumes a forfeiture rate of up to 7% annually based upon expected turnover by class of recipient.


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Notes to Condensed Consolidated Financial Statements (Continued)

Market Condition Awards

On November 2, 2017, KKR's Co-Presidents and Co-Chief Operating Officers were each granted equity awards representing 2.5 million shares of KKR Class A common unitsstock subject to a market-price basedmarket price-based vesting condition ("Market Condition Awards"). These unitsawards were granted under the 2010 Equity Incentive Plan. All of such unitsawards will vest upon the market price of KKR Class A common unitsstock reaching and maintaining a closing market price of $40 per unitshare for 10 consecutive trading days on or prior to December 31, 2022, subject to the employee's continued service to the time of such vesting. If the $40 price target is not achieved by the close of business on December 31, 2022, the unvested Market Condition Awards will be automatically canceled and forfeited. These Market Condition Awards are subject to additional transfer restrictions and minimum retained ownership requirements after vesting. Due to the existence of the market condition, the vesting period for the Market Condition Awards is not explicit, and as such, compensation expense will be recognized over the period derived from the valuation technique used to estimate the grant-date fair value of the award (the "Derived Vesting Period").

The fair value of the Market Condition Awards at the date of grant was $4.02 per unitshare based on a Monte-Carlo simulation valuation model due to the existence of the market condition described above. Below is a summary of the significant assumptions used to estimate the grant date fair value of the Market Condition Awards.

Awards:
Closing KKR unitshare price as of valuation date $19.90
Risk Free Rate 2.02%
Volatility 25.00%
Dividend Yield 3.42%
Expected Cost of Equity 11.02%

In addition, the grant date fair value assumes that holders of the Market Condition Awards will not participate in distributionsdividends until such awards have met their vesting requirements.

Compensation expense is recognized over the Derived Vesting Period, which was estimated to be 3 years from the date of grant, on a straight-line basis.
As of March 31, 2018,2019, there was approximately $17.4$10.7 million of estimated unrecognized compensation expense related to unvested Market Condition Awards and such awards did not meet their market-price based vesting condition.

As of March 31, 2018,2019, there was approximately $492.7$340.4 million of total estimated unrecognized expense related to unvested awards, including Market Condition Awards. That cost is expected to be recognized as follows:
Year Unrecognized Expense 
(in millions)		 Unrecognized Expense 
(in millions)
Remainder of 2018 164.2
2019 167.8
Remainder of 2019 $132.8
2020 111.3
 131.8
2021 38.2
 58.5
2022 10.3
 16.4
2023 0.9
 0.9
Total $492.7
 $340.4

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A summary of the status of unvested awards granted under the Equity Incentive Plan,Plans, excluding Market Condition Awards as described above, from January 1, 20182019 through March 31, 20182019 is presented below:
 Shares 
Weighted
Average Grant
Date Fair Value
Balance, January 1, 201933,400,183
 $16.23
Granted50,511
 18.96
Vested(15,440) 15.83
Forfeitures(604,519) 17.43
Balance, March 31, 201932,830,735
 $16.21
 Units 
Weighted
Average Grant
Date Fair Value
Balance, January 1, 201846,422,733
 $14.98
Granted1,271,656
 20.21
Vested—
 —
Forfeitures(1,092,523) 13.40
Balance, March 31, 201846,601,866
 $15.16
 
The weighted average remaining vesting period over which unvested awards are expected to vest is 1.41.1 years.
A summary of the remaining vesting tranches of awards granted under the Equity Incentive PlanPlans is presented below:
Vesting Date Units
April 1, 201810,254,674
October 1, 20185,824,493
Shares
April 1, 2019 9,492,0308,917,856
October 1, 2019 4,425,7094,733,416
April 1, 2020 6,625,4557,135,649
October 1, 2020 3,371,7043,607,073
April 1, 2021 3,378,6864,093,420
October 1, 2021 1,930,2392,134,028
April 1, 2022 116,532916,731
October 1, 2022 1,091,1721,201,390
October 1, 2023 91,172
  46,601,86632,830,735

KKR Holdings Awards

KKR Holdings units are exchangeable for KKR Group Partnership Units and allow for their exchange into Class A common unitsstock of KKR & Co. L.P.Inc. on a one-for oneone-for-one basis. As of March 31, 20182019 and 2017,2018, KKR Holdings owned approximately 35.9% or 298,645,285 units and 40.5% or 333,648,078 units and 43.5% or 350,909,471 units, respectively, of outstanding KKR Group Partnership Units. Awards for KKR Holdings units that have been granted are generally subject to service based vesting, typically over a three to five year period from the date of grant. They are also generally subject to transfer restrictions which last for (i) one year with respect to one-half of the interests vesting on any vesting date and (ii) two years with respect to the other one-half of the interests vesting on such vesting date. While providing services to KKR, the recipients are also subject to minimum retained ownership rules requiring them to continuously hold 25% of their vested interests. Upon separation from KKR, award recipients are subject to the terms of a confidentiality and restrictive covenants agreement that would require the forfeiture of certain vested and unvested units should the terms of the agreement be violated. Holders of KKR Holdings units are not entitled to participate in distributions made on KKR Group Partnership Units underlying their KKR Holdings units until such units are vested. All of the KKR Holdings units (except for less than 0.1%0.6% of the outstanding KKR Holdings units) have been granted as of March 31, 2018.
2019, and certain Holdings units remain subject to vesting.
The fair value of awards granted out of KKR Holdings is generally based on the closing price of KKR & Co. L.P.Inc. Class A common unitsstock on the date of grant.grant discounted for the lack of participation rights in the expected distributions on unvested units. KKR determined this to be the best evidence of fair value as a KKR & Co. L.P.Inc. Class A common unitstock is traded in an active market and has an observable market price. Additionally, a KKR Holdings unit is an instrument with terms and conditions similar to those of a KKR & Co. L.P.Inc. Class A common unit.stock. Specifically, units in both KKR Holdings and shares of KKR & Co. L.P.Inc. represent ownership interests in KKR Group Partnership Units and, subject to any vesting, minimum retained ownership requirements and transfer restrictions, each KKR Holdings unit is exchangeable into a KKR Group Partnership Unit and then into a share of KKR & Co. L.P.Inc. Class A common unitstock on a one-for-one basis.


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Notes to Condensed Consolidated Financial Statements (Continued)

In February 2016, approximately 28.9 million KKR Holdings units were granted that were originally subject to market condition and service-based vesting that were subsequently modified in November 2016 to eliminate the market condition vesting and instead require only service-based vesting in equal annual installments over a five year period. At the date of

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Notes to Financial Statements (Continued)

modification, total future compensation expense amounted to $320.9 million, net of estimated forfeitures, to be recognized over the remaining vesting period of the modified awards.

The awards described above were granted from outstanding but previously unallocated units of KKR Holdings, and consequently these grants did not increase the number of KKR Holdings units outstanding or outstanding KKR & Co. Inc. Class A common unitsstock on a fully-diluted basis. If and when vested, these awards will not dilute KKR's respective ownership interests in the KKR Group Partnerships.
KKR Holdings Awards give rise to equity-based compensation in the consolidated statements of operations based on the grant-date fair value of the award discounted for the lack of participation rights in the expected distributions on unvested units. BeginningThis discount is consistent with that noted above for shares issued under the financial results reported for the first quarter of 2017, KKR's distribution policy has been to make quarterly distributions to common unitholders of $0.17 per common unit per quarter or $0.68 per year. Therefore, for awards granted on or after January 1, 2017, the discount for lack of participation rights in the expected distributions on unvested units is based on the $0.68 annual distribution. See Note 19 "Subsequent Events" for update to KKR's distribution policy. KKR has made equal quarterly distributions to holders of its common units of $0.16 per common unit per quarter or $0.64 per year in respect of financial results reported for the first quarter of 2016 through the fourth quarter of 2016. Accordingly, for awards granted subsequent to December 31, 2015 but before January 1, 2017, the discount for the lack of participation rights in the expected distributions on unvested units was based on the $0.64 annual distribution.

Equity Incentive Plans.
Expense is recognized on a straight line basis over the life of the award and assumes a forfeiture rate of up to 7% annually based on expected turnover by class of recipient.

As of March 31, 2018,2019, there was approximately $332.7$230.3 million of estimated unrecognized expense related to unvested KKR Holdings awards. That cost is expected to be recognized as follows:
Year Unrecognized Expense 
(in millions)		 Unrecognized Expense 
(in millions)
Remainder of 2018 $75.2
2019 96.5
Remainder of 2019 $70.7
2020 88.3
 86.9
2021 47.5
 47.2
2022 25.2
 25.5
Total $332.7
 $230.3
A summary of the status of unvested awards granted under the KKR Holdings Plan from January 1, 20182019 through March 31, 20182019 is presented below:
Units 
Weighted
Average Grant
Date Fair Value
Units 
Weighted
Average Grant
Date Fair Value
Balance, January 1, 201830,848,583
 $14.42
Balance, January 1, 201924,123,993
 $14.42
Granted—
 —
—
 —
Vested—
 —
—
 —
Forfeitures—
 —
(270,000) 16.28
Balance, March 31, 201830,848,583
 $14.42
Balance, March 31, 201923,853,993
 $14.40
The weighted average remaining vesting period over which unvested awards are expected to vest is 2.21.7 years.


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Notes to Condensed Consolidated Financial Statements (Continued)

A summary of the remaining vesting tranches of awards granted under the KKR Holdings Plan is presented below:
Vesting Date Units
April 1, 2018574,590
May 1, 20183,805,000
October 1, 20181,970,000
April 1, 2019 229,514
May 1, 2019 3,805,0003,590,000
October 1, 2019 2,455,000
April 1, 2020 124,479
May 1, 2020 3,805,0003,590,000
October 1, 2020 2,940,000
May 1, 2021 3,805,0003,590,000
October 1, 2021 3,425,000
October 1, 2022 3,910,000
  30,848,58323,853,993


13. RELATED PARTY TRANSACTIONS
Due from Affiliates consists of:
 March 31, 2018 December 31, 2017
Amounts due from portfolio companies$139,158
 $129,594
Amounts due from unconsolidated investment funds414,133
 415,907
Amounts due from related entities12,390
 8,848
Due from Affiliates$565,681
 $554,349


Due to Affiliates consists of:
 March 31, 2018 December 31, 2017
Amounts due to KKR Holdings in connection with the tax receivable agreement$83,710
 $84,034
Amounts due to unconsolidated investment funds181,480
 239,776
Due to Affiliates$265,190
 $323,810



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13. RELATED PARTY TRANSACTIONS
Due from Affiliates consists of:
 March 31, 2019 December 31, 2018
Amounts due from portfolio companies$93,855
 $82,204
Amounts due from unconsolidated investment funds637,501
 568,211
Amounts due from related entities2,839
 6,774
Due from Affiliates$734,195
 $657,189
Due to Affiliates consists of:
 March 31, 2019 December 31, 2018
Amounts due to KKR Holdings in connection with the tax receivable agreement$108,270
 $117,862
Amounts due to unconsolidated investment funds146,511
 157,722
Due to Affiliates$254,781
 $275,584
14. SEGMENT REPORTING
KKR operates through fourone operating and reportable segment. This single reportable segment reflects how the chief operating decision makers allocate resources and assess performance under KKR's "one-firm approach," which includes operating collaboratively across business segments. These segments,lines, with predominantly a single expense pool.
KKR’s segment reporting is presented prior to giving effect to the allocation of income (loss) between KKR & Co. Inc. and KKR Holdings L.P. and as such represents the business in total. In addition, KKR’s segment reporting is presented without giving effect to the consolidation of the investment funds and CFEs that KKR manages as well as other consolidated entities that are not subsidiaries of KKR & Co. Inc. The segment measures used in KKR’s segment reporting, including segment revenues, segment expenses, after-tax distributable earnings, segment assets, segment liabilities, and segment book value are used by management in making operational and resource deployment decisions as well as assessing the overall performance of KKR’s business.
After-tax Distributable Earnings
After-tax distributable earnings is a performance measure of KKR’s earnings on a segment basis excluding mark-to-market gains (losses). Starting with the second quarter of 2018, it is defined as the amount of net realized earnings of KKR for a given reporting period, after deducting equity-based compensation. KKR revised the definition of after-tax distributable earnings starting in the second quarter of 2018, because it reflects how the chief operating decision makers allocate resources and assess the performance of KKR’s business. KKR believes that after-tax distributable earnings is useful to stockholders as it aligns KKR’s net realization performance with the manner in which KKR receives its revenues and determines the compensation of its employees. After-tax distributable earnings does not represent and is not used to calculate actual dividends under KKR’s dividend policy. Historically, equity-based compensation expense relating to the Equity Incentive Plans was not reflected in our calculation of after-tax distributable earnings. Under KKR’s segment presentation, equity-based compensation expense is included in after-tax distributable earnings as a component of compensation expense in order to reflect the dilutive nature of these non-cash equity-based awards. For comparability, after-tax distributable earnings for the comparable prior periods have been calculated using this definition.


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Notes to Financial Statements (Continued)

The following table sets forth information regarding KKR's segment results:
  As of and for the Three Months Ended
  March 31, 2019 March 31, 2018
Segment Revenues    
Fees and Other, Net    
Management Fees $292,296
 $251,585
Transaction Fees 186,727
 156,845
Monitoring Fees 25,651
 17,530
Fee Credits (107,416) (43,774)
Total Fees and Other, Net 397,258
 382,186
     
Realized Performance Income (Loss)    
Carried Interest 330,345
 202,555
Incentive Fees 19,537
 16,407
Total Realized Performance Income (Loss) 349,882
 218,962
     
Realized Investment Income (Loss)    
Net Realized Gains (Losses) 44,712
 7,875
Interest Income and Dividends 58,207
 72,577
Total Realized Investment Income (Loss) 102,919
 80,452
Total Segment Revenues $850,059
 $681,600
     
Segment Expenses    
Compensation and Benefits (1)
 340,286
 300,480
Occupancy and Related Charges 13,957
 13,583
Other Operating Expenses 74,910
 57,905
Total Segment Expenses $429,153
 $371,968
     
Segment Operating Earnings 420,906
 309,632
     
Interest Expense 44,130
 50,192
Preferred Dividends 8,341
 8,341
Income (Loss) Attributable to Noncontrolling Interests 359
 1,203
Income Taxes Paid 53,993
 14,168
After-tax Distributable Earnings $314,083
 $235,728
     
Segment Assets $18,770,564
 $16,243,603
Segment Liabilities $4,100,354
 $3,736,797
Segment Book Value $14,148,206
 $11,983,289
(1)Includes equity-based compensation of $54.9 million and $67.8 million for the three months ended March 31, 2019 and 2018, respectively.

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Notes to Financial Statements (Continued)

KKR's business lines are differentiated primarily by their business objectives, and investment strategies and sources of revenue, and are presentedsummarized below. These financial results represent the combined financial results of the KKR Group Partnerships on a segment basis. KKR earns the majority of its fees from subsidiaries located in the United States.
Private Markets
Through KKR's Private Markets segment,business line, KKR manages and sponsors private equity funds and co-investment vehicles, which invest capital for long-term appreciation, either through controlling ownership of a company or strategic minority positions. In addition to its traditional private equity funds, KKR sponsors investment funds that invest in growth equity and core investments. KKR also manages and sponsors investment funds and co-investment vehicles that invest capital in real assets, such as infrastructure, energy, and real estate.
Through KKR's Public Markets
business line, KKR operates and reports its combined credit and hedge funds businesses through the Public Markets segment.platforms. KKR's credit businessplatform invests capital in leveraged credit strategies, including leveraged loans, high-yield bonds, opportunistic credit, and revolving credit strategies, and alternative credit strategies including special situations and private credit opportunities, such as direct lending and private opportunistic credit investment strategies. KKR's hedge funds businessplatform consists of strategic managerhedge fund partnerships with third-party hedge fund managers in which KKR owns a minority stake.
KKR's Capital Markets
KKR's capital markets business line supports the firm, portfolio companies, and third-party clients by developing and implementing both traditional and non-traditional capital solutions for investments or companies seeking financing. These services include arranging debt and equity financing, placing and underwriting securities offerings and providing other types of capital markets services.

Principal Activities

Through KKR's Principal Activities segment,business line, KKR manages the firm's assets and deploydeploys capital to support and grow its businesses.

KKR's Principal Activities segment uses its balance sheet assets to support KKR's investment management and capital markets businesses,business lines including to makemaking capital commitments as general partner to its funds, to seed new businessesbusiness strategies or investments for new funds or to bridge capital selectively for its funds' investments.

The Principal Activities segmentbusiness line also provides the required capital to fund the various commitments of KKR's Capital Markets business line or to meet regulatory capital requirements.
Economic Net Income ("ENI")
ENI is a measure of profitability for KKR's reportable segments and is an alternative measurement of the operating and investment earnings of KKR and its business segments. ENI is comprised of total segment revenues; less total segment expenses and segment noncontrolling interests. The reportable segments for KKR's business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings and as such represents the business in total. In addition, KKR's reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.




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Notes to Condensed Consolidated Financial Statements (Continued)

The following tables present the financial data forprovide KKR's reportable segments:segment revenues on a disaggregated basis by business line:
 As of and for the Three Months Ended March 31, 2018
 
Private
Markets
 
Public
 Markets
 
Capital
Markets
 Principal Activities Total
Reportable
Segments
Segment Revenues 
  
  
  
  
Management, Monitoring and Transaction Fees, Net 
  
  
  
  
Management Fees$158,190
 $93,395
 $—
 $—
 $251,585
Monitoring Fees17,530
 —
 —
 —
 17,530
Transaction Fees46,689
 2,558
 107,598
 —
 156,845
Fee Credits(41,343) (2,431) —
 —
 (43,774)
Total Management, Monitoring and Transaction Fees, Net181,066
 93,522
 107,598
 —
 382,186
          
Performance Income (Loss) 
  
  
  
  
Realized Incentive Fees—
 16,407
 —
 —
 16,407
Realized Carried Interest202,555
 —
 —
 —
 202,555
Unrealized Carried Interest(141,240) 29,508
 —
 —
 (111,732)
Total Performance Income (Loss)61,315
 45,915
 —
 —
 107,230
          
Investment Income (Loss) 
  
  
  
  
Net Realized Gains (Losses)—
 —
 —
 7,875
 7,875
Net Unrealized Gains (Losses)—
 —
 —
 207,862
 207,862
Total Realized and Unrealized—
 —
 —
 215,737
 215,737
Interest Income and Dividends—
 —
 —
 72,577
 72,577
Interest Expense—
 —
 —
 (50,192) (50,192)
Net Interest and Dividends—
 —
 —
 22,385
 22,385
Total Investment Income (Loss)—
 —
 —
 238,122
 238,122
          
Total Segment Revenues242,381
 139,437
 107,598
 238,122
 727,538
          
Segment Expenses 
  
  
  
  
Compensation and Benefits 
  
  
  
  
Cash Compensation and Benefits59,719
 22,714
 21,457
 34,640
 138,530
Realized Performance Income Compensation87,099
 7,055
 —
 —
 94,154
Unrealized Performance Income Compensation(55,379) 12,256
 —
 —
 (43,123)
Total Compensation and Benefits91,439
 42,025
 21,457
 34,640
 189,561
Occupancy and Related Charges7,876
 1,608
 744
 3,355
 13,583
Other Operating Expenses28,302
 9,587
 6,749
 13,267
 57,905
Total Segment Expenses127,617
 53,220
 28,950
 51,262
 261,049
          
Income (Loss) attributable to noncontrolling interests—
 —
 1,203
 —
 1,203
          
Economic Net Income (Loss)$114,764
 $86,217
 $77,445
 $186,860
 $465,286
          
Total Assets$2,203,895
 $1,642,038
 $550,429
 $11,847,241
 $16,243,603

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Notes to Condensed Consolidated Financial Statements (Continued)

  Three Months Ended March 31, 2019
  Private Markets Public Markets Capital Markets Principal Activities Total
Fees and Other, Net          
Management Fees $183,221
 $109,075
 $—
 $—
 $292,296
Transaction Fees 99,017
 27,456
 60,254
 —
 186,727
Monitoring Fees 25,651
 —
 —
 —
 25,651
Fee Credits (82,342) (25,074) —
 —
 (107,416)
Total Fees and Other, Net 225,547
 111,457
 60,254
 —
 397,258
           
Realized Performance Income (Loss)          
Carried Interest 330,345
 —
 —
 —
 330,345
Incentive Fees 675
 18,862
 —
 —
 19,537
Total Realized Performance Income (Loss) 331,020
 18,862
 —
 —
 349,882
           
Realized Investment Income (Loss)          
Net Realized Gains (Losses) —
 —
 —
 44,712
 44,712
Interest Income and Dividends —
 —
 —
 58,207
 58,207
Total Realized Investment Income (Loss) —
 —
 —
 102,919
 102,919
Total $556,567
 $130,319
 $60,254
 $102,919
 $850,059
 As of and for the Three Months Ended March 31, 2017
 
Private
Markets
 
Public
Markets
 
Capital
Markets
 Principal Activities Total
Reportable
Segments
Segment Revenues 
  
  
  
  
Management, Monitoring and Transaction Fees, Net 
  
  
  
  
Management Fees$123,512
 $84,772
 $—
 $—
 $208,284
Monitoring Fees13,220
 —
 —
 —
 13,220
Transaction Fees117,882
 4,056
 121,097
 —
 243,035
Fee Credits(85,650) (3,367) —
 —
 (89,017)
Total Management, Monitoring and Transaction Fees, Net168,964
 85,461
 121,097
 —
 375,522
          
Performance Income (Loss) 
  
  
  
  
Realized Incentive Fees—
 1,686
 —
 —
 1,686
Realized Carried Interest206,204
 —
 —
 —
 206,204
Unrealized Carried Interest123,506
 17,120
 —
 —
 140,626
Total Performance Income (Loss)329,710
 18,806
 —
 —
 348,516
          
Investment Income (Loss) 
  
  
  
  
Net Realized Gains (Losses)—
 —
 —
 79,451
 79,451
Net Unrealized Gains (Losses)—
 —
 —
 204,036
 204,036
Total Realized and Unrealized—
 —
 —
 283,487
 283,487
Interest Income and Dividends—
 —
 —
 56,882
 56,882
Interest Expense—
 —
 —
 (41,709) (41,709)
Net Interest and Dividends—
 —
 —
 15,173
 15,173
Total Investment Income (Loss)—
 —
 —
 298,660
 298,660
          
Total Segment Revenues498,674
 104,267
 121,097
 298,660
 1,022,698
          
Segment Expenses 
  
  
  
  
Compensation and Benefits 
  
  
  
  
Cash Compensation and Benefits60,008
 19,784
 22,561
 37,082
 139,435
Realized Performance Income Compensation87,393
 674
 —
 —
 88,067
Unrealized Performance Income Compensation50,366
 6,848
 —
 —
 57,214
Total Compensation and Benefits197,767
 27,306
 22,561
 37,082
 284,716
Occupancy and Related Charges8,107
 1,856
 664
 3,742
 14,369
Other Operating Expenses26,887
 8,338
 5,328
 12,945
 53,498
Total Segment Expenses232,761
 37,500
 28,553
 53,769
 352,583
          
Income (Loss) attributable to noncontrolling interests—
 —
 1,584
 —
 1,584
          
Economic Net Income (Loss)$265,913
 $66,767
 $90,960
 $244,891
 $668,531
          
Total Assets$1,815,404
 $1,191,199
 $573,162
 $10,758,695
 $14,338,460
  Three Months Ended March 31, 2018
  Private Markets Public Markets Capital Markets Principal Activities Total
Fees and Other, Net          
Management Fees $158,190
 $93,395
 $—
 $—
 $251,585
Transaction Fees 46,689
 2,558
 107,598
 —
 156,845
Monitoring Fees 17,530
 —
 —
 —
 17,530
Fee Credits (41,343) (2,431) —
 —
 (43,774)
Total Fees and Other, Net 181,066
 93,522
 107,598
 —
 382,186
           
Realized Performance Income (Loss)          
Carried Interest 202,555
 —
 —
 —
 202,555
Incentive Fees —
 16,407
 —
 —
 16,407
Total Realized Performance Income (Loss) 202,555
 16,407
 —
 —
 218,962
           
Realized Investment Income (Loss)          
Net Realized Gains (Losses) —
 —
 —
 7,875
 7,875
Interest Income and Dividends —
 —
 —
 72,577
 72,577
Total Realized Investment Income (Loss) —
 —
 —
 80,452
 80,452
Total $383,621
 $109,929
 $107,598
 $80,452
 $681,600

          
          




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Notes to Condensed Consolidated Financial Statements (Continued)

The following tables reconcile the most directly comparable financial measures calculated and presented in accordance with GAAP to KKR's total reportable segments: 

segment information:
Revenues
 Three Months Ended
 March 31, 2018 March 31, 2017
Total Revenues$472,606
 $767,755
Plus: Management fees relating to consolidated funds and placement fees63,858
 47,102
Less: Fee credits relating to consolidated funds14,721
 939
Plus: Net realized and unrealized carried interest - consolidated funds28,076
 11,057
Less: General partner capital interest - unconsolidated funds15,465
 51,803
Plus: Total investment income (loss)238,122
 298,660
Less: Revenue earned by oil & gas producing entities14,507
 17,273
Less: Expense reimbursements20,211
 23,549
Less: Other10,220
 8,312
Total Segment Revenues$727,538
 $1,022,698
  Three Months Ended
  March 31, 2019 March 31, 2018
Total GAAP Revenues $1,187,480
 $472,606
Add: Management Fees - Consolidated Funds and Other 121,949
 64,596
Deduct: Fee Credits - Consolidated Funds 3,939
 14,721
Deduct: Capital Allocation-Based Income (GAAP) 814,932
 78,212
Add: Segment Realized Carried Interest 330,345
 202,555
Add: Segment Realized Investment Income (Loss) 102,919
 80,452
Deduct: Revenue Earned by Other Consolidated Entities 29,703
 25,465
Deduct: Expense Reimbursements 44,060
 20,211
Total Segment Revenues $850,059
 $681,600

Expenses
 Three Months Ended
 March 31, 2018 March 31, 2017
Total Expenses$436,601
 $540,014
Less: Equity-based and other non-cash compensation96,227
 111,036
Less: Reimbursable expenses and placement fees27,761
 36,123
Less: Operating expenses relating to consolidated funds, CFEs and other entities21,805
 13,430
Less: Expenses incurred by oil & gas producing entities11,101
 11,177
Less: Intangible amortization5,030
 6,366
Less: Other13,628
 9,299
Total Segment Expenses$261,049
 $352,583
  Three Months Ended
  March 31, 2019 March 31, 2018
Total GAAP Expenses $728,767
 $436,601
Deduct: Equity-based and Other Compensation - KKR Holdings L.P. 23,743
 32,695
Deduct: Segment Unrealized Performance Income Compensation 159,880
 (43,123)
Deduct: Amortization of Intangibles 535
 5,030
Deduct: Reimbursable Expenses 52,032
 26,093
Deduct: Operating Expenses relating to Other Consolidated Entities 51,818
 44,309
Add: Other (11,606) 371
Total Segment Expenses $429,153
 $371,968

Net Income (Loss) Attributable to KKR & Co. L.P.Inc. Class A Common UnitholdersStockholders
 Three Months Ended
 March 31, 2018 March 31, 2017
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$170,102
 $259,343
Plus: Preferred Distributions8,341
 8,341
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P.121,002
 216,432
Plus: Equity-based and other non-cash compensation100,491
 111,036
Plus: Amortization of intangibles, placement fees and other, net (1)
47,709
 32,837
Plus: Income tax (benefit)17,641
 40,542
Economic Net Income (Loss)$465,286
 $668,531
(1) Other primarily represents the statement of operations impact of the accounting convention differences for (i) direct interests in oil & natural gas properties outside of investment funds and (ii) certain interests in consolidated CLOs and other entities. On a segment basis, direct interests in oil & natural gas properties outside of investment funds are carried at fair value with changes in fair value recorded in Economic Net Income (Loss) and certain interests in consolidated CLOs and other entities are carried at cost. See Note 2 "Summary of Significant Accounting Policies" for the GAAP accounting for these direct interests in oil and natural gas producing properties outside investment funds and interests in consolidated CLOs and other entities.





  Three Months Ended
  March 31, 2019 March 31, 2018
GAAP Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders $700,978
 $170,102
Add: Net Income (Loss) Attributable to Noncontrolling Interests held by KKR Holdings L.P. 481,368
 121,002
Add: Equity-based and Other Compensation - KKR Holdings L.P. 23,118
 32,695
Add: Amortization of Intangibles and Other, net 56,153
 47,709
Deduct: Unrealized Carried Interest 401,612
 (111,732)
Deduct: Net Unrealized Gains (Losses) 819,402
 207,862
Add: Unrealized Performance Income Compensation 159,880
 (43,123)
Add: Income Tax Provision 167,593
 17,641
Deduct: Income Taxes Paid 53,993
 14,168
After-tax Distributable Earnings $314,083
 $235,728

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Notes to Condensed Consolidated Financial Statements (Continued)

The items that reconcile KKR's total reportable segmentssegment income (loss) attributable to noncontrolling interests to the corresponding consolidated amounts calculated and presented in accordance with GAAP for net income (loss) attributable to redeemable noncontrolling interests and income (loss) attributable to noncontrolling interests are primarily attributable to the impact of KKR Holdings L.P., KKR's consolidated funds, and certain other consolidated entities.

Assets
 As of March 31,
 2018 2017
Total Assets$47,579,153
 $41,635,712
Less: Impact of consolidation of funds and other entities (1)
29,972,064
 25,963,256
Less: Carry pool reclassification from liabilities1,176,070
 1,035,671
Less: Impact of KKR Management Holdings Corp.187,416
 298,325
Total Segment Assets$16,243,603
 $14,338,460
    
(1) Includes accounting basis difference for oil & natural gas properties of $10,738 and $7,700 as of March 31, 2018 and 2017, respectively.
  As of March 31,
  2019 2018
GAAP Assets $52,004,019
 $47,579,153
Impact of Consolidation of Investment Vehicles and Other Entities (31,561,635) (29,972,064)
Carry Pool Reclassification (1,089,045) (1,176,070)
Other Reclassifications (582,775) —
Impact of KKR Management Holdings Corp. —
 (187,416)
Segment Assets (1)
 $18,770,564
 $16,243,603

Liabilities
  As of March 31,
  2019 2018
GAAP Liabilities $25,796,178
 $25,810,215
Impact of Consolidation of Investment Vehicles and Other Entities (20,024,004) (20,775,320)
Carry Pool Reclassification (1,089,045) (1,176,070)
Other Reclassifications (582,775) —
Impact of KKR Management Holdings Corp. —
 (122,028)
Segment Liabilities (1)
 $4,100,354
 $3,736,797

Stockholders' Equity
  As of March 31,
  2019 2018
KKR & Co. Inc. Stockholders' Equity - Common Stockholders $8,839,817
 $6,918,185
Impact of Consolidation of Investment Vehicles and Other Entities 246,793
 254,777
Other Reclassifications (17,446) (17,446)
Noncontrolling Interests Held by KKR Holdings L.P. 5,079,042
 4,893,161
Impact of KKR Management Holdings Corp. —
 (65,388)
Segment Book Value (1)
 $14,148,206
 $11,983,289
(1)As of March 31, 2019, KKR's segment assets, liabilities, and book value reflect KKR's tax assets and liabilities prepared under GAAP.

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Notes to Financial Statements (Continued)

15. EQUITY

Share Repurchase Program
TransferKKR increased the available amount under its repurchase program to $500 million, which may be used for the repurchase of Interests Under Common Controlits shares of Class A common stock of KKR & Co. Inc. and Other

On March 30, 2017, KKR reorganized KKR's Indian capital markets and credit asset management businesses, to create KKR India Financial Investments Pte. Ltd. ("KIFL"). This reorganization transaction was accounted for as a transfer of interests under common control, and the difference between KKR's carrying value before and after the transaction was treated as a reallocationretirement of equity interests. No gain or loss was recognized inawards issued pursuant to the condensed consolidated financial statements.

On November 24, 2017, KIFL issued equity to an unaffiliated third-party. This transaction was accounted for as a subsidiary's direct issuance of its equity to third-parties, and the difference between KKR's carrying value before and after the transaction was treated as a reallocation of equity interests. No gain or loss was recognized in the condensed consolidated financial statements.

Both transactions above resulted in an increase to KKR's equity and to noncontrolling interests held by KKR Holdings.

Unit Repurchase Program

As of March 31, 2018, KKR had a total of $750.0 million authorized to repurchase its common units. Through May 7, 2018, KKR has utilized $459.0 million to repurchase 31.7 million common units. See Note 19 "Subsequent Events."

Equity Incentive Plans. Under this common unit repurchase program, shares of Class A common unitsstock of KKR & Co. Inc. may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any unit repurchases will be determined by KKR in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions. KKR expects that the program, which has no expiration date, will be in effect until the maximum approved dollar amount has been used to repurchase common units.used. The program does not require KKR to repurchase any specific number of shares of Class A common units,stock of KKR & Co. Inc., and the program may be suspended, extended, modified or discontinued at any time. During the three months ended March 31, 2019, approximately 1.4 million shares of Class A common stock were repurchased pursuant to this program. There were no shares of Class A common unitsstock repurchased pursuant to this program during the three months ended March 31, 2018. During the three months ended March 31, 2019 and 2018, no equity awards were retired pursuant to this program.
Noncontrolling Interests
Noncontrolling interests represent (i) noncontrolling interests in consolidated entities and 2017.(ii) noncontrolling interests held by KKR Holdings.

Noncontrolling Interests in Consolidated Entities
Distribution PolicyNoncontrolling interests in consolidated entities represent the non-redeemable ownership interests in KKR that are held primarily by:
(i)third party fund investors in KKR's consolidated funds and certain other entities;
(ii)third parties entitled to up to 1% of the carried interest received by certain general partners of KKR's funds that have made investments on or prior to December 31, 2015;
(iii)certain former principals and their designees representing a portion of the carried interest received by the general partners of KKR's private equity funds that was allocated to them with respect to private equity investments made during such former principals' tenure with KKR prior to October 1, 2009;
(iv)certain principals and former principals representing all of the capital invested by or on behalf of the general partners of KKR's private equity funds prior to October 1, 2009 and any returns thereon; and
(v)third parties in KKR's capital markets business line.
Noncontrolling Interests held by KKR Holdings

UnderNoncontrolling interests held by KKR Holdings include economic interests held by principals indirectly in the KKR Group Partnership Units. Such principals receive financial benefits from KKR's distribution policy for its common units,business in the form of distributions received from KKR intends to make equal quarterly distributions to holders of its common unitsHoldings and through their direct and indirect participation in an amount of $0.17 per common unit per quarter. The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partnervalue of KKR Group Partnership Units held by KKR Holdings. These financial benefits are not paid by KKR & Co. Inc. and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all, that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners ofare borne by KKR or that any particular distribution policy will be maintained. See Note 19 "Subsequent Events."

Holdings.

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Notes to Condensed Consolidated Financial Statements (Continued)

16. GOODWILL AND INTANGIBLE ASSETSThe following table presents the calculation of total noncontrolling interests:
  Three Months Ended March 31, 2019
  Noncontrolling Interests in Consolidated Entities Noncontrolling Interests Held by KKR Holdings Total Noncontrolling Interests
Balance at the beginning of the period $10,984,910
 $4,625,448
 $15,610,358
Net income (loss) attributable to noncontrolling interests (1)
 436,359
 481,368
 917,727
Other comprehensive income (loss), net of tax (2)
 2,511
 121
 2,632
Exchange of KKR Holdings Units to Class A Common Stock (3)  
 —
 (7,094) (7,094)
Equity-based and other non-cash compensation —
 23,118
 23,118
Capital contributions 1,194,792
 23
 1,194,815
Capital distributions (812,144) (43,942) (856,086)
Balance at the end of the period $11,806,428
 $5,079,042
 $16,885,470
(1)Refer to the table below for calculation of net income (loss) attributable to noncontrolling interests held by KKR Holdings.
(2)With respect to noncontrolling interests held by KKR Holdings, calculated on a pro rata basis based on the weighted average KKR Group Partnership Units held by KKR Holdings during the reporting period. 
(3)Calculated based on the proportion of KKR Holdings units exchanged for KKR & Co. Inc. Class A common stock during the reporting period. The exchange agreement with KKR Holdings provides for the exchange of KKR Group Partnership Units held by KKR Holdings for KKR & Co. Inc. Class A common stock.
Goodwill
AsNet income (loss) attributable to each of March 31, 2018KKR & Co. Inc. Class A common stockholders and December 31, 2017,KKR Holdings, with the carrying valueexception of goodwill was $83.5 million. The carrying valuecertain tax assets and liabilities that are directly allocable to KKR & Co. Inc., is attributed based on the percentage of goodwill allocatedthe weighted average KKR Group Partnership Units directly or indirectly held by KKR & Co. Inc. and KKR Holdings, each of which directly or indirectly holds equity of the KKR Group Partnerships. However, primarily because of the (i) contribution of certain expenses borne entirely by KKR Holdings, (ii) the periodic exchange of KKR Holdings units for KKR & Co. Inc. Class A common stock pursuant to the Public Marketsexchange agreement and Principal Activities segments is $53.5 million and $30.0 million, respectively, as(iii) the contribution of March 31, 2018 and December 31, 2017. Goodwill is recorded in Other Assetscertain expenses borne entirely by KKR associated with the Equity Incentive Plans, equity allocations shown in the condensedconsolidated statement of changes in equity differ from their respective pro rata ownership interests in KKR's net assets.
The following table presents net income (loss) attributable to noncontrolling interests held by KKR Holdings:
 Three Months Ended March 31,
 2019 2018
Net income (loss)$1,627,046
 $602,894
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests—
 25,674
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities436,359
 277,775
Less: Preferred Stock Dividends8,341
 8,341
Plus: Income tax expense (benefit) attributable to KKR & Co. Inc.158,962
 6,068
Net income (loss) attributable to KKR & Co. Inc. Class A Common Stockholders and KKR Holdings$1,341,308
 $297,172
    
Net income (loss) attributable to Noncontrolling Interests held by KKR Holdings$481,368
 $121,002
Redeemable Noncontrolling Interests
Redeemable Noncontrolling Interests represent noncontrolling interests of certain investment funds and vehicles that are subject to periodic redemption by fund investors following the expiration of a specified period of time (typically one year), or may be withdrawn subject to a redemption fee during the period when capital may not be otherwise withdrawn. Fund investors interests subject to redemption as described above are presented as Redeemable Noncontrolling Interests in the accompanying consolidated statements of financial condition. Allcondition and presented as Net Income (Loss) Attributable to Redeemable Noncontrolling Interests in the accompanying consolidated statements of the goodwill is currently expectedoperations. There was no impact to be deductible for tax purposes. See Note 8 "Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities."
Intangible Assets
Intangible Assets, Net consists of the following:
 March 31, 2018 December 31, 2017
Finite-Lived Intangible Assets$191,526
 $190,526
Accumulated Amortization(67,012) (61,348)
Intangible Assets, Net$124,514
 $129,178
Changes in Intangible Assets, Net consists of the following: 
 Three Months Ended
 March 31, 2018
Balance, Beginning of Period$129,178
Amortization Expense(5,030)
Foreign Exchange366
Balance, End of Period$124,514
  





Redeemable Noncontrolling Interests upon Conversion.

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Notes to Condensed Consolidated Financial Statements (Continued)

17.When redeemable amounts become legally payable to fund investors, they are classified as a liability and included in Accounts Payable, Accrued Expenses and Other Liabilities in the accompanying consolidated statements of financial condition. For all consolidated investment vehicles and funds in which redemption rights have not been granted, noncontrolling interests are presented within Stockholders' Equity in the accompanying consolidated statements of financial condition as noncontrolling interests.
The following table presents the rollforward of Redeemable Noncontrolling Interests:
  For the Three Months Ended March 31,
  2019
Balance at the beginning of the period $1,122,641
Changes in consolidation (1,122,641)
Balance at the end of the period $—
16. COMMITMENTS AND CONTINGENCIES
Funding Commitments
As of March 31, 2018,2019, KKR had unfunded commitments consisting of $5,720.8$5,086.9 million to its active private equity and other investment vehicles. In addition to the uncalled commitments to KKR's investment funds, KKR has entered into contractual commitments with respect to (i) the purchase of investments and other assets in its Principal Activities segment,business line and (ii) underwriting transactions, debt financing, and syndications in KKR's Capital Markets segment.business line. As of March 31, 2018,2019, these commitments amounted to $275.1$153.7 million and $1,114.1$516.2 million, respectively. Whether these amounts are actually funded, in whole or in part, depends on the contractual terms of such commitments, including the satisfaction or waiver of any conditions to closing or funding. The unfunded commitments shown for KKR's Capital Markets segmentbusiness line are shown without reflecting arrangements that may reduce the actual amount of contractual commitments shown;shown occurring after March 31, 2019. KKR's capital marketmarkets business has an arrangement with a third party, which reduces its risk when underwriting certain debt transactions.transactions, and thus our unfunded commitments as of March 31, 2019 are reduced to reflect the amount to be funded by such third party. In the case of purchases of investments or assets in itsKKR's Principal Activities segment,business line, the amount to be funded includes amounts that are intended to be syndicated to third parties, and the actual amounts to be funded may be less than shown.
Non-cancelable Operating Leases

KKR's non-cancelable operating leases consist of leases of office space around the world. There are no material rent holidays, contingent rent, rent concessions or leasehold improvement incentives associated with any of these property leases. In addition to base rentals, certain lease agreements are subject to escalation provisions and rent expense is recognized on a straight‑line basis over the term of the lease agreement.
As of March 31, 2019, the approximate aggregate minimum future lease payments, net of sublease income, required on the operating leases are as follows:
  
April 2019 - March 2020$50,312
April 2020 - March 202266,055
April 2022 - March 202426,828
April 2024 and thereafter18,855
Total minimum payments required162,050
Less: Imputed Interest(9,977)
Total operating lease liabilities$152,073
As of March 31, 2019, KKR has an additional operating lease for office space that has not yet commenced with minimum future lease payments of approximately $87.2 million over a lease term of 15 years.


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Notes to Financial Statements (Continued)

As of December 31, 2018, the approximate aggregate minimum future lease payments, net of sublease income, required on the operating leases are as follows:
  
2019$50,649
2020 - 202169,263
2022 - 202329,687
2024 and thereafter76,332
Total minimum payments required (1)
$225,931
(1) Table depicts aggregate minimum future lease payments under ASC 840.
Contingent Repayment Guarantees
The partnership documents governing KKR's carry-paying investment funds including funds relating to private equity, infrastructure, energy, real estate, mezzanine, direct lending and special situations investments,vehicles generally include a "clawback" provision that, if triggered, may give rise to a contingent obligation requiring the general partner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund. Under a clawback obligation, upon the liquidation of a fund, the general partner is required to return, typically on an after-tax basis, previously distributed carry to the extent that, due to the diminished performance of later investments, the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, including the effects of any performance thresholds. Excluding carried interest received by the general partners of funds that were not contributed to KKR in the acquisition of the assets and liabilities of KKR & Co. (Guernsey) L.P. (formerly known as KKR Private Equity Investors, L.P.) on October 1, 2009 (the "KPE Transaction"), asAs of March 31, 2018, $12.6 million of2019, no carried interest was subject to this clawback obligation, assuming that all applicable carry-paying funds were liquidated at their March 31, 20182019 fair values. Had the investments in such funds been liquidated at zero value, the clawback obligation would have been approximately $1.8$2.1 billion. Carried interest is recognized in the condensed consolidated statements of operations based on the contractual conditions set forth in the agreements governing the fund as if the fund were terminated and liquidated at the reporting date and the fund's investments were realized at the then estimated fair values. Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns are positive and where applicable, preferred return thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods, recognized carried interest will be reversed and to the extent that the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, a clawback obligation would be recorded. For funds that are consolidated, this clawback obligation, if any, is reflected as an increase in noncontrolling interests in the condensed consolidated statements of financial condition. For funds that are not consolidated, this clawback obligation, if any, is reflected as a reduction of KKR's investment balance as this is where carried interest is initially recorded.
Indemnifications and Other Guarantees
KKR may incur contingent liabilities for claims that may be made against it in the future. KKR enters into contracts that contain a variety of representations, warranties and covenants, including indemnifications. For example, certain of KKR's investment funds and KFN have provided certain indemnities relating to environmental and other matters and have provided nonrecourse carve-out guarantees for fraud, willful misconduct and other customary wrongful acts, each in connection with the financing of certain real estate investments that KKR has made.made and for certain investment vehicles that KKR manages. In addition, KKR has also provided credit support to certain of its subsidiaries' obligations in connection with a limited number of investment vehicles that KKR manages. For example, KKR has guaranteed the obligations of a general partner to post collateral on behalf of its investment vehicle in connection with such vehicle's derivative transactions, and KKR has also agreed to be liable for certain investment losses and/or for providing liquidity in the events specified in the governing documents of other investment vehicles. KKR has also provided credit support regarding repayment obligations to third-party lenders to certain of its employees, excluding its executive officers, in connection with their personal investments in KKR investment funds and to a strategic partnerhedge fund partnership regarding the ownership of its business. KKR also may become liable for certain fees payable to sellers of businesses or assets if a transaction does not close, subject to certain conditions, if any, specified in the acquisition agreements for such businesses or assets. KKR's maximum exposure under these arrangements is currently unknown and KKR's liabilities for these matters would require a claim to be made against KKR in the future.

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Notes to Condensed Consolidated Financial Statements (Continued)


Litigation
From time to time, KKR is involved in various legal proceedings, lawsuits and claims incidental to the conduct of KKR's business. KKR's business is also subject to extensive regulation, which may result in regulatory proceedings against it.

In December 2017, KKR & Co. L.P. and its Co-Chief Executive Officers were named as defendants in a lawsuit pending in Kentucky state court alleging, among other things, the violation of fiduciary and other duties in connection with certain separately managed accounts that Prisma Capital Partners LP, a former subsidiary of KKR, manages for the Kentucky Retirement Systems. Also named as defendants in the lawsuit are certain current and former trustees and officers of the Kentucky Retirement Systems, Prisma Capital Partners LP, and various other service providers to the Kentucky Retirement Systems and their related persons.

The defendants’ motion to dismiss was denied by the trial court in November 2018, but in April 2019 the Kentucky Court of Appeals vacated the trial court's opinion and order denying the motion to dismiss the case for lack of standing. The decision of the Court of Appeals has been appealed by plaintiffs to the Supreme Court of Kentucky.
KKR currently is and expects to continue to become, from time to time, subject to examinations, inquiries and investigations by various U.S. and non U.S.non-U.S. governmental and regulatory agencies, including but not limited to the SEC, Department of Justice, state attorney generals, Financial Industry Regulatory Authority, or FINRA, and the U.K. Financial Conduct Authority. Such examinations, inquiries and investigations may result in the commencement of civil, criminal or administrative proceedings or fines against KKR or its personnel.
Moreover, in the ordinary course of business, KKR is and can be both the defendant and the plaintiff in numerous lawsuits with respect to acquisitions, bankruptcy, insolvency and other types of proceedings. Such lawsuits may involve claims that adversely affect the value of certain investments owned by KKR's funds.
 
KKR establishes an accrued liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. No loss contingency is recorded for matters where such losses are either not probable or reasonably estimable (or both) at the time of determination. Such matters may be subject to many uncertainties, including among othersothers: (i) the proceedings may be in early stages; (ii) damages sought may be unspecified, unsupportable, unexplained or uncertain; (iii) discovery may not have been started or is incomplete; (iv) there may be uncertainty as to the outcome of pending appeals or motions; (v) there may be significant factual issues to be resolved;resolved or (vi) there may be novel legal issues or unsettled legal theories to be presented or a large number of parties. Consequently, management is unable to estimate a range of potential loss, if any, related to these matters. In addition, loss contingencies may be, in part or in whole, subject to insurance or other payments such as contributions and/or indemnity, which may reduce any ultimate loss.
It is not possible to predict the ultimate outcome of all pending legal proceedings, and some of the matters discussed above seek or may seek potentially large and/or indeterminate amounts. As of such date, based on information known by management, management has not concluded that the final resolutions of the matters above will have a material effect upon the financial statements. However, given the potentially large and/or indeterminate amounts sought or may be sought in certain of these matters and the inherent unpredictability of investigations and litigations, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on KKR's financial results in any particular period.

18. REGULATORY CAPITAL REQUIREMENTS
KKR has registered broker-dealer subsidiaries which are subject to the minimum net capital requirements of the SEC and the FINRA. Additionally, KKR entities based in London and Dublin are subject to the regulatory capital requirements of the U.K. Financial Conduct Authority and the Central Bank of Ireland, respectively. In addition, KKR has an entity based in Hong Kong which is subject to the capital requirements of the Hong Kong Securities and Futures Ordinance, an entity based in Tokyo subject to the capital requirements of Financial Services Authority of Japan, and two entities based in Mumbai which are subject to capital requirements of the Reserve Bank of India and the Securities and Exchange Board of India. All of these entities have continuously operated in excess of their respective minimum regulatory capital requirements.
 The regulatory capital requirements referred to above may restrict KKR's ability to withdraw capital from its registered broker-dealer entities. At March 31, 2018, approximately $180.1 million of cash at KKR's registered broker-dealer entities may be restricted as to the payment of cash dividends and advances to KKR.

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Notes to Condensed Consolidated Financial Statements (Continued)

19.17. SUBSEQUENT EVENTS
Common Unit Distribution
Stock Dividend
A distributiondividend of $0.17$0.125 per share of Class A common stock of KKR & Co. L.P. common unitInc. was announced on May 3, 2018,April 30, 2019, and will be paid on May 29, 201828, 2019 to Class A common unitholdersstockholders of record as of the close of business on May 14, 2018.13, 2019. KKR Holdings will receive its pro rata share of the distribution from the KKR Group Partnerships.

Preferred Unit Distributions

Stock Dividend
A distributiondividend of $0.421875 per share of Series A Preferred UnitStock has been declared as announced on May 3, 2018April 30, 2019 and set aside for payment on June 15, 201817, 2019 to holders of record of Series A Preferred UnitsStock as of the close of business on June 1, 2018.

2019.
A distributiondividend of $0.406250 per share of Series B Preferred UnitStock has been declared as announced on May 3, 2018April 30, 2019 and set aside for payment on June 15, 201817, 2019 to holders of record of Series B Preferred UnitsStock as of the close of business on June 1, 2018.

Conversion to a Corporation
On May 3, 2018, KKR announced its decision to convert KKR & Co. L.P. (the "Conversion") from a Delaware limited partnership to a Delaware corporation named KKR & Co. Inc., to become effective at 12:01 a.m. (Eastern Time) on July 1, 2018.
Distribution Policy
KKR's distribution policy as a limited partnership has been to pay annual aggregate distributions to holders of our common units of $0.68 per common unit, and KKR has announced that it anticipates that its dividend policy as a corporation will be to pay dividends to holders of our Class A common stock in an initial annual aggregate amount of $0.50 per share, in each case, subject to the discretion of KKR's board of directors and compliance with applicable law. For U.S. federal income tax purposes, any dividends KKR pays following the Conversion (including dividends on KKR's preferred shares) generally will be treated as qualified dividend income (generally taxable to U.S. individual stockholders at capital gain rates) paid by a domestic corporation to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes.
Unit Repurchase Program
On May 3, 2018, KKR announced an increase to the available amount under its repurchase program to $500 million, which may be used for the repurchase of its common units or, after the Conversion, Class A common stock, and the cancellation (by cash settlement or the payment of tax withholding amounts upon net settlement) of equity awards issued pursuant to our Equity Incentive Plan (and any successor equity plan thereto) representing the right to receive its common units or Class A common stock. Prior to this increase, there was approximately $291 million remaining under the program.

Strategic BDC Partnership with FS Investments

On December 11, 2017, KKR announced a definitive agreement to form a new strategic BDC partnership with FS Investment Corporation. This transaction was completed through a combination of cash and other assets on April 9, 2018.

CMBS Sale
In April 2018, a consolidated entity of KKR sold its controlling beneficial interest in four consolidated CMBS vehicles. As a result of this sale, KKR expects to deconsolidate these CMBS vehicles in the second quarter of 2018, resulting in a reduction in investments and debt obligations of approximately $4.1 billion and $4.0 billion, respectively. Subsequent to this sale, KKR will continue to consolidate one CMBS vehicle.

2019.

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of KKR & Co. L.P.Inc., together with its consolidated subsidiaries, and the related notes included elsewhere in this report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2018, filed with the SEC on February 23,
201815, 2019 (our "Annual Report"), including the audited consolidated financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein. The historical condensed consolidated financial data discussed below reflects the historical results and financial position of KKR. In addition, this discussion and analysis contains forward lookingforward-looking statements and involves numerous risks and uncertainties, including those described under "Cautionary Note Regarding Forward-looking Statements" and “Risk"Risk Factors" in this report, our Annual Report, and our other quarterly reports.filing with the SEC. Actual results may differ materially from those contained in any forward lookingforward-looking statements.

The unaudited condensed consolidated financial statements and the related notes included elsewhere in this report are hereafter referred to as the "financial statements." Additionally, the condensed consolidated statements of financial condition are referred to herein as the “consolidated statements of financial condition”; the condensed consolidated statements of operations are referred to herein as the “consolidated statements of operations”;  the condensed consolidated statements of comprehensive income (loss) are referred to herein as the “consolidated statements of comprehensive income (loss)”; the condensed consolidated statements of changes in equity are referred to herein as the “consolidated statements of changes in equity”; and the condensed consolidated statements of cash flows are referred to herein as the “ consolidated statements of cash flows."

Overview
 
We are a leading global investment firm that manages multiple alternative asset classes including private equity, energy, infrastructure, real estate and credit, with strategic manager partnershipspartners that manage hedge funds. We aim to generate attractive investment returns for our fund investors by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with our portfolio companies. We invest our own capital alongside the capital we manage for fund investors and provide financing solutions and investment opportunities through our capital markets business.
Our business offers a broad range of investment management services to our fund investors and provides capital markets services to our firm, our portfolio companies and third parties. Throughout our history, we have consistently been a leader in the private equity industry, having completed more than 325360 private equity investments in portfolio companies with a total transaction value in excess of $560$610 billion as of March 31, 2018.2019. We have grown our firm by expanding our geographical presence and building businesses in areas such as leveraged credit, alternative credit, hedge funds, capital markets, infrastructure, energy, real estate, growth equity and core investments. Our balance sheet has provided a significant source of capital in the growth and expansion of our business, and has allowed us to further align our interests with those of our fund investors. Building on these efforts and leveraging our industry expertise and intellectual capital hashave allowed us to capitalize on a broader range of the opportunities we source. Additionally, we have increased our focus on meeting the needs of our existing fund investors and in developing relationships with new investors in our funds.
We conductseek to work proactively and collaboratively as one-firm across business lines, departments, and geographies, as appropriate, to achieve what we believe are the best results for our business withfunds and the firm. Through our offices throughoutaround the world, providing us withwe have a pre-eminent global integrated platform for sourcing transactions, raising capital and carrying out capital markets activities. Our growth has been driven by value that we have created through our operationally focused investment approach, the expansion of our existing businesses, our entry into new lines of business, innovation in the products that we offer investors in our funds, an increased focus on providing tailored solutions to our clients and the integration of capital markets distribution activities.
As a global investment firm, we earn management, monitoring, transaction and incentive fees and carried interest for providing investment management, monitoring and other services to our funds, vehicles, CLOs, managed accounts and portfolio companies, and we generate transaction-specific income from capital markets transactions. We earn additional investment income fromby investing our own capital alongside that of our fund investors, from other assets on our balance sheet and from the carried interest we receive from our funds and certain of our other investment vehicles. A carried interest entitles the sponsor of a fund to a specified percentage of investment gains that are generated on third-party capital that is invested.


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Our investment teams have deep industry knowledge and are supported by a substantial and diversified capital base,base; an integrated global investment platform,platform; the expertise of operating consultants, senior advisors and other advisorsadvisors; and a worldwide network of business relationships that provide a significant source of investment opportunities, specialized knowledge during due diligence and substantial resources for creating and realizing value for stakeholders. These teams invest capital, a substantial portion of which is of a long duration and not subject to redemption. As of March 31, 2018,2019, approximately 76%78% of our fee paying assets under management are not subject to redemption for at least 8 years from inception, providing us with significant flexibility to grow investments and select exit opportunities. We believe that these aspects of our business will help us continue to expand and grow our business and deliver strong investment performance in a variety of economic and financial conditions.

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Recent Developments
Strategic BDC Partnership with FS Investments

On December 11, 2017, KKR announced a definitive agreement to form a new strategic BDC partnership with FS Investment Corporation ("FS Investments") to provide investment advisory services to Corporate Capital Trust ("CCT") and Corporate Capital Trust II ("CCT II"), which were business development companies ("BDCs") previously advised and sub-advised, respectively, by us, and four BDCs that were previously sponsored by FS Investments. This transaction was completed through a combination of cash and other assets on April 9, 2018. Following the closing of this transaction, the new strategic BDC partnership, FS/KKR Advisor, LLC, began serving as the investment adviser to all six of the aforementioned BDCs.

Our Conversion to a Corporation
On May 3, 2018, we announced our decision to convert KKR & Co. L.P. (the "Conversion") from a Delaware limited partnership to a Delaware corporation named KKR & Co. Inc., to become effective at 12:01 a.m. (Eastern Time) on July 1, 2018. See "Part II. Item 5. Other Information" for further information about the Conversion. See also "Part II. Item 1A. Risk Factors."



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Business SegmentsLines

Private Markets

Through our Private Markets segment,business line, we manage and sponsor a group of private equity funds that invest capital for long-term appreciation, either through controlling ownership of a company or strategic minority positions. In addition to our traditional private equity funds, we sponsor investment funds that invest in growth equity and core equity investments. We also manage and sponsor investment funds that invest capital in real assets, such as infrastructure, energy, and real estate. Our Private Markets segmentbusiness line includes separately managed accounts that invest in multiple strategies, which may include our credit strategies as well as our private equity and real assets strategies. These funds and accounts are managed by Kohlberg Kravis Roberts & Co. L.P., an SEC-registered investment adviser. As of March 31, 2018, the segment2019, Private Markets business line had $102.2$108.1 billion of AUM and FPAUM of $61.5$71.6 billion, consisting of $46.2$47.4 billion in private equity (including growth equity and core investments) and $15.3, $18.4 billion in real assets (including infrastructure, energy, and real estate) and $5.8 billion in other related strategies.


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The table below presents information as of March 31, 20182019, relating to our current private equity, growth equity, core investment, and real asset funds and other investment vehicles in our Private Markets business line for which we have the ability to earn carried interest. This data does not reflect acquisitions or disposals of investments, changes in investment values, or distributions occurring after March 31, 2018.2019.
 
Investment Period (1)
 Amount ($ in millions)
Investment Period (1)
Amount ($ in millions) 
Start DateEnd Date 
Commitment (2)
Uncalled
Commitments
Percentage
Committed by
General
Partner
InvestedRealized
Remaining
Cost (3)
Remaining
Fair Value
Start
Date
End
Date
Commitment (2)
Uncalled
Commitments
Percentage
Committed
by General
Partner
InvestedRealized
Remaining
Cost (3)
Remaining
Fair Value
Gross Accrued
Carried
Interest
Private Markets   
 
  
 
 
 
      
 
  
 
 
 
 
Private Equity and Growth Equity    
 
  
 
 
 
Private Equity and Growth Equity Funds   
 
  
 
 
 
 
European Fund V3/2019(6)$5,252.2
$5,252.2
7.6%$—
$—
$—
$—
$—
Asian Fund III (4)
4/20174/2023 $9,000.0
$8,373.6
5.6%$626.4
$—
$626.4
$588.9
4/20174/20239,000.0
6,654.5
5.6%2,345.5
—
2,345.5
2,988.2
83.5
Americas Fund XII (4)
1/20171/2023 13,500.0
11,962.0
6.0%1,538.0
—
1,538.0
1,641.0
1/20171/202313,500.0
8,219.7
6.0%5,299.0
89.0
5,295.1
5,819.6
55.2
Health Care Strategic Growth Fund (4)
12/201612/2021 1,331.0
1,284.2
11.3%46.8
—
46.8
43.3
12/201612/20211,331.0
1,133.7
11.3%197.3
—
197.3
294.6
5.4
Next Generation Technology Growth Fund (4)
3/20163/2021 658.9
414.4
22.5%244.5
—
244.5
385.8
3/20163/2021658.9
149.5
22.5%509.4
—
509.4
969.9
45.4
European Fund IV (4)
12/201412/2020 3,539.2
1,373.2
5.6%2,276.2
85.1
2,199.5
3,414.0
12/20143/20193,513.9
920.3
5.6%2,686.4
461.2
2,303.2
3,834.1
272.0
Asian Fund II (4)
4/20134/2017 5,825.0
889.5
1.3%5,936.7
2,009.2
4,631.7
7,006.3
4/20134/20175,825.0
626.2
1.3%6,205.5
2,761.9
4,546.4
6,895.5
469.4
North America Fund XI (4)
9/20121/2017 8,718.4
874.2
2.9%9,274.4
5,345.9
6,478.7
11,809.8
9/20121/20178,718.4
837.1
2.9%9,315.3
9,361.8
5,555.4
9,370.3
747.1
China Growth Fund(4)11/201011/2016 1,010.0
—
1.0%1,010.0
600.5
636.3
741.2
11/201011/20161,010.0
—
1.0%1,010.0
726.9
579.1
580.9
(0.5)
European Fund III(4)3/20083/2014 6,167.6
840.2
4.6%5,327.4
8,368.0
1,212.6
2,303.2
3/20083/20145,560.4
223.5
5.1%5,336.9
10,374.7
436.1
520.2
18.7
Asian Fund(4)7/20074/2013 3,983.3
—
2.5%3,945.9
8,192.1
361.3
477.1
7/20074/20133,983.3
—
2.5%3,945.9
8,474.5
179.1
230.7
11.4
2006 Fund(4)9/20069/2012 17,642.2
337.7
2.1%17,304.5
28,235.1
4,190.3
5,219.0
9/20069/201217,642.2
337.7
2.1%17,304.5
29,816.6
3,592.7
5,723.8
420.3
European Fund II(4)11/200510/2008 5,750.8
—
2.1%5,750.8
8,469.8
—
57.7
11/200510/20085,750.8
—
2.1%5,750.8
8,479.3
—
58.8
4.6
Millennium Fund(4)12/200212/2008 6,000.0
—
2.5%6,000.0
13,305.4
444.9
815.4
12/200212/20086,000.0
—
2.5%6,000.0
14,123.1
—
6.1
1.3
Private Equity and Growth Equity  83,126.4
26,349.0
 59,281.6
74,611.1
22,611.0
34,502.7
Private Equity and Growth Equity Funds 87,746.1
24,354.4
 65,906.5
84,669.0
25,539.3
37,292.7
2,133.8
        
Co-Investment Vehicles and Other (4)
Various 6,128.7
1,656.9
Various4,664.6
2,938.3
3,227.5
4,620.5
Various9,750.6
4,305.3
Various5,667.6
4,082.1
3,800.2
5,112.8
242.3
         
Total Private Equity and Growth Equity 89,255.1
28,005.9
 63,946.2
77,549.4
25,838.5
39,123.2
Total Private Equity and Growth Equity Funds 97,496.7
28,659.7
 71,574.1
88,751.1
29,339.5
42,405.5
2,376.1
   
 
  
 
 
 
  
 
  
 
 
 
 
Real Assets        
Energy Income and Growth Fund (4)
9/20139/2018 1,974.2
292.9
12.9%1,714.2
326.6
1,412.8
1,546.9
9/20136/20181,974.2
59.3
12.9%1,961.1
648.3
1,407.6
1,609.1
—
Natural Resources Fund(4)Various 887.4
2.8
Various884.6
113.4
794.9
157.3
Various887.4
1.7
Various885.7
119.2
198.3
168.3
—
Global Energy Opportunities (4)
Various 979.2
579.6
Various440.8
61.0
323.8
334.4
Various979.2
329.4
Various479.6
95.5
343.2
295.2
—
Global Infrastructure Investors (4)
9/201110/2014 1,040.2
42.4
4.8%1,029.3
873.2
623.0
811.7
9/201110/20141,040.2
25.4
4.8%1,047.6
1,295.2
377.9
553.0
19.8
Global Infrastructure Investors II (4)
10/201410/2020 3,044.3
756.6
4.1%2,513.1
229.0
2,283.6
2,735.2
10/20146/20183,040.3
393.4
4.1%2,877.0
339.5
2,614.8
3,334.4
72.5
Global Infrastructure Investors III (4)
(5) 6,021.0
6,021.0
4.5%—
—
—
—
6/20186/20247,166.8
6,668.0
3.8%498.8
—
498.8
466.6
—
Real Estate Partners Americas (4)
5/20135/2017 1,229.1
352.8
16.3%1,004.1
853.9
543.3
588.2
5/20135/20171,229.1
352.7
16.3%1,004.3
1,146.4
338.5
342.9
19.1
Real Estate Partners Americas II (4)
5/201712/2020 1,921.2
1,872.1
7.8%49.1
—
48.5
47.0
5/201712/20201,921.2
1,308.0
7.8%668.3
104.0
606.2
653.2
—
Real Estate Partners Europe (4)
9/20156/2020 720.1
527.1
9.2%209.9
15.1
198.0
247.4
9/20156/2020710.5
285.2
9.5%438.5
22.3
422.1
518.0
8.3
Real Estate Credit Opportunity Partners (4)
2/20172/2019 1,130.0
621.5
4.4%508.5
19.0
508.5
510.6
2/20174/20191,130.0
243.5
4.4%886.5
71.5
886.5
916.1
4.9
Co-Investment Vehicles and OtherVarious 1,781.9
387.2
Various1,394.7
547.0
1,391.4
1,777.0
Various2,612.9
1,219.8
Various1,393.1
706.2
1,389.9
1,619.8
4.5
        
Real Assets $20,728.6
$11,456.0
 $9,748.3
$3,038.2
$8,127.8
$8,755.7
 $22,691.8
$10,886.4
 $12,140.5
$4,548.1
$9,083.8
$10,476.6
$129.1
        
Other        
Core Investment Vehicles (4)
Various 9,500.0
7,811.0
36.8%1,689.0
—
1,689.0
1,689.0
Various9,500.0
6,342.0
36.8%3,158.0
—
3,158.0
3,941.6
33.9
Unallocated Commitments (6)(5)
 3,027.6
3,027.6
Various—
—
—
—
 2,540.3
2,540.3
Various—
—
—
—
—
        
Private Markets Total  $122,511.3
$50,300.5
 $75,383.5
$80,587.6
$35,655.3
$49,567.9
 $132,228.8
$48,428.4
 $86,872.6
$93,299.2
$41,581.3
$56,823.7
$2,539.1
 
(1)The start date represents the date on which the general partner of the applicable fund commenced investment of the fund's capital or the date of the first closing. The end date represents the earlier of (i) the date on which the general partner of the applicable fund was or will be required by the fund's governing agreement to cease making investments on behalf of the fund, unless extended by a vote of the fund investors, and (ii) the date on which the last investment was made.
(2)The commitment represents the aggregate capital commitments to the fund, including capital commitments by third-party fund investors and the general partner. Foreign currency commitments have been converted into U.S. dollars based on (i) the foreign exchange rate at the date of purchase for each investment and (ii) the exchange rate that prevailed on March 31, 2018,2019, in the case of uncalled commitments.
(3)The remaining cost represents the initial investment of the general partner and limited partners, reduced for returns of capital, with the limited partners' investment further reduced for any return of capital and realized gains from which the general partner did not receive a carried interest.
(4)The "Invested" and "Realized" columns do not include the amounts of any realized investments that restored the unused capital commitments of the fund investors, if any.
(5)Initial investment period is six years from first investment date.
(6)"Unallocated Commitments" represent unallocated commitments from our strategic investor partnerships.
(6)Six years from first investment date.

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The tablestable below presentpresents information as of March 31, 20182019, relating to the historical performance of certain of our Private Markets investment vehicles since inception, which we believe illustrates the benefits of our investment approach. The information presented under Total Investments includes all of the investments made by the specified investment vehicle, while the information presented under Realized/Partially Realized Investments includes only those investments that have been disposed of or have otherwise generated disposition proceeds or current income including dividends that have been distributed by the relevant fund. This data does not reflect additional capital raised since March 31, 20182019, or acquisitions or disposals of investments, changes in investment values or distributions occurring after that date. However, the information presented below is not intended to be representative of any past or future performance for any particular period other than the period presented below. Past performance is no guarantee of future results.
 Amount Fair Value of Investments       
Private Markets Investment FundsCommitmentInvested 
Realized (4)
Unrealized Total Value 
Gross
IRR (5)
Net IRR (5)
 
Gross Multiple of Invested
Capital (5)
($ in millions)  
Total Investments 
 
  
 
  
  
 
  
Legacy Funds (1)
 
 
  
 
  
  
 
  
1976 Fund$31.4
$31.4
 $537.2
$—
 $537.2
 39.5 %35.5 % 17.1
1980 Fund356.8
356.8
 1,827.8
—
 1,827.8
 29.0 %25.8 % 5.1
1982 Fund327.6
327.6
 1,290.7
—
 1,290.7
 48.1 %39.2 % 3.9
1984 Fund1,000.0
1,000.0
 5,963.5
—
 5,963.5
 34.5 %28.9 % 6.0
1986 Fund671.8
671.8
 9,080.7
—
 9,080.7
 34.4 %28.9 % 13.5
1987 Fund6,129.6
6,129.6
 14,949.2
—
 14,949.2
 12.1 %8.9 % 2.4
1993 Fund1,945.7
1,945.7
 4,143.3
—
 4,143.3
 23.6 %16.8 % 2.1
1996 Fund6,011.6
6,011.6
 12,476.9
—
 12,476.9
 18.0 %13.3 % 2.1
Subtotal - Legacy Funds16,474.5
16,474.5
 50,269.3
—
 50,269.3
 26.1 %19.9 % 3.1
Included Funds 
 
  
 
  
  
 
  
European Fund (1999) (2)
3,085.4
3,085.4
 8,757.7
—
 8,757.7
 26.9 %20.2 % 2.8
Millennium Fund (2002)6,000.0
6,000.0
 13,305.4
815.4
 14,120.8
 22.0 %16.1 % 2.4
European Fund II (2005) (2)
5,750.8
5,750.8
 8,469.8
57.7
 8,527.5
 6.1 %4.5 % 1.5
2006 Fund (2006)17,642.2
17,304.5
 28,235.1
5,219.0
 33,454.1
 11.3 %8.8 % 1.9
Asian Fund (2007)3,983.3
3,945.9
 8,192.1
477.1
 8,669.2
 19.0 %13.8 % 2.2
European Fund III (2008) (2)
6,167.6
5,327.4
 8,368.0
2,303.2
 10,671.2
 17.0 %11.9 % 2.0
E2 Investors (Annex Fund) (2009) (2)
195.8
195.8
 195.7
1.6
 197.3
 0.2 %(0.4)% 1.0
China Growth Fund (2010)1,010.0
1,010.0
 600.5
741.2
 1,341.7
 10.0 %4.8 % 1.3
Natural Resources Fund (2010)887.4
884.6
 113.4
157.3
 270.7
 (27.8)%(30.3)% 0.3
Global Infrastructure Investors (2011) (2) 
1,040.2
1,029.3
 873.2
811.7
 1,684.9
 14.4 %12.4 % 1.6
North America Fund XI (2012)8,718.4
9,274.4
 5,345.9
11,809.8
 17,155.7
 26.3 %20.8 % 1.8
Asian Fund II (2013)5,825.0
5,936.7
 2,009.2
7,006.3
 9,015.5
 22.8 %16.7 % 1.5
Real Estate Partners Americas (2013)1,229.1
1,004.1
 853.9
588.2
 1,442.1
 19.9 %14.7 % 1.4
Energy Income and Growth Fund (2013)1,974.2
1,714.2
 326.6
1,546.9
 1,873.5
 4.8 %1.6 % 1.1
Global Infrastructure Investors II (2014) (2)
3,044.3
2,513.1
 229.0
2,735.2
 2,964.2
 15.9 %12.8 % 1.2
European Fund IV (2015) (2)
3,539.2
2,276.2
 85.1
3,414.0
 3,499.1
 33.6 %25.6 % 1.5
Real Estate Partners Europe (2015) (2)
720.1
209.9
 15.1
247.4
 262.5
 21.9 %12.7 % 1.3
Next Generation Technology Growth Fund (2016) (3)
658.9
244.5
 —
385.8
 385.8
 —
—
 —
Health Care Strategic Growth Fund (2016) (3)
1,331.0
46.8
 —
43.3
 43.3
 —
—
 —
Americas Fund XII (2017) (3)
13,500.0
1,538.0
 —
1,641.0
 1,641.0
 —
—
 —
Real Estate Credit Opportunity Partners
(2017) (3)
1,130.0
508.5
—
19.0
510.6
 529.6
 —
—
 —
Asian Fund III (2017) (3)
9,000.0
626.4
 —
588.9
 588.9
 —
—
 —
Real Estate Partners Americas II (2017) (3)
1,921.2
49.1
—
—
47.0
 47.0
 —
—
 —
Core Investment Vehicles (2017) (3)
9,500.0
1,689.0
 —
1,689.0
 1,689.0
 —
—
 —
Global Infrastructure Investors III (2018) (3)
6,021.0
—
—
—
—
 —
     
Subtotal - Included Funds113,875.1
72,164.6
 85,994.7
42,837.6
 128,832.3
 15.8 %11.6 % 1.8
             
All Funds$130,349.6
$88,639.1
 $136,264.0
$42,837.6
 $179,101.6
 25.6 %18.8 % 2.0
             





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Amount Fair Value of Investments    Amount Fair Value of Investments     
Private Markets Investment FundsCommitmentInvested 
Realized (4)
Unrealized Total Value 
Gross Multiple of Invested
Capital (5)
CommitmentInvested 
Realized (4)
Unrealized Total Value 
Gross
IRR (5)
Net
IRR (5)
Gross Multiple of Invested
Capital (5)
($ in millions)($ in millions) ($ in millions)
Realized/Partially Realized Investments (4)
 
 
  
 
  
  
Legacy Funds (1)
 
 
  
 
  
  
 
 
  
 
  
  
 
 
1976 Fund$31.4
$31.4
 $537.2
$—
 $537.2
 17.1
$31.4
$31.4
 $537.2
$—
 $537.2
 39.5 %35.5 %17.1
1980 Fund356.8
356.8
 1,827.8
—
 1,827.8
 5.1
356.8
356.8
 1,827.8
—
 1,827.8
 29.0 %25.8 %5.1
1982 Fund327.6
327.6
 1,290.7
—
 1,290.7
 3.9
327.6
327.6
 1,290.7
—
 1,290.7
 48.1 %39.2 %3.9
1984 Fund1,000.0
1,000.0
 5,963.5
—
 5,963.5
 6.0
1,000.0
1,000.0
 5,963.5
—
 5,963.5
 34.5 %28.9 %6.0
1986 Fund671.8
671.8
 9,080.7
—
 9,080.7
 13.5
671.8
671.8
 9,080.7
—
 9,080.7
 34.4 %28.9 %13.5
1987 Fund6,129.6
6,129.6
 14,949.2
—
 14,949.2
 2.4
6,129.6
6,129.6
 14,949.2
—
 14,949.2
 12.1 %8.9 %2.4
1993 Fund1,945.7
1,945.7
 4,143.3
—
 4,143.3
 2.1
1,945.7
1,945.7
 4,143.3
—
 4,143.3
 23.6 %16.8 %2.1
1996 Fund6,011.6
6,011.6
 12,476.9
—
 12,476.9
 2.1
6,011.6
6,011.6
 12,476.9
—
 12,476.9
 18.0 %13.3 %2.1
Subtotal - Legacy Funds16,474.5
16,474.5
 50,269.3
—
 50,269.3
 3.1
16,474.5
16,474.5
 50,269.3
—
 50,269.3
 26.1 %19.9 %3.1
Included Funds 
 
  
 
  
  
 
 
  
 
  
  
 
 
European Fund (1999) (2)
3,085.4
3,085.4
 8,757.7
—
 8,757.7
 2.8
3,085.4
3,085.4
 8,757.7
—
 8,757.7
 26.9 %20.2 %2.8
Millennium Fund (2002)6,000.0
5,599.4
 13,305.4
815.4
 14,120.8
 2.5
6,000.0
6,000.0
 14,123.1
6.1
 14,129.2
 22.0 %16.1 %2.4
European Fund II (2005) (2)
5,750.8
5,245.4
 8,469.8
57.7
 8,527.5
 1.6
5,750.8
5,750.8
 8,479.3
58.8
 8,538.1
 6.1 %4.5 %1.5
2006 Fund (2006)17,642.2
15,889.9
 28,235.1
4,211.2
 32,446.3
 2.0
17,642.2
17,304.5
 29,816.6
5,723.8
 35,540.4
 11.8 %9.2 %2.1
Asian Fund (2007)3,983.3
3,418.8
 8,192.1
263.1
 8,455.2
 2.5
3,983.3
3,945.9
 8,474.5
230.7
 8,705.2
 18.9 %13.7 %2.2
European Fund III (2008) (2)
6,167.6
3,897.0
 8,368.0
787.3
 9,155.3
 2.3
5,560.4
5,336.9
 10,374.7
520.2
 10,894.9
 16.9 %11.8 %2.0
E2 Investors (Annex Fund) (2009) (2)
195.8
94.8
 195.7
—
 195.7
 2.1
195.8
195.8
 199.6
—
 199.6
 0.6 %0.5 %1.0
China Growth Fund (2010)1,010.0
568.4
 600.5
299.3
 899.8
 1.6
1,010.0
1,010.0
 726.9
580.9
 1,307.8
 8.0 %3.3 %1.3
Natural Resources Fund (2010)887.4
886.9
 113.4
157.2
 270.6
 0.3
887.4
885.7
 119.2
168.3
 287.5
 (22.3)%(24.2)%0.3
Global Infrastructure Investors (2011) (2)
1,040.2
1,025.7
 873.2
830.6
 1,703.8
 1.7
1,040.2
1,047.6
 1,295.2
553.0
 1,848.2
 15.1 %13.1 %1.8
North America Fund XI (2012)8,718.4
5,781.8
 5,345.9
8,087.4
 13,433.3
 2.3
8,718.4
9,315.3
 9,361.8
9,370.3
 18,732.1
 24.6 %19.5 %2.0
Asian Fund II (2013)5,825.0
3,077.4
 2,009.2
3,956.0
 5,965.2
 1.9
5,825.0
6,205.5
 2,761.9
6,895.5
 9,657.4
 18.3 %13.4 %1.6
Real Estate Partners Americas (2013)1,229.1
871.1
 853.9
459.8
 1,313.7
 1.5
1,229.1
1,004.3
 1,146.4
342.9
 1,489.3
 18.9 %13.9 %1.5
Energy Income and Growth Fund (2013)1,974.2
1,714.2
 326.6
1,546.9
 1,873.5
 1.1
1,974.2
1,961.1
 648.3
1,609.1
 2,257.4
 5.9 %3.3 %1.2
Global Infrastructure Investors II (2014) (2)
3,044.3
1,245.6
 229.0
1,311.3
 1,540.3
 1.2
3,040.3
2,877.0
 339.5
3,334.4
 3,673.9
 14.2 %11.7 %1.3
European Fund IV (2015) (2)
3,539.2
447.9
 85.1
980.8
 1,065.9
 2.4
3,513.9
2,686.4
 461.2
3,834.1
 4,295.3
 25.2 %18.9 %1.6
Real Estate Partners Europe (2015) (2) (4)
720.1
89.8
 15.1
107.2
 122.3
 1.4
Next Generation Technology Growth Fund (2016) (3) (4)
658.9
—
 —
—
 —
 —
Health Care Strategic Growth Fund (2016) (3) (4)
1,331.0
—
 —
—
 —
 —
Americas Fund XII (2017) (3) (4)
13,500.0
—
 —
—
 —
 —
Real Estate Credit Opportunity Partners
(2017) (3) (4)
1,130.0
—
 —
—
 —
 —
Asian Fund III (2017) (3) (4)
9,000.0
—
 —
—
 —
 —
Real Estate Partners Americas II (2017) (3) (4)
1,921.2
—
 —
—
 —
 —
Core Investment Vehicles (2017) (3) (4)
9,500.0
—
 —
—
 —
 —
Global Infrastructure Investors III (2018) (3)(4)
6,021.0
—
 —
—
 —
 —
Real Estate Partners Europe (2015) (2)
710.5
438.5
 22.3
518.0
 540.3
 17.7 %10.9 %1.2
Next Generation Technology Growth Fund (2016)658.9
509.4
 —
969.9
 969.9
 59.6 %48.3 %1.9
Health Care Strategic Growth Fund
(2016)
1,331.0
197.3
 —
294.6
 294.6
 86.3 %26.6 %1.5
Americas Fund XII (2017) (3)
13,500.0
5,299.0
 89.0
5,819.6
 5,908.6
 —
—
—
Real Estate Credit Opportunity Partners
(2017) (3)
1,130.0
886.5
 71.5
916.1
 987.6
 —
—
—
Asian Fund III (2017) (3)
9,000.0
2,345.5
 —
2,988.2
 2,988.2
 —
—
—
Real Estate Partners Americas II (2017) (3)
1,921.2
668.3
 104.0
653.2
 757.2
 —
—
—
Core Investment Vehicles (2017) (3)
9,500.0
3,158.0
 —
3,941.6
 3,941.6
 —
—
—
Global Infrastructure Investors III (2018) (2)(3)
7,166.8
498.8
 —
466.6
 466.6
 —
—
—
European Fund V (2019) (2)(3)
5,252.2
—
 —
—
 —
 —
—
—
Subtotal - Included Funds113,875.1
52,939.5
 85,975.7
23,871.2
 109,846.9
 2.1
119,627.0
82,613.5
 97,372.7
49,795.9
 147,168.6
 15.8 %11.7 %1.9
              
All Realized/Partially Realized Investments$130,349.6
$69,414.0
 $136,245.0
$23,871.2
 $160,116.2
 2.3
All Funds$136,101.5
$99,088.0
 $147,642.0
$49,795.9
 $197,437.9
 25.6 %18.8 %2.0
       
(1)These funds were not contributed to KKR as part of the KPE Transaction.acquisition of the assets and liabilities of KKR & Co. (Guernsey) L.P. (formerly known as KKR Private Equity Investors, L.P.) on October 1, 2009 (the "KPE Transaction").

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(2)The capital commitments of the European Fund, European Fund II, European Fund III, E2 Investors (Annex Fund), European Fund IV, Global Infrastructure Investors, Global Infrastructure Investors II and Real Estate Partners Europe includefollowing table presents information regarding investment funds with euro-denominated commitments of €196.5 million, €2,597.5 million, €2,882.8 million, €55.5 million, €1,626.1 million, €30.0 million, €243.8 million and €276.6 million, respectively.commitments. Such amounts have been converted into U.S. dollars based on (i) the foreign exchange rate at the date of purchase for each investment and (ii) the exchange rate prevailing on March 31, 20182019, in the case of unfunded commitments.
Private Markets Investment FundsCommitment (€ in millions)
European Fund€196.5
European Fund II€2,597.5
European Fund III€2,882.8
E2 Investors (Annex Fund)€55.5
European Fund IV€1,626.1
Global Infrastructure Investors€30.0
Global Infrastructure Investors II€243.8
Real Estate Partners Europe€276.6
Global Infrastructure Investors III€987.0
European Fund V€1,598.5
(3)
The gross IRR, net IRR and gross multiple of invested capital are calculated for our investment funds that made their first investment at least 24 months prior to March 31, 2018.2019. None of the Next Generation Technology Growth Fund, Health Care Strategic Growth Fund, Americas Fund XII, Real Estate Credit Opportunity Partners, Asian Fund III, Real Estate Partners Americas II, our Core Investment Vehicles, or Global Infrastructure Investors III, or European Fund V has invested for at least 24 months as of March 31, 2018.2019. We therefore have not calculated gross IRRs, net IRRs and gross multiples of invested capital with respect to those funds.
(4)An investment is considered fully or partially realized when it has been disposed of or has otherwise generated disposition proceeds or current income that has been distributed by the relevant fund. In periods prior to the three months ended September 30, 2015, realized proceeds excluded current income such as dividends and interest. Realizations have not been shown for those investment funds that have either made their first investment more recently than 24 months prior to March 31, 20182019 or have otherwise not had any realizations.

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(5)IRRs measure the aggregate annual compounded returns generated by a fund's investments over a holding period. Net IRRs are calculated after giving effect to the allocation of realized and unrealized carried interest and the payment of any applicable management fees and organizational expenses. Gross IRRs are calculated before giving effect to the allocation of realized and unrealized carried interest and the payment of any applicable management fees and organizational expenses.
The gross multiples of invested capital measure the aggregate value generated by a fund's investments in absolute terms. Each multiple of invested capital is calculated by adding together the total realized and unrealized values of a fund's investments and dividing by the total amount of capital invested by the fund. Such amounts do not give effect to the allocation of realized and unrealized carried interest or the payment of any applicable management fees or organizational expenses.

KKR's Private Markets funds may utilize third-party financing facilities to provide liquidity to such funds. The above net and gross IRRs are calculated from the time capital contributions are due from fund investors to the time fund investors receive a related distribution from the fund, and the use of such financing facilities generally decreases the amount of invested capital that would otherwise be used to calculate IRRs, which tends to increase IRRs when fair value grows over time and decrease IRRs when fair value decreases over time. KKR's Private Markets funds also generally provide in certain circumstances, which vary depending on the relevant fund documents, for a portion of capital returned to investors to be restored to unused commitments as recycled capital. For KKR's Private Markets funds that have a preferred return, we take into account recycled capital in the calculation of IRRs and multiples of invested capital because the calculation of the preferred return includes the effect of recycled capital. For KKR's Private Markets funds that do not have a preferred return, we do not take recycled capital into account in the calculation of IRRs and multiples of invested capital. The inclusion of recycled capital generally causes invested and realized amounts to be higher and IRRs and multiples of invested capital to be lower than had recycled capital not been included. The inclusion of recycled capital would reduce the composite net IRR of all Included Funds by 0.1% and the composite net IRR of all Legacy Funds by 0.5%, and would reduce the composite multiple of invested capital of Included Funds by less than 0.1 and the composite multiple of invested capital of Legacy Funds by 0.4.


Public Markets
 
WeThrough our Public Markets business line, we operate and report our combined credit and hedge funds businesses through the Public Markets segment.platforms. Our credit business invests capital in (i) leveraged credit strategies, including leveraged loans, high-yield bonds, opportunistic credit and revolving credit strategies, and (ii) alternative credit strategies, including special situations and private credit strategies such as direct lending and private opportunistic credit (or mezzanine) investment strategies. The funds, CLOs, separately managed accounts, investment companies registered under the Investment Company Act of 1940 (the "Investment Company Act"), including BDCs,business development companies ("BDCs"), and alternative investmentsinvestment funds ("AIFs") in our leveraged credit and alternative credit strategies are managed by KKR Credit Advisors (US) LLC, which is an SEC-registered investment adviser and KKR Credit Advisors (Ireland) Unlimited Company, regulated by the Central Bank of Ireland and KKR Credit Advisors (EMEA) LLP, regulated by the United Kingdom Financial Conduct Authority (the "FCA"("CBI"). Our Public Markets segmentbusiness line also includes our hedge funds business,platform, which consists of strategic partnerships with third-party hedge fund managers in which KKR owns a minority stake (which we refer to as "strategic manager"hedge fund partnerships"). Our strategic managerhedge fund partnerships offer a variety of investment strategies, including hedge fund-of-funds, equity hedge funds and credit hedge fundsfunds. Our BDC platform consists of BDCs advised by FS/KKR Advisor, LLC (“FS/KKR Advisor”), which began serving as the investment adviser to BDCs that were previously advised or sub-advised by KKR and funds focusedFranklin Square Holdings, L.P. (“FS Investments”) following the completion of our strategic partnership with FS Investments on investing in natural catastrophe and weather risks.April 9, 2018 (the “FS Investments Transaction”). 

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We intend to continue to grow the Public Markets business line by leveraging our global investment platform, experienced investment professionals and the ability to adapt our investment strategies to different market conditions to capitalize on investment opportunities that may arise at various levels of the capital structure and across market cycles.

As of March 31, 2018,2019, our Public Markets segmentbusiness line had $74.1$91.4 billion of AUM, comprised of $25.6$36.1 billion of assets managed in our leveraged credit strategies (which include $1.9$2.5 billion of assets managed in our opportunistic credit strategy and $1.5$1.9 billion of assets managed in our revolving credit strategy), $7.5$6.6 billion of assets managed in our special situations strategy, $11.8$23.7 billion of assets managed in our private credit strategies, $28.5$24.3 billion of assets managed through our hedge fund businessplatform, and $0.7 billion of assets managed in other strategies. Our private credit strategies include $7.4$17.5 billion of assets managed in our direct lending strategy and $4.4$6.2 billion of assets managed in our private opportunistic credit strategy.
On December 11, 2017, we entered into an agreement with FS Investments to form a strategic BDC partnership to provide investment advisory services to CCT and CCT II, which were BDCs advised and sub-advised, respectively, by us, and four BDCs that were sponsored by FS Investments. This transaction closed on April 9, 2018 and together with CCT and CCT II created a Assets managed through our hedge fund platform represent KKR's pro rata portion of AUM of our hedge fund partnerships. Our BDC platform with $18has approximately $17.0 billion in combined assets under management, which are reflected in the AUM (calculated based on AUMs of FS Investments'our leveraged credit strategies and alternative credit strategies above. We report all of the assets under management of the BDCs as of December 31, 2017).



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in our BDC platform.
Credit

Performance
We generally review our performance in our credit businessplatform by investment strategy.

Our leveraged credit strategies principally invest through separately managed accounts, BDCs, CLOs and investment funds. In certain cases, these strategies have meaningful track records and may be compared to widely-known indices. The following table presents information regarding the principallarger leveraged credit strategies managed by KKR. The returns presented below areKKR from inception of the strategy to March 31, 2018.2019. However, the information presented below is not intended to be representative of any past or future performance for any particular period other than the period presented below. Past performance is no guarantee of any future result.


Leveraged Credit Strategies: Inception-to-Date Annualized Gross Performance vs. Benchmark by Strategy
($ in millions) Inception Date 
Gross
Returns
 
Net
Returns
 Benchmark (1) 
Benchmark
Gross
Returns
Leveraged Credit Strategy Inception Date 
Gross
Returns
 
Net
Returns
 
Benchmark (1)
 
Benchmark
Gross
Returns
Bank Loans Plus High Yield Jul 2008 8.11% 7.47% 
65% S&P/ LSTA Loan Index, 35% BoAML HY Master II Index (2)
 6.29% Jul 2008 7.73% 7.11% 
65% S&P/LSTA Loan Index, 35% BoAML HY Master II Index (2)
 6.07%
Opportunistic Credit (3)
 May 2008 12.94% 10.95% 
BoAML HY Master II Index (3)
 6.55% May 2008 12.23% 10.27% 
BoAML HY Master II Index (3)
 6.35%
Bank Loans Apr 2011 5.57% 4.96% 
S&P/LSTA Loan Index (4)
 4.31% Apr 2011 5.17% 4.57% 
S&P/LSTA Loan Index (4)
 4.14%
High-Yield Apr 2011 6.83% 6.24% 
BoAML HY Master II Index (5)
 6.22% Apr 2011 6.81% 6.22% 
BoAML HY Master II Index (5)
 6.18%
Bank Loans Conservative Apr 2011 4.81% 4.20% 
S&P/LSTA BB-B Loan Index (6)
 4.30% Apr 2011 4.52% 3.92% 
S&P/LSTA BB-B Loan Index (6)
 4.14%
European Leveraged Loans (7)
 Sep 2009 5.35% 4.83% 
CS Inst West European Leveraged Loan Index (8)
 4.72% Sep 2009 4.99% 4.47% 
CS Inst West European Leveraged Loan Index (8)
 4.41%
High-Yield Conservative Apr 2011 6.07% 5.49% 
BoAML HY BB-B Constrained (9)
 6.08% Apr 2011 6.19% 5.61% 
BoAML HY BB-B Constrained (9)
 6.11%
European Credit Opportunities (7)
 Sept 2007 5.65% 4.74% 
S&P European Leveraged Loans (All Loans) (10)
 4.43% Sept 2007 5.47% 4.57% 
S&P European Leveraged Loans (All Loans) (10)
 4.25%
Revolving Credit (11)
 May 2015 N/A
 N/A
 N/A N/A
 May 2015 N/A
 N/A
 N/A N/A
 
(1)
The benchmarks referred to herein include the S&P/LSTA Leveraged Loan Index (the "S&P/LSTA Loan Index"), S&P/LSTA U.S. B/BB Ratings Loan Index (the "S&P/LSTA BB-B Loan Index"), the Bank of America Merrill Lynch High Yield Master II Index (the "BoAML HY Master II Index"), the BofA Merrill Lynch BB-B US High Yield Index (the "BoAML HY BB-B Constrained"), the Credit Suisse Institutional Western European Leveraged Loan Index (the "CS Inst West European Leveraged Loan Index"), and S&P European Leveraged Loans (All Loans). The S&P/LSTA Loan Index is a daily tradable index for the U.S. loan market that seeks to mirror the market-weighted performance of the largest institutional loans that meet certain criteria. The S&P/ LSTA BB-B Loan Index is comprised of loans in the S&P/LSTA Loan Index, whose rating is BB+, BB, BB-, B+, B or B-. The BoAML HY Master II Index is an index for high-yield corporate bonds. It is designed to measure the broad high-yield market, including lower-rated securities. The BoAML HY BB-B Constrained is a subset of the BoAML HY Master II Index including all securities rated BB1 through B3, inclusive. The CS Inst West European Leveraged Loan Index contains only institutional loan facilities priced above 90, excluding TL and TLa facilities and loans rated CC, C or are in default. The S&P European Leveraged Loan Index reflects the market-weighted performance of institutional leveraged loan portfolios investing in European credits. While the returns of our leveraged credit strategies reflect the reinvestment of income and dividends, none of the indices presented in the chart above reflect such reinvestment, which has the effect of increasing the reported relative performance of these strategies as compared to the indices. Furthermore, these indices are not subject to management fees, incentive allocations, or expenses.
(2)
Performance is based on a blended composite of Bank Loans Plus High Yield strategy accounts. The benchmark used for purposes of comparison for the Bank Loans Plus High Yield strategy is based on 65% S&P/LSTA Loan Index and 35% BoAML HY Master II Index.
(3)The Opportunistic Credit strategy invests in high-yield securities and corporate loans with no preset allocation. The Benchmark used for purposes of comparison for the Opportunistic Credit strategy presented herein is based on the BoAML HY Master II Index. Funds within this strategy may utilize third-party financing facilities to enhance investment returns. In cases where financing facilities are used, the amounts drawn on the facility are deducted from the assets of the fund in the calculation of net asset value, which tends to increase returns when net asset value grows over time and decrease returns when net asset value decreases over time.

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(4)Performance is based on a composite of portfolios that primarily invest in leveraged loans. The benchmark used for purposes of comparison for the Bank Loans strategy is based on the S&P/LSTA Loan Index.
(5)Performance is based on a composite of portfolios that primarily invest in high-yield securities. The benchmark used for purposes of comparison for the High Yield strategy is based on the BoAML HY Master II Index.
(6)Performance is based on a composite of portfolios that primarily invest in leveraged loans rated B-/Baa3 or higher. The benchmark used for purposes of comparison for the Bank Loans Conservative strategy is based on the S&P/LSTA BB-B Loan Index.
(7)The returns presented are calculated based on local currency.
(8)Performance is based on a composite of portfolios that primarily invest in higher quality leveraged loans. The benchmark used for purposes of comparison for the European Leveraged Loans strategy is based on the CS Inst West European Leveraged Loan Index.
(9)Performance is based on a composite of portfolios that primarily invest in high-yield securities rated B or higher. The benchmark used for purposes of comparison for the High-Yield Conservative strategy is based on the BoAML HY BB-B Constrained Index.
(10)Performance is based on a composite of portfolios that primarily invest in European institutional leveraged loans. The benchmark used for purposes of comparison for the European Credit Opportunities strategy is based on the S&P European Leveraged Loans (All Loans) Index.

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(11)This strategy has not called any capital as of March 31, 2018.2019. As a result, the gross and net return performance measures are not meaningful and are not included above.

Our alternative credit strategies primarily invest in more illiquid instruments through private investment funds, BDCs and separately managed accounts. The following table presents information regarding our Public Markets alternative credit commingled funds where investors are subject to capital commitments from inception to March 31, 2018.2019. Some of these funds have been investing for less than 24 months, and thus their performance is less meaningful and not included below. In addition, the information presented below is not intended to be representative of any past or future performance for any particular period other than the period presented below, and pastbelow. Past performance is no guarantee of any future result.


Alternative Credit Strategies: Fund Performance
   Amount Fair Value of Investments           Amount Fair Value of Investments          
Public Markets
Investment Funds
 Inception Date Commitment 
Invested (1)
 
Realized (1)
 Unrealized Total Value 
Gross
IRR (2)
 
Net
IRR (2)
 
Multiple
 of Invested
Capital (3)
 Inception Date Commitment 
Invested (1)
 
Realized (1)
 Unrealized 
Total
Value
 
Gross
IRR (2)
 
Net
IRR (2)
 
Multiple of Invested Capital (3)
 
Gross
Accrued
Carried Interest
($ in Millions)($ in Millions)  ($ in Millions)
Special Situations Fund Dec 2012 $2,274.3
 $2,244.7
 $900.7
 $1,941.9
 $2,842.6
 7.6% 5.6% 1.3
 Dec 2012 $2,274.3
 $2,272.7
 $1,436.2
 $1,211.9
 $2,648.1
 4.3% 2.3% 1.2
 $—
Special Situations Fund II Dec 2014 3,294.2
 1,690.8
 —
 1,758.1
 1,758.1
 2.8% —% 1.0
 Dec 2014 3,524.7
 2,348.7
 176.8
 2,412.8
 2,589.6
 5.3% 2.9% 1.1
 —
Mezzanine Partners Mar 2010 1,022.8
 913.9
 980.1
 366.1
 1,346.2
 13.4% 8.6% 1.5
 Mar 2010 1,022.8
 913.9
 1,060.1
 292.6
 1,352.7
 12.8% 8.2% 1.5
 65.1
Private Credit Opportunities Partners II Dec 2015 2,245.1
 525.5
 9.5
 538.4
 547.9
 6.4% 2.7% 1.0
 Dec 2015 2,245.1
 1,013.3
 27.0
 1,014.8
 1,041.8
 4.3% 2.6% 1.0
 —
Lending Partners Dec 2011 460.2
 405.3
 367.5
 153.7
 521.2
 7.6% 6.1% 1.3
 Dec 2011 460.2
 405.3
 434.9
 63.2
 498.1
 6.0% 4.5% 1.2
 —
Lending Partners II Jun 2014 1,335.9
 1,177.1
 325.1
 1,169.8
 1,494.9
 13.5% 11.2% 1.3
 Jun 2014 1,335.9
 1,179.1
 1,009.1
 518.6
 1,527.7
 11.3% 9.1% 1.3
 44.2
Lending Partners III Apr 2017 963.8
 195.0
 —
 217.4
 217.4
 N/A
 N/A
 N/A
 Apr 2017 1,497.8
 432.2
 35.3
 456.9
 492.2
 N/A
 N/A
 N/A
 4.8
Lending Partners Europe Mar 2015 847.6
 514.0
 56.1
 527.5
 583.6
 12.1% 7.5% 1.1
 Mar 2015 847.6
 544.2
 93.4
 510.4
 603.8
 8.6% 5.3% 1.1
 —
Other Alternative Credit Vehicles Various 7,245.4
 3,929.6
 2,290.5
 3,084.5
 5,375.0
 N/A
 N/A
 N/A
 Various 8,460.1
 4,422.3
 2,859.7
 3,032.0
 5,891.7
 N/A
 N/A
 N/A
 80.4
Unallocated Commitments (4)
 Various 450.0
 —
 —
 —
 —
 N/A
 N/A
 N/A
 Various 450.0
 —
 —
 —
 —
 N/A
 N/A
 N/A
 —
All Funds   $20,139.3
 $11,595.9
 $4,929.5
 $9,757.4
 $14,686.9
  
  
     $22,118.5
 $13,531.7
 $7,132.5
 $9,513.2
 $16,645.7
  
  
   $194.5
(1)    Recycled capital is excluded from the amounts invested and realized. 

(2)    These credit funds utilize third-party financing facilities to provide liquidity to such funds, and in such an event, IRRs are calculated from the time capital contributions are due from fund investors to the time fund investors receive a related distribution from the fund. The use of such financing facilities generally decreases the amount of invested capital that would otherwise be used to calculate IRRs, which tends to increase IRRs when fair value grows over time and decrease IRRs when fair value decreases over time. IRRs measure the aggregate annual compounded returns generated by a fund's investments over a holding period and are calculated taking into account recycled capital. Net IRRs presented are calculated after giving effect to the allocation of realized and unrealized carried interest and the payment of any applicable management fees. Gross IRRs are calculated before giving effect to the allocation of carried interest and the payment of any applicable management fees.
 
(3)    The multiples of invested capital measure the aggregate value generated by a fund's investments in absolute terms. Each multiple of invested capital is calculated by adding together the total realized and unrealized values of a fund's investments and dividing by the total amount of capital invested by the investors. The use of financing facilities generally decreases the amount of invested capital that would otherwise be used to calculate multiples of invested capital, which tends to increase multiples when fair value grows over time and decrease multiples when fair value decreases over time. Such amounts do not give effect to the allocation of any realized and unrealized returns on a fund's investments to the fund's general partner pursuant to a carried interest or the payment of any applicable management fees and are calculated without taking into account recycled capital.

(4)"Unallocated Commitments" represent unallocated commitments from our strategic investor partnerships.



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Public Markets AUM and Vehicle Structures
The table below presents information as of March 31, 2018,2019, based on the investment funds, vehicles or accounts offered by our Public Markets segment.business line. Our funds, vehicles and accounts have been sorted based upon their primary investment strategies. However, the AUM and FPAUM presented for each line in the table includes certain investments from non-primary investment strategies, which are permitted by their investment mandates, for purposes of presenting the fees and other terms for such funds, vehicles and accounts.
($ in millions) AUM FPAUM 
Typical 
Management
Fee Rate
 
Incentive Fee /
Carried
Interest
 
Preferred
Return
 
Duration
of Capital
 AUM FPAUM 
Typical 
Management
Fee Rate
 
Incentive Fee /
Carried
Interest
 
Preferred
Return
 
Duration
of Capital
Leveraged Credit:  
  
          
  
        
Leveraged Credit SMAs/Funds $13,793
 $12,685
 0.33%-1.50% 
Various (1)
 
Various (1)
 Subject to redemptions $19,822
 $18,478
 0.10% - 1.10% 
Various (1)
 
Various (1)
 Subject to redemptions
CLOs 10,752
 10,752
 0.40%-0.50% 
Various (1)
 
Various (1)
 
10-14 Years (2)
 13,323
 13,323
 0.40% - 0.50% 
Various (1)
 
Various (1)
 
10-14 Years (2)
Total Leveraged Credit 24,545
 23,437
         33,145
 31,801
        
          
Alternative Credit: (3)
          
Special Situations 7,770
 4,556
 
0.90%-1.75% (4)
 10.00-20.00% 7.00-12.00% 
8-15 Years (2)
 6,838
 4,376
 
0.90% - 1.75% (4)
 10.00 - 20.00% 7.00 - 12.00% 
8-15 Years (2)
Private Credit 9,059
 4,584
 0.50%-1.75% 10.00-20.00% 5.00-8.00% 
8-15 Years (2)
 10,035
 4,318
 0.50% - 1.50% 10.00 - 20.00% 5.00 - 8.00% 
8-15 Years (2)
Total Alternative Credit 16,829
 9,140
  16,873
 8,694
 
          
Hedge Funds (5)
 28,503
 21,336
 0.50%-2.00% 
Various (1)
 
Various (1)
 Subject to redemptions 24,328
 18,582
 0.50% - 2.00% 
Various (1)
 
Various (1)
 Subject to redemptions
BDCs (6)
 4,239
 4,239
 1.00%-1.125% 10.00-15.00% 7.00% 7 years 17,038
 17,038
 0.60% 8.00% 7.00% Indefinite
Total $74,116
 $58,152
         $91,384
 $76,115
        
 
(1)Certain funds and CLOs are subject to a performance fee in which the manager or general partner of the funds share up to 20% of the net profits earned by investors in excess of performance hurdles (generally tied to a benchmark or index) and are subject to a provision requiring the funds and vehicles to regain prior losses before any performance fee is earned.
(2)Duration of capital is measured from inception. Inception dates for CLOs were between 20052013 and 20172018 and for separately managed accounts and funds investing in alternative credit strategies from 2009 through 2017.2018.
(3)Our alternative credit funds generally have investment periods of three to five years and our newer alternative credit funds generally earn fees on invested capital during the investment period.
(4)Lower fees on uninvested capital in certain vehicles.
(5)Hedge Funds represent KKR's pro rata portion of AUM and FPAUM of our strategic managerhedge fund partnerships, which consist of minority stakes in third-party hedge fund managers.
(6)Consists of CCTour BDC platform advised by FS/KKR Advisor, LLC. We report all of the assets under management of the BDCs in AUM and CCT II, which were BDCs advised and sub-advised, respectively, by KKR. These vehicles invest in both leveraged credit and private credit strategies. On November 14, 2017, shares of CCT's common stock commenced trading on the NYSE and KKR Credit Advisors (US) LLC became CCT's sole investment adviser. On December 11, 2017, we entered into an agreement with FS Investments to form a strategic BDC partnership that will provide investment advisory services to CCT, CCT II and four BDCs that were sponsored by FS Investments. This transaction was completed on April 9, 2018.FPAUM.


Capital Markets
 
Our Capital Markets segmentbusiness line is comprised of our global capital markets business. Our capital markets business, supportswhich is integrated with KKR's other business lines, and serves our firm, our portfolio companies and third-party clients by developing and implementing both traditional and non-traditional capital solutions for investments or companies seeking financing. These services include arranging debt and equity financing, placing and underwriting securities offerings, and providing other types of capital markets services. services that may result in the firm receiving fees, including underwriting, placement, transaction and syndication fees, commissions, underwriting discounts, interest payments and other compensation, which may be payable in cash or securities, in respect of the activities described above.

Our capital markets business underwrites credit facilities and arranges loan syndications and participations. When we are sole arrangers of a credit facility, we may advance amounts to the borrower on behalf of other lenders, subject to repayment. When we underwrite an offering of securities on a firm commitment basis, we commit to buy and sell an issue of securities and generate revenue by purchasing the securities at a discount or for a fee. When we act in an agency capacity or best efforts basis, we generate revenue for arranging financing or placing securities with capital markets investors. We may also provide issuers with capital markets advice on security selection, access to markets, marketing considerations, securities pricing, and other aspects of capital markets transactions in exchange for a fee. Our capital markets business also plays an important roleprovides syndication services in syndicating private equity co-investment opportunities to both fund investors and other third parties, which may entitle the firm to receive management fees and/or a carried interest.

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respect of co-investments in transactions participated in by KKR funds or third-party clients, which may entitle the firm to receive syndication fees, management fees and/or a carried interest.
The capital markets business has a global footprint, with local presence and licenses to carry out certain broker-dealer activities in various countries in North America, Europe, Asia-Pacific and the Middle East. Our flagship capital markets subsidiary is KKR Capital Markets LLC, an SEC-registered broker-dealer and a member of the Financial Industry Regulation Authority ("FINRA"), which is registered or authorized to carry out certain broker-dealer activities in various countries in North America, Europe, Asia-Pacific and the Middle East..


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Principal Activities
 
Through our Principal Activities segment,business line, we manage the firm's own assets on our balance sheet and deploy capital to support and grow our businesses. Our Principal Activities segment uses our balance sheet assets to support our investment management and capital markets businesses.business lines. Typically, the funds in our Private Markets and Public Markets businessesbusiness lines contractually require us, as general partner of the funds, to make sizable capital commitments from time to time. We believe ourmaking general partner commitments are indicative of the conviction we have in a given fund's strategy, which assists us in raising new funds from limited partners.partners by demonstrating our conviction in a given fund's strategy. We also use our balance sheet to acquire investments in order to help establish a track record for fundraising purposes in new strategies. We may also use our own capital to seed investments for new funds, to bridge capital selectively for our funds' investments or finance strategic acquisitions and partnerships, although the financial results of an acquired business or strategic managerhedge fund partnership may be reported in our other segments.business lines.

Our Principal Activities segmentbusiness line also provides the required capital to fund the various commitments of our Capital Markets business line when underwriting or syndicating securities, or when providing term loan commitments for transactions involving our portfolio companies and for third parties. Our Principal Activities segmentbusiness line also holds assets that may be utilized to satisfy regulatory requirements for our Capital Markets business line and risk retention requirements for our CLOs.

We also make opportunistic investments through our Principal Activities segment,business line, which include co-investments alongside our Private Markets and Public Markets funds as well as Principal Activities investments that do not involve our Private Markets or Public Markets funds.

We endeavor to use our balance sheet strategically and opportunistically to generate an attractive risk-adjusted return on equity in a manner that is consistent with our fiduciary duties, and in compliance with applicable laws.laws, and consistent with our one-firm approach.


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The chart below presents the holdings of our Principal Activities segmentbusiness line by asset class as of March 31, 2018.2019.

Holdings by Asset Class (1) 
a10qinvestmentpiechart.jpgchart-94e751e3b2105bcebc6.jpg
(1) This presentation includes our capital commitments to our funds. Assets and revenues of other asset managers with which KKR has formed strategic manager partnerships where KKR does not hold more than 50% ownership interest are not included in our Principal Activities segment but are reported in the financial results of our other segments. Private Equity and Other Equity includes KKR private equity funds, co-investments alongside such KKR-sponsored private equity funds, certain core equity investments, and other opportunistic investments. However, equity investments in other asset classes, such as real estate, special situations and energy appear in these other asset classes.  Other Credit consists of other leveraged credit and specialty finance strategies.
(1)This presentation includes our capital commitments to our funds. Assets and revenues of other asset managers with which KKR has formed hedge fund partnerships where KKR does not hold more than 50% ownership interest are not included in Principal Activities but are reported in the financial results of our other business lines. Private Equity includes KKR private equity funds, co-investments alongside such KKR-sponsored private equity funds, core private equity funds, and other opportunistic investments. However, equity investments in other asset classes, such as real estate, alternative credit and energy appear in these other asset classes. Other Credit consists of other leveraged credit and specialty finance strategies.


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Business Environment
 
Economic and Market Conditions
Economic Conditions. As a global investment firm, we are affected by financial and economic conditions globally. Global and regional economic conditions have a substantial impact on our financial condition and results of operations, impacting the values of the investments we make, our ability to exit these investments profitably, our ability to raise capital from investors, and our ability to make new investments. Financial and economic conditions in the United States, the European Union, Japan, China, and other major economies are significant contributors to the global economy.

As of March 31, 2018,2019, key economic indicators of U.S. economic growth seemed to be slowing slightly,showed positive signs in the United States showed signsfirst quarter of rising inflation, and2019, while the widely-held expectation remained that the U.S. economy will grow at a slower rate in 2019 than last year. After raising its benchmark interest rate four times in 2018, the U.S. Federal Reserve continuedsuggested in March 2019 that it would not raise the rate in 2019 and on May 1, 2019, announced its decision to raise its benchmark interestkeep the rate and reduce its balance sheet.unchanged. In the United States, real GDP growth was 2.3%3.2%, on a seasonally adjusted annualized basis, for the quarter ended March 31, 2018, down from 2.9%2019, compared to 2.2% for the quarter ended December 31, 2017;2018; the U.S. unemployment rate was 4.1%3.8% as of March 31, 2018, flat2019, down from 4.1%3.9% as of December 31, 2017;2018; U.S. core consumer price index inflation was 2.1%2.0% on a year-over-year basis as of March 31, 2018, up2019, down from 1.8%2.2% on a year-over-year basis as of December 31, 2017;2018; and the effective federal funds rate set by the U.S. Federal Reserve was 1.7%2.4% as of March 31, 2018, up from 1.3%2019, flat compared to 2.4% as of December 31, 2017.2018.
As of March 31, 2018,2019, the European Union appearedcontinued to be experiencing a softening pacedisplay signs of slow-down in economic growth, with a modest risestemming in inflation,part from political uncertainty and the European Central Bank is expected to taper its quantitative easing programweak economic momentum in the near future.region. In the Euro Area, real GDP growth is estimated to be 0.5%0.2%, on a seasonally adjusted quarter-over-quarter basis, for the quarter ended March 31, 2019, compared to 0.7%0.2%, on a seasonally adjusted quarter-over-quarter basis, for the quarter ended December 31, 2017;2018; the Euro Area unemployment rate was 8.5%7.8% as of February 28, 2018,March 31, 2019, down from 8.6%7.9% as of December 31, 2017;2018; Euro Area core inflation was 1.0%0.8% on a year-over-year basis as of March 31, 2018, up slightly when compared to2019, down from 0.9% on a year-over-year basis as of December 31, 2017;2018; and the short-term benchmark interest rate set by the European Central Bank was 0.0% as of March 31, 2018, flat2019, unchanged from December 31, 2017. As noted, in March 2017, the United Kingdom triggered Article 50 to formally begin the process to exit from the European Union, which could, among other outcomes, significantly disrupt trade and the free movement of goods, services and people between the United Kingdom and the European Union.2018.
As of March 31, 2018,2019, the Bank of Japan is expectedmaintained its accommodative monetary policy, and announced in April 2019 its intention to continue its quantitative easing program, andkeep rates very low at least until the spring of 2020; it also projected a continued "moderate expanding trend" for Japan's economy, despite the slowdown in overseas economies. The Chinese economy appears to be slowing slightly againstexhibited only a slight moderation in reported economic growth in the backdropfirst quarter of certain economic reforms.2019, easing concerns of a further slowdown. In Japan, the short-term benchmark interest rate set by the Bank of Japan was -0.1% as of March 31, 2018,2019, unchanged from December 31, 2017;2018; and in China, reported real GDP was 1.4%, on a seasonally adjusted quarter-over-quarter basis, for the quarter ended March 31, 2018,2019, compared to 1.6%1.5% in the quarter ended December 31, 2017.2018.
These and other key issues could have repercussions across regional and global financial markets, which could adversely affect the valuations of our investments. Other key issues include (i) political uncertainty caused by, among other things, populist political parties and economic nationalist sentiments, (ii) regulatory changes regarding, for example, taxation, international trade, cross-border investments, immigration, and austerity programs, and (iii) increased volatility asin stock markets, (iv) an unexpected shift in the U.S. Federal Reserve potentially raises interest rates more frequently and/or in larger increments than in previous yearsReserve's monetary policies and (iv)its impact on the markets and (v) technological advancements and innovations that may disrupt marketplaces and businesses. For a further discussion of how market conditions may affect our businesses, see "Risk Factors—Risks Related to Our Business—Difficult market and economic conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manage or by reducing the ability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect our financial condition" in our Annual Report.
Equity and Credit Markets. Global equity and credit markets have a substantial effect on our financial condition and results of operations. In general, a climate of reasonable interest rates and high levels of liquidity in the debt and equity capital markets provide a positive environment for us to generate attractive investment returns, which also impacts our ability to generate incentive fees and carried interest. Periods of volatility and dislocation in the capital markets present substantial risks, but also can present us with opportunities to invest at reduced valuations that position us for future growth and investment returns. Low interest rates related to monetary stimulus and economic stagnation may negatively impact expected returns on all types of investments. Higher interest rates in conjunction with slower growth or weaker currencies in some emerging market economies have caused, and may further cause, the default risk of these countries to increase, and this could impact the operations or value of our investments that operate in these regions. Areas such as the Eurozone and Japan, which have ongoing central bank quantitative easing campaigns and comparatively low interest rates relative to the United States, could potentially experience further currency volatility and weakness relative to the U.S. dollar.


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Many of our investments are in equities, so a change in global equity prices or in market volatility directly impacts the value of our investments and our profitability as well as our ability to realize investment gains and the receptiveness of fund investors to our investment products. For the quarter ended March 31, 2018,2019, global equity markets were negative,positive, with the S&P 500 Index down 1.2%up 13.6% and the MSCI World Index down 0.8%up 12.6% on a total return basis including dividends. Equity market volatility as evidenced by the Chicago Board Options Exchange Market Volatility Index (the "VIX"), a measure of volatility, ended at 20.013.7 as of March 31, 2018, increasing2019, decreasing from 11.025.4 as of December 31, 2017.2018. For a discussion of our valuation methods, see "Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions that are difficult to quantify or predict, which may have a significant impact on the valuation of our investments and, therefore, on the investment income we realize and our results of operations and financial condition" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Fair Value Measurements—Level III Valuation Methodologies" in our Annual Report.
Many of our investments are also in non-investment grade credit instruments, and our funds and our portfolio companies also rely on credit financing and the ability to refinance existing debt. Consequently, any decrease in the value of credit instruments that we have invested in or any increase in the cost of credit financing reduces our returns and decreases our net income. In particular due in part to holdings of credit instruments such as CLOs on our balance sheet, the performance of the credit markets has had an amplified impact on our financial results, as we directly bear the full extent of losses from credit instruments on our balance sheet. Credit markets can also impact valuations because a discounted cash flow analysis is generally used as one of the methodologies used to ascertain the fair value of our investments that do not have readily observable market prices. In addition, with respect to our credit instruments, tightening credit spreads are generally expected to lead to an increase, and widening credit spreads are generally expected to lead to a decrease, in the value of these credit investments, if not offset by hedging or other factors. In addition, the significant widening of credit spreads is also typically expected to negatively impact equity markets, which in turn would negatively impact our portfolio and us as noted above. During the quarter ended March 31, 2018,2019, U.S. investment grade corporate bond spreads (BofA Merrill Lynch US Corporate Index) widened by 1832 basis points and U.S. high-yield corporate bond spreads (BofAML HY Master II Index) widened by 9128 basis points. The non-investment grade credit indices were mixedup during the quarter ended March 31, 2018,2019, with the S&P/LSTA Leveraged Loan Index up 1.4%4.0% and the BofAML HY Master II Index down 0.9%up 7.4%. In addition, duringDuring the quarter ended March 31, 2018,2019, 10-year government bond yields rose 33fell 28 basis points in the United States, and, rose 7 basis points in Germany and rose 16fell 28 basis points in the United Kingdom, fell 1431 basis points in Germany, fell 24 basis points in China and were flatfell 8 basis points in Japan. For a further discussion of how market conditions may affect our businesses, see "Risk Factors—Risks Related to Our Business—Difficult market and economic conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manage or by reducing the ability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect our financial condition" and "Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions that are difficult to quantify or predict, which may have a significant impact on the valuation of our investments and, therefore, on the investment income we realize and our results of operations and financial condition" in our Annual Report.

For further discussion of the impact of global credit markets on our financial condition and results of operations, see "Risk Factors—Risks Related to the Assets We Manage—Changes in the debt financing markets may negatively impact the ability of our investment funds, their portfolio companies and strategies pursued with our balance sheet assets to obtain attractive financing for their investments or to refinance existing debt and may increase the cost of such financing or refinancing if it is obtained, which could lead to lower-yielding investments and potentially decrease our net income," "Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions that are difficult to quantify or predict, which may have a significant impact on the valuation of our investments and, therefore, on the investment income we realize and our results of operations and financial condition" and "Risk Factors—Risks Related to the Assets We Manage—Our funds and our firm through our Principal Activities segmentbalance sheet may make a limited number of investments, or investments that are concentrated in certain issuers, geographic regions or asset types, which could negatively affect our performance or the performance of our funds to the extent those concentrated assets perform poorly" in our Annual Report. For a further discussion of our valuation methods, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Fair Value Measurements—Level III Valuation Methodologies" in our Annual Report.
Foreign Exchange Rates. Foreign exchange rates have a substantial impact on the valuations of our investments that are denominated in currencies other than the U.S. dollar. Currency volatility can also affect our businesses and investments that deal in cross-border trade. The appreciation or depreciation of the U.S. dollar is expected to contribute to a decrease or increase, respectively, in the U.S. dollar value of our non-U.S. investments to the extent unhedged. In addition, an appreciating U.S. dollar would be expected to make the exports of U.S. based companies less competitive, which may lead to a decline in their export revenues, if any, while a depreciating U.S. dollar would be expected to have the opposite effect. Moreover, when selecting investments for our investment funds that are denominated in U.S. dollars, an appreciating U.S. dollar may create opportunities to invest at more attractive U.S. dollar prices in certain countries outside of the United States, while a

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depreciating U.S. dollar would be expected to have the opposite effect. For our investments denominated in currencies other than the U.S. dollar, the depreciation in such currencies will generally contribute to the decrease in the valuation of such investments, to the extent unhedged, and adversely affect the U.S. dollar equivalent revenues of portfolio companies with substantial revenues denominated in such currencies, while the appreciation in such currencies would be expected to have the opposite effect. For the quarter ended March 31, 2018,2019, the euro rose 2.7%fell 2.2%, the British pound rose 3.7%2.2%, the Japanese yen rose 5.7%fell 1.1%, and the Chinese renminbi rose 3.6%2.5%, respectively, relative to the U.S. dollar. For additional information regarding our foreign exchange rate risk, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosure About Market Risk—Exchange Rate Risk" in our Annual Report.

Commodity Markets. Our Private Markets portfolio contains energy real asset investments, and certain of our other Private Markets and Public Markets strategies and products, including private equity, direct lending, special situations and CLOs, also have meaningful investments in the energy sector. The value of these investments is heavily influenced by the price of natural gas and oil. During the quarter ended March 31, 2018,2019, the long-term price of WTI crude oil andincreased approximately 8%, while the long-term price of natural gas were relatively stable.increased approximately 2%. The long-term price of WTI crude oil was flat atincreased from approximately $53$50 per barrel to $54 per barrel, and the long-term price of natural gas increased from approximately $2.82$2.60 per mcf to $2.83$2.66 per mcf as of December 31, 20172018 and March 31, 2018,2019, respectively. When commodity prices decline or if a decline is not offset by other factors, we would expect the value of our energy real asset investments to be adversely impacted.impacted, to the extent unhedged. In addition, because we hold certain energy assets, on our balance sheet, which had a fair value of $0.7 billion as of March 31, 2018,2019 on our balance sheet, these price movements would have an amplified impact on our financial results, to the extent unhedged, as we would directly bear the full extent of such gains or losses. For additional information regarding our energy real assets, see " Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Fair Value Measurements—Level III Valuation Methodologies—Real Asset Investments" and "Risk Factors—Risks Related to the Assets We Manage—Our funds and our firm through our Principal Activities segmentbalance sheet may make a limited number of investments, or investments that are concentrated in certain issuers, geographic regions or asset types, which could negatively affect our performance or the performance of our funds to the extent those concentrated assets perform poorly" in our Annual Report.

Business Conditions
Our segment revenues consist of fees, performance income and investment income. Our ability to grow our revenues depends in part on our ability to attract new capital and investors, our successful deployment of capital including from our balance sheet and our ability to realize investments.investments at a profit.
Our ability to attract new capital and investors. Our ability to attract new capital and investors in our funds is driven, in part, by the extent to which they continue to see the alternative asset management industry generally, and our investment products specifically, as an attractive vehicle for capital appreciation or income. Since 2010, we have expanded into strategies such as energy, infrastructure, real estate, growth equity, core, credit and, through strategic managerhedge fund partnerships, hedge funds. In several of these strategies, our first time funds have begun raising successor funds, and we expect the cost of raising such successor funds to be lower. We have also reached out to new clients,fund investors, including retail and high net worth clients.investors. However, fundraising continues to be competitive. While our Americas Fund XII, Asian Fund III, and our Real Estate Partners Americas II fundand Global Infrastructure Investors III funds exceeded the size of their respective predecessor funds, there is no assurance that fundraises for our other flagship private equity funds or for our newer strategies and their successor funds will experience similar success. If we are unable to successfully raise comparably sized or larger funds, our AUM, FPAUM, and associated fees attributable to new capital raised in future periods may be lower than in prior years. New capital organically raised in AUM for the quarters ended March 31, 2019 and 2018 and 2017 were $10.6$6.3 billion and $8.5$10.6 billion, respectively. See "Risk Factors—Risks Related to Our Business—Our inability to raise additional or successor funds (or raise successor funds of a comparable size as our predecessor funds) could have a material adverse impact on our business" in our Annual Report.
Our ability to successfully deploy capital. Our ability to maintain and grow our revenue base is dependent upon our ability to successfully deploy the capital available to us and participate in capital markets transactions. Greater competition, high valuations, increased overall cost of credit and other general market conditions may impact our ability to identify and execute attractive investments. Additionally, because we seek to make investments that have an ability to achieve our targeted returns while taking on a reasonable level of risk, we may experience periods of reduced investment activity. We have a long-term investment horizon and the capital deployed in any one quarter may vary significantly from the capital deployed in any other quarter or the quarterly average of capital deployed in any given year. Reduced levels of transaction activity also tends to result in reduced potential future investment gains, lower transaction fees and lower fees for our capital marketsCapital Markets business line, which may earn fees in the syndication of equity or debt. Capital invested for the quarters ended March 31, 2019 and 2018 and 2017 were $3.7$5.5 billion and $5.4 billion, respectively, and syndicated capital for the quarters ended March 31, 2019 and 2018 and 2017 were $0.6$0.3 billion and $1.2$0.6 billion, respectively.

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Our ability to realize investments. Challenging market and economic conditions may adversely affect our ability to exit and realize value from our investments and result in lower-than-expected returns. Although the equity markets are not the only means by which we exit investments, the strength and liquidity of the U.S. and relevant global equity markets generally, and the initial public offering market specifically, affect the valuation of, and our ability to successfully exit, our equity positions in our private equity portfolio companies in a timely manner. We may also realize investments through strategic sales. When financing is not available or becomes too costly, it may be more difficult to find a buyer that can successfully raise sufficient capital to purchase our investments. For the quarters ended March 31, 20182019 and 2017,2018, through exit activity in our investments, we realized carried interest of $0.2$0.3 billion and $0.2 billion, respectively.

Basis of Accounting
 
We consolidate the financial results of the KKR Group Partnerships and their consolidated subsidiaries,entities, which include the accounts of our investment management and capital markets companies, the general partners of unconsolidated funds and vehicles, general partners of certain funds that are consolidated and their respective consolidated funds and certain other entities including certain consolidated CLOs and CMBS. We refer to CLOs and CMBS as collateralized financing entities ("CFEs").

When an entity is consolidated, we reflect the accounts of the consolidated entity, including its assets, liabilities, fees,revenues, expenses, investment income, cash flows and other amounts, on a gross basis. While the consolidation of a consolidated fund or entity does not have an effect on the amounts of Net Income Attributable to KKR or KKR's partners'stockholders' capital that KKR reports, the consolidation does significantly impact the financial statement presentation under GAAP. This is due to the fact that the accounts of the consolidated entities are reflected on a gross basis while the allocable share of those amounts that are attributable to third parties are reflected as single line items. The single line items in which the accounts attributable to third parties are recorded are presented as noncontrolling interests on the consolidated statements of financial condition and net income attributable to noncontrolling interests on the consolidated statements of operations.
 
For a further discussion of our consolidation policies, see Note 2 "Summary of Significant Accounting Policies" to the condensed consolidated financial statements included elsewhere in this report.
 
Key Financial Measures Under GAAP
 
Revenues

Fees and Other
 
Fees and other consist primarily of (i) management and incentive fees from providing investment management services to unconsolidated funds, CLOs, other vehicles, and separately managed accounts,accounts; (ii) transaction fees earned in connection with successful investment transactions and from capital markets activities,activities; (iii) monitoring fees from providing services to portfolio companies,companies; (iv) expense reimbursements from certain investment funds and portfolio companies,companies; (v) revenue earned by oil and gas-producing entities that are consolidatedconsolidated; and (vi) consulting fees earned by consolidated entities that employ non-employee operating consultants. These fees are based on the contractual terms of the governing agreements and are recognized when earned, which coincides with the period during which the related services are performed and in the case of transaction fees, upon closing of the transaction. Monitoring fees may provide for a termination payment following an initial public offering or change of control. These termination payments are recognized in the period when the related transaction closes.

Capital Allocation-Based Income

Capital allocation-based income is earned from those arrangements whereby KKR serves as general partner and includes income from KKR's capital interest as well as “carried interest”"carried interest" which entitles KKR to a disproportionate allocation of investment income from investment funds' limited partners.
For a further discussion of our revenue policies, see Note 2 "Summary of Significant Accounting Policies" to the condensed consolidated financial statements included elsewhere in this report.

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Expenses
Compensation and Benefits
Compensation and benefits expense includes cash compensation consisting of salaries, bonuses, and benefits, as well as equity-based compensation consisting of charges associated with the vesting of equity-based awards, carry pool allocations,

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and other performance-based income compensation. The amounts allocated to the carry pool and other performance-based income compensation are accounted for as compensatory profit-sharing arrangements and recorded as compensation and benefits expenses.
All employees and employees of certain consolidated entities receive a base salary that is paid by KKR or its consolidated entities, and is accounted for as compensation and benefits expense. These employees are also eligible to receive discretionary cash bonuses based on performance, overall profitability, and other matters. While cash bonuses paid to most employees are borne by KKR and certain consolidated entities and result in customary compensation and benefits expense, in the past cash bonuses that are paid to certain employees have been borne by KKR Holdings. These bonuses have historically been funded with distributions that KKR Holdings receives on KKR Group Partnership Units held by KKR Holdings but are not then passed on to holders of unvested units of KKR Holdings. Because employees are not entitled to receive distributions on units that are unvested, any amounts allocated to employees in excess of an employee's vested equity interests are reflected as employee compensation and benefits expense. These compensation charges are currently recorded based on the amount of cash expected to be paid by KKR Holdings. Because KKR makes only fixed quarterly distributions,dividends, the distributions made on KKR Group Partnership Units underlying any unvested KKR Holdings units are generally insufficient to fund annual cash bonus compensation to the same extent as in periods prior to the fourth quarter of 2015. In addition, substantially all remaining units in KKR Holdings have been allocated and, while subject to a 5 year vesting period, will become fully vested by 2021, thus decreasing the amount of distributions received by KKR Holdings that are available for annual cash bonus compensation. We, therefore, expect to pay all or substantially all of the cash bonus payments from KKR's cash from operations and the carry pool and other performance-based income compensation as described below,pool; although, from time to time, KKR Holdings may contribute to the cash bonus payments in the future. See "Risks Related to Our Business—If we cannot retain and motivate our principals and other key personnel and recruit, retain and motivate new principals and other key personnel, our business, results and financial condition could be adversely affected" in our Annual Report regarding the adequacy of such distributions to fund future discretionary cash bonuses.

KKR uses three differentseveral methods, which are designed to yield comparable results, to allocate carried interest and other performance income compensation. With respect to KKR's investment funds that provide for carried interest without a preferred return, KKR allocates 40% of the carried interest received from such funds to its carry pool for employees and non-employee operating consultants. In addition, for investment funds that provide for incentive fees rather than carried interest, beginning with the quarter ended March 31, 2018, our carry pool is supplemented by allocating 43% of the incentive fees that do not constitute carried interest that are earned from such funds to performance income compensation. Prior to the quarter ended March 31, 2018, our carry pool was supplemented by 40% of incentive fees that do not constitute carried interest. Beginning with the quarter ended September 30, 2016, for investment funds that provide for carried interest with a preferred return and have accrued carried interest as of June 30, 2016, KKR also includes 40% of the management fees that would have been subject to a management fee refund as performance income compensation. Because of the different ways management fees are refunded in preferred return and non-preferred return funds that provide for carried interest, this calculation of 40% of the portion of the management fees subject to refund for funds that have a preferred return is designed to allocate to compensation an amount comparable to the amount that would have been allocated to the carry pool had the fund not had a preferred return. Beginning with the quarter ended September 30, 2017, for then-current and future carry generating funds with a preferred return and no or minimal accrued carried interest as of June 30, 2017, KKR allocates 43% of the carried interest to the carry pool instead of 40% of carried interest. For impacted funds, the incremental 3% replaces the allocation of management fee refunds that would have been calculated for those funds and is designed, based on a historical financial analysis of certain investment funds, to allocate an amount for preferred return funds that is comparable to the management fee refunds that would have been allocated as performance income compensation for those funds. The percentage of carried interest, management fee refunds, and incentive fees allocable to the carry pool or as performance income compensation is subject to change from time to time. For a discussion of how management fees are refunded for preferred return funds and non-preferred funds see "—Fair Value Measurements—Recognition of Carried Interest in the Statement of Operations."

The amounts allocated to the carry pool and other performance-based income compensation are accounted for as compensatory profit-sharing arrangements and recorded as compensation and benefits expense for KKR employees and general, administrative and other expense for certain non-employee consultants and service providers in the consolidated statements of operations prepared in accordance with GAAP.

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General, Administrative and Other
 
General, administrative and other expense consists primarily of professional fees paid to legal advisors, accountants, advisors and consultants, insurance costs, travel and related expenses, communications and information services, depreciation and amortization charges, changes in fair value of contingent consideration, expenses (including impairment charges) incurred by oil and gas-producing entities (including impairment charges) that are consolidated, and other general and operating expenses which are not borne by fund investors and are not offset by credits attributable to fund investors' noncontrolling interests in consolidated funds. General, administrative and other expense also consists of costs incurred in connection with pursuing potential investments that do not result in completed transactions a substantial("broken-deal expenses"), and other general operating expenses. A portion of whichthese general administrative and other expenses, in particular broken-deal expenses, are borne by fund investors.

Investment Income (Loss)
Net Gains (Losses) from Investment Activities
Net gains (losses) from investment activities consist of realized and unrealized gains and losses arising from our investment activities as well as income earned from certain equity method investments. A large portion of our net gains (losses) from investment activities are related to our private equity investments. Fluctuations in net gains (losses) from

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investment activities between reporting periods is driven primarily by changes in the fair value of our investment portfolio as well as the realization of investments. The fair value of, as well as the ability to recognize gains from, our private equity and other investments is significantly impacted by the global financial markets, which, in turn, affects the net gains (losses) from investment activities recognized in any given period. Upon the disposition of an investment, previously recognized unrealized gains and losses are reversed and an offsetting realized gain or loss is recognized in the current period. Since our investments are carried at fair value, fluctuations between periods could be significant due to changes to the inputs to our valuation process over time. For a further discussion of our fair value measurements and fair value of investments, see "—Critical Accounting Policies—Fair Value Measurements."

Dividend Income
 
Dividend income consists primarily of distributions that we and our consolidated investment funds receive from portfolio companies in which they invest. Dividend income is recognized primarily in connection with (i) dispositions of operations by portfolio companies, (ii) distributions of excess cash generated from operations from portfolio companiesinvestments, and (iii) other significant refinancings undertaken by portfolio companies.investments.

Interest Income
 
Interest income consists primarily of interest that is received on our credit instruments in which we and our consolidated funds and other entities invest as well as interest on our cash balances and other investments.
 
Interest Expense
 
Interest expense is incurred from debt issued by KKR, including debt issued by KFN, credit facilities entered into by KKR, debt securities issued by consolidated CFEs, and financing arrangements at our consolidated funds entered into primarily with the objective of managing cash flow. KFN's debt obligations are non-recourse to KKR beyond the assets of KFN. Debt securities issued by consolidated CFEs are supported solely by the investments held at the CFE and are not collateralized by assets of any other KKR entity. Our obligations under financing arrangements at our consolidated funds are generally limited to our pro rata equity interest in such funds. However, in some circumstances, we may provide limited guarantees of the obligations of our general partners in an amount equal to its pro rata equity interest in such funds. Our management companies bear no obligations with respect to financing arrangements at our consolidated funds. We also may provide other kinds of guarantees. See "—Liquidity."


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Income Taxes

TheOn July 1, 2018, we converted from a Delaware limited partnership to a Delaware corporation (the "Conversion"). Prior to the Conversion, KKR’s investment income and carried interest generally were not subject to U.S. corporate income taxes. Subsequent to the Conversion, all income earned by KKR is subject to U.S. corporate income taxes, resulting in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion.

KKR & Co. Inc. is a corporation for U.S. federal income tax purposes and thus is subject to U.S. federal, state and local corporate income taxes at the entity level on KKR’s share of net taxable income.  In addition, the KKR Group Partnerships and certain of their subsidiaries operate in the United States as partnerships for U.S. federal income tax purposes and as corporate entities in certain non-U.S. jurisdictions.  Accordingly, theseThese entities, in some cases, are subject to New York City unincorporated businessU.S. state or local income taxes or non-U.S. income taxes.  Furthermore, we hold our interest in one of the KKR Group Partnerships through KKR Management Holdings Corp., which is treated as a corporation for U.S. federal income tax purposes, and certain other subsidiaries of the KKR Group Partnerships are treated as corporations for U.S. federal income tax purposes. Accordingly, certain subsidiaries of KKR, including KKR Management Holdings Corp., are subject to U.S. federal, state and local corporate income taxes at the entity level and the related tax provision attributable to KKR's share of this income is reflected in the financial statements. We also generate certain interest income to our unitholders and interest deductions to KKR Management Holdings Corp.

We use the asset and liability method to account for income taxes in accordance with GAAP. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that all or a portion of the deferred tax assets will not be realized.
The 2017 Tax Act, which was enacted on December 22, 2017, permanently reduces the U.S. federal corporate income tax rate from a maximum of 35% to a 21% rate, effective January 1, 2018. KKR has recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets, deferred tax liabilities and the related impact on the tax receivable agreement and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions KKR has made, additional regulatory guidance that may be issued, and actions KKR may take following the enactment of the 2017 Tax Act. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018. See Note 11 "Income Taxes" to the audited financial statements included in our Annual Report for further information on the financial statement impact of the 2017 Tax Act.

On May 3, 2018, we announced our decision to convert KKR & Co. L.P. from a Delaware limited partnership to a Delaware corporation. See "Part II. Item 5. Other Information" for further information about the Conversion. Prior to the Conversion, KKR’s investment income and carried interest generally was not subject to U.S. corporate income taxes. Subsequent to the Conversion, we expect that all income earned by KKR will be subject to U.S. corporate income taxes, resulting in an overall higher income tax expense (or benefit) in periods subsequent to the Conversion. See "Part II. Item 1A. Risk Factors."

Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions including evaluating uncertainties. We review our tax positions quarterly and adjust our tax balances as new information becomes available.
For a further discussion of our income tax policies and further information about the impact of the Conversion, see Note 2 "Summary of Significant Accounting Policies" and Note 11 "Income Taxes" to the financial statements included elsewhere in this report.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income (loss) attributable to noncontrolling interests primarily represents the ownership interests that certain third parties hold in entities that are consolidated in the financial statements as well as the ownership interests in our KKR Group Partnerships that are held by KKR Holdings. The allocable share of income and expense attributable to these interests is

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accounted for as net income (loss) attributable to noncontrolling interests. Given the consolidation of certain of our investment funds and the significant ownership interests in our KKR Group Partnerships held by KKR Holdings, we expect a portion of net income (loss) will continue to be attributed to noncontrolling interests in our business.

For a further discussion of our noncontrolling interests policies, see Note 2 "Summary of Significant Accounting Policies" to the condensed consolidated financial statements included elsewhere in this report.


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Key Segment and Other Operating and Performance Measures
The segment key performance measures that follow are used by management in making operatingoperational and resource deployment decisions as well as assessing the overall performance of each of KKR's reportable business segments. The reportable segments forbusinesses. KKR's business aresegment reporting is presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P.Inc. and KKR Holdings L.P. and as such representrepresents the business in total. In addition, KKR's reportable segments aresegment reporting is presented without giving effect to the consolidation of the investment funds and CFEs that KKR manages as well as other consolidated entities that are not subsidiaries of KKR & Co. L.P.

Inc.
We disclose the followingcertain financial measures in this report that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholdersstockholders in assessing the overall performance of KKR's businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP, if available. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, where applicable, are included within Note 14 "Segment Reporting" to the condensed consolidated financial statements included elsewhere in this report and under "—Segment Balance Sheet."

Adjusted Shares
Adjusted Units

Adjusted unitsshares are used as a measure of the total common equity ownership of KKR that is held by KKR & Co. L.P.Inc. (including equity awards issued under the KKR & Co. L.P. 2010our Equity Incentive Plan (the "Equity Incentive Plan"),Plans, but excluding preferred units)stock), KKR Holdings, and other holders of securities exchangeable into Class A common unitsstock of KKR & Co. L.P.Inc. and represent the fully diluted share count of Class A common unit countstock using the if-converted method. We believe this measure is useful to unitholdersstockholders as it provides an indication of the total common equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issued under theour Equity Incentive PlanPlans and other exchangeable securities had been exchanged for Class A common unitsstock of KKR & Co. L.P.Inc. The 6.75% Series A Preferred Stock ("Series A Preferred Stock") and 6.50% Series B Preferred UnitsStock ("Series B Preferred Stock") are not exchangeable for Class A common unitsstock of KKR & Co. L.P.

Inc.
Adjusted UnitsShares Eligible for Distribution

Adjusted unitsshares eligible for distribution represents the portion of total adjusted unitsshares that isare eligible to receive a distribution.dividend. We believe this measure is useful to unitholdersstockholders as it provides insight into the calculation of amounts available for distribution as dividends on a per unitshare basis. Adjusted unitsWeighted average adjusted shares eligible for distribution is used in the calculation of after-tax distributable earnings per unit.share.

After-TaxAfter-tax Distributable Earnings

After-tax distributable earnings is used by management as an operatinga performance measure of theKKR’s earnings on a segment basis excluding mark-to-market gains (losses). Starting with the second quarter of KKR.2018, it is defined as the amount of net realized earnings of KKR for a given reporting period, after deducting equity-based compensation. KKR revised the definition of after-tax distributable earnings starting in the second quarter of 2018, because it reflects how the chief operating decision makers allocate resources and assess performance of KKR’s business. KKR believes this measurethat after-tax distributable earnings is useful to unitholdersstockholders as it provides a supplemental measure to assessaligns KKR’s net realization performance excludingwith the impactmanner in which KKR receives its revenues and determines the compensation of mark-to-market gains (losses). After-tax distributable earnings excludes certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KKR Private Equity Investors, L.P. on October 1, 2009.its employees. After-tax distributable earnings does not represent and is not used to calculate actual distributionsdividends under KKR's distributionKKR’s dividend policy.

The following tables present Historically equity-based compensation expense relating to our calculationsEquity Incentive Plans was not reflected in our calculation of after-tax distributable earnings. Under KKR’s segment revenues, whichpresentation, equity-based compensation expense is our total segment revenues excluding the impact of mark-to-market gains (losses), distributable segment expenses, which is our total segment expenses excluding the impact of mark-to-market gains (losses), andincluded in after-tax distributable earnings on common units foras a component of compensation expense in order to reflect the three months ended March 31, 2018 and 2017. Additionally, the individual componentsdilutive nature of our calculations ofthese non-cash equity-based awards. For comparability, after-tax distributable earnings are reconciled tofor the most directly comparable GAAP measure in the tables below.

prior periods have been calculated using this definition.

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The following table presents our calculation of distributable segment revenues for the three months ended March 31, 2018 and 2017.

  Three Months Ended
($ in thousands) March 31, 2018 March 31, 2017
Distributable Segment Revenues    
Fees and Other, Net    
Management Fees $251,585
 $208,284
Monitoring Fees 17,530
 13,220
Transaction Fees 156,845
 243,035
Fee Credits (43,774) (89,017)
Total Fees and Other, Net 382,186
 375,522
     
Realized Performance Income (Loss)    
Incentive Fees 16,407
 1,686
Carried Interest 202,555
 206,204
Total Realized Performance Income (Loss) 218,962
 207,890
     
Realized Investment Income (Loss)    
Net Realized Gains (Losses) 7,875
 79,451
Interest Income and Dividends 72,577
 56,882
Interest Expense (50,192) (41,709)
Total Realized Investment Income (Loss) 30,260
 94,624
Total Distributable Segment Revenues $631,408
 $678,036

The following table presents our calculation of distributable segment expenses for the three months ended March 31, 2018 and 2017.

  Three Months Ended
($ in thousands) March 31, 2018 March 31, 2017
Distributable Segment Expenses    
Compensation and Benefits    
Cash Compensation and Benefits $138,530
 $139,435
Performance Income Compensation 94,154
 88,067
Total Compensation and Benefits 232,684
 227,502
Occupancy and Related Charges 13,583
 14,369
Other Operating Expenses 57,905
 53,498
Total Distributable Segment Expenses $304,172
 $295,369
     

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The following table presents our calculation of after-tax distributable earnings for the three months ended March 31, 2018 and 2017.

  Three Months Ended
($ in thousands except per unit data) March 31, 2018 March 31, 2017
After-tax Distributable Earnings    
Distributable Segment Revenues $631,408
 $678,036
Distributable Segment Expenses 304,172
 295,369
Income (Loss) Attributable to Noncontrolling Interests 1,203
 1,584
Income Taxes Paid 14,168
 26,275
Preferred Distributions 8,341
 8,341
After-tax Distributable Earnings $303,524
 $346,467
     
Per Adjusted Unit Eligible for Distribution $0.37
 $0.43

For a discussion of the components that drove the changes in our after-tax distributable earnings, see discussion of (i) management, monitoring and transaction fees, (ii) realized performance income, (iii) realized gains and net interest and dividends within investment income and (iv) expenses excluding unrealized performance income compensation, within "—Segment Analysis."

Subsequent to March 31, 2018 and during the quarter ended June 30, 2018, we expect to realize losses in certain investments, primarily certain credit and energy investments, in advance of the Conversion in the amount of approximately $650 million. Since these investments have already been largely written down in periods prior to March 31, 2018, the realization of losses from these investments are not expected to have a significant impact on our total investment income or cash flows in the quarter ended June 30, 2018. These losses are being realized in advance of the Conversion and given the extraordinary nature of the Conversion, we expect to exclude these realized losses, which would otherwise reduce after-tax distributable earnings, from our reported after-tax distributable earnings in the second quarter of 2018.

The following are reconciliations of the individual components of the calculation of after-tax distributable earnings to the most directly comparable GAAP measure.

  Three Months Ended
($ in thousands) March 31, 2018 March 31, 2017
     
Total Revenues $472,606
 $767,755
Plus: Management fees relating to consolidated funds and placement fees 63,858
 47,102
Less: Fee credits relating to consolidated funds 14,721
 939
Plus: Net realized and unrealized carried interest - consolidated funds 28,076
 11,057
Less: General partner capital interest - unconsolidated funds 15,465
 51,803
Plus: Total investment income (loss) 238,122
 298,660
Less: Revenue earned by oil & gas producing entities 14,507
 17,273
Less: Expense reimbursements 20,211
 23,549
Less: Other 10,220
 8,312
Total Segment Revenues $727,538
 $1,022,698
Less: Unrealized Carried Interest (111,732) 140,626
Less: Net Unrealized Gains (Losses) 207,862
 204,036
Total Distributable Segment Revenues $631,408
 $678,036
     


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  Three Months Ended
($ in thousands) March 31, 2018 March 31, 2017
     
Total Expenses $436,601
 $540,014
Less: Equity-based and other non-cash compensation 96,227
 111,036
Less: Reimbursable expenses and placement fees 27,761
 36,123
Less: Operating expenses relating to consolidated funds, CFEs and other entities 21,805
 13,430
Less: Expenses incurred by oil & gas producing entities 11,101
 11,177
Less: Intangible amortization 5,030
 6,366
Less: Other 13,628
 9,299
Total Segment Expenses $261,049
 $352,583
Less: Unrealized Performance Income Compensation (43,123) 57,214
Total Distributable Segment Expenses $304,172
 $295,369
     

Assets Under Management ("AUM")

Assets under management represent the assets managed or advised by KKR from which KKR is entitled to receive fees or a carried interest (either currently or upon deployment of capital), general partner capital, and assets managed or advised by strategic manager partnershipsBDC partnership and hedge fund managers in which KKR holds a minority ownership interest. We believe this measure is useful to unitholdersstockholders as it provides additional insight into the capital raising activities of KKR and its strategic manager partnershipshedge fund managers and the overall activity in their investment funds and other managed capital. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR's investment funds; (ii) uncalled capital commitments from these funds, including uncalled capital commitments from which KKR is currently not earning management fees or carried interest; (iii) the fair value of investments in KKR's co-investment vehicles; (iv) the par value of outstanding CLOs (excluding CLOs wholly-owned by KKR); (v) KKR's pro rata portion of the AUM of strategic manager partnershipshedge fund managers in which KKR holds a minority ownership interest; (vi) all AUM of the strategic BDC partnership with FS Investments; and (vi)(vii) the fair value of other assets managed by KKR. The pro rata portion of the AUM of strategic manager partnershipshedge fund managers is calculated based on KKR'sKKR’s percentage ownership interest in such entities multiplied by such entity'sentity’s respective AUM. KKR's definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.

Book Value

Book value is a measure of the net assets of KKR'sKKR’s reportable segmentssegment and is used by management primarily in assessing the unrealized value of KKR'sKKR’s investments and other assets, including carried interest. We believe this measure is useful to unitholdersstockholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders and to the holders of the Series A and Series B Preferred Units.

Stock. Following the Conversion, KKR's segment balance sheet reflects KKR's tax assets and liabilities as prepared under GAAP.
Capital Invested

Capital invested is the aggregate amount of capital invested by (i) KKR'sKKR’s investment funds, (ii) KKR's Principal Activities segmentbusiness line as a co-investment, if any, alongside KKR'sKKR’s investment funds, and (iii) theKKR's Principal Activities segmentbusiness line in connection with a syndication transaction conducted by KKR's Capital Markets segment,business line, if any. Capital invested is used as a measure of investment activity at KKR during a given period. We believe this measure is useful to unitholdersstockholders as it provides a measure of capital deployment across KKR'sKKR’s business segments.lines. Capital invested includes investments made using investment financing arrangements like credit facilities, as applicable.  Capital invested excludes (i) investments in certain leveraged credit strategies, (ii) capital invested by KKR'sKKR’s Principal Activities segmentbusiness line that is not a co-investment alongside KKR'sKKR’s investment funds, and (iii) capital invested by theKKR’s Principal Activities segmentbusiness line that is not invested in connection with a syndication transaction by KKR’s Capital Markets business line. Capital syndicated by KKR's Capital Markets segment. Capital syndicated by our Capital Markets segmentbusiness line to third parties other than KKR'sKKR’s investment funds or Principal Activities segmentbusiness line is not included in capital invested.  See also "—Syndicated Capital."


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Economic Net Income (Loss) ("ENI")

Economic net income (loss) is a measure of profitability for KKR's reportable segments and is an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure may provide additional insight into the overall profitability of KKR's businesses inclusive of carried interest, incentive fees and related carry pool allocations and investment income. ENI is comprised of total segment revenues less total segment expenses and certain economic interests in KKR's segments held by third parties. Pre-tax Economic Net Income (Loss) represents Economic Net Income (Loss) after equity-based compensation. After-tax Economic Net Income (Loss) represents Economic Net Income (Loss) after equity-based compensation, provision for income taxes and preferred distributions.

syndicated capital.
Fee Paying AUM ("FPAUM")

Fee paying AUM represents only the AUM from which KKR receivesis entitled to receive management fees. We believe this measure is useful to unitholdersstockholders as it provides additional insight into the capital base upon which KKR earns management fees. FPAUM is the sum of all of the individual fee bases that are used to calculate KKR's and its strategic managerhedge fund and BDC partnership management fees and differs from AUM in the following respects: (i) assets and commitments from which KKR doesis not entitled to receive a management fee are excluded (e.g., assets and commitments with respect to which it receivesis entitled to receive only carried interest or is otherwise not currently receivingentitled to receive a management fee) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.

Fee Related Earnings ("FRE")

Fee related earnings is a supplemental measure of the operating earnings of KKR and its business segmentson a segment basis before performance income related performance income compensation and investment income. KKR believes this measure may be useful to unitholdersstockholders as it provides additional insight into the operating profitability of KKR'sKKR’s fee generating management companies and capital markets businesses. Starting with the second quarter of 2018, fee related earnings is calculated as KKR’s total Fees and Other, Net, multiplied by KKR’s segment operating margin. For purposes of the fee related earnings calculation, segment operating margin is calculated as Segment Operating Earnings, before equity-based compensation, divided by total segment revenues. Historically, fee related earnings was calculated as operating earnings of KKR on a segment basis before performance income, related performance income compensation and

Outstanding Adjusted Units
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Outstanding adjusted unitsinvestment income. KKR revised the definition of fee related earnings starting in the second quarter of 2018 to provide supplemental information about fees generated from KKR’s management companies and capital markets business because KKR believes it provides increased transparency on KKR’s underlying financial results to the stockholders. Fee related earnings for the comparable prior periods have been calculated using this definition.
Income Taxes Paid
Income taxes paid represents the portionestimated total tax impact on KKR’s distributable earnings before taxes. This amount is the implied amount of total adjusted unitsincome taxes that would receive assetsbe paid assuming that all pre-tax distributable earnings were allocated to KKR & Co. Inc., which would occur following an exchange of all KKR Holdings units for Class A common stock of KKR if it were& Co. Inc. Income taxes paid also includes amounts paid pursuant to be liquidated as of a particular date. Outstanding adjusted units is usedthe tax receivable agreement.
Segment Operating Earnings
Segment operating earnings represents segment earnings before interest expense, preferred dividends, income attributable to calculate book value per outstanding adjusted unit, which wenoncontrolling interests and income taxes paid. We believe segment operating earnings is useful to unitholdersstockholders as it provides a supplemental measure of net assets of KKR's reportable segments on a per unit basis.

our operating performance without taking into account items that we do not believe relate directly to operations.
Syndicated Capital

Syndicated capital is generally the aggregate amount of capital in transactions originated by KKR and its investment funds and carry-yielding co-investment vehicles, which has been distributed to third parties, generally in exchange for a fee. It does not include (i) capital invested in such transactions by KKR investment funds and carry-yielding co-investment vehicles, which is instead reported in capital invested, (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds, and (iii) debt capital that is either underwritten or arranged on a best efforts basis. Syndicated capital is used as a measure of investment activity for KKR during a given period, and we believe that this measure is useful to unitholdersstockholders as it provides additional insight into levels of syndication activity in KKR's Capital Markets segmentbusiness line and across itsKKR's investment platform.

platform.
Uncalled Commitments

Uncalled commitments are used as a measure of unfunded capital commitments that KKR'sKKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholdersstockholders as it provides additional insight into the amount of capital that is available to KKR'sKKR’s investment funds to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements.

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A reconciliation of Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders on a GAAP basis to ENI, FRE and After-tax Distributable Earnings is provided below. For a discussion of the components that drove the changes in our FRE, see discussion of (i) management, monitoring and transaction fees and (ii) expenses of our Private Markets, Public Markets and Capital Markets segments excluding performance income compensation in "—Segment Analysis."

  Three Months Ended
($ in thousands) March 31, 2018 March 31, 2017
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders $170,102
 $259,343
Plus: Preferred Distributions 8,341
 8,341
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P. 121,002
 216,432
Plus: Equity-based and other non-cash compensation 100,491
 111,036
Plus: Amortization of intangibles, placement fees and other, net 47,709
 32,837
Plus: Income tax (benefit) 17,641
 40,542
Economic Net Income (Loss) 465,286
 668,531
Plus: Income attributable to segment noncontrolling interests 1,203
 1,584
Less: Total investment income (loss) 238,122
 298,660
Less: Net performance income (loss) 56,199
 203,235
Plus: Expenses of Principal Activities Segment 51,262
 53,769
Fee Related Earnings 223,430
 221,989
Plus: Net interest and dividends 22,385
 15,173
Less: Expenses of Principal Activities Segment 51,262
 53,769
Plus: Realized performance income (loss), net 124,808
 119,823
Plus: Net realized gains (losses) 7,875
 79,451
Less: Income taxes paid 14,168
 26,275
Less: Preferred distributions 8,341
 8,341
Less: Income attributable to segment noncontrolling interests 1,203
 1,584
After-tax Distributable Earnings $303,524
 $346,467
     


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Unaudited Condensed Consolidated Results of Operations
 
The following is a discussion of our condensed consolidated results of operations for the three months ended March 31, 20182019 and 2017.2018. You should read this discussion in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report. For a more detailed discussion of the factors that affected the results of operations of our four business segmentsreportable segment in these periods, see "—Segment Analysis."

Three months ended March 31, 20182019 compared to three months ended March 31, 20172018
Three Months EndedThree Months Ended
March 31, 2018 March 31, 2017 ChangeMarch 31, 2019 March 31, 2018 Change
($ in thousands)($ in thousands)
Revenues 
  
   
  
  
Fees and Other$394,394
 $380,179
 $14,215
$372,548
 $394,394
 $(21,846)
Capital Allocation-Based Income78,212
 387,576
 (309,364)814,932
 78,212
 736,720
Total Revenues472,606
 767,755
 (295,149)1,187,480
 472,606
 714,874
          
Expenses          
Compensation and Benefits298,136
 402,963
 (104,827)544,562
 298,136
 246,426
Occupancy and Related Charges14,215
 14,851
 (636)14,690
 14,215
 475
General, Administrative and Other124,250
 122,200
 2,050
169,515
 124,250
 45,265
Total Expenses436,601
 540,014
 (103,413)728,767
 436,601
 292,166
          
Investment Income (Loss)          
Net Gains (Losses) from Investment Activities472,800
 506,645
 (33,845)1,203,878
 472,800
 731,078
Dividend Income33,064
 9,924
 23,140
22,625
 33,064
 (10,439)
Interest Income298,256
 280,980
 17,276
358,511
 298,256
 60,255
Interest Expense(219,590) (186,854) (32,736)(249,088) (219,590) (29,498)
Total Investment Income (Loss)584,530
 610,695
 (26,165)1,335,926
 584,530
 751,396
          
Income (Loss) Before Taxes620,535
 838,436
 (217,901)1,794,639
 620,535
 1,174,104
          
Income Taxes17,641
 40,542
 (22,901)
Income Tax Expense (Benefit)167,593
 17,641
 149,952
          
Net Income (Loss)602,894
 797,894
 (195,000)1,627,046
 602,894
 1,024,152
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests25,674
 20,933
 4,741
—
 25,674
 (25,674)
Net Income (Loss) Attributable to Noncontrolling Interests398,777
 509,277
 (110,500)917,727
 398,777
 518,950
Net Income (Loss) Attributable to KKR & Co. L.P.178,443
 267,684
 (89,241)
Net Income (Loss) Attributable to KKR & Co. Inc.709,319
 178,443
 530,876
          
Less: Net Income Attributable to Series A Preferred Unitholders5,822
 5,822
 —
Less: Net Income Attributable to Series B Preferred Unitholders2,519
 2,519
 —
Series A Preferred Stock Dividends5,822
 5,822
 —
Series B Preferred Stock Dividends2,519
 2,519
 —
          
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$170,102
 $259,343
 $(89,241)
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders$700,978
 $170,102
 $530,876








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Revenues

For the three months ended March 31, 20182019 and 2017,2018, revenues consisted of the following:

  Three Months Ended
  March 31, 2018 March 31, 2017 Change
Management Fees $187,727
 $161,182
 $26,545
Transaction Fees 158,653
 243,658
 (85,005)
Monitoring Fees 17,586
 13,504
 4,082
Fee Credits (29,053) (88,078) 59,025
Incentive Fees 13,805
 273
 13,532
Expense Reimbursements 20,211
 23,265
 (3,054)
Oil and Gas Revenue 14,507
 17,273
 (2,766)
Consulting Fees 10,958
 9,102
 1,856
Total Fees and Other 394,394
 380,179
 14,215
       
Carried Interest 62,747
 335,773
 (273,026)
General Partner Capital Interest 15,465
 51,803
 (36,338)
Total Capital Allocation-Based Income 78,212
 387,576
 (309,364)
       
Total Revenues $472,606
 $767,755
 $(295,149)

Prior to January 1, 2018, to the extent an investment fund was not consolidated, KKR accounted for carried interest within Fees and Other separately from its general partner capital interest, which was included in Net Gains (Losses) from Investment Activities in the condensed consolidated statements of operations. Effective January 1, 2018, the carried interest component of the general partner interest and the capital interest KKR holds in its investment funds as the general partner are accounted for as a single unit of account and reported in capital allocation-based income within Revenues in the condensed consolidated statements of operations. This change in accounting has been applied on a full retrospective basis. See Note 2 "Summary of Significant Accounting Policies" to the condensed consolidated financial statements included elsewhere in this report.
  Three Months Ended
  March 31, 2019 March 31, 2018 Change
  ($ in thousands)
Management Fees $188,408
 $187,727
 $681
Fee Credits (103,477) (29,053) (74,424)
Transaction Fees 188,203
 158,653
 29,550
Monitoring Fees 25,651
 17,586
 8,065
Incentive Fees —
 13,805
 (13,805)
Expense Reimbursements 44,060
 20,211
 23,849
Oil and Gas Revenue 13,175
 14,507
 (1,332)
Consulting Fees 16,528
 10,958
 5,570
Total Fees and Other 372,548
 394,394
 (21,846)
       
Carried Interest 694,383
 62,747
 631,636
General Partner Capital Interest 120,549
 15,465
 105,084
Total Capital Allocation-Based Income 814,932
 78,212
 736,720
       
Total Revenues $1,187,480
 $472,606
 $714,874

Total Fees and Other for the three months ended March 31, 2018 increased2019 decreased compared to the three months ended March 31, 20172018 primarily as a result of a decreasean increase in fee credits and to a lesser extent, an increasedecrease in managementincentive fees, partially offset by an increase in expense reimbursements, transaction fees, and monitoring fees.

Fee credits increased overall as a decreaseresult of a higher level of transaction and monitoring fees in our Private Markets and Public Markets business lines. Fee credits owed to consolidated investment funds are eliminated upon consolidation under GAAP. Transaction and monitoring fees earned that generate these fee credits are not eliminated upon consolidation because those fees are earned from KKR portfolio companies which are not consolidated. Accordingly, certain transaction fees. and monitoring fees are reflected in revenues without a corresponding fee credit.

For a more detailed discussion of the factors that affected our management fees, transaction fees monitoring fees, fee credits and incentivemonitoring fees during the period, see "—Segment Analysis.Results—Segment Revenues."

The increase in management fees during the three months ended March 31, 2019 compared to the prior period was primarily due to new management fees earned from our Global Infrastructure Fund III when it entered its investment period in the second quarter of 2018. Partially offsetting this increase was a decrease in management fees and incentive fees related to our BDC platform as a result of the FS Investments Transaction that closed in the second quarter of 2018. KKR reports its investment in FS/KKR Advisor using the equity method of accounting, and as such, KKR reflects its allocation of the net income of this entity as investment income. Accordingly, the management fees and incentive fees of the BDCs that had been reported in fees and other revenues prior to the closing of the FS Investment Transaction are now reflected on a net basis as part of our allocation of the net income of this entity within investment income. This decreased our reported gross management fees and incentive fees when compared to the prior period.

The increase in carried interest and general partner capital interest during the three months ended March 31, 20182019 was due primarily to a lowerhigher level of net appreciation in the value of our private equity portfolio as compared to the three months ended March 31, 2017. For a more detailed discussion of the factors that affected our Private Markets and Public Markets carried interest during the period, see "—Segment Analysis—Private Markets—Segment Revenues—Performance Income" and "—Segment Analysis—Public Markets—Segment Revenues—Performance Income." For a more detailed discussion of the factors that affected our general partner capital interest during the period, see "—Segment Analysis—Principal Activities—Segment Revenues—Investment Income."2018.






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Compensation and Benefits Expenses

The decreaseincrease was primarily due to a lowerhigher level of performance income compensation primarily reflecting a lowerhigher level of appreciation in the value of our private equity portfolio during the three months ended March 31, 20182019 compared to the three months ended March 31, 2017.


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unvested shares outstanding.

General, Administrative and Other Expenses

The increase during the three months ended March 31, 2019 compared to the prior period was primarily due to (i) an increase in professional feesexpenses reimbursable by investment funds, (ii) a higher level of expenses that are creditable to our investment funds, which includes broken-deal expenses and travel expenses incurred(iii) an increase in depreciation, depletion and amortization of our consolidated oil and gas producing entities as compared to the prior period. These increases were partially offset by (i) a decrease in placement feeslower level of expenses incurred in connection with capital raising activityfrom our consolidated investment funds during the three months ended March 31, 20172019 as compared to the prior period and (ii) expenses of KKR Prisma that had been reported on a gross basis prior to the closing of the PAAMCO Prisma transaction on June 1, 2017 and that are now reflected as part of our allocation of the net income of PAAMCO Prisma after June 1, 2017, resulting in a decrease in our reported General, Administrative and Other Expenses.period.

Net Gains (Losses) from Investment Activities

The following is a summary of net gains (losses) from investment activities:
Three Months EndedThree Months Ended
March 31, 2018 March 31, 2017March 31, 2019 March 31, 2018
($ in thousands)($ in thousands)
Private Equity$174,622
 $110,101
$988,193
 $174,622
Credit59,413
 33,282
(9,207) 59,413
Investments of Consolidated CFEs(74,919) 11,880
222,827
 (74,919)
Real Assets72,254
 9,858
119,128
 72,254
Equity Method - Other144,814
 35,033
177,039
 144,814
Other Investments(157,834) 105,720
(28,911) (157,834)
Debt Obligations and Other108,688
 (29,402)(267,148) 108,688
Other Net Gains (Losses) from Investment Activities145,762
 230,173
1,957
 145,762
Net Gains (Losses) from Investment Activities$472,800
 $506,645
$1,203,878
 $472,800
   

Prior to January 1, 2018, to the extent an investment fund was not consolidated, KKR accounted for its general partner capital interest in Net Gains (Losses) from Investment Activities for the three months ended March 31, 2019
The net gains from investment activities for the three months ended March 31, 2019 were comprised of net realized gains of $129.8 million and net unrealized gains of $1,074.1 million.
Realized Gains and Losses from Investment Activities
For the three months ended March 31, 2019, net realized gains related primarily to realized gains on (i) the final sale of our investment in Sedgwick Claims Management Services, Inc. (financial services sector), (ii) the statementssale of operations. Effective January 1, 2018,real estate investments held through certain consolidated entities, and (iii) the general partner capital interest andsale of assets in our consolidated special situations funds.
Unrealized Gains from Investment Activities
For the carried interest component of the general partner interest are accounted forthree months ended March 31, 2019, unrealized gains were driven primarily by (i) mark-to-market gains on our investment in First Data Corporation (NYSE: FDC) which is held as a single unitco-investment by KKR, (ii) mark-to-market gains in portfolio companies in our core investment strategy, the most significant of accountwhich were PetVet Care Centers, LLC (health care sector), Heartland Dental, LLC (health care sector), and reported within RevenuesThe Bay Clubs Company, LLC (hotels/leisure sector), and (iii) mark-to-market gains on our growth equity investments held by KKR and certain consolidated entities. Certain of our investment funds also hold an investment in First Data Corporation; these funds are not consolidated and as such, unrealized gains and losses relating to these funds' investments are not reflected in net gains (losses) from investment activities.

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Unrealized Losses from Investment Activities
Partially offsetting the statementsunrealized gains above were unrealized losses relating to (i) mark-to-market losses on alternative credit assets held in our consolidated special situations funds and our investment in Mr. Cooper Group Inc. (NASDAQ: COOP) and (ii) the reversal of operations. This change in accounting has been applied on a full retrospective basis. See Note 2 "Summary of Significant Accounting Policies"previously recognized unrealized gains relating to the condensed consolidated financial statements included elsewhere in this report.realization activity described above.

For a discussion of other factors that affected KKR's realized investment income, see "—Segment Analysis."
Net Gains (Losses) from Investment Activities for the three months ended March 31, 2018
The net gains from investment activities for the three months ended March 31, 2018 were comprised of net realized gains of $30.4 million and net unrealized gains of $442.4 million.

Realized Gains from Investment Activities

For the three months ended March 31, 2018, realized gains related primarily to (i) the partial sale of growth equity investments held through certain consolidated entitiesfunds and (ii) the partial sale of an investment in K Twin Towers (real estate sector) held directly by KKR.

Realized Losses from Investment Activities

Partially offsetting these realized gains were realized losses primarily relating to the sale of (i) alternative credit assets in our consolidated special situations funds and (ii) the sale of investments held by our consolidated CLOs.

Unrealized Gains from Investment Activities

For the three months ended March 31, 2018, net unrealized gains were driven primarily by (i) mark-to-market gains in our growth equity investments held directly by KKR and certain consolidated entities, (ii) gains in our private equity portfolio held directly by KKR, the most significant of which were gains on our investments in USI, Inc. (financial services sector) and WMIH Corp. (NASDAQ: WMIH)(name has since changed to Mr. Cooper Group Inc.), and (iii) mark-to-market gains on alternative credit assets in our consolidated special situations funds.


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Unrealized Losses from Investment Activities

Partially offsetting the unrealized gains above were unrealized losses relating to mark-to-market losses on our private equity portfolio held directly by KKR, the most significant of which was our co-investment in First Data Corporation (NYSE: FDC).

Corporation.
For a discussion of other factors that affected KKR's realized investment income, see "—Segment Analysis."

Dividend Income
Net Gains (Losses) from Investment Activities for
During the three months ended March 31, 2017

The net gains2019, the most significant dividends received included $14.7 million from investment activities for the three months ended March 31, 2017 were comprised of net realized gains of $146.2 millionour consolidated real estate funds and net unrealized gains of $412.3 million.

Realized Gains and Losses from Investment Activities

For the three months ended March 31, 2017, net realized gains were comprised primarily of realized gains on sales of private equityreal estate investments held directly by KKR, including the final sale of Galenica AG (VTX: GALN) and HCA Holdings, Inc. (NYSE: HCA) and a partial sale of US Foods Holding Corp. (NYSE: USFD).

Unrealized Gains$4.5 million from Investment Activities

For the three months ended March 31, 2017, net unrealized gains were driven primarily by (i) mark-to-market gains in our private equity portfolio held directly by KKR including unrealized gains in First Data Corporation, (ii) mark-to-market gains on alternative credit assets in our consolidated special situations funds and KFN and (iii) mark-to-market gains on investments held through$2.4 million from our consolidated CMBS structures.

Unrealized Losses from Investment Activities

Partially offsetting the unrealized gains for the three months ended March 31, 2017 were unrealized losses, the most significant of which were unrealized losses relating to (i) the reversal of unrealized gains on the final sale of Galenica AG and HCA Holdings, Inc. and the partial sale of US Foods Holding Corp., and (ii) mark-to-market losses on debt held through consolidated CMBS.

For a discussion of other factors that affected KKR's investment income, see "—Segment Analysis."

Dividend Income
energy funds. During the three months ended March 31, 2018, the most significant dividends received included $11.4 million from our consolidated real estate funds, $6.2 million from our consolidated special situations funds and KFN and $5.6 million from our private equity investment in Internet Brands, Inc. (technology sector). During the three months ended March 31, 2017, the most significant dividends received included $9.9 million from various investments across a variety of investment strategies. Significant dividends from portfolio companies are generally not recurring quarterly dividends, and while they may occur in the future, their size and frequency are variable. For a discussion of other factors that affected KKR's dividend income, see "—Segment Analysis.Analysis—Segment Results—Segment Revenues—Principal Activities Revenues—Realized Investment Income."

Interest Income
 
The increase in interest income during the three months ended March 31, 20182019 compared to the three months ended March 31, 20172018 was primarily due to a higher level of interest earned related to (i) the closing of six additional CLOs subsequent to the three months ended March 31, 2018, (ii) an increase in the amount of capital deployed in investments held by KKR Real Estate Finance Trust Inc. ("KREF"), our REIT,a NYSE-listed real estate investment trust ("REIT"), which is consolidated and (iii) an increase in reference benchmark interest rates as compared to the prior period (ii) the closing of three additional CLOs subsequent to the three months ended March 31, 2017 and (iii) an increase inwhich impacted the amount of investments held atinterest earned across various investment vehicles, most notably our India debt financing company as compared to the prior period.CLOs and KREF. These increases were partially offset by a

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decrease in interest income related to certain notes issuedas a result of the sale of KKR's beneficial interest in four consolidated CMBS vehicles held by consolidated CLOs being called for redemptionKREF that resulted in the deconsolidation of such vehicles subsequent to March 31, 2017.2018. For a discussion of other factors that affected KKR's interest income, see "—Segment Analysis.Analysis—Segment Results—Segment Revenues—Principal Activities Revenues—Realized Investment Income."


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Interest Expense
 
The increase in interest expense during the three months ended March 31, 20182019 compared to the three months ended March 31, 20172018 was primarily due to the impact of (i) the closing of threesix additional CLOs subsequent to the three months ended March 31, 2017,2018, (ii) increased interest on amounts outstandingborrowings under KREF's repurchaselending facilities used to finance investments in commercial loans and (iii) increased borrowings at KFNan increase in reference benchmark interest rates as compared to the prior period which impacted the amount of interest expense incurred primarily in our CLOs and (iv) increased borrowings at our India debt financing company.KREF. These increases were partially offset by (i) a decrease in interest expense incurred as a result of the sale of KKR's beneficial interest in four consolidated CMBS vehicles held by KREF that resulted in the deconsolidation of such vehicles subsequent to March 31, 2018 and (ii) a decrease in interest expense associated with ourcertain notes issued by consolidated credit funds.CLOs being called and repaid subsequent to March 31, 2018. For a discussion of other factors that affected KKR's interest expense, see "—Segment Analysis.Analysis—Segment Results—Segment Expenses—Interest Expense."
 
Income (Loss) Before Taxes
 
The decreaseincrease in income (loss) before taxes during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was due primarily to a lower level of carried interest gains in our private equity portfolio, a lowerhigher level of net gains from investment activities and a higher level of interest expense,capital allocation-based income, partially offset by an increase in dividenda higher level of compensation and interest income,benefits expense, in each case as described above.

Income Taxes

The decrease in income taxes is due primarily to the impact of the 2017 Tax Act which was enacted on December 22, 2017. The 2017 Tax Act, among other provisions, reduced the U.S. federal corporate tax rate from 35% to 21%. Accordingly, a lower amount of incomeIncome tax expense was incurred duringfor the three months ended March 31, 2019 increased compared to the three months ended March 31, 2018 for those entities within KKR’s business that are currently subject to corporate income tax, which generally include our management companies and capital markets companies.primarily as a result of the Conversion. Prior to the Conversion, the majority of KKR’sKKR & Co. L.P.’s investment income and carried interest was generally were not subject to U.S. corporate income taxes. Subsequent to the Conversion, we expect that all income earned by KKR will be& Co. Inc. is subject to U.S. corporate income taxes, resultingwhich we believe will result in an overall higher income tax expense (or benefit) inwhen compared to periods subsequentprior to the Conversion. See "Part II. Item 1A. Risk Factors—AsOur effective tax rate under GAAP for the three months ended March 31, 2019 was 9.34%. For a resultdiscussion of factors that impacted KKR's tax provision, see Note 11 "Income Taxes" to the Conversion, we expect to pay more corporate income taxes and also expect to make larger payments under our tax receivable agreement than we would as a limited partnership. We also expect the anticipated amount of annual dividends to our Class A common stockholders immediately following the Conversion, if declared, to be lower than the distribution amounts we declaredfinancial statements included elsewhere in prior annual periods as a limited partnership. In addition, we may fail to realize all or some of the anticipated benefits of the Conversion or those benefits may take longer to realize than expected, which could have a material and adverse impact on the trading price of our securities."this report.

Net Income (Loss) Attributable to Noncontrolling Interests
 
Net income (loss) attributable to noncontrolling interests for the three months ended March 31, 20182019 relates primarily to net income attributable to KKR Holdings representing its ownership interests in the KKR Group Partnerships as well as third-party limited partner interests in those investment funds that we consolidate. The decreaseincrease from the prior period is due primarily to lowerhigher amounts attributed to KKR Holdings in connection with a lowerhigher level of income recognized for the three months ended March 31, 20182019 as compared to the prior period as well as a higher level of income recorded by certain consolidated fund entities that is attributable to third party limited partners. This increase was partially offset by a reduction in KKR Holdings' ownership percentage in the KKR Group Partnerships.Partnerships as compared to the prior period.

Net Income (Loss) Attributable to KKR & Co. L.P.Inc.
 
The decreaseincrease in net income (loss) attributable to KKR & Co. Inc. for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily due to a lowerhigher level of carried interestnet gains from investment activities and net investment gainsa higher level of capital allocation-based income as compared to the prior period, partially offset by an increase in income attributable to noncontrolling interests, and to a lesser extent, increased compensation and benefits and income tax expense in the current period as compared to the prior period.



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Condensed Consolidated Statements of Financial Condition

The following table provides the condensed consolidated statements of financial condition on a GAAP Basis as of March 31, 2018 and December 31, 2017.
(Amounts in thousands, except common unit and per common unit amounts)
  As of As of
  March 31, 2018 December 31, 2017
     
Assets    
Cash and Cash Equivalents $1,880,834
 $1,876,687
Investments 42,101,905
 39,013,934
Other 3,596,414
 4,944,098
Total Assets 47,579,153
 45,834,719
     
Liabilities and Equity    
Debt Obligations 22,041,271
 21,193,859
Other Liabilities 3,768,944
 3,978,060
Total Liabilities 25,810,215
 25,171,919
     
Redeemable Noncontrolling Interests 690,630
 610,540
     
Equity    
Series A Preferred Units 332,988
 332,988
Series B Preferred Units 149,566
 149,566
KKR & Co. L.P. Capital - Common Unitholders 6,918,185
 6,703,382
Noncontrolling Interests 13,677,569
 12,866,324
Total Equity 21,078,308
 20,052,260
Total Liabilities and Equity $47,579,153
 $45,834,719
     
KKR & Co. L.P. Capital Per Outstanding Common Unit - Basic $14.14
 $13.79
     




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Condensed Consolidated Statements of Financial Condition

The following table provides the Consolidated Statements of Financial Condition on a GAAP basis as of March 31, 2019 and December 31, 2018.
(Amounts in thousands, except per share amounts)
  As of As of
  March 31, 2019 December 31, 2018
     
Assets    
Cash and Cash Equivalents $1,808,368
 $1,751,287
Investments 45,795,254
 44,907,982
Other 4,400,397
 4,084,106
Total Assets 52,004,019
 50,743,375
     
Liabilities and Equity    
Debt Obligations 22,262,369
 22,341,192
Other Liabilities 3,533,809
 3,019,574
Total Liabilities 25,796,178
 25,360,766
     
Redeemable Noncontrolling Interests —
 1,122,641
     
Stockholders' Equity    
Preferred Stock 482,554
 482,554
KKR & Co. Inc. Stockholders' Equity - Common Stockholders 8,839,817
 8,167,056
Noncontrolling Interests 16,885,470
 15,610,358
Total Equity 26,207,841
 24,259,968
Total Liabilities and Equity $52,004,019
 $50,743,375
     
KKR & Co. Inc. Stockholders' Equity Per Outstanding Share of Class A Common Stock $16.56
 $15.27
     


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Consolidated Statements of Cash Flows
 
The accompanying condensed consolidated statements of cash flows include the cash flows of our consolidated entities which include certain consolidated investment funds and CFEs notwithstanding the fact that we may hold only a minority economic interest in those funds and CFEs.

The assets of our consolidated funds and CFEs, on a gross basis, can be substantially larger than the assets of our business and, accordingly, could have a substantial effect on the cash flows reflected in our consolidated statements of cash flows. The primary cash flow activities of our consolidated funds and CFEs involve: (i) capital contributions from fund investors; (ii) using the capital of fund investors to make investments; (iii) financing certain investments with indebtedness; (iv) generating cash flows through the realization of investments; and (v) distributing cash flows from the realization of investments to fund investors. Because our consolidated funds and CFEs are treated as investment companies for accounting purposes, certain of these cash flow amounts are included in our cash flows from operations.

On January 1, 2018, KKR adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which amends the guidance to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. Upon adoption, (i) Restricted Cash and Cash Equivalents and (ii) Cash and Cash Equivalents Held at Consolidated Entities were (a) included in the cash and cash-equivalents balances in the condensed consolidated statements of cash flows and (b) disclosed in a reconciliation between the condensed consolidated statements of financial condition and the condensed consolidated statements of cash flows. This guidance has been applied on a full retrospective basis. For the three months ended March 31, 2017, $32.5 million of cash provided by operating activities and $83.3 million of cash provided by investing activities were removed from net cash provided (used) by operating activities and net cash provided (used) by investing activities, respectively, and included in net increase/(decrease) in cash, cash-equivalents and restricted cash in the condensed consolidated statements of cash flows.

Net Cash Provided (Used) by Operating Activities
 
Our net cash provided (used) by operating activities was $(2.2)$0.2 billion and $(1.2)$(2.2) billion during the three months ended March 31, 20182019 and 2017,2018, respectively. These amounts primarily included: (i) proceeds from investments net of investments purchased of $(2.7)$0.3 billion and $(2.0)$(2.7) billion during the three months ended March 31, 20182019 and 2017,2018, respectively; (ii) net realized gains (losses) on investments of $30.4$129.8 million and $146.2$30.4 million during the three months ended March 31, 20182019 and 2017,2018, respectively; (iii) change in unrealized gains (losses) on investments of $442.4$1,074.1 million and $360.5$442.4 million during the three months ended March 31, 2019 and 2018 and 2017 respectively;respectively and (iv) capital allocation-based income of $78.2$814.9 million and $387.6$78.2 million during the three months ended March 31, 20182019, and 2017,2018, respectively. Investment funds are, for GAAP purposes, investment companies and reflect their investments and other financial instruments at fair value.
 
Net Cash Provided (Used) by Investing Activities
 
Our net cash provided (used) by investing activities was $(8.7)$(19.9) million and $(21.6)$(8.7) million during the three months ended March 31, 20182019 and 2017,2018, respectively. Our investing activities included: (i) the purchase of fixed assets of $(8.7)$(19.5) million and $(21.4)$(8.7) million during the three months ended March 31, 2019 and 2018, respectively and 2017, respectively; and (iii)(ii) development of oil and natural gas properties of $(0.2)$(0.5) million for the three months ended March 31, 2017.2019.
 
Net Cash Provided (Used) by Financing Activities
 
Our net cash provided (used) by financing activities was $1.2 billion$7.2 million and $1.3 billion$1,218.2 million during the three months ended March 31, 20182019 and 2017,2018, respectively. Our financing activities primarily included: (i) distributions to, net of contributions by, our noncontrolling and redeemable noncontrolling interests of $0.5$0.3 billion and $0.4$0.5 billion during the three months ended March 31, 20182019 and 2017,2018, respectively; (ii) proceeds received net of repayment of debt obligations of $0.8$(0.2) billion and $1.0$0.8 billion during the three months ended March 31, 20182019 and 2017,2018, respectively; (iii) distributions to our partnerscommon stock dividends of $(82.8)$(66.6) million and $(72.4)$(82.8) million during the three months ended March 31, 2019 and 2018, respectively; (iv) repurchases of Class A common stock of $(28.6) million during the three months ended March 31, 2019 and 2017, respectively; and (iv)(v) preferred unit distributionsstock dividends of $(8.3) million during the three months ended March 31, 20182019 and 2017.2018.


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Segment Analysis
 
The following is a discussion of the results of our four reportable business segmentson a segment basis for the three months ended March 31, 20182019 and 2017.2018. You should read this discussion in conjunction with the information included under "—Basis of Accounting—Key Segment and Other Operating and Performance Measures" and the condensed consolidated financial statements and related notes included elsewhere in this report.

Expense Allocations

Certain expenses are allocated among our operating segments. Specifically, as described below, (i) a portion of expenses, except for broken deal expenses, originating in our Private Markets, Public Markets and Capital Markets segments are reflected in the Principal Activities segment and (ii) corporate expenses are allocated across all segments.

Expenses Allocated to Principal Activities

KKR allocates certain expenses to its Principal Activities segment. The Principal Activities segments incurs its own direct costs, and an allocation from the other segments is also made to reflect the estimated amount of costs that are necessary to operate our Principal Activities segment, which are incremental to those costs incurred directly by the Principal Activities segment. These allocable expenses consist of a portion of our cash compensation and benefits, occupancy and related charges and other operating expenses that are initially recognized within our Private Markets, Public Markets and Capital Markets segments. Consistent with prior years, the total amount of expenses (other than its direct costs) that is allocated to Principal Activities is based on the proportion of revenue earned by Principal Activities, relative to other operating segments' revenue, over the preceding four calendar years. However, this allocation percentage will not be less than the allocation percentage calculated using the cumulative amount of such revenues since 2009 (the year we completed the KPE transaction). For 2018, KKR determined that this allocation percentage is 24.3%. This allocation percentage is expected to be updated annually or more frequently if there are material changes to our business.Segment Results
 
Below is a summary of the allocation to Principal Activities, relative to otherWe operate through one operating segments, for the 2018 and 2017 periods.

2018 Allocation: 24.3%, based on cumulative revenues earned since 2009
2017 Allocation: 25.7%, based on cumulative revenues earned since 2009

Once the total amount of expense to be allocated to the Principal Activitiesreportable segment is estimated for each reporting period, the amount of this expense will be allocated from the Private Markets, Public Markets and Capital Markets segments based on the proportion of headcount in each of these three segments.

Allocations of Corporate Expenses

Corporate expenses are allocated to each of the Private Markets, Public Markets, Capital Markets and Principal Activities segments based on the proportion of revenues earned by each segment over the precedingwith four calendar years. However, to the extent that expenses allocated to Principal Activities, as described above, is based on the cumulative amount of such revenues since 2009, corporate expenses will also be allocated based on the proportion of revenues earned by each segment since 2009.


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Below is a summary of the allocations percentages used for corporate expenses to each of our operating segments for the 2018 and 2017 periods.

     
  Expense Allocation
Segment 2018 2017
     
Private Markets 59.7% 59.6%
Public Markets 9.5% 9.0%
Capital Markets 6.5% 5.7%
Principal Activities 24.3% 25.7%
Total Reportable Segments 100.0% 100.0%
     
Allocation basis Cumulative revenue since 2009 Cumulative revenue since 2009
     




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Private Markets Segment
business lines. The following tables settable sets forth information regarding theKKR's segment results of operations and certain key operating metrics for our Private Markets segmentas of and for the three months ended March 31, 20182019 and 2017.2018.

Three months ended March 31, 20182019 compared to three months ended March 31, 20172018

 Three Months Ended
 March 31, 2018 March 31, 2017 Change
 ($ in thousands)
Segment Revenues 
  
  
Management, Monitoring and Transaction Fees, Net 
  
  
Management Fees$158,190
 $123,512
 $34,678
Monitoring Fees17,530
 13,220
 4,310
Transaction Fees46,689
 117,882
 (71,193)
Fee Credits(41,343) (85,650) 44,307
Total Management, Monitoring and Transaction Fees, Net181,066
 168,964
 12,102
      
Performance Income 
  
  
Realized Incentive Fees—
 —
 —
Realized Carried Interest202,555
 206,204
 (3,649)
Unrealized Carried Interest(141,240) 123,506
 (264,746)
Total Performance Income61,315
 329,710
 (268,395)
      
Investment Income (Loss) 
  
  
Net Realized Gains (Losses)—
 —
 —
Net Unrealized Gains (Losses)—
 —
 —
Total Realized and Unrealized—
 —
 —
Interest Income and Dividends—
 —
 —
Interest Expense—
 —
 —
Net Interest and Dividends—
 —
 —
Total Investment Income (Loss)—
 —
 —
      
Total Segment Revenues242,381
 498,674
 (256,293)
      
Segment Expenses 
  
  
Compensation and Benefits 
  
  
Cash Compensation and Benefits59,719
 60,008
 (289)
Realized Performance Income Compensation87,099
 87,393
 (294)
Unrealized Performance Income Compensation(55,379) 50,366
 (105,745)
Total Compensation and Benefits91,439
 197,767
 (106,328)
Occupancy and related charges7,876
 8,107
 (231)
Other operating expenses28,302
 26,887
 1,415
Total Segment Expenses127,617
 232,761
 (105,144)
      
Income (Loss) attributable to noncontrolling interests—
 —
 —
      
Economic Net Income (Loss)$114,764
 $265,913
 $(151,149)
      
Assets Under Management$102,240,200
 $80,197,600
 $22,042,600
Fee Paying Assets Under Management$61,506,200
 $56,667,600
 $4,838,600
Capital Invested$2,366,700
 $4,484,200
 $(2,117,500)
Uncalled Commitments$50,300,500
 $35,071,700
 $15,228,800
  Three Months Ended
  March 31, 2019 March 31, 2018 Change
  ($ in thousands)
Segment Revenues      
Fees and Other, Net      
Management Fees $292,296
 $251,585
 $40,711
Transaction Fees 186,727
 156,845
 29,882
Monitoring Fees 25,651
 17,530
 8,121
Fee Credits (107,416) (43,774) (63,642)
Total Fees and Other, Net 397,258
 382,186
 15,072
       
Realized Performance Income (Loss)      
Carried Interest 330,345
 202,555
 127,790
Incentive Fees 19,537
 16,407
 3,130
Total Realized Performance Income (Loss) 349,882
 218,962
 130,920
       
Realized Investment Income (Loss)      
Net Realized Gains (Losses) 44,712
 7,875
 36,837
Interest Income and Dividends 58,207
 72,577
 (14,370)
Total Realized Investment Income (Loss) 102,919
 80,452
 22,467
Total Segment Revenues 850,059
 681,600
 168,459
       
Segment Expenses      
Compensation and Benefits (1)
 340,286
 300,480
 39,806
Occupancy and Related Charges 13,957
 13,583
 374
Other Operating Expenses 74,910
 57,905
 17,005
Total Segment Expenses 429,153
 371,968
 57,185
       
Segment Operating Earnings 420,906
 309,632
 111,274
       
Interest Expense 44,130
 50,192
 (6,062)
Preferred Dividends 8,341
 8,341
 —
Income (Loss) Attributable to Noncontrolling Interests 359
 1,203
 (844)
Income Taxes Paid 53,993
 14,168
 39,825
After-tax Distributable Earnings $314,083
 $235,728
 $78,355
(1)Includes equity-based compensation of $54,885 and $67,796 for the three months ended March 31, 2019 and 2018, respectively.



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Segment Revenues

Management, MonitoringThe following sections discuss revenues for each of our business lines on a disaggregated basis for the three months ended March 31, 2019 and Transaction2018.

Private Markets Revenues

The following table presents Fees and Other, Net, and Realized Performance Income in the Private Markets business line for the three months ended March 31, 2019 and 2018:

  Three Months Ended
  March 31, 2019 March 31, 2018 Change
  ($ in thousands)
Fees and Other, Net      
Management Fees $183,221
 $158,190
 $25,031
Transaction Fees 99,017
 46,689
 52,328
Monitoring Fees 25,651
 17,530
 8,121
Fee Credits (82,342) (41,343) (40,999)
Total Fees and Other, Net 225,547
 181,066
 44,481
       
Realized Performance Income (Loss)      
Carried Interest 330,345
 202,555
 127,790
Incentive Fees 675
 —
 675
Total Realized Performance Income (Loss) $331,020
 $202,555
 $128,465

Fees and Other, Net
 
The net increase for the quarterthree months ended March 31, 2019 as compared to the three months ended March 31, 2018 as compared to the quarter ended March 31, 2017 was primarily due to an increase in management fees as well as a decrease in fee credits, partially offset by a decrease in transaction fees.

The increase in management fees was primarily due to (i) the new managementan increase in transaction fees, paid by the Asian Fund III when it entered its investment period in the second quarter of 2017, and (ii) new capital raised in our Health Care Strategic Growth Fund. This net increase was partially offset by decreases due to (i) the lower management fees paid by the Asian Fund II when it entered its post-investment perioda corresponding increase in the second quarter of 2017, in which it pays fees at a lower rate than during the investment period and based on capital invested at the time rather than total committed capital,fee credits and (ii) loweran increase in management fees calculated based on lower levels of invested capital as a result of realizations primarily in our Real Estate Partners Fund, Asian Fund and European Fund III.fees.

The decreaseincrease in transaction fees was primarily attributable to a decreasean increase in both the number and size of transaction fee-generating investments. During the three months ended March 31, 2018,2019, there were 15 transaction fee-generating investments that paid an average fee of $6.6 million compared to 9 transaction fee-generating investments that paid an average fee of $5.2 million compared to 13 transaction fee-generating investments that paid an average fee of $9.1 million during the three months ended March 31, 2017.2018. For the three months ended March 31, 2018,2019, approximately 49%45% of these transaction fees were paid by companies located in North America, 46%42% were paid from companies located in the Asia-Pacific region and 5%13% were paid from companies located in Europe. Transaction fees vary by investment based upon a number of factors, the most significant of which are transaction size, the particular discussionsagreements as to the amount of the fees, the complexity of the transaction, and KKR's role in the transaction. Additionally, transaction fees are generally not earned with respect to energy and real estate investments. The decreaseincrease in fee credits is due primarily to a lowerhigher level of transaction fees.fees which are shared with fund investors.

The increase in management fees was primarily due to management fees earned from our Global Infrastructure Fund III when it entered its investment period in the second quarter of 2018 and increased capital invested in our core investment strategy, for which fees are earned on invested capital. This net increase was partially offset by decreases due to management fees calculated based on lower levels of invested capital as a result of realizations primarily in our European Fund III, North America Fund XI and 2006 Fund.

Recurring monitoring fees increased $4.3$8.1 million, which was primarily the result of an increase in both the size and number of portfolio companies paying monitoring fees. For the three months ended March 31, 2018,2019, we had 5456 portfolio companies that were paying an average monitoring fee of $0.3$0.5 million compared with 4854 portfolio companies that were paying an average monitoring fee of $0.3 million for the three months ended March 31, 2017.2018. There were no termination payments for the three months ended March 31, 20182019 and 2017.2018. These termination payments may occur in the future; however, they are infrequent in nature and are generally correlated with the initial public offeringIPO and other realization activity in our private equity portfolio, and they are expected to continue to be smaller in size and number compared to prior periods.


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Realized Performance Income

The net decrease is attributable to a lower level of netfollowing table presents realized carried interest gains inby investment vehicle for the three months ended March 31, 2018 compared to2019 and 2018:
 Three Months Ended March 31,
 2019 2018
 ($ in thousands)  
North America Fund XI$186,710
 $35,450
European Fund III58,505
 11,993
Co-Investment Vehicles and Other38,337
 1,669
2006 Fund28,647
 125,950
Core Investment Vehicles14,449
 —
Real Estate Partners Americas2,785
 143
Asian Fund912
 10,566
Asian Fund II—
 16,346
European Fund II—
 438
Total Realized Carried Interest (1)
$330,345
 $202,555
(1)The above table excludes any funds for which there was no realized carried interest during either of the periods presented.
Realized carried interest for the three months ended March 31, 2017,2019 consisted primarily reflecting a lower level of appreciation inrealized gains from the valuesale of our private equity portfolio inSedgwick Claims Management Services, Inc. and the current period compared to the prior period.partial sales of United Group B.V. (telecom) and GoDaddy Inc. (NYSE: GDDY).

Realized carried interest for the three months ended March 31, 2018, consisted primarily of realized gains from the partial sales of Weld North (education sector) and GoDaddy Inc. (NYSE: GDDY) and a dividend received from Internet Brands, Inc.

Public Markets Revenues

The following table presents Fees and Other, Net, and Realized carried interestPerformance Income in the Public Markets business line for the three months ended March 31, 2017 consisted primarily of realized gains from the final
sales of Galenica AG2019 and HCA Holdings, Inc. and the partial sale of US Foods Holding Corp.








2018:

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  Three Months Ended
  March 31, 2019 March 31, 2018 Change
  ($ in thousands)
Fees and Other, Net      
Management Fees $109,075
 $93,395
 $15,680
Transaction Fees 27,456
 2,558
 24,898
Fee Credits (25,074) (2,431) (22,643)
Total Fees and Other, Net 111,457
 93,522
 17,935
       
Realized Performance Income (Loss)      
Carried Interest —
 —
 —
Incentive Fees 18,862
 16,407
 2,455
Total Realized Performance Income (Loss) $18,862
 $16,407
 $2,455

The following table presents performance income by investment vehicle for the three months ended March 31, 2018Fees and 2017:
 Three Months Ended March 31,
 2018 2017
   ($ in thousands)  
 Realized Carried InterestUnrealized Carried Interest
Total
Carried Interest
 Realized Carried InterestUnrealized Carried Interest
Total
Carried
Interest
Co-Investment Vehicles and Other$1,669
$69,338
$71,007
 $2,303
$17,634
$19,937
European Fund IV—
44,676
44,676
 —
1,730
1,730
European Fund III11,993
17,922
29,915
 —
30,636
30,636
Asian Fund II16,346
4,692
21,038
 —
32,642
32,642
Millennium Fund—
8,667
8,667
 28,266
(20,087)8,179
Global Infrastructure Investors II—
4,383
4,383
 —
—
—
Asian Fund10,566
(7,105)3,461
 14,293
(2,299)11,994
Next Generation Technology Growth—
3,425
3,425
 —
963
963
Real Estate Partners Americas143
1,956
2,099
 —
3,991
3,991
Americas Fund XII—
1,183
1,183
 —
—
—
E2 Investors—
—
—
 —
(306)(306)
European Fund II438
(458)(20) 18,109
(23,282)(5,173)
Global Infrastructure Investors—
(608)(608) —
15,702
15,702
2006 Fund125,950
(134,934)(8,984) 111,823
(63,848)47,975
China Growth Fund—
(10,599)(10,599) 6,891
(3,014)3,877
North America Fund XI35,450
(143,778)(108,328) 24,519
133,044
157,563
Total (1)
$202,555
$(141,240)$61,315
 $206,204
$123,506
$329,710
(1)The above table excludes any funds for which there was no carried interest during either of the periods presented.
Unrealized carried interest reflects the difference between total carried interest and realized carried interest. The recognition of realized carried interest results in the reversal of accumulated unrealized carried interest, generally resulting in minimal impact on total performance income. Additionally, because unrealized carried interest can be reversed upon a realization event, in periods where there is significant realized carried interest, unrealized carried interest can be negative even in periods of portfolio appreciation.

For the three months ended March 31, 2018, the value of our private equity investment portfolio increased 0.4%. This was comprised of a 3.6% increase in value of our privately held investments and a 6.5% decrease in the share prices of various publicly held or publicly indexed investments.

The most significant increases in value of our privately held investments were gains relating to Ambea Mehiläinen (health care sector), Cognita (education sector) and Hensoldt (industrial sector). The unrealized gains on our privately held investments were partially offset by unrealized losses relating primarily to Arbor Pharmaceuticals, Inc. (health care sector), Sundrop Farms Holdings Limited (agriculture sector) and Westbrick Energy Ltd. (energy sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to individual company performance. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of market comparables.

The most significant decreases in share prices of various publicly held or publicly indexed investments were losses in National Vision Holdings, Inc. (NASDAQ: EYE), Gardner Denver Holdings, Inc. (NYSE: GDI) and First Data Corporation. These decreases were partially offset by increased share prices of various publicly held investments, the most significant of which were gains in GoDaddy, Inc., Integer Holdings Corporation (NYSE: ITGR) and Pets at Home Group Plc. (LSE: PETS.L).


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Subsequent to March 31, 2018, realization activity such as dividends and agreements to sell, including partial sales and secondary sales, are expected, with respect to certain private equity portfolio companies, the most significant of which are Aricent Group (technology sector), Välinge Innovation AB (manufacturing sector), South Staffordshire (infrastructure sector) and National Vision Holdings, Inc. We expect that these transactions will be consummated subsequent to March 31, 2018, and represent distributable earnings of approximately $250 million. These transactions are generally subject to the satisfaction of closing conditions prior to their completion, and there can be no assurance if or when any of these transactions will be completed.
For the three months ended March 31, 2017, the value of our private equity investment portfolio increased 4.7%. This was comprised of a 4.2% increase in the share prices of various publicly held or publicly indexed investments and a 5.0% increase in value of our privately held investments. The most significant increases in share prices of various publicly held or publicly indexed investments were gains in First Data Corporation, PRA Health Sciences, Inc. (NASDAQ: PRAH) and Qingdao Haier (CH: 600690). These increases were partially offset by decreased share prices of various publicly held investments, the most significant of which were losses in Laureate Education, Inc. (NASDAQ: LAUR), Pets at Home Ltd. and Fujian Sunner Development Co. Ltd (SZ: 002299). Our privately held investments contributed the remainder of the change in value, the most significant of which were gains relating to Gardner Denver, Inc., PortAventura (hotels/leisure sector) and Weld North. The unrealized gains on our privately held investments were partially offset by unrealized losses relating primarily to Westbrick Energy Ltd. and Santanol Pty Ltd (forestry sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) in the case of PortAventura, a valuation that reflects a pending realization event, (ii) an increase in the value of market comparables and (iii) individual company performance. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of market comparables.
Segment Expenses
Compensation and BenefitsOther, Net
 
The net decrease for the three months ended March 31, 2018 was due primarily to lower performance income compensation resulting from a lower level of gains in our private equity portfolio in the current period compared to the prior period as described above.

Occupancy and Other Operating Expenses

The net increase for the three months ended March 31, 2018 is2019 compared to the prior period was primarily due to (i) an increase in transaction fees partially offset by an increase in fee credits, and (ii) an increase in management fees.

The increase in transaction fees was primarily attributable to an increase in expenses that are not creditable to our investment funds, which includes professional fees. These increases were partially offset by a decrease in expenses that are creditable to ourthe average size of transaction fee-generating investments funds, which includes broken-deal expenses.

Economic Net Income (Loss)
The decrease was primarily due to lower levels of performance income gains induring the current period compared to the prior period. This decrease was partially offset by higher management fees and a decrease in compensation and benefits as described above.

Assets Under Management

The following table reflects the changes in our Private Markets AUM from December 31, 2017 to March 31, 2018:
 ($ in thousands)
December 31, 2017$97,527,100
New Capital Raised6,548,700
Distributions and Other(2,252,100)
Change in Value416,500
March 31, 2018$102,240,200

AUM for the Private Markets segment was $102.2 billion at March 31, 2018, an increase of $4.7 billion, compared to $97.5 billion at December 31, 2017.


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The increase in management fees was primarily attributabledue to (i) new capital raised primarily in our Global Infrastructure Fund III and our Energy Income and Growth Fund II and (ii) to a lesser extent, an increase in fees earned from BDCs advised by FS/KKR Advisor, driven primarily by the valuecompletion of the FS Investments Transaction in the second quarter of 2018 and increased fees from our Private Markets portfolio. These increases were partially offset by distributions to Private Markets fund investors primarilyCLOs and leveraged credit strategies as a result of realizations most notablygreater overall FPAUM. On a segment basis, KKR's pro rata income from our BDC platform, which is an equity method investment, is included in our 2006 Fund, Asian Fundmanagement fees and European Fund III.incentive fees. On a GAAP basis, such amounts are included in net gains from investment activities.

Realized Performance Income
 
The increase in the value of our Private Markets portfolio was driven primarily by net gains of $0.3 billion in our European Fund IV, $0.2 billion in our European Fund III and $0.1 billion in each of our Asian Fund II and Americas Fund XII.  These gains were partially offset by net losses of $0.6 billion in our North America Fund XI. The drivers of the overall change in value for Private Markets were consistent with those noted in the Performance Income commentary above. See "—Private Markets—Segment Revenues—Performance Income."

Certain investments included in our AUM are denominated in currencies other than the U.S. dollar. Those investments expose our AUM to the risk that the value of the investments will be affected by changes in exchange rates between the currency in which the investments are denominated and the currency in which the investments are made. We generally seek to minimize these risks by employing hedging techniques in connection with certain investments, including using foreign currency options and foreign exchange forward contracts to reduce exposure to changes in exchange rates when a meaningful amount of capital has been invested in currencies other than the currencies in which the investments are denominated. We do not, however, hedge our currency exposure in all currencies or for all investments. See "—Quantitative and Qualitative Disclosures about Market Risk—Exchange Rate Risk" and "Risk Factors—Risks Related to the Assets We Manage—We make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companies that are based in the United States" in our Annual Report.
Fee-Paying Assets Under Management
The following table reflects the changes in our Private Markets FPAUM from December 31, 2017 to March 31, 2018:
 ($ in thousands)
December 31, 2017$61,678,600
New Capital Raised575,800
Distributions and Other(1,033,200)
Change in Value285,000
March 31, 2018$61,506,200

FPAUM in our Private Markets segment was $61.5 billion at March 31, 2018, a decrease of $0.2 billion, compared to $61.7 billion at December 31, 2017.

The decrease was primarily attributable to distributions primarily relating to realizations in our 2006 Fund, Asian Fund and European Fund III. These decreases were partially offset by new capital raised in our core investment vehicles and capital invested in our Real Estate Credit Opportunity Partners fund.

Uncalled capital commitments from investment funds from which KKR is currently not earning management fees amounted to approximately $18.7 billion at March 31, 2018, which includes capital commitments reserved for follow-on investments for funds that have completed their investment periods.  This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period.  The average annual management fee rate associated with this capital is approximately 1.0%. We will not begin earning fees on this capital until it is deployed or the related investment period commences, neither of which is guaranteed.  If and when such management fees are earned, which will occur over an extended period of time, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.


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Capital Invested
The decrease was driven primarily by a $1.2 billion decrease in capital invested in our private equity platform (including core investments and growth equity) and a $0.9 billion decrease in capital invested in our real assets and other platforms. Generally, the portfolio companies acquired through our private equity funds have higher transaction values and result in higher capital invested relative to transactions in our real assets funds. The number of large private equity investments made in any quarter is volatile and consequently, a significant amount of capital invested in one quarter or a few quarters may not be indicative of a similar level of capital deployment in future quarters. During the quarter ended March 31, 2018, 55% of capital deployed in private equity was in transactions in the Asia-Pacific region and 45% was in North America. As of May 7, 2018, our Private Markets segment had announced transactions that were subject to closing conditions which aggregated approximately $3.3 billion. These transactions are generally subject to the satisfaction of closing conditions prior to their completion, and there can be no assurance if or when any of these transactions will be completed.
Uncalled Commitments
As of March 31, 2018, our Private Markets segment had $50.3 billion of remaining uncalled capital commitments that could be called for investments in new transactions. The increase from March 31, 2017 is due primarily to new capital raised in our core investment vehicles, Global Infrastructure III, Asian Fund III, two new strategic investor partnerships and Real Estate Partners Americas II, partially offset by capital called from fund investors to fund investments during the period.

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Public Markets Segment
The following tables set forth information regarding the results of operations and certain key operating metrics for our Public Markets segment for the three months ended March 31, 2018 and 2017.

Three months ended March 31, 2018 compared to three months ended March 31, 2017
  Three Months Ended
  March 31, 2018 March 31, 2017 Change
  ($ in thousands)
Segment Revenues      
Management, Monitoring and Transaction Fees, Net  
  
  
Management Fees $93,395
 $84,772
 $8,623
Monitoring Fees —
 —
 —
Transaction Fees 2,558
 4,056
 (1,498)
Fee Credits (2,431) (3,367) 936
Total Management, Monitoring and Transaction Fees, Net 93,522
 85,461
 8,061
       
Performance Income  
  
  
Realized Incentive Fees 16,407
 1,686
 14,721
Realized Carried Interest —
 —
 —
Unrealized Carried Interest 29,508
 17,120
 12,388
Total Performance Income 45,915
 18,806
 27,109
       
Investment Income (Loss)  
  
  
Net Realized Gains (Losses) —
 —
 —
Net Unrealized Gains (Losses) —
 —
 —
Total Realized and Unrealized —
 —
 —
Interest Income and Dividends —
 —
 —
Interest Expense —
 —
 —
Net Interest and Dividends —
 —
 —
Total Investment Income (Loss) —
 —
 —
       
Total Segment Revenues 139,437
 104,267
 35,170
       
Segment Expenses  
  
  
Compensation and Benefits  
  
  
Cash Compensation and Benefits 22,714
 19,784
 2,930
Realized Performance Income Compensation 7,055
 674
 6,381
Unrealized Performance Income Compensation 12,256
 6,848
 5,408
Total Compensation and Benefits 42,025
 27,306
 14,719
Occupancy and related charges 1,608
 1,856
 (248)
Other operating expenses 9,587
 8,338
 1,249
Total Segment Expenses 53,220
 37,500
 15,720
       
Income (Loss) attributable to noncontrolling interests —
 —
 —
       
Economic Net Income (Loss) $86,217
 $66,767
 $19,450
   
  
  
Assets Under Management $74,115,500
 $57,418,700
 $16,696,800
Fee Paying Assets Under Management $58,151,900
 $50,463,500
 $7,688,400
Capital Invested $1,367,900
 $893,600
 $474,300
Uncalled Commitments $8,543,400
 $6,151,100
 $2,392,300

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Segment Revenues
Management, Monitoring and Transaction Fees, Net
The net increase for the three months ended March 31, 2018 was primarily due to an increase in management fees. The increase in management fees was primarily due to increased fees from our strategic manager partnerships as a result of greater AUM and an increase in fees earned from BDCs advised or sub-advised by KKR. This increase was partially offset by a reduction in management fees from KKR Prisma as a result of the PAAMCO Prisma transaction that closed in the second quarter of 2017. KKR reports its investment in PAAMCO Prisma using the equity method of accounting, and on a segment basis, KKR reflects its allocation of the net income of PAAMCO Prisma as management fees and realized incentive fees.  Accordingly, the management fees and other revenues and expenses of KKR Prisma that had been reported on a gross basis prior to the closing of the transaction on June 1, 2017 are reflected on a net basis as part of our allocation of the net income of PAAMCO Prisma after June 1, 2017 resulting in a decrease in our reported gross management fees when2019 compared to the prior period. As a result of the closing of the strategic BDC partnership with FS Investments on April 9, 2018, KKR will begin receiving its portion of the management and incentive fees on an additional $13 billion of FPAUM (calculated based on AUMs of FS Investments' BDCs as of December 31, 2017), which will be reflected in our operating results beginning in the second quarter of 2018.

Performance Income
The net increase for the three months ended March 31, 2018period was primarily attributable to higher incentive fees received from BDCs advised or sub-advised by FS/KKR and to a lesser extent, higher incentive fees earned in our strategic manager partnerships. Performance income also increased as a result of higher net carried interest gainsAdvisor.

Capital Markets Revenues

The following table presents Transaction Fees in the three months ended March 31, 2018, compared to the three months ended March 31, 2017. The carried interest gains in the current period were primarily the result of increases in the value of our private credit portfolio, with the most significant carried interest gains arising in our private opportunistic credit strategies and special situations strategies. In the prior period, the most significant carried interest gains were recognized in our direct lending strategies and special situations strategies.

Segment Expenses
Compensation and Benefits
The increaseCapital Markets business line for the three months ended March 31, 2018 was primarily due to higher net performance income compensation in connection with higher incentive fees2019 and higher net carried interest gains for the three months ended March 31, 2018, as compared to the three months ended March 31, 2017, as described above.2018:
Occupancy and Other Operating Expenses
The increase for the three months ended March 31, 2018 was primarily driven by higher professional fees in connection with the growth of this segment.
Economic Net Income (Loss)
The increase for the three months ended March 31, 2018 is primarily attributable to the increase in performance income and fees, partially offset by an increase in compensation and benefits expense as described above.
Assets Under Management
The following table reflects the changes in our Public Markets AUM from December 31, 2017 to March 31, 2018: 
 ($ in thousands)
December 31, 2017$70,943,500
New Capital Raised4,100,100
Distributions(830,100)
Redemptions(964,100)
Change in Value866,100
March 31, 2018$74,115,500
  Three Months Ended
  March 31, 2019 March 31, 2018 Change
  ($ in thousands)
Transaction Fees $60,254
 $107,598
 $(47,344)
       


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AUM in our Public Markets segment totaled $74.1 billion at March 31, 2018, an increase of $3.2 billion compared to AUM of $70.9 billion at December 31, 2017. The increase for the period was primarily due to new capital raised across multiple strategies most notably $3.0 billion in our strategic manager partnerships, $0.9 billion in certain leveraged credit strategies and $0.2 billion in our Lending Partners III Fund. The increases due to change in value were driven primarily by our domestic private credit strategies, certain leveraged credit strategies, strategic manager partnerships and our European CLOs. Partially offsetting these increases were redemptions and distributions from certain investment vehicles across multiple strategies, primarily with our strategic manager partnerships, in certain leveraged credit strategies and our private credit strategies.

Fee-Paying Assets Under Management
The following table reflects the changes in our Public Markets FPAUM from December 31, 2017 to March 31, 2018: 
 ($ in thousands)
December 31, 2017$55,758,900
New Capital Raised3,415,000
Distributions(710,500)
Redemptions(964,100)
Change in Value652,600
March 31, 2018$58,151,900
FPAUM in our Public Markets segment was $58.2 billion at March 31, 2018, an increase of $2.4 billion compared to FPAUM of $55.8 billion at December 31, 2017. The increase was primarily due to new capital raised across multiple strategies, most notably $1.4 billion with our strategic manager partnerships, $1.0 billion in certain leveraged credit strategies, $0.3 billion in our direct lending strategies, $0.3 billion in our private opportunistic credit strategy and $0.2 billion in our Special Situations Fund II. New capital raised includes capital that was raised in previous periods but began earning fees upon deployment of capital. Change in value was driven primarily by $0.3 billion through our strategic manager partnerships, $0.2 billion in certain leveraged credit strategies and $0.1 billion in our European CLOs. Partially offsetting these increases were redemptions and distributions from certain investment vehicles across multiple strategies driven by $0.8 billion from our strategic manager partnerships, $0.6 billion from our private credit strategies and $0.2 billion from certain leveraged credit strategies.

Uncalled capital commitments from investment funds from which KKR is currently not earning management fees amounted to approximately $6.1 billion at March 31, 2018.  This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period.  The average annual management fee rate associated with this capital is approximately 1.0%.  We will not begin earning fees on this capital until it is deployed or the related investment period commences, neither of which is guaranteed.  If and when such management fees are earned, which will occur over an extended period of time, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.
Capital Invested
Capital invested increased for the three months ended March 31, 2018, compared to the three months ended March 31, 2017. The increase is primarily due to a higher level of net capital deployed in our direct lending and special situations strategies.

Uncalled Commitments
As of March 31, 2018, our Public Markets segment had $8.5 billion of uncalled capital commitments that could be called for investments in new transactions. The increase from March 31, 2017 is due to new capital raised primarily in our private opportunistic credit strategy, two new strategic investor partnerships, Lending Partners III Fund and Revolving Credit Partners II Fund, partially offset by capital called from fund investors to fund investments during the period.







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Capital Markets
The following tables set forth information regarding the results of operations and certain key operating metrics for our Capital Markets segment for the three months ended March 31, 2018 and 2017.

Three months ended March 31, 2018 compared to three months ended March 31, 2017
  Three Months Ended
  March 31, 2018 March 31, 2017 Change
  ($ in thousands)
Segment Revenues      
Management, Monitoring and Transaction Fees, Net  
  
  
Management Fees $—
 $—
 $—
Monitoring Fees —
 —
 —
Transaction Fees 107,598
 121,097
 (13,499)
Fee Credits —
 —
 —
Total Management, Monitoring and Transaction Fees, Net 107,598
 121,097
 (13,499)
       
Performance Income  
  
  
Realized Incentive Fees —
 —
 —
Realized Carried Interest —
 —
 —
Unrealized Carried Interest —
 —
 —
Total Performance Income —
 —
 —
       
Investment Income (Loss)  
  
  
Net Realized Gains (Losses) —
 —
 —
Net Unrealized Gains (Losses) —
 —
 —
Total Realized and Unrealized —
 —
 —
Interest Income and Dividends —
 —
 —
Interest Expense —
 —
 —
Net Interest and Dividends —
 —
 —
Total Investment Income (Loss) —
 —
 —
       
Total Segment Revenues 107,598
 121,097
 (13,499)
       
Segment Expenses  
  
  
Compensation and Benefits  
  
  
Cash Compensation and Benefits 21,457
 22,561
 (1,104)
Realized Performance Income Compensation —
 —
 —
Unrealized Performance Income Compensation —
 —
 —
Total Compensation and Benefits 21,457
 22,561
 (1,104)
Occupancy and related charges 744
 664
 80
Other operating expenses 6,749
 5,328
 1,421
Total Segment Expenses 28,950
 28,553
 397
       
Income (Loss) attributable to noncontrolling interests 1,203
 1,584
 (381)
       
Economic Net Income (Loss) $77,445
 $90,960
 $(13,515)
       
Syndicated Capital $553,000
 $1,181,300
 $(628,300)
       

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Segment Revenues
Management, Monitoring and Transaction Fees, Net
Transaction fees decreased due primarily to a decrease in both the size and number of capital markets transactions for the three months ended March 31, 2018,2019, compared to the three months ended March 31, 2017.2018. Overall, we completed 4641 capital markets transactions for the three months ended March 31, 2019, of which 6 represented equity offerings and 35 represented debt offerings, as compared to 46 transactions for the three months ended March 31, 2018, of which 4 represented equity offerings and 42 represented debt offerings, as compared to 47 transactions for the three months ended March 31, 2017, of which 7 represented equity offerings and 40 represented debt offerings. We earned fees in connection with underwriting, syndication and other capital markets services. While each of the capital markets transactions that we undertake in this segmentbusiness line is separately negotiated, our fee rates are generally higher with respect to underwriting or syndicating equity offerings than with respect to debt offerings, and the amount of fees that we collectearn for likesimilar transactions generally correlates with overall transaction sizes. Our capital markets fees are generated in connection with our Private Markets and Public Markets businessesbusiness lines as well as from third-party companies. For the three months ended March 31, 2018,2019, approximately 36%56% of our transaction fees were earned from unaffiliated third parties as compared to approximately 20%36% for the three months ended March 31, 2017.2018. Our transaction fees are comprised of fees earned from North America, Europe, and the Asia-Pacific including India.region. For the three months ended March 31, 2018,2019, approximately 17%30% of our transaction fees were generated outside of North America as compared to approximately 54%17% for the three months ended March 31, 2017.2018. Our capital marketsCapital Markets business line is dependent on the overall capital markets environment, which is influenced by equity prices, credit spreads, and volatility. Our capital marketsCapital Markets business line does not generate management or monitoring fees.

Principal Activities Revenues

The following table presents Realized Investment Income in the Principal Activities business line for the three months ended March 31, 2019 and 2018:

  Three Months Ended
  March 31, 2019 March 31, 2018 Change
  ($ in thousands)
Realized Investment Income (Loss)      
Net Realized Gains (Losses) $44,712
 $7,875
 $36,837
Interest Income and Dividends 58,207
 72,577
 (14,370)
Total Realized Investment Income (Loss) $102,919
 $80,452
 $22,467

Realized Investment Income
The increase is primarily due to an increased level of net realized gains, partially offset by a decrease in interest income and dividends during the three months ended March 31, 2019, compared to the prior period.

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For the three months ended March 31, 2019, net realized gains were comprised of gains primarily from the sale of Private Markets investments including the sale of our investments in Sedgwick Claims Management Services, Inc., United Group B.V. and Cylance, Inc. (technology sector).
    For the three months ended March 31, 2018, net realized gains were primarily comprised of gains from the sale of Private Markets investments including the sales or partial sales of our investments in Weld North, K Twin Towers, and GoDaddy, Inc., as well as the sale of our alternative credit investment in Algeco Scotsman (industrial sector). These gains were partially offset by losses on the sale of certain investments in our special situations and direct lending funds.
The net decrease in interest income and dividends for the three months ended March 31, 2019 compared to the prior period is due to a lower level of interest income in alternative credit and our Capital Markets business line and a lower level of dividend income in our Private Markets business line. These decreases were partially offset by increased interest income at our CLOs.
For the three months ended March 31, 2019, interest income and dividends were comprised of (i) $42.3 million of interest income which consists primarily of interest that is received from our Public Markets investments including CLOs and other credit investments and to a lesser extent our India debt financing company and our cash balances and (ii) $15.9 million of dividend income from distributions received primarily through our energy investments and real estate investments including our investment in KREF.
For the three months ended March 31, 2018, interest income and dividends were comprised of (i) $40.8 million of interest income which consists primarily of interest that is received from our Public Markets investments including CLOs and other credit investments and to a lesser extent our capital markets business and our cash balances and (ii) $31.8 million of dividend income from distributions received primarily through our private equity investments and real estate investments including our investment in KREF.
Subsequent to March 31, 2019, we completed, or expect to complete sales, partial sales or secondary sales with respect to certain private equity portfolio companies and other investments as well as other realization activities such as the receipt of dividends and interest income across our broader portfolio. These realization activities, if and when completed, are expected to result in realized performance income and realized investment income of approximately $200 million. Some of these transactions are not complete, and are subject to the satisfaction of closing conditions; there can be no assurance if or when any of these transactions will be completed.
Segment Expenses
Compensation and Benefits and Occupancy and Other Operating Expenses
Segment expenses increased slightly for the three months ended March 31, 2018 compared to the prior period primarily due to higher operating expenses, which was partially offset by lower compensation expense.
Economic Net Income (Loss)
The decrease for the three months ended March 31, 2018 compared to the prior period is primarily attributable to the decrease in transaction fees as described above.

Syndicated Capital
The decrease is primarily due to a decrease in the size and number of syndication transactions in the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. Overall, we completed three syndication transactions for the three months ended March 31, 2018 as compared to five syndications for the three months ended March 31, 2017.







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Principal Activities
The following tables set forth information regarding the results of operations and certain key operating metrics for our Principal Activities segment for the three months ended March 31, 2018 and 2017.

Three months ended March 31, 2018 compared to three months ended March 31, 2017
  Three Months Ended
  March 31, 2018 March 31, 2017 Change
  ($ in thousands)
Segment Revenues      
Management, Monitoring and Transaction Fees, Net  
  
  
Management Fees $—
 $—
 $—
Monitoring Fees —
 —
 —
Transaction Fees —
 —
 —
Fee Credits —
 —
 —
Total Management, Monitoring and Transaction Fees, Net —
 —
 —
       
Performance Income  
  
  
Realized Incentive Fees —
 —
 —
Realized Carried Interest —
 —
 —
Unrealized Carried Interest —
 —
 —
Total Performance Income —
 —
 —
       
Investment Income (Loss)  
  
  
Net Realized Gains (Losses) 7,875
 79,451
 (71,576)
Net Unrealized Gains (Losses) 207,862
 204,036
 3,826
Total Realized and Unrealized 215,737
 283,487
 (67,750)
Interest Income and Dividends 72,577
 56,882
 15,695
Interest Expense (50,192) (41,709) (8,483)
Net Interest and Dividends 22,385
 15,173
 7,212
Total Investment Income (Loss) 238,122
 298,660
 (60,538)
       
Total Segment Revenues 238,122
 298,660
 (60,538)
       
Segment Expenses  
  
  
Compensation and Benefits  
  
  
Cash Compensation and Benefits 34,640
 37,082
 (2,442)
Realized Performance Income Compensation —
 —
 —
Unrealized Performance Income Compensation —
 —
 —
Total Compensation and Benefits 34,640
 37,082
 (2,442)
Occupancy and related charges 3,355
 3,742
 (387)
Other operating expenses 13,267
 12,945
 322
Total Segment Expenses 51,262
 53,769
 (2,507)
       
Income (Loss) attributable to noncontrolling interests —
 —
 —
       
Economic Net Income (Loss) $186,860
 $244,891
 $(58,031)
       


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Segment Revenues
Investment Income
The net decrease is primarily due to a lower level of net realized and unrealized gains during the three months ended March 31, 2018, compared to the prior period.
For the three months ended March 31, 2018, net realized gains were comprised primarily of gains from the sale of Private Markets investments including the sales or partial sales of our investments in Weld North, K Twin Towers, and GoDaddy, Inc., as well as the sale of our alternative credit investment in Algeco Scotsman (industrial sector). These gains were partially offset by losses on the sale of certain investments in our special situations and direct lending funds. Net unrealized gains were primarily attributed to gains on various Private Markets investments including USI, Inc., WMIH Corp. and The Hut Group (retail sector). These increases were partially offset by unrealized losses on First Data Corporation, National Vision, Inc. and an asset in our alternative credit strategy as well as unrealized losses due to the reversal of unrealized gains on the sales of private equity investments mentioned above.
As of March 31, 2018, $372.0 million of investments in CLOs and our $325.0 million investment in KREF were carried at cost. As of March 31, 2018, the cumulative net unrealized gain or loss relating to changes in fair value for these investments was a $9.6 million loss for CLOs and a $1.0 million gain for KREF.
For the three months ended March 31, 2017, net realized gains were primarily comprised of gains from the sale of private equity investments including the sales or partial sales of Walgreens Boots Alliance (NASDAQ: WBA), Inc., HCA Holdings, Inc. and Zimmer Biomet Holdings, Inc. (NYSE: ZBH), offset by our investment in Samson Resources (energy sector) of approximately $254 million, the loss from the redemption of limited partner interests in a fund managed by BlackGold Capital Management, as well as certain CLOs being called. As of December 31, 2016, KKR no longer holds any limited partner interests in a hedge fund managed by BlackGold Capital Management, although we continue to own an interest in its management company and fund general partner. Net unrealized losses were primarily attributable to mark to market losses on various Private Markets investments including First Data Corporation and to a lesser extent WMIH Corp., Walgreens Boots Alliance, Inc., mark to market losses on various alternative credit investments and unrealized losses on energy investments, and reversals of unrealized gains on the sales of private equity investments. These unrealized losses were partially offset by unrealized gains representing the reversal of unrealized losses primarily in connection with our investment in Samson Resources and the limited partner interests in a hedge fund managed by BlackGold Capital Management as described above.
For the three months ended March 31, 2018, net interest and dividends were comprised of (i) $40.8 million of interest income which consists primarily of interest that is received from our Public Markets investments including CLOs and other credit investments and to a lesser extent our India debt financing company and our cash balances and (ii) $31.8 million of dividend income from distributions received primarily through our private equity investments and real estate investments including our investment in KREF, less (iii) $50.2 million of interest expense primarily relating to the senior notes outstanding for KKR and KFN.
For the three months ended March 31, 2017, net interest and dividends were comprised of (i) $38.5 million of interest income which consists primarily of interest that is received from our Public Markets investments including CLOs and other credit investments and to a lesser extent our cash balances and other assets and (ii) $18.4 million of dividend income from distributions received primarily through our private equity investments and real estate investments including our investment in KREF, less (iii) $41.7 million of interest expense primarily relating to the senior notes outstanding for KKR and KFN.
The net increase in net interest and dividends is due primarily to a higher level of dividends for the three months ended March 31, 2018 compared to the prior period, partially offset by higher interest expense due to overall higher levels of borrowings, in particular at KFN.
Segment Expenses
Compensation and Benefits
The decreaseincrease for the three months ended March 31, 20182019 compared to the prior period was due primarily to higher compensation recorded in connection with higher total segment revenues partially offset by lower equity-based compensation charges resulting from a decrease in the weighted average number of unvested shares outstanding.

Occupancy and Other Operating Expenses

The increase for the three months ended March 31, 2019 compared to the prior period is primarily due to a lower amounthigher level of compensationexpenses that are creditable to our investment funds, which includes broken-deal expenses, and benefitsa higher level of professional fees and other administrative costs in connection with the growth of the firm. The level of broken-deal expenses allocated fromcan vary significantly period to period based upon a number of factors, the other operating segmentsmost significant of which are the number of potential investments being pursued for our investment funds, the size and complexity of investments being pursued and the number of investment funds currently in their investment period.

Interest Expense

For the three months ended March 31, 2019 and 2018 interest expense relates primarily to Principal Activities, as well as a lower amount of corporate compensation allocated to Principal Activities, in each case as a result of athe senior notes outstanding for KKR and KFN. The decrease in interest expense for the proportionthree months ended March 31, 2019 compared to the prior period is due primarily to the redemption of revenue earned by Principal Activities relative to other operating segments. See "—Segment Analysis" for a discussionpreferred shares at KFN in the first quarter of expense allocations among segments.2018 and an overall lower level of borrowings in our Capital Markets business line.

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Occupancy and Other Operating ExpensesIncome Taxes Paid
The decreaseincrease in income taxes paid is primarily due to a higher level of income that is subject to corporate taxes following the Conversion. Prior to the Conversion, KKR's investment income and carried interest generally were not subject to U.S. corporate income taxes. Subsequent to the Conversion, all income earned by KKR is subject to U.S. corporate income taxes which we believe will result in an overall higher income taxes paid when compared to periods prior to the Conversion. As a result of the Conversion, KKR obtained a partial step-up in the tax basis of certain assets that will be recovered as those assets are sold or the basis is amortized. This generally results in a lower level of taxable gains upon realization of carried interest and investment income for those assets that existed on the date of the Conversion. Over time as these assets with higher tax basis are realized, we expect that our income taxes paid and segment effective tax rate will increase. The pace of such increase is not currently known and is dependent on a variety of factors including the pace at which the assets with higher tax basis are realized and the mix of all assets realized in any given period. Therefore, we cannot predict what the increase, if any, in income taxes paid will be quarter-over-quarter or year-over-year.
After-tax Distributable Earnings
The increase in after-tax distributable earnings for the three months ended March 31, 20182019 compared to the prior period was due primarily due to a decrease in occupancyhigher management fees, realized investment income and other related charges from the other operating segments to Principal Activities,realized performance income, partially offset by a slightly greater amounthigher level of other operating expenses allocatedcompensation expense and income taxes paid in the current period compared to Principal Activities.the prior period.
Economic Net Income (Loss)
Other Operating and Performance Measures

The decrease in economic net incomefollowing table presents certain key operating and performance metrics as of March 31, 2019 and December 31, 2018:
  As of
  March 31, 2019 December 31, 2018 Change
  ($ in thousands)
Assets Under Management $199,503,300
 $194,720,400
 $4,782,900
Fee Paying Assets Under Management $147,685,300
 $141,007,700
 $6,677,600
Uncalled Commitments $58,102,600
 $57,959,000
 $143,600


The following table presents one of our key performance metrics for the three months ended March 31, 2019 and 2018:
  Three Months Ended
  March 31, 2019 March 31, 2018 Change
  ($ in thousands)
Capital Invested and Syndicated Capital $5,825,000
 $4,287,600
 $1,537,400

Assets Under Management

Private Markets

The following table reflects the changes in our Private Markets AUM from December 31, 2018 to March 31, 2019:
 ($ in thousands)
December 31, 2018$103,396,500
New Capital Raised2,695,900
Distributions and Other(2,951,900)
Change in Value4,979,000
March 31, 2019$108,119,500

AUM for the Private Markets business line was primarily driven by the decrease in net investment income in the current period as described above.$108.1 billion at March 31, 2019, an increase of $4.7 billion, compared to $103.4 billion at December 31, 2018.




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The increase was primarily attributable to (i) an increase in the value of our Private Markets portfolio and (ii) to a lesser extent, new capital raised primarily in our private equity separately managed accounts, Real Estate Credit Opportunity Partners II Fund and European Fund V. These increases were partially offset by distributions to Private Markets fund investors primarily as a result of realizations, most notably in our North America Fund XI, European Fund III and 2006 Fund.
The increase in the value of our Private Markets portfolio was driven primarily by net gains of $1.7 billion in our 2006 Fund, $0.8 billion in North America Fund XI, $0.5 billion in Asian Fund II, $0.4 billion Americas Fund XII and $0.3 billion in our Asian Fund III.

For the three months ended March 31, 2019, the value of our private equity investment portfolio increased 11.1%. This was comprised of a 31.1% increase in the share prices of various publicly held or publicly indexed investments and a 5.5% increase in value of our privately held investments.

The most significant increases in share prices of various publicly held or publicly indexed investments were gains in First Data Corporation, Gardner Denver Holdings, Inc. (NYSE: GDI) and Fujian Sunner Development Co. Ltd. (SZ: 002299). These increases were partially offset by decreases in share prices of various publicly held investments, the most significant of which were losses in Ambea AB (STO: AMBEA), RigNet, Inc. (NASDAQ: RNET) and Laureate Education, Inc. (NASDAQ: LAUR).

The most significant increases in value of our privately held investments related to AppLovin Corporation (technology sector), KKR Debt Investors 2006 S.à.r.l. (financial services sector) and Cue & Company (technology sector). These increases in value on our privately held investments were partially offset by decreases in value relating primarily to Mills Fleet Farm Group LLC (retail sector), Channel Control Merchants, LLC (retail sector) and Ticket Monster Inc. (technology sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance and (ii) an increase in the value of market comparables. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to individual company performance or, in certain cases, an unfavorable business outlook.

For the three months ended March 31, 2018, the value of our private equity investment portfolio increased 0.4%. This was comprised of a 3.6% increase in value of our privately held investments and a 6.5% decrease in the share prices of various publicly held or publicly indexed investments.

For the three months ended March 31, 2018, the most significant increases in value of our privately held investments were gains relating to Ambea Mehiläinen (health care sector) (since taken public as Ambea AB), Cognita Schools Ltd. (education sector) and Hensoldt (industrial sector). The unrealized gains on our privately held investments were partially offset by unrealized losses relating primarily to Arbor Pharmaceuticals, Inc. (health care sector), Sundrop Farms Holdings Limited (agriculture sector) and Westbrick Energy Ltd. (energy sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to individual company performance. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of market comparables.

For the three months ended March 31, 2018, the most significant decreases in share prices of various publicly held or publicly indexed investments were losses in National Vision Holdings, Inc. (NASDAQ: EYE), Gardner Denver Holdings, Inc. and First Data Corporation. These decreases were partially offset by increased share prices of various publicly held investments, the most significant of which were gains in GoDaddy, Inc., Integer Holdings Corporation (NYSE: ITGR) and Pets at Home Group Plc. (LSE: PETS.L).

Certain investments included in our AUM are denominated in currencies other than the U.S. dollar. Those investments expose our AUM to the risk that the value of the investments will be affected by changes in exchange rates between the currency in which the investments are denominated and the currency in which the investments are made. We generally seek to reduce these risks by employing hedging techniques in connection with certain investments, including using foreign currency options and foreign exchange forward contracts to reduce exposure to changes in exchange rates when a meaningful amount of capital has been invested in currencies other than the currencies in which the investments are denominated. We do not, however, hedge our currency exposure in all currencies or for all investments. See "—Quantitative and Qualitative Disclosures about Market Risk—Exchange Rate Risk" and "Risk Factors—Risks Related to the Assets We Manage—We make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companies that are based in the United States" in our Annual Report.

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Public Markets

The following table reflects the changes in our Public Markets AUM from December 31, 2018 to March 31, 2019: 
 ($ in thousands)
December 31, 2018$91,323,900
New Capital Raised3,595,100
Distributions(229,800)
Redemptions(3,384,100)
Change in Value78,700
March 31, 2019$91,383,800

AUM in our Public Markets business line totaled $91.4 billion at March 31, 2019, comparatively flat against AUM of $91.3 billion at December 31, 2018. The increases due to new capital raised were related to multiple strategies, most notably $1.2 billion in our BDCs, $1.0 billion in our leveraged credit strategies and $0.8 billion with our hedge fund partnerships. Partially offsetting these increases were redemptions and distributions from certain investment vehicles across multiple strategies, including our hedge fund partnerships and certain leveraged credit strategies. Increases in value at our hedge fund partnerships and various leveraged credit strategies were largely offset by equivalent decreases in our BDCs and CLOs.

Fee Paying Assets Under Management
Private Markets

The following table reflects the changes in our Private Markets FPAUM from December 31, 2018 to March 31, 2019:
 ($ in thousands)
December 31, 2018$66,830,000
New Capital Raised6,158,400
Distributions and Other(1,096,100)
Net Changes in Fee Base of Certain Funds(320,800)
Change in Value(1,200)
March 31, 2019$71,570,300

FPAUM in our Private Markets business line was $71.6 billion at March 31, 2019, an increase of $4.8 billion, compared to $66.8 billion at December 31, 2018.

The increase was primarily attributable to new capital raised of $4.4 billion in European Fund V, as a result of it entering into its investment period on April 1, 2019, and $1.3 billion in our private equity separately managed accounts. These increases were partially offset by (i) distributions relating to realizations in our North America Fund XI and European Fund III and (ii) net changes in the fee base of our European Fund IV as a result of it entering into its post-investment period, during which it earns fees on invested capital rather than committed capital.

Uncalled capital commitments from Private Markets investment funds from which KKR is currently not earning management fees amounted to approximately $12.2 billion at March 31, 2019, which includes capital commitments reserved for follow-on investments for funds that have completed their investment periods. This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.0%. We will not begin earning fees on this capital until it is deployed or the related investment period commences, neither of which is guaranteed.  If and when such management fees are earned, which will occur over an extended period of time, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.


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Public Markets

The following table reflects the changes in our Public Markets FPAUM from December 31, 2018 to March 31, 2019: 
 ($ in thousands)
December 31, 2018$74,177,700
New Capital Raised4,142,800
Distributions(659,400)
Redemptions(1,588,600)
Change in Value42,500
March 31, 2019$76,115,000
FPAUM in our Public Markets business line was $76.1 billion at March 31, 2019, an increase of $1.9 billion, compared to FPAUM of $74.2 billion at December 31, 2018. The increases due to new capital raised were related to multiple strategies, most notably $1.2 billion in our BDCs, $0.9 billion in certain leveraged credit strategies, $0.8 billion in our private credit strategies and $0.8 billion in our hedge fund partnerships . Partially offsetting these increases were redemptions and distributions from certain investment vehicles across multiple strategies, most notably our hedge fund partnerships, certain leveraged credit strategies and our private credit strategies.

Uncalled capital commitments from Public Markets investment funds from which KKR is currently not earning management fees amounted to approximately $7.7 billion at March 31, 2019. This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.0%. We will not begin earning fees on this capital until it is deployed or the related investment period commences, neither of which is guaranteed. If and when such management fees are earned, which will occur over an extended period of time, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned.

Uncalled Commitments
Private Markets

As of March 31, 2019, our Private Markets business line had $48.4 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $48.2 billion as of December 31, 2018. The increase is due primarily to new capital raised in our private equity separately managed accounts and European Fund V, partially offset by capital called from fund investors to make investments during the period.
Public Markets

As of March 31, 2019, our Public Markets business line had $9.7 billion of uncalled capital commitments that could be called for investments in new transactions, which was relatively flat against $9.8 billion of uncalled capital commitments as of December 31, 2018. The net decrease was primarily attributable to capital invested across various private credit strategies, partially offset by new capital raised in our revolving credit strategies.

Capital Invested and Syndicated Capital
Private Markets Capital Invested
For the three months ended March 31, 2019, Private Markets had $3.3 billion of capital invested as compared to $2.4 billion for the three months ended March 31, 2018. The increase was driven primarily by a $0.8 billion increase in capital invested in our private equity strategies (including core investments and growth equity) and $0.1 billion increase in capital invested in our real assets platforms. Generally, the portfolio companies acquired through our private equity funds have higher transaction values and result in higher capital invested relative to transactions in our real assets funds. The number of large private equity investments made in any quarter is volatile and consequently, a significant amount of capital invested in one quarter or a few quarters may not be indicative of a similar level of capital deployment in future quarters. During the quarter ended March 31, 2019, 49% of capital deployed in private equity, which includes core and growth equity investments, was in transactions in the Asia-Pacific region, 38% was in North America, and 13% was in Europe.
As of April 30, 2019, our Private Markets business line had announced transactions that were subject to closing conditions which aggregated approximately $4.0 billion. These transactions are generally subject to the satisfaction of closing conditions prior to their completion, and there can be no assurance if or when any of these transactions will be completed.

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Public Markets Capital Invested
For the three months ended March 31, 2019, Public Markets had $2.2 billion of capital invested as compared to $1.4 billion for the three months ended March 31, 2018. This was primarily due to a higher level of net capital deployed in our direct lending and private opportunistic credit strategies, offset by a lower level of net capital deployed in our special situations strategy.
Capital Markets Syndicated Capital
For the three months ended March 31, 2019, Capital Markets syndicated $0.3 billion of capital as compared to $0.6 billion for the three months ended March 31, 2018. The decrease was primarily due to a decrease in the size of syndication transactions in the three months ended March 31, 2019 as compared to the three months ended March 31, 2018. Overall, we completed five syndication transactions for the three months ended March 31, 2019 as compared to three syndications for the three months ended March 31, 2018.
Reconciliations to GAAP Measures

For the reconciliations of the most directly comparable financial measures calculated and presented in accordance with GAAP to total segment revenues, total segment expenses, and after-tax distributable earnings, see Note 14 "Segment Reporting" to the financial statements included elsewhere in this report.

Segment Balance Sheet
 
Our segment balance sheet is the balance sheet of KKR & Co. L.P.Inc. and its subsidiaries on a segment basis which includes, but is not limited to, our investment management companies, broker-dealer companies, general partners of our investment funds, and KFN. Our segment balance sheet excludes the assets and liabilities of our investment funds and CFEs and other consolidated entities that are not subsidiaries of KKR & Co. L.P.Inc.
 
Investments
 
Investments is a term used solely for purposes of financial presentation of a portion of KKR's balance sheet and includes majority ownership of subsidiaries that operate KKR's asset management and other businesses, including the general partner interests of KKR's investment funds.

Cash and Short-Term Investments
 
Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR's liquidity position. We believe this measure is useful to unitholdersstockholders as it provides additional insight into KKR's available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments. The impact that these liquid short-term investments have on cash and cash equivalents on a GAAP basis is reflected in the consolidated statements of cash flows within cash flows from operating activities. Accordingly, the exclusion of these investments from cash and cash equivalents on a GAAP basis has no impact on cash provided (used) by operating activities, investing activities or financing activities.
    

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The following tables present information with respect to our segment balance sheet as of March 31, 20182019 and December 31, 2017:2018:
 As of As of As of As of
 March 31, 2018 December 31, 2017 March 31, 2019 December 31, 2018
 ($ in thousands, except per unit amounts) ($ in thousands, except per share amounts)
Cash and Short-term Investments $2,510,024
 $3,214,794
 $2,554,305
 $2,502,239
Investments 9,768,400
 8,488,606
 10,713,740
 9,847,464
Unrealized Carry (1)
 1,591,335
 1,620,401
Other Assets 2,212,619
 2,276,286
Unrealized Carried Interest (1)
 1,468,431
 1,223,084
Corporate Real Estate 161,225
 161,225
 161,225
 161,225
Tax Assets 429,505
 561,114
Other Assets (2)
 3,443,358
 3,292,510
Total Assets $16,243,603
 $15,761,312
 $18,770,564
 $17,587,636
        
Debt Obligations - KKR (ex-KFN) $2,379,259
 $2,000,000
 $2,363,636
 $2,367,801
Debt Obligations - KFN 884,767
 764,767
 948,517
 948,517
Preferred Shares - KFN —
 373,750
Tax Liabilities 190,066
 174,395
Other Liabilities 472,771
 426,699
 598,135
 590,981
Total Liabilities 3,736,797
 3,565,216
 4,100,354
 4,081,694
        
Noncontrolling Interests 23,517
 22,187
 22,004
 25,382
Preferred Units 500,000
 500,000
Preferred Stock 500,000
 500,000
        
Book Value $11,983,289
 $11,673,909
 $14,148,206
 $12,980,560
        
Book Value Per Outstanding Adjusted Unit $14.56
 $14.20
    
(1) Unrealized Carry
    
Private Markets $1,429,614
 $1,480,142
Public Markets 161,721
 140,259
Total $1,591,335
 $1,620,401
 

 

Book Value Per Adjusted Share $16.99
 $15.57
(1)The following table provides unrealized carried interest by business line:
  As of
  March 31, 2019 December 31, 2018
Private Markets Business Line $1,336,213
 $1,083,163
Public Markets Business Line 132,218
 139,921
Total $1,468,431
 $1,223,084
(2)Other Assets include KKR's ownership interest in FS/KKR Advisor, LLC and minority ownership interests in hedge fund partnerships.
Book Value Per Adjusted Share



Book value per adjusted share increased 9.1% from December 31, 2018. This increase was due primarily to a broad-based increase in the value of KKR's investment portfolio, including investments held by KKR as well as investments held through investment funds, such as KKR's private equity funds, where KKR is entitled to earn carried interest. For the three months ended March 31, 2019, the value of KKR's balance sheet portfolio, on a segment basis, increased 9.2% and KKR's overall private equity portfolio increased 11.1%. The increase in KKR's balance sheet portfolio was primarily due to mark-to-market gains in our portfolio companies. For a further discussion, see "—Unaudited Consolidated Results of Operations—Unrealized Gains from Investment Activities" and "—Unaudited Consolidated Results of Operations—Unrealized Losses from Investment Activities." For a discussion of the changes in KKR's private equity portfolio, see "—Segment Analysis—Segment Results—Other Operating and Performance Measures—AUM." The increase in book value per outstanding adjusted share was also due to approximately $0.3 billion of after-tax distributable earnings which were partially offset by dividends to Class A common stockholders during the three months ended March 31, 2019. For a discussion of factors that impacted KKR's after-tax distributable earnings, see "—Segment Analysis—Segment Results."

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The following table presents the holdings of our segment balance sheet by asset class as of March 31, 2018.2019. To the extent investments on our segment balance sheet for example in energy, CLOs and specialty finance, are realized at values below their cost in future periods, after-tax distributable earnings would be adversely affected by the amount of such loss, if any, during the period in which the realization event occurs.
 As of March 31, 2018
       As of March 31, 2019
Investments Cost 
Carrying
Value
 
Carrying Value as a Percentage of
Total Investments
 Cost Fair Value 
Fair Value as a Percentage of
Total Investments
            
Private Equity Co-Investments, Core Investments and Other Equity $2,680,023
 $3,188,100
 32.6%
Private Equity Funds 1,130,181
 1,488,790
 15.2%
Private Equity and Other Equity Total 3,810,204
 4,676,890
 47.8%
Private Equity Funds / SMAs $2,681,895
 $3,569,296
 33.3%
Private Equity Co-Investments and Other Equity 2,195,525
 2,998,425
 28.0%
Private Equity Total 4,877,420
 6,567,721
 61.3%
            
Energy 1,025,500
 687,731
 7.0% 651,377
 679,216
 6.3%
Real Estate (1)
 751,693
 801,733
 8.2%
Real Estate 801,417
 837,973
 7.8%
Infrastructure 318,796
 401,086
 4.1% 416,626
 510,016
 4.8%
Real Assets Total 2,095,989
 1,890,550
 19.3% 1,869,420
 2,027,205
 18.9%
            
Special Situations 770,453
 790,611
 8.1% 688,332
 560,694
 5.2%
Direct Lending 134,370
 134,151
 1.4% 144,814
 132,451
 1.3%
Mezzanine 25,319
 28,373
 0.3%
Alternative Credit Total 930,142
 953,135
 9.8% 833,146
 693,145
 6.5%
CLOs (1)
 1,086,652
 725,030
 7.4%
Other Leveraged Credit 119,412
 136,131
 1.4%
Specialty Finance 289,870
 205,731
 2.1%
CLOs 729,155
 635,934
 5.9%
Other Credit 353,892
 234,827
 2.2%
Credit Total 2,426,076
 2,020,027
 20.7% 1,916,193
 1,563,906
 14.6%
            
Other 1,128,939
 1,180,933
 12.2% 673,130
 554,908
 5.2%
            
Total Investments $9,461,208
 $9,768,400
 100.0% $9,336,163
 $10,713,740
 100.0%
            
 As of March 31, 2018 March 31, 2019
Significant Investments: (2)
 Cost 
Carrying
Value
 Carrying Value as a Percentage of
Total Investments
First Data Corporation $956,454
 $1,138,448
 11.7%
Significant Investments: (1)
 Cost Fair Value Fair Value as a Percentage of
Total Investments
First Data Corporation (NYSE: FDC) $794,978
 $1,534,049
 14.3%
USI, Inc. 500,000
 574,078
 5.9% 500,111
 650,144
 6.1%
Heartland Dental LLC 302,255
 362,706
 3.4%
PetVet Care Centers, LLC 243,188
 340,463
 3.2%
KKR Real Estate Finance Trust Inc. (NYSE: KREF) 325,000
 325,000
 3.3% 325,000
 325,325
 3.0%
PortAventura Entertainment S.A. 233,132
 266,715
 2.7%
WMIH Corp. 221,250
 247,725
 2.5%
Total Significant Investments 2,235,836
 2,551,966
 26.1% 2,165,532
 3,212,687
 30.0%
            
Other Investments 7,225,372
 7,216,434
 73.9% 7,170,631
 7,501,053
 70.0%
Total Investments $9,461,208
 $9,768,400
 100.0% $9,336,163
 $10,713,740
 100.0%
            
(1) Includes our ownership of $325.0 million in KREF and $372.0 million of CLOs which are not held for investment purposes and held at cost.
(2) The significant investments include the top five investments (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their carrying values as of March 31, 2018. The carrying value figures include the co-investment and the limited partner and/or general partner interests held directly by KKR in the underlying investment, if applicable.
(1)The significant investments include the top five investments (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair values as of March 31, 2019. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying investment, if applicable.

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The following tables provide reconciliations of KKR's GAAP Condensed Consolidated Statements of Financial Condition to Total Reportable Segmentsour Segment Balance Sheet as of March 31, 20182019 and December 31, 2017.2018.
As of March 31, 2018
As of March 31, 2019As of March 31, 2019
(Amounts in thousands)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (GAAP BASIS) 1 2 3 4 5 TOTAL REPORTABLE SEGMENTS BALANCE SHEET
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (GAAP BASIS)CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (GAAP BASIS) 1 2 3 4 SEGMENT BALANCE SHEET
                          
Assets                          
Cash and Cash Equivalents$1,880,834
 —
 —
 636,819
 —
 (7,629) $2,510,024
Cash and Short-term Investments$1,808,368
 (86,012) —
 831,949
 —
 $2,554,305
Cash and Short-term Investments
Investments42,101,905
 (29,566,100) (1,176,070) (1,591,335) —
 —
 9,768,400
Investments45,795,254
 (29,504,201) (1,089,045) (4,488,268) —
 10,713,740
Investments
  —
 —
 1,591,335
 —
 —
 1,591,335
Unrealized Carry  —
 —
 1,468,431
 —
 1,468,431
Unrealized Carried Interest
  —
 —
 161,225
 —
 161,225
Corporate Real Estate
  —
 —
 429,505
 —
 429,505
Tax Assets
Other Assets3,596,414
 (405,964) —
 (798,044) —
 (179,787) 2,212,619
Other Assets4,400,397
 (1,971,422) —
 1,014,383
 —
 3,443,358
Other Assets
  —
 —
 161,225
 —
 —
 161,225
Corporate Real Estate
Total Assets$47,579,153
 (29,972,064) (1,176,070) —
 —
 (187,416) $16,243,603
 $52,004,019
 (31,561,635) (1,089,045) (582,775) —
 $18,770,564
 
                          
Liabilities and Equity                          
Debt Obligations22,041,271
 (18,777,245) —
 (884,767) —
 —
 2,379,259
Debt Obligations - KKR (ex-KFN)22,262,369
 (18,950,216) —
 (948,517) —
 2,363,636
Debt Obligations - KKR (ex-KFN)
  —
 —
 884,767
 —
 —
 884,767
Debt Obligations - KFN  —
 —
 948,517
 —
 948,517
Debt Obligations - KFN
  —
 —
 —
 —
 —
 —
Preferred Shares - KFN  —
 —
 190,066
 —
 190,066
Tax Liabilities
Other Liabilities3,768,944
 (1,998,075) (1,176,070) —
 —
 (122,028) 472,771
Other Liabilities3,533,809
 (1,073,788) (1,089,045) (772,841) —
 598,135
Other Liabilities
Total Liabilities25,810,215
 (20,775,320) (1,176,070) —
 —
 (122,028) 3,736,797
 25,796,178
 (20,024,004) (1,089,045) (582,775) —
 4,100,354
 
                          
Redeemable Noncontrolling Interests690,630
 (690,630) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 
                          
Equity              
Series A Preferred Units332,988
 —
 —
 (332,988) —
 —
 —
 
Series B Preferred Units149,566
 —
 —
 (149,566) —
 —
 —
 
KKR & Co. L.P. Capital - Common Unitholders6,918,185
 254,777
 —
 (17,446) 4,893,161
 (65,388) 11,983,289
Book Value
Stockholders' Equity            
Preferred Stock482,554
 —
 —
 (482,554) —
 
 
KKR & Co. Inc. Stockholders' Equity - Common Stockholders8,839,817
 246,793
 —
 (17,446) 5,079,042
 14,148,206
Book Value
Noncontrolling Interests13,677,569
 (8,760,891) —
 —
 (4,893,161) —
 23,517
Noncontrolling Interests16,885,470
 (11,784,424) —
 —
 (5,079,042) 22,004
Noncontrolling Interests
  —
 —
 500,000
 —
 —
 500,000
Preferred Units  —
 —
 500,000
 —
 500,000
Preferred Stock
Total Liabilities and Equity$47,579,153
 (29,972,064) (1,176,070) —
 —
 (187,416) $16,243,603
 $52,004,019
 (31,561,635) (1,089,045) (582,775) —
 $18,770,564
 
                          
                          
                          
1IMPACT OF CONSOLIDATION OF INVESTMENT VEHICLES AND OTHER ENTITIESIMPACT OF CONSOLIDATION OF INVESTMENT VEHICLES AND OTHER ENTITIES
2CARRY POOL RECLASSIFICATION CARRY POOL RECLASSIFICATION 
3OTHER RECLASSIFICATIONS OTHER RECLASSIFICATIONS 
4NONCONTROLLING INTERESTS HELD BY KKR HOLDINGS L.P. AND OTHER NONCONTROLLING INTERESTS HELD BY KKR HOLDINGS L.P. 
5EQUITY IMPACT OF KKR MANAGEMENT HOLDINGS CORP. 





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As of December 31, 2017
As of December 31, 2018As of December 31, 2018
(Amounts in thousands)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (GAAP BASIS) 1 2 3 4 5 TOTAL REPORTABLE SEGMENTS BALANCE SHEET
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (GAAP BASIS)CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (GAAP BASIS) 1 2 3 4 SEGMENT BALANCE SHEET
                          
Assets                          
Cash and Cash Equivalents$1,876,687
 —
 —
 1,338,107
 —
 —
 $3,214,794
Cash and Short-term Investments$1,751,287
 (88,852) —
 839,804
 —
 $2,502,239
Cash and Short-term Investments
Investments39,013,934
 (27,684,368) (1,220,559) (1,620,401) —
 —
 8,488,606
Investments44,907,982
 (30,069,428) (922,977) (4,068,113) —
 9,847,464
Investments
  —
 —
 1,620,401
 —
 —
 1,620,401
Unrealized Carry  —
 —
 1,223,084
 —
 1,223,084
Unrealized Carried Interest
  —
 —
 161,225
 —
 161,225
Corporate Real Estate
  —
 —
 561,114
 —
 561,114
Tax Assets
Other Assets4,944,098
 (974,710) —
 (1,499,332) —
 (193,770) 2,276,286
Other Assets4,084,106
 (1,730,191) —
 938,595
 —
 3,292,510
Other Assets
  —
 —
 161,225
 —
 —
 161,225
Corporate Real Estate
Total Assets$45,834,719
 (28,659,078) (1,220,559) —
 —
 (193,770) $15,761,312
 $50,743,375
 (31,888,471) (922,977) (344,291) —
 $17,587,636
 
                          
Liabilities and Equity                          
Debt Obligations21,193,859
 (18,429,092) —
 (764,767) —
 —
 2,000,000
Debt Obligations - KKR (ex-KFN)22,341,192
 (19,024,874) —
 (948,517) —
 2,367,801
Debt Obligations - KKR (ex-KFN)
  —
 —
 764,767
 —
 —
 764,767
Debt Obligations - KFN  —
 —
 948,517
 —
 948,517
Debt Obligations - KFN
  —
 —
 373,750
 —
 —
 373,750
Preferred Shares - KFN  —
 —
 174,395
 —
 174,395
Tax Liabilities
Other Liabilities3,978,060
 (2,207,518) (1,220,559) —
 —
 (123,284) 426,699
Other Liabilities3,019,574
 (986,930) (922,977) (518,686) —
 590,981
Other Liabilities
Total Liabilities25,171,919
 (20,636,610) (1,220,559) 373,750
 —
 (123,284) 3,565,216
 25,360,766
 (20,011,804) (922,977) (344,291) —
 4,081,694
 
                          
Redeemable Noncontrolling Interests610,540
 (610,540) —
 —
 —
 —
   1,122,641
 (1,122,641) —
 —
 —
   
                          
Equity              
Series A Preferred Units332,988
 —
 —
 (332,988) —
 —
   
Series B Preferred Units149,566
 —
 —
 (149,566) —
 —
   
KKR & Co. L.P. Capital - Common Unitholders6,703,382
 214,188
 —
 (17,446) 4,844,271
 (70,486) 11,673,909
Book Value
Stockholders' Equity            
Preferred Stock482,554
 —
 —
 (482,554) —
   
KKR & Co. Inc. Stockholders' Equity - Common Stockholders8,167,056
 205,502
 —
 (17,446) 4,625,448
 12,980,560
Book Value
Noncontrolling Interests12,866,324
 (7,626,116) —
 (373,750) (4,844,271) —
 22,187
Noncontrolling Interests15,610,358
 (10,959,528) —
 —
 (4,625,448) 25,382
Noncontrolling Interests
  —
 —
 500,000
 —
 —
 500,000
Preferred Units  —
 —
 500,000
 —
 500,000
Preferred Stock
Total Liabilities and Equity$45,834,719
 (28,659,078) (1,220,559) —
 —
 (193,770) $15,761,312
 $50,743,375
 (31,888,471) (922,977) (344,291) —
 $17,587,636
 
                          
                          
                          
1IMPACT OF CONSOLIDATION OF INVESTMENT VEHICLES AND OTHER ENTITIES IMPACT OF CONSOLIDATION OF INVESTMENT VEHICLES AND OTHER ENTITIES 
2CARRY POOL RECLASSIFICATION CARRY POOL RECLASSIFICATION 
3OTHER RECLASSIFICATIONS OTHER RECLASSIFICATIONS 
4NONCONTROLLING INTERESTS HELD BY KKR HOLDINGS L.P. AND OTHER NONCONTROLLING INTERESTS HELD BY KKR HOLDINGS L.P. AND OTHER 
5EQUITY IMPACT OF KKR MANAGEMENT HOLDINGS CORP. 


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The following tables providetable provides reconciliations of KKR's GAAP Shares of Class A Common UnitsStock Outstanding to Adjusted Units, Adjusted UnitsShares Eligible for Distribution and Outstanding Adjusted Units:Shares:
 As ofAs of
 March 31, 2018December 31, 2017
GAAP Common Units Outstanding - Basic489,242,042
486,174,736
Adjustments: 
 
Unvested Common Units (1)
46,654,309
46,475,176
Other Exchangeable Securities (2)
1,518,843
2,299,421
GAAP Common Units Outstanding - Diluted537,415,194
534,949,333
Adjustments: 
 
KKR Holdings Units (3)
333,648,078
335,971,334
Adjusted Units871,063,272
870,920,667
Adjustments:  
Unvested Common Units(46,654,309)(46,475,176)
Adjusted Units Eligible for Distribution824,408,963
824,445,491
Adjustments:  
Vested Other Exchangeable Securities (2)
(1,518,843)(2,299,421)
Outstanding Adjusted Units822,890,120
822,146,070
 As ofAs of
 March 31, 2019December 31, 2018
GAAP Shares of Class A Common Stock Outstanding533,922,902
534,857,237
Adjustments:  
KKR Holdings Units (1)
298,645,285
299,081,239
Adjusted Shares Eligible for Distribution (2)
832,568,187
833,938,476
   
Unvested Shares of Class A Common Stock (3)
32,854,483
33,408,491
(1)Class A common stock that may be issued by KKR & Co. Inc. upon exchange of units in KKR Holdings for Class A common stock.
(2)Amounts exclude unvested equity awards granted under our Equity Incentive Plans.
(3)Represents equity awards granted under theour Equity Incentive Plan.Plans. The issuance of Class A common unitsstock of KKR & Co. L.P.Inc. pursuant to awards under theour Equity Incentive PlanPlans dilutes KKR Class A common unitholdersstockholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business. Excludes the award of 2,500,000 restricted equitystock units granted to each of our Co-Presidents/Co-Chief Operating Officers during 2017 that have not met their market-price based vesting condition as of March 31, 2019 or December 31, 2018. See "Item 1. Condensed Consolidated Financial Statements (unaudited)—EquityNote 12 "Equity Based Compensation."Compensation" to the financial statements included elsewhere in this report.

(2)Represents securities in a subsidiary of a KKR Group Partnership and of KKR & Co. L.P. that are exchangeable into KKR & Co. L.P. common units issued in connection with the acquisition of Avoca.

(3)Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.

Liquidity
 
We manage our liquidity and capital requirements by focusing on our cash flows before the consolidation of our funds and CFEs and the effect of changes in short term assets and liabilities, which we anticipate will be settled for cash within one year. Our primary cash flow activities on a segment basis typically involve: (i) generating cash flow from operations; (ii) generating income from investment activities, by investing in investments that generate yield (namely interest and dividends), as well as the sale of investments and other assets; (iii) funding capital commitments that we have made to, and advancing capital to, our funds and CLOs; (iv) developing and funding new investment strategies, investment products, and other growth initiatives, including acquisitions of other investments, assets, and businesses; (v) underwriting and funding commitments in our capital markets business; (vi) distributing cash flow to our unitholders, certain holders of certain exchangeable securitiesstockholders and holders of our Series A and Series B Preferred Units;Stock; and (vii) paying borrowings, interest payments, and repayments under credit agreements, our senior notes, and other borrowing arrangements. See "—Liquidity—Liquidity Needs—Distributions.Dividends."

Sources of Liquidity
 
Our primary sources of liquidity consist of amounts received from: (i) our operating activities, including the fees earned from our funds, portfolio companies, and capital markets transactions; (ii) realizations on carried interest from our investment funds; (iii) interest and dividends from investments that generate yield, including our investments in CLOs; (iv) realizations on and sales of investments and other assets, including the transfers of investments for fund formations,formations; and (v) borrowings under our credit facilities, debt offerings, and other borrowing arrangements. In addition, we may generate cash proceeds from sales of our equity securities.
 
Many of our investment funds provide carried interest. With respect to our private equity funds, carried interest is distributed to the general partner of a private equity fund with a clawback provision only after all of the following are met: (i) a realization event has occurred (e.g., sale of a portfolio company, dividend, etc.); (ii) the vehicle has achieved positive overall investment returns since its inception, in excess of performance hurdles where applicable; and (iii) with respect to investments

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with a fair value below cost, cost has been returned to fund investors in an amount sufficient to reduce remaining cost to the investments' fair value. As of March 31, 2018,2019, certain of our funds had met the first and second criteria, as described above, but did not meet the third criteria. In these cases, carried interest accrues on the consolidated statement of operations, but will not be distributed in cash to us as the general partner of an investment fund upon a realization event. For a fund that has a fair value above cost, overall, but has one or more investments where fair value is below cost, the shortfall between cost and fair value for such investments is referred to as a "netting hole." When netting holes are present, realized gains on individual investments that would otherwise allow the general partner to receive carried interest distributions are instead used to return invested capital to our funds' limited partners in an amount equal to the netting hole. Once netting holes have been filled with either (a) return of capital equal to the netting hole for those investments where fair value is below cost or (b) increases in the fair value of those investments where fair value is below cost, then realized carried interest will be distributed to the general partner upon a realization event. A fund that is in a position to pay cash carry refers to a fund for which carried interest is expected to be paid to the general partner upon the next material realization event, which includes funds with no netting holes as well as funds with

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a netting hole that is sufficiently small in size such that the next material realization event would be expected to result in the payment of carried interest. Strategic investor partnerships with fund investors may require netting across the various funds in which they invest, which may reduce the carried interest we otherwise would have earned if such fund investors were to have invested in our funds without the existence of the strategic investor partnership. See "Risk Factors—Risks Related to Our Business—Strategic investor partnerships have longer investment periods and invest in multiple strategies, which may increase the possibility of a 'netting hole,' which will result in less carried interest for us, as well as clawback liabilities" in our Annual Report.
 
As of March 31, 2018,2019, no netting holes in excess of $50 million existed at three of our private equity funds, which were our European Fund IV, Millennium Fund, and Asian Fund II, which had netting holes of approximately $148 million, $82 million and $79 million, respectively.funds. In accordance with the criteria set forth above, other funds currently have and may in the future develop netting holes, and netting holes for those and other funds may otherwise increase or decrease in the future.

We have access to funding under various credit facilities, other borrowing arrangements and other sources of liquidity that we have entered into with major financial institutions or which we receive from the capital markets. The following describes these sources of liquidity.
 
Revolving Credit Agreements, Senior Notes, KFN Debt Obligations & KFN Securities

For a discussion of KKR's debt obligations, including our revolving credit agreements, senior notes, KFN debt obligations, and KFN securities, see Note 10 "Debt Obligations" to the audited financial statements included in our Annual Report. For an update of such information seeReport and Note 10 "Debt Obligations" to the condensed consolidated financial statements included elsewhere in this report which should be read in conjunction with the information filed in our Annual Report.report.

Preferred UnitsStock

For a discussion of KKR's equity, including our preferred units,stock, see Note 15 "Equity" to the audited financial statements included in our Annual Report.

Liquidity Needs
 
We expect that our primary liquidity needs will consist of cash required to:

continue to grow our business lines, including seeding new strategies, funding our capital commitments made to existing and future funds, co-investments and any net capital requirements of our capital markets companies and otherwise supporting investment vehicles which we sponsor;
 
warehouse investments in portfolio companies or other investments for the benefit of one or more of our funds, vehicles, accounts or CLOs pending the contribution of committed capital by the investors in such vehicles, and advancing capital to them for operational or other needs;

service debt obligations including the payment of obligations upon maturity or redemption, as well as any contingent liabilities that may give rise to future cash payments;

fund cash operating expenses and contingencies, including litigation matters and, after the Conversion, additionalmatters; 

payment of corporate income taxes; 


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taxes following the Conversion;

pay amounts that may become due under our tax receivable agreement with KKR Holdings; 

makepay cash distributionsdividends in accordance with our distributiondividend policy for our Class A common unitsstock or the terms of our preferred units;stock;  

underwrite commitments, advance loan proceeds and fund syndication commitments within our capital markets business;

make future purchase price payments in connection with our proprietary investments, such as our strategic managerhedge fund partnership with Marshall Wace, to the extent not paid by newly issued Class A common units;stock;


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acquire other assets for our Principal Activities segment,business line, including other businesses, investments and assets, some of which may be required to satisfy regulatory requirements for our capital markets business or risk retention requirements for CLOs (to the extent it continues to apply); and

repurchase KKR's Class A common unitsstock pursuant to the unitshare repurchase program or other securities issued by KKR.

KKR & Co. L.P. UnitInc. Share Repurchase Program

On October 27, 2015, KKR announced the authorization of a program providing for the repurchase by KKR of up to $500 million in the aggregate of its outstanding common units. On February 9, 2017, KKR announced the authorization for KKR to repurchase an incremental $250 million under this unit repurchase program. Since inception of the unit repurchase program, KKR has repurchased and canceled approximately 31.7 million outstanding common units for approximately $459 million, with approximately $291 million remaining under the program. No units were repurchased during the first quarter of 2018.

On May 3, 2018, KKR announced the increase to the available amount under its repurchase program to $500 million.

Under the currentterms of our share repurchase program, KKR is authorized to repurchase its common units or, after the Conversion, Class A common stock from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any common unit or Class A common stock repurchases will be determined by KKR in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions. KKR expects that the program, which has no expiration date, will be in effect until the maximum approved dollar amount has been used to repurchase common units or Class A common stock.used. The program does not require KKR to repurchase any specific number of common units orshares of Class A common stock, and the program may be suspended, extended, modified or discontinued at any time. As of March 31, 2019, $500 million was available under the repurchase program.
    
In addition to the purchases of common units and Class A common stock as described above, the repurchase program will be used for the cancellationretirement (by cash settlement or the payment of tax withholding amounts upon net settlement) of equity awards issued pursuant to our Equity Incentive Plan (and any successor equity plan thereto)Plans representing the right to receive common units or Class A common stock. See "Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds."






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Capital Commitments

The agreements governing our active investment funds generally require the general partners of the funds to make minimum capital commitments to such funds, which usually range from 2% to 8% of a fund's total capital commitments at final closing; however, the size of our general partner commitment to certain funds pursuing newer strategies may exceed this range. The following table presents our uncalled commitments to our active investment funds as of March 31, 2018:2019:

Uncalled
Commitments
Uncalled
Commitments
Private Markets($ in thousands)($ in thousands)
Core Investment Vehicles$2,756,900
$2,238,200
Americas Fund XII712,000
489,200
Asian Fund III464,900
476,300
Global Infrastructure Investors III
270,000
European Fund V400,000
Global Infrastructure III310,600
Energy Income and Growth II200,000
Health Care Strategic Growth127,800
Real Estate Partners Americas II219,200
125,900
Health Care Strategic Growth144,700
Global Impact Fund100,000
Real Estate Credit Opportunity Partners II50,000
European Fund IV49,900
Next Generation Technology Growth93,300
33,600
European Fund IV71,200
Real Estate Partners Europe52,800
Energy Income and Growth37,800
Real Estate Credit Opportunity Partners22,500
Other Private Markets Vehicles543,900
196,200
Total Private Markets Commitments5,389,200
4,797,700
 
 
Public Markets 
 
Special Situations Fund II143,700
105,400
Private Credit Opportunities Partners II
38,000
27,000
Lending Partners III19,500
18,400
Lending Partners Europe16,300
13,800
Other Public Markets Vehicles114,100
124,600
Total Public Markets Commitments331,600
289,200
 
 
Total Uncalled Commitments$5,720,800
$5,086,900
 
Other Commitments

In addition to the uncalled commitments to our investment funds as shown above, KKR has entered into contractual commitments with respect to (i) the purchase of investments and other assets primarily in our Principal Activities segment,business line and (ii) underwriting transactions, debt financing, and syndications in our Capital Markets segment.business line. As of March 31, 2018,2019, these commitments amounted to $275.1$153.7 million and $1,114.1$516.2 million, respectively. Whether these amounts are actually funded, in whole or in part, depends on the contractual terms of such commitments, including the satisfaction or waiver of any conditions to closing or funding. The unfunded commitments shown for our Capital Markets segmentbusiness line are shown without reflecting arrangements that may reduce the actual amount of contractual commitments shown.shown occurring after March 31, 2019. Our capital markets business has an arrangement with a third party, which reduces our risk when underwriting certain debt transactions.transactions, and thus our unfunded commitments as of March 31, 2019 are reduced to reflect the amount to be funded by such third party. In the case of purchases of investments or assets in our Principal Activities segment,business line, the amount to be funded includes amounts that are intended to be syndicated to third parties, and the actual amounts to be funded may be less than shown.
 
Investment in Marshall Wace

On November 2, 2015, KKR entered into a strategic manager partnership with Marshall Wace and acquired a 24.9% interest in Marshall Wace through a combination of cash and common units. Subject to the exercise of a put option by Marshall Wace or a call option by KKR, at subsequent closings to occur in the second, third and fourth years following the initial closing described above, and subject to satisfaction or waiver of certain closing conditions, including regulatory approvals, KKR may at each such closing subscribe (or be required to subscribe) for an incremental 5% equity interest, for ultimate aggregate


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ownership of up to 39.9%Investment in Marshall Wace

In connection with our investment in Marshall Wace, either of Marshall Wace or KKR may, in the fourth quarter of 2019, exercise a put option or a call option, respectively, that would give KKR an incremental 5% equity interest in Marshall Wace. KKR currently holds an ownership interest of 34.6%. The exercise of such options would require the use of cash and/or KKR Class A common units. KKR's investment in Marshall Wace is accounted for using the equity method of accounting.

On November 30, 2017, KKR acquired an additional 5.0% interest in Marshall Wace after the exercise of one of the options agreed to between Marshall Wace and KKR. This acquisition was funded through a combination of cash and 4,727,966 common units.

Corporate Capital Trust

During 2017, CCT shareholders approved, among other things, a proposal for KKR Credit Advisors (US) LLC to become CCT's sole investment adviser subject to the listing of CCT's common stock on a national securities exchange, which occurred during the fourth quarter of 2017.  Following the listing of CCT on the NYSE, KKR Credit Advisors may purchase up to $50 million of CCT's common stock in the aggregate in open-market transactions. Through March 31, 2018, approximately $23.5 million has been purchased.

Strategic BDC Partnership with FS Investments Corporation

On December 11, 2017, KKR announced a definitive agreement to form a new strategic BDC partnership with FS Investment Corporation. This transaction was completed through a combination of cash and other assets on April 9, 2018.stock.

Tax Receivable Agreement

We and certain intermediate holding companies that are taxable corporations for U.S. federal, state and local income tax purposes, may be required to acquire KKR Group Partnership Units from time to time pursuant to our exchange agreement with KKR Holdings. KKR Management Holdings, L.P. made an election under Section 754 of the Code that will remain in effect for each taxable year in which an exchange of KKR Group Partnership Units for common units occurs, which may result in an increase in our intermediate holding companies' share of the tax basis of the assets of the KKR Group Partnerships at the time of an exchange of KKR Group Partnership Units. Certain of these exchanges are expected to result in an increase in our intermediate holding companies' share of the tax basis of the tangible and intangible assets of the KKR Group Partnerships, primarily attributable to a portion of the goodwill inherent in our business that would not otherwise have been available. This increase in tax basis may increase depreciation and amortization deductions for tax purposes and therefore reduce the amount of income tax our intermediate holding companies would otherwise be required to pay in the future. This increase in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

We have entered into a tax receivable agreement with KKR Holdings, which requires our intermediate holding companiesus to pay to KKR Holdings, or to current and former principals who have exchanged KKR Holdings units for KKR Class A common unitsstock as transferees of KKR Group Partnership Units, 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the intermediate holding companieswe realize as a result of the increase in tax basis described above, as well as 85% of the amount of any such savings the intermediate holding companieswe realize as a result of increases in tax basis that arise due to future payments under the agreement. We expect our intermediate holding companiesAs of March 31, 2019, an undiscounted payable of $108.3 million has been recorded in due to benefit fromaffiliates in the remaining 15% of cash savings, if any, in income tax that they realize. A terminationfinancial statements representing management's best estimate of the agreement or a change of control could give rise to similar payments based on tax savings that we would be deemed to realize in connection with such events. In the event that other of our current or future subsidiaries become taxable as corporations and acquire KKR Group Partnership Units in the future, or if we become taxable as a corporation for U.S. federal income tax purposes, we expect that each will become subject to a tax receivable agreement with substantially similar terms.

These payment obligations are obligations of our intermediate holding companies and not the KKR Group Partnerships. As such, cash payments received by common unitholders may vary from those received by holders of KKR Group Partnership Units held by KKR Holdings and its current and former principals to the extent payments are made to those parties under the tax receivable agreement. Payments made under the tax receivable agreement are requiredamounts currently expected to be made within 90 days of the filing of the tax returns of our intermediate holding companies, which may result in a timing difference between the tax savings received by KKR's intermediate holdings companies and the cash payments made to the selling holders of KKR Group Partnership Units.

For the quarter ended March 31, 2018 and 2017, no cash payments were madeowed under the tax receivable agreement. As of March 31, 2018, $4.22019, approximately $35.8 million of cumulative income tax savingscash payments have been realized. See "—Liquidity—Other Liquidity Needs—Contractual Obligations, Commitments and Contingencies" for a discussion of amounts payable and cumulative cash payments made under thisthe tax receivable agreement.

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Regarding the impact of the Conversion, see "Part II. Item 5. Other Information" and "Part II. Item 1A. Risk Factors—As a result ofFollowing the Conversion, we expect to pay more corporate income taxes and also expect to make largerthe amount of future payments under ourthe tax receivable agreement to be materially higher than it would have been had we not converted to a corporation. In addition, our obligations under the tax receivable agreement would as a limited partnership. be effectively accelerated in the event of an early termination of the tax receivable agreement by us or in the event of certain mergers, asset sales and other forms of business combinations or other changes of control. See "Risk Factors—Risks Related to Our Organization—We also expectwill be required to pay our principals for most of the anticipated amountbenefits relating to our use of annual dividends totax attributes we receive from prior and future exchanges of our Class A common stockholders immediately following the Conversion, if declared, to be lower than the distribution amounts we declaredstock for KKR Group Partnership Units and related transactions" in prior annual periods as a limited partnership. In addition, we may fail to realize all or some of the anticipated benefits of the Conversion or those benefits may take longer to realize than expected, which could have a material and adverse impact on the trading price of our securities."Annual Report.

DistributionsDividends
A distributiondividend of $0.17$0.125 per share of Class A common unitstock has been declared, which will be paid on May 29, 201828, 2019 to holders of record of Class A common unitsstock as of the close of business on May 14, 2018.13, 2019.
A distributiondividend of $0.421875 per share of Series A Preferred UnitStock has been declared and set aside for payment on June 15, 201817, 2019 to holders of record of Series A Preferred UnitsStock as of the close of business on June 1, 2018.2019. A distributiondividend of $0.406250 per share of Series B Preferred UnitStock has been declared and set aside for payment on June 15, 201817, 2019 to holders of record of Series B Preferred UnitsStock as of the close of business on June 1, 2018. 2019.
When KKR & Co. L.P.Inc. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships.
The declaration and payment of dividends to our Class A common stockholders will be at the sole discretion of our board of directors, and our dividend policy may be changed at any future distributions on preferred ortime. Our current dividend policy is to pay dividends to holders of our Class A common units arestock in an annual aggregate amount of $0.50 per share (or a quarterly dividend of $0.125 per share), subject to the discretion of theour board of directors based on a number of factors, including KKR’s future financial performance and other considerations that the general partnerboard deems relevant, and compliance with the terms of KKR & Co. L.P.Inc.'s certificate of incorporation and applicable law. For U.S. federal income tax purposes, any dividends we pay (including dividends on our preferred stock) generally will be treated as qualified dividend income for U.S. individual stockholders to the termsextent paid out of its limited partnership agreement.our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. There can be no assurance that future distributionsdividends will be made as intended or at all that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. or that any particular distributiondividend policy for our Class A common unitsstock will be maintained. Furthermore, the declaration and payment of distributions by the KKR Group Partnerships and our other subsidiaries may also be subject to legal, contractual and regulatory restrictions, including restrictions contained in our debt agreements and the terms of the preferred unitsstock of the KKR Group Partnerships.
Following the Conversion, the declaration and payment of dividends to our common stockholders will be at the sole discretion of our board of directors, and our dividend policy may be changed at any time. As a corporation, we expect our dividends to our Class A common stockholders, if declared, to be lower than the distribution amounts we declared in prior periods as a limited partnership. Our distribution policy as a limited partnership has been to pay annual aggregate distributions to holders of our common units of $0.68 per common unit, and we have announced that we anticipate that our dividend policy beginning in the third quarter of 2018 will be to pay dividends to holders of our Class A common stock in an initial annual aggregate amount of $0.50 per share, in each case, subject to the discretion of our board of directors and compliance with applicable law. For U.S. federal income tax purposes, any dividends we pay following the Conversion (including dividends on our preferred shares) generally will be treated as qualified dividend income (generally taxable to U.S. individual stockholders at capital gain rates) paid by a domestic corporation to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Following the Conversion, no income, gains, losses, deductions or credits of KKR will flow through to the stockholders for U.S. federal income tax purposes.







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Other Liquidity Needs
 
We may also be required to fund various underwriting, syndicationssyndication and fronting commitments in our capital markets business in connection with the underwriting of loans, securities or other financial instruments, which has increased in significance in recent periods and may continue to be significant in future periods. We generally expect that these commitments will be syndicated to third parties or otherwise fulfilled or terminated, although we may in some instances elect to retain a portion of the commitments for our own investment.


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Contractual Obligations, Commitments and Contingencies
In the ordinary course of business, we and our consolidated funds and CFEs enter into contractual arrangements that may require future cash payments. The following table sets forth information relating to anticipated future cash payments as of March 31, 2018 excluding consolidated funds and CFEs with a reconciliation of such amounts to the anticipated future cash payments of KKR including consolidated funds and CFEs.

  Payments due by Period
Types of Contractual Obligations <1 Year 1-3 Years 3-5 Years >5 Years Total
  ($ in millions)
Uncalled commitments to investment funds (1)
 $5,720.8
 $—
 $—
 $—
 $5,720.8
Debt payment obligations (2)
 —
 500.0
 235.3
 2,528.8
 3,264.1
Interest obligations on debt (3)
 207.7
 301.4
 253.6
 2,114.7
 2,877.4
Underwriting commitments (4)
 888.2
 —
 —
 —
 888.2
Lending commitments (5)
 225.9
 —
 —
 —
 225.9
Purchase commitments (6)
 275.1
 —
 —
 —
 275.1
Lease obligations 51.4
 87.8
 22.2
 12.9
 174.3
Corporate real estate (7)
 —
 292.5
 —
 —
 292.5
Total Contractual Obligations of KKR 7,369.1
 1,181.7
 511.1
 4,656.4
 13,718.3
Plus: Uncalled commitments of consolidated funds (8)
 10,803.7
 —
 —
 —
 10,803.7
Plus: Debt payment obligations of consolidated funds and CFEs (9)
 851.0
 2,348.8
 411.4
 14,905.5
 18,516.7
Plus: Interest obligations of consolidated funds and
CFEs (10)
 597.4
 1,242.4
 1,025.4
 2,303.0
 5,168.2
Plus: Purchase commitments of consolidated funds (11)
 306.7
 —
 —
 —
 306.7
Total Consolidated Contractual Obligations $19,927.9
 $4,772.9
 $1,947.9
 $21,864.9
 $48,513.6

(1)These uncalled commitments represent amounts committed by us to fund a portion of the purchase price paid for each investment made by our investment funds which are actively investing. Because capital contributions are due on demand, the above commitments have been presented as falling due within one year. However, given the size of such commitments and the pace at which our investment funds make investments, we expect that the capital commitments presented above will be called over a period of several years. See "—Liquidity—Liquidity Needs."

(2)Amounts include (i) $500 million aggregate principal amount of 6.375% Senior Notes due 2020 issued by KKR Group Finance Co. LLC, $500 million aggregate principal amount of 5.500% Senior Notes due 2043 issued by KKR Group Finance Co. II LLC, and $1,000 million aggregate principal amount of 5.125% Senior Notes due 2044 issued by KKR Group Finance Co. III LLC, gross of unamortized discount, (ii) $379.3 million aggregate principal amount of 0.509% Senior Notes due 2023, 0.764% Senior Notes due 2025, and 1.595% Senior Notes due 2038 issued by KKR Group Finance Co. IV LLC (denominated in Japanese Yen), (iii) $500 million aggregate principal amount of KFN 2032 Senior Notes, gross of unamortized discount, (iv) $120 million aggregate principal amount of KFN 2033 Senior Notes, and (v) $264.8 million aggregate principal amount of KFN junior subordinated notes, gross of unamortized discount. KFN's debt obligations are non-recourse to KKR beyond the assets of KFN.

(3)These interest obligations on debt represent estimated interest to be paid over the maturity of the related debt obligation, which has been calculated assuming the debt outstanding at March 31, 2018 is not repaid until its maturity. Future interest rates are assumed to be those in effect as of March 31, 2018, including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amounts presented above include accrued interest on outstanding indebtedness.

(4)Represents various commitments in our capital markets business in connection with the underwriting of loans, securities and other financial instruments. These commitments are shown net of amounts syndicated.

(5)Represents obligations in our capital markets business to lend under various revolving credit facilities.


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(6)Represents commitments of KKR and KFN to fund the purchase of various investments.

(7)Represents the purchase price due upon delivery of a new KKR office being constructed, all or a portion of which represents construction financing obtained by the developer and may be refinanced upon delivery of the completed office.

(8)Represents uncalled commitments of our consolidated funds excluding KKR's portion of uncalled commitments as the general partner of the respective funds.

(9)Amounts include (i) financing arrangements entered into by our consolidated funds with the objective of providing liquidity to the funds of $3.3 billion, (ii) debt securities issued by our consolidated CLOs of $10.2 billion and (iii) debt securities issued by our consolidated CMBS entities of $5.0 billion. In April 2018, a consolidated entity of KKR sold its controlling beneficial interest in four consolidated CMBS vehicles. Debt securities issued by consolidated CLOs and CMBS entities are supported solely by the investments held at the CLO and CMBS vehicles and are not collateralized by assets of any other KKR entity. Obligations under financing arrangements entered into by our consolidated funds are generally limited to our pro rata equity interest in such funds. Our management companies bear no obligations to repay any financing arrangements at our consolidated funds.

(10)The interest obligations on debt of our consolidated funds and CFEs represent estimated interest to be paid over the maturity of the related debt obligation, which has been calculated assuming the debt outstanding at March 31, 2018 is not repaid until its maturity. Future interest rates are assumed to be those in effect as of March 31, 2018, including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amounts presented above include accrued interest on outstanding indebtedness.

(11)Represents commitments of consolidated funds to fund the purchase of various investments.
The commitment table above excludes contractual amounts owed under the tax receivable agreement because the ultimate amount and timing of the amounts due are not presently known. As of March 31, 2018, an undiscounted payable of $83.7 million has been recorded in due to affiliates in the consolidated financial statements representing management's best estimate of the amounts currently expected to be owed under the tax receivable agreement. As of March 31, 2018, approximately $24.0 million of cumulative cash payments have been made under the tax receivable agreement. See "—Liquidity Needs—Tax Receivable Agreement" and "Part II. Item 1A. Risk Factors—As a result of the Conversion, we expect to pay more corporate income taxes and also expect to make larger payments under our tax receivable agreement than we would as a limited partnership. We also expect the anticipated amount of annual dividends to our Class A common stockholders immediately following the Conversion, if declared, to be lower than the distribution amounts we declared in prior annual periods as a limited partnership. In addition, we may fail to realize all or some of the anticipated benefits of the Conversion or those benefits may take longer to realize than expected, which could have a material and adverse impact on the trading price of our securities."
We may incur contingent liabilities for claims that may be made against us in the future. We enter into contracts that contain a variety of representations, warranties and covenants, including indemnifications. For example, certain of our investment funds and KFN have provided certain indemnities relating to environmental and other matters and have provided nonrecourse carve-out guarantees for fraud, willful misconduct and other customary wrongful acts, each in connection with the financing of certain real estate investments that we have made. KKR has also provided certain guarantees for fraud, willful misconduct, bankruptcy and other customary wrongful acts in connection with certain investment vehicles. KKR has also guaranteed certain of our employees' (other than our named executive officers) and consultants' personal loans obtained in connection with certain fund investments. We have also indemnified employees and non-employees against potential liabilities, in connection with their service as described under “Item 13. Certain Relationships and Related Transactions, and Director Independence-Indemnification of Directors, Officers and Others” in our Annual Report. In addition, we have also provided credit support to certain of our subsidiaries' obligations in connection with certain investment vehicles or partnerships that we manage. For example, KKR has guaranteed the obligations of a general partner to post collateral on behalf of its investment vehicle in connection with such vehicle's derivative transactions, and we have also agreed to be liable for certain investment losses and/or for providing liquidity in the events specified in the governing documents of certain investment vehicles. Our maximum exposure under these arrangements is currently unknown as our liabilities for these matters would require a claim to be made against us in the future.
The partnership documents governing our carry-paying funds, including funds and vehicles relating to private equity, mezzanine, infrastructure, energy, direct lending and special situations investments, generally include a "clawback" provision that, if triggered, may give rise to a contingent obligation requiring the general partner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund. Under a clawback obligation, upon the liquidation of a fund,

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the general partner is required to return, typically on an after-tax basis, previously distributed carry to the extent that, due to the diminished performance of later investments, the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, including the effects of any performance thresholds. Excluding carried interest received by the general partners of funds that were not contributed to us in the KPE Transaction, as of March 31, 2018, $12.6 million of carried interest was subject to this clawback obligation, assuming that all applicable carry paying funds were liquidated at their March 31, 2018 fair values. Had the investments in such funds been liquidated at zero value, the clawback obligation would have been approximately $1.8 billion. Carried interest is recognized in the statement of operations based on the contractual conditions set forth in the agreements governing the fund as if the fund were terminated and liquidated at the reporting date and the fund's investments were realized at the then estimated fair values. Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns are positive and where applicable, preferred return thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods, recognized carried interest will be reversed and to the extent that the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, a clawback obligation would be recorded. For funds that are consolidated, this clawback obligation, if any, is reflected as an increase in noncontrolling interests in the consolidated statements of financial condition. For funds that are not consolidated, this clawback obligation, if any, is reflected as a reduction of our investment balance as this is where carried interest is initially recorded.

Off Balance Sheet Arrangements
Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any off-balance sheet financings or liabilities.

Critical Accounting Policies
 
The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of fees, expenses and investment income. Our management bases these estimates and judgments on available information, historical experience and other assumptions that we believe are reasonable under the circumstances. However, these estimates, judgments and assumptions are often subjective and may be impacted negatively based on changing circumstances or changes in our analyses. If actual amounts are ultimately different from those estimated, judged or assumed, revisions are included in the consolidated financial statements in the period in which the actual amounts become known. We believe our critical accounting policies could potentially produce materially different results if we were to change underlying estimates, judgments or assumptions.

The following discussion detailsdiscusses certain aspects of our critical accounting policies. For a full discussion of these and all critical accounting policies, please see Note 2 "Summary of Significant Accounting Policies" to the condensed consolidated financial statements included elsewhere in this report.

Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Except for certain of KKR's equity method investments and debt obligations, KKR's investments and other financial instruments are recorded at fair value or at amounts whose carrying values approximate fair value. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation techniques are applied. These valuation techniques involve varying levels of management estimation and judgment, the degree of which is dependent on a variety of factors.

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type ofInvestments and financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fair values, as follows:


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Level I
Pricing inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date. The types of financial instruments included in this category are publicly-listed equities and securities sold short.

We classified 5.4%6.0% of total investments measured and reported at fair value as Level I at March 31, 2018.
2019.
Level II
Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the measurement date, and fair value is determined through the use of models or other valuation methodologies. The types of financial instruments included in this category are credit investments, investments and debt obligations of consolidated CLO entities, convertible debt securities indexed to publicly-listed securities, less liquid and restricted equity securities and certain over-the-counter derivatives such as foreign currency option and forward contracts.

We classified 39.3%36.7% of total investments measured and reported at fair value as Level II at March 31, 2018.
2019.
Level III
Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments generally included in this category are private portfolio companies, real assets investments, credit investments, equity method investments for which the fair value option was elected and investments and debt obligations of consolidated CMBS entities.

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We classified 55.3%57.3% of total investments measured and reported at fair value as Level III at March 31, 2018.2019. The valuation of our Level III investments at March 31, 20182019 represents management's best estimate of the amounts that we would anticipate realizing on the sale of these investments in an orderly transaction at such date.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset.
 
A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representative of fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value.
The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, and current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level III. The variability and availability of the observable inputs affected by the factors described above may cause transfers between Levels I, II, and III, which we recognize at the beginning of the reporting period.
Investments and other financial instruments that have readily observable market prices (such as those traded on a securities exchange) are stated at the last quoted sales price as of the reporting date. We do not adjust the quoted price for these investments, even in situations where we hold a large position and a sale could reasonably affect the quoted price.

Management's determination of fair value is based upon the methodologies and processes described below and may incorporate assumptions that are management's best estimates after consideration of a variety of internal and external factors.

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Level II Valuation Methodologies
Credit Investments: These instruments generally have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that KKR and others are willing to pay for an instrument. Ask prices represent the lowest price that KKR and others are willing to accept for an instrument. For financial assets and liabilities whose inputs are based on bid-ask prices obtained from third party pricing services, fair value may not always be a predetermined point in the bid-ask range. KKR's policy is generally to allow for mid-market pricing and adjusting to the point within the bid-ask range that meets KKR's best estimate of fair value.

Investments and Debt Obligations of Consolidated CLO Vehicles: Investments of consolidated CLO vehicles are valued using the same valuation methodology as described above for credit investments. Under ASU 2014-13, KKR measures CLO debt obligations on the basis of the fair value of the financial assets of the CLO.
Securities indexed to publicly-listed securities: The securities are typically valued using standard convertible security pricing models. The key inputs into these models that require some amount of judgment are the credit spreads utilized and the volatility assumed. To the extent the company being valued has other outstanding debt securities that are publicly-traded, the implied credit spread on the company's other outstanding debt securities would be utilized in the valuation. To the extent the company being valued does not have other outstanding debt securities that are publicly-traded, the credit spread will be estimated based on the implied credit spreads observed in comparable publicly-traded debt securities. In certain cases, an additional spread will be added to reflect an illiquidity discount due to the fact that the security being valued is not publicly-traded. The volatility assumption is based upon the historically observed volatility of the underlying equity security into which the convertible debt security is convertible and/or the volatility implied by the prices of options on the underlying equity security.

Restricted Equity Securities: The valuation of certain equity securities is based on an observable price for an identical security adjusted for the effect of a restriction.

Derivatives: The valuation incorporates observable inputs comprising yield curves, foreign currency rates and credit spreads.
Level III Valuation Methodologies
Financial assets and liabilities categorized as Level III consist primarily of the following:
Private Equity Investments: WeWith respect to our private equity portfolio, which includes growth equity investments, we generally employ two valuation methodologies when determining the fair value of a private equityan investment. The first methodology is typically a market comparables analysis that considers key financial inputs and recent public and private transactions and other available measures. The second methodology utilized is typically a discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputs used in this methodology include the weighted average cost of capital for the investment and assumed inputs used to calculate terminal values, such as exit EBITDA multiples. In certain cases the results of the discounted cash flow approach can be significantly impacted by these estimates. Other inputs are also used in both methodologies. Also, as discussed in greater detail under "—Business Environment" and "Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions that are difficult to quantify or predict, but may have a significant adverse impact on the value of our investments" in this report, a change in interest rates could have a significant impact on valuations. In addition, when a definitive agreement has been executed to sell an investment, KKR generally considers a significant determinant of fair value to be the consideration to be received by KKR pursuant to the executed definitive agreement.
Upon completion of the valuations conducted using these methodologies, a weighting is ascribed to each method, and an illiquidity discount is typically applied where appropriate. The ultimate fair value recorded for a particular investment will generally be within a range suggested by the two methodologies, except that the value may be higher or lower than such range in the case of investments being sold pursuant to an executed definitive agreement.
When determining the weighting ascribed to each valuation methodology, we consider, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis, the expected hold period and manner of realization for the investment, and in the case of investments being sold pursuant to an executed definitive agreement, we estimated probability of such a sale being completed. These factors can result in different weightings among investments in the portfolio and in certain instances may result in up to a 100% weighting to a single methodology. Across the total Level III private equity investment portfolio (including core investments), and including investments in both consolidated and unconsolidated investment funds, approximately 78%63% of the fair value is derived from investments that are valued based exactly 50% on market

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comparables and 50% on a discounted cash flow analysis. Less than 5%2% of the fair value of this Level III private equity investment portfolio is derived from investments that are valued either based 100% on market comparables or 100% on a discounted cash flow analysis. As of March 31, 2018,2019, the overall weights ascribed to the market comparables methodology, the discounted cash flow methodology, and a methodology based on pending sales for this portfolio of Level III private equity investments were 44%41%, 49%51%, and 7%8%, respectively.
When an illiquidity discount is to be applied, we seek to take a uniform approach across our portfolio and generally apply a minimum 5% discount to all private equity investments. We then evaluate such private equity investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include (i) whether we are unable to freely sell the portfolio company or conduct an initial public offering of the portfolio company due to the consent rights of a third party or similar factors, (ii) whether the portfolio company is undergoing significant restructuring activity or similar factors and (iii) characteristics about the portfolio company regarding its size and/or whether the portfolio company is experiencing, or expected to experience, a significant decline in earnings. These factors generally make it less likely that a portfolio company would be sold or publicly offered in the near term at a price indicated by using just a market multiples and/or discounted cash flow analysis, and these factors tend to reduce the number of opportunities to sell an investment and/or increase the time horizon over which an investment may be monetized. Depending on the applicability of these factors, we determine the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time we hold the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by us in our valuations.

In the case of growth equity investments, enterprise values may be determined using the market comparables analysis and discounted cash flow analysis described above. A scenario analysis may also be conducted to subject the estimated enterprise values to a downside, base and upside case, which involves significant assumptions and judgments. A milestone analysis may also be conducted to assess the current level of progress towards value drivers that we have determined to be important, which involves significant assumptions and judgments. The enterprise value in each case may then be allocated across the investment's capital structure to reflect the terms of the security and subjected to probability weightings. In certain cases, the values of growth equity investments may be based on recent or expected financings.
Real Asset Investments: Real asset investments in infrastructure, energy and real estate are valued using one or more of the discounted cash flow analysis, market comparables analysis and direct income capitalization, which in each case incorporates significant assumptions and judgments. Infrastructure investments are generally valued using the discounted cash flow analysis. Key inputs used in this methodology can include the weighted average cost of capital and assumed inputs used to calculate terminal values, such as exit EBITDA multiples. Energy investments are generally valued using a discounted cash flow analysis. Key inputs used in this methodology that require estimates include the weighted average cost of capital. In addition, the valuations of energy investments generally incorporate both commodity prices as quoted on indices and long-term commodity price forecasts, which may be substantially different from, and are currently higher than, commodity prices on certain indices for equivalent future dates. Certain energy investments do not include an illiquidity discount. Long-term commodity price forecasts are utilized to capture the value of the investments across a range of commodity prices within the energy investment portfolio associated with future development and to reflect a range of price expectations. Real estate investments are generally valued using a combination of direct income capitalization and discounted cash flow analysis. Key inputs used in such methodologies that require estimates include an unlevered discount rate and current capitalization rate, and certain real estate investments do not include a minimum illiquidity discount. The valuations of real assets investments also use other inputs.

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On a segment basis, our energy real asset investments in oil and gas-producing properties as of March 31, 20182019 had a fair value of approximately $688$679 million. Based on this fair value, we estimate that an immediate, hypothetical 10% decline in the fair value of these energy investments from one or more adverse movements to the investments' valuation inputs would result in a decline in investment incomebook value of $68.8 million and a decline in net income attributable to KKR & Co. L.P. of $40.9 million, after deducting amounts that are attributable to noncontrolling interests held by KKR Holdings L.P.$67.9 million. As of March 31, 2018,2019, if we were to value our energy investments using only the commodity prices as quoted on indices and did not use long-term commodity price forecasts, and also held all other inputs to their valuation constant, we estimate that investment incomebook value would have been approximately $70$83 million lower, resulting in a lower amount of net income attributable to KKR & Co. L.P. of approximately 59.5% of the overall decrease in investment income, after deducting amounts that are attributable to noncontrolling interests held by KKR Holdings L.P.


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lower.
These hypothetical declines relate only to investment income.book value. There would be no current impact on KKR's unrealized carried interest since all of the investment funds which hold these types of energy investments have investment values that are either below their cost or not currently accruing carried interest. Additionally, there would be no impact on fees since fees earned from investment funds which hold investments in oil and gas-producing properties are based on either committed capital or capital invested.

For GAAP purposes, where KKR holds energy investments consisting of working interests in oil and gas-producing properties directly and not through an investment fund, such working interests are consolidated based on the proportion of the working interests held by us. Accordingly, we reflect the assets, liabilities, revenues, expenses, investment income and cash flows of the consolidated working interests on a gross basis and changes in the value of these energy investments are not reflected as unrealized gains and losses in the consolidated statements of operations. Accordingly, a change in fair value for these investments does not result in a decrease in net gains (losses) from investment activities, but may result in an impairment charge reflected in general, administrative and other expenses. For segment purposes, these directly held working interests are treated as investments and changes in value are reflected in our segment results as unrealized gains and losses.

Credit Investments: Credit investments are valued using values obtained from dealers or market makers, and where these values are not available, credit investments are generally valued by us based on ranges of valuations determined by an independent valuation firm. Valuation models are based on discounted cash flow analyses, for which the key inputs are determined based on market comparables, which incorporate similar instruments from similar issuers.
Other Investments:  With respect to other investments including equity method investments for which the fair value election has been made, we generally employ the same valuation methodologies as described above for private equity investments when valuing these other investments.
Investments and Debt Obligations of Consolidated CMBS Vehicles: Under ASU 2014-13, we measure CMBS investments on the basis of the fair value of the financial liabilities of the CMBS. Debt obligations of consolidated CMBS vehicles are valued based on discounted cash flow analyses. The key input is the expected yield of each CMBS security using both observable and unobservable factors, which may include recently offered or completed trades and published yields of similar securities, security-specific characteristics (e.g. securities ratings issued by nationally recognized statistical rating organizations, credit support by other subordinate securities issued by the CMBS and coupon type) and other characteristics.
Key unobservable inputs that have a significant impact on our Level III investment valuations as described above are included in Note 5 "Fair Value Measurements" ofto the financial statements included elsewhere in this report. We utilize several unobservable pricing inputs and assumptions in determining the fair value of our Level III investments. These unobservable pricing inputs and assumptions may differ by investment and in the application of our valuation methodologies. Our reported fair value estimates could vary materially if we had chosen to incorporate different unobservable pricing inputs and other assumptions or, for applicable investments, if we only used either the discounted cash flow methodology or the market comparables methodology instead of assigning a weighting to both methodologies. For valuations determined for periods other than at year end, various inputs may be estimated prior to the end of the relevant period.
Level III Valuation Process
The valuation process involved for Level III measurements is completed on a quarterly basis and is designed to subject the valuation of Level III investments to an appropriate level of consistency, oversight, and review.

For Private Markets investments classified as Level III, investment professionals prepare preliminary valuations based on their evaluation of financial and operating data, company specific developments, market valuations of comparable companies and other factors. KKR begins its procedures to determine the fair values of its Level III assets one month prior to the end of a reporting period, and KKR follows additional procedures to ensure that its determinations of fair value for its Level III assets are appropriate as of the relevant reporting date. These preliminary valuations are reviewed by an independent valuation firm engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR's valuations annually for all Level III investments in Private Markets and quarterly for investments other than certain investments, which have values less than pre-setpreset value thresholds and which in the aggregate comprise less than 5% of the total value of KKR's Level III Private Markets investments. The valuations of certain real asset investments are determined solely by an independent valuation firm without the preparation of preliminary valuations by our investment professionals, and instead such independent valuation firm relies on valuation information available to it as a broker or valuation firm. For credit investments and debt obligations of consolidated CMBS vehicles, an independent valuation firm is generally engaged quarterly by KKR with respect to most investments classified as Level III. The valuation firm either provides a value or provides a valuation range from which KKR's investment professionals select a point in the range to determine the preliminary valuation or performs certain procedures in order to assess the reasonableness and provide positive assurance of KKR's valuations. After reflecting any input from the independent valuation firm, the valuation

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proposals are submitted for review and approval by KKR's valuation committees. As of March 31, 2018,2019, less than 5%3% of the total value of our Level III credit investments were not valued with the engagement of an independent valuation firm.

KKR has a global valuation committee that is responsible for coordinating and implementing the firm's valuation process to ensure consistency in the application of valuation principles across portfolio investments and between periods. The global valuation committee is assisted by the asset class-specific valuation committees that exist for private equity (including core investments), growth equity),equity, real estate, energy and infrastructure and credit. The asset class-specific valuation committees are responsible for the review and approval of all preliminary Level III valuations in their respective asset classes on a quarterly

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basis. The members of these valuation committees are comprised of investment professionals, including the heads of each respective strategy, and professionals from business operations functions such as legal, compliance and finance, who are not primarily responsible for the management of the investments. For periods prior to the completion of the PAAMCO Prisma transaction, when Level III valuations were required to be performed on hedge fund investments, a valuation committee for hedge funds reviewed these valuations.

All Level III valuations are also subject to approval by the global valuation committee, which is comprised of senior employees including investment professionals and professionals from business operations functions, and includes one of KKR's Co-Presidents and Co-Chief Operating Officers and its Chief Financial Officer, General Counsel and Chief Compliance Officer. When valuations are approved by the global valuation committee after reflecting any input from it, the valuations of Level III investments, as well as the valuations of Level I and Level II investments, are presented to the audit committee of the board of directors of the general partner of KKR & Co. L.P.Inc. and are then reported to the board of directors.
As of March 31, 2018,2019, upon completion by, where applicable, an independent valuation firm of certain limited procedures requested to be performed by them on certain investments, the independent valuation firm concluded that the fair values, as determined by KKR, of those investments reviewed by them were reasonable. The limited procedures did not involve an audit, review, compilation or any other form of examination or attestation under generally accepted auditing standards and were not conducted on all Level III investments. We are responsible for determining the fair value of investments in good faith, and the limited procedures performed by an independent valuation firm are supplementary to the inquiries and procedures that we are required to undertake to determine the fair value of the commensurate investments.
As described above, Level II and Level III investments were valued using internal models with significant unobservable inputs and our determinations of the fair values of these investments may differ materially from the values that would have resulted if readily observable inputs had existed. Additional external factors may cause those values, and the values of investments for which readily observable inputs exist, to increase or decrease over time, which may create volatility in our earnings and the amounts of assets and partners' capitalstockholders' equity that we report from time to time.
Changes in the fair value of investments impacts the amount of carried interest that is recognized as well as the amount of investment income that is recognized for investments held directly and through our consolidated funds as described below. We estimate that an immediate 10% decrease in the fair value of investments held directly and through consolidated investment funds generally would result in a commensurate change in the amount of net gains (losses) from investment activities for investments held directly and through investment funds and a more significant impact to the amount of carried interest recognized, regardless of whether the investment was valued using observable market prices or management estimates with significant unobservable pricing inputs. With respect to consolidated investment funds, the impact that the consequential decrease in investment income would have on net income attributable to KKR would generally be significantly less than the amount described above, given that a majority of the change in fair value of our consolidated funds would be attributable to noncontrolling interests and therefore we are only impacted to the extent of our carried interest and our balance sheet investments.
As of March 31, 2018,2019, there were no investments which represented greater than 5% of total investments on a GAAP basis. On a segment basis, as of March 31, 2018,2019, investments which represented greater than 5% of total reportable segmentssegment investments consisted of First Data Corporation and USI, Inc. valued at $1,138.4$1,534.0 million and $574.1$650.1 million, respectively. Our investment income on a GAAP basis and our book value can be impacted by volatility in the public markets related to our holdings of publicly traded securities, including our sizable holdings of First Data Corporation. For the quarter ended March 31, 2018, the decrease in the stock price of First Data Corporation decreased economic net income on a segment basis by approximately $63 million. See "—Business Environment" for a discussion on the impact of global equity markets on our financial condition and "—Segment Balance Sheet" for additional information regarding our largest holdings on a segment basis.

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Recognition of Investment Income

Investment income consists primarily of the net impact of: (i) realized and unrealized gains and losses on investments,investments; (ii) dividends,dividends; (iii) interest income,income; (iv) interest expense and (v) foreign exchange gains and losses relating to mark-to-market activity on foreign exchange forward contracts, foreign currency options, foreign denominated debt and debt securities issued by consolidated CFEs. Unrealized gains or losses resulting from the aforementioned activities are included in net gains (losses) from investment activities. Upon disposition of an instrument that is marked-to-market, previously recognized unrealized gains or losses are reversed and a realized gain or loss is recognized. While this reversal generally does not significantly impact the net amounts of gains (losses) that we recognize from investment activities, it affects the manner in which we classify our gains and losses for reporting purposes.
Certain of our investment funds are consolidated. When a fund is consolidated, the portion of our funds' investment income that is allocable to our carried interests and capital investments is not shown in the consolidated financial statements.statements of operations. For funds that are consolidated, all investment income (loss), including the portion of a funds' investment income (loss) that is allocable to KKR's carried interest, is included in investment income (loss) on the consolidated statements of operations. The carried interest that KKR retains in net income (loss) attributable to KKR & Co. L.P.Inc. is reflected as an adjustment to net income

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(loss) attributable to noncontrolling interests. However, because certain of our funds remain consolidated and because we hold a minority economic interest in these funds' investments, our share of the investment income is less than the total amount of investment income presented in the consolidated financial statements of operations for these consolidated funds.
Recognition of Carried Interest in the Statement of Operations
Carried interest entitles the general partner of a fund to a greater allocable share of the fund's earnings from investments relative to the capital contributed by the general partner and correspondingly reduces noncontrolling interests' attributable share of those earnings. Carried interest is earned by the general partner of those funds to the extent that cumulative investment returns are positive and where applicable, preferred return thresholds have been met. If these investment returns decrease or turn negative in subsequent periods, recognized carried interest will be reversed and reflected as losses in the statement of operations. For funds that are not consolidated, amounts earned pursuant to carried interest are included in fees and othercapital allocation-based income in the consolidated statements of operations. Amounts earned pursuant to carried interest at consolidated funds are eliminated from fees and other upon consolidation of the fund and are included as investment income (loss) in net gains (losses) from investment activities along with all of the other investment gains and losses at the consolidated fund.
Carried interest is recognized in the statement of operations based on the contractual conditions set forth in the agreements governing the fund as if the fund were terminated and liquidated at the reporting date and the fund's investments were realized at the then estimated fair values. Due to the extended durations of our private equity funds, we believe that this approach results in income recognition that best reflects our periodic performance in the management of those funds. Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns are positive and where applicable, preferred return thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods, recognized carried interest will be reversed and to the extent that the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, a clawback obligation would be recorded. For funds that are not consolidated, this clawback obligation, if any, is reflected as a reduction of our investment balance as this is where carried interest is initially recorded. For funds that are consolidated, this clawback obligation, if any, is reflected as an increase in noncontrolling interests in the consolidated statements of financial condition.

Prior to January 1, 2016, most of our historical private equity funds that provide for carried interest do not have a preferred return. For these funds, the management company is required to refund up to 20% of any management fees earned from its limited partners in the event that the fund recognizes carried interest. At such time as the fund recognizes carried interest in an amount sufficient to cover 20% of the management fees earned or a portion thereof, a liability due to the fund's limited partners is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the management fees earned. The refunds to the limited partners are paid, and liabilities relieved, at such time that the underlying investment is sold and the associated carried interest is realized. In the event that a fund's carried interest is not sufficient to cover all or a portion of the amount that represents 20% of the earned management fees, such management fees would be retained and not returned to the funds' limited partners.

Most of our newer investment funds that provide for carried interest, however, have a preferred return. In this case, the management company does not refund the management fees earned from the limited partners of the fund as described above. Instead, the management fee is effectively returned to the limited partners through a reduction of the realized gain on which carried interest is calculated. To calculate the carried interest, KKR calculates whether a preferred return has been achieved

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based on an amount that includes all of the management fees paid by the limited partners as well as the other capital contributions and expenses paid by them to date. To the extent the fund has exceeded the preferred return at the time of a realization event, and subject to any other conditions for the payment of carried interest like netting holes, carried interest is distributed to the general partner. Until the preferred return is achieved, no carried interest is recorded. Thereafter, the general partner is entitled to a catch up allocation such that the general partner's carried interest is paid in respect of all of the fund's net gains, including the net gains used to pay the preferred return, until the general partner has received the full percentage amount of carried interest that the general partner is entitled to under the terms of the fund. In general, investment funds that entitle the management company to receive an incentive fee have a preferred return and are calculated on a similar basis that takes into account management fees paid.

Recently Issued Accounting Pronouncements
For a full discussion of recently issued accounting pronouncements, please see Note 2 "Summary of Significant Accounting Policies" to the condensed consolidated financial statements included elsewhere in this report.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There was no material change in our market risks during the three months ended March 31, 2018.2019. For additional information, please refer to our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 23, 2018.

Report.
ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that the information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and such information is accumulated and communicated to management, including the Co-Chief Executive Officers and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives.

 As of the period ended March 31, 2018,2019, we carried out an evaluation, under the supervision and with the participation of our management, including the Co-Chief Executive Officers and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that, as of the period ended March 31, 2018,2019, our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during the three months ended March 31, 20182019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. II —OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.
The section entitled "Litigation" appearing in Note 1716 "Commitments and Contingencies" to our condensed consolidated financial statements included elsewhere in this report is incorporated herein by reference.

ITEM 1A.  RISK FACTORS.
AsFor a result of the Conversion, we expect to pay more corporate income taxes and also expect to make larger payments under our tax receivable agreement than we would as a limited partnership. We also expect the anticipated amount of annual dividends to our Class A common stockholders immediately following the Conversion, if declared, to be lower than the distribution amounts we declared in prior annual periods as a limited partnership. In addition, we may fail to realize all or some of the anticipated benefits of the Conversion or those benefits may take longer to realize than expected, which could have a material and adverse impact on the trading pricediscussion of our securities.

On May 3, 2018, we announced our decision to convert KKR & Co. L.P. from a limited partnership to a corporation, effective July 1, 2018. See "Part II. Item 5. Other Information." Followingpotential risks and uncertainties, see the Conversion, all of our net income will be subject to U.S. federal (and state and local) corporate income taxes, which may reduceinformation under the amount of cash available for dividends or reinvestmentheading "Risk Factors" in our business as well as reduce our reported after-tax earnings. Effective January 1, 2018, the maximum U.S. federal corporate income tax rate is 21%, but this rate may increase in the future, which would cause us to pay more corporate income taxes than currently anticipated. For the quarter ended March 31, 2018, our effective tax rate under GAAP was 2.84%. Based on tax rates and laws currently in effect and other information currently available, had we converted to a corporation on January 1, 2018, and assuming that the partial step-up in asset basis as a result of the Conversion was accounted for in a period prior to January 1, 2018, we believe our estimated effective tax rate under GAAP for the same period would have been approximately 9.00%. The Conversion will cause a partial step-up in the tax basis of certain of our assets that will be recovered as those assets are sold. After those assets are sold, our effective tax rate is expected to increase. We present the estimated tax rate for illustrative purpose only, and our actual effective tax rate following the Conversion may vary materially from the rates presented above.

Following the Conversion, the declaration and payment of dividends to our common stockholders will be at the sole discretion of our board of directors, and our dividend policy may be changed at any time. As a corporation, we expect our dividends to our Class A common stockholders, if declared, to be lower than the distribution amounts we declared in prior periods as a limited partnership. Our distribution policy as a limited partnership has been to pay annual aggregate distributions to holders of our common units of $0.68 per common unit, and we have announced that we anticipate that our dividend policy beginning in the third quarter of 2018 will be to pay dividends to holders of our Class A common stock in an initial annual aggregate amount of $0.50 per share, in each case, subject to the discretion of our board of directors and compliance with applicable law. For U.S. federal income tax purposes, any dividends we pay following the Conversion (including dividends on our preferred shares) generally will be treated as qualified dividend income (generally taxable to U.S. individual stockholders at capital gain rates) paid by a domestic corporation to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Following the Conversion, no income, gains, losses, deductions or credits of KKR will flow through to the stockholders for U.S. federal income tax purposes.

We generally receive a tax benefit when KKR Holdings units are exchanged because our tax basis in our assets generally increases as a result of these exchanges. We are a party to a tax receivable agreement with KKR Holdings, which requires us to pay to KKR Holdings, and to current and former principals who have exchanged KKR Holdings units for our common units, 85% of the amount of cash savings in U.S. federal, state and local income tax that we actually realize as a result of an increase in tax basis arising from such exchanges.

We recorded $83.7 million in our condensed consolidated statements of financial condition as of March 31, 2018, representing the estimated aggregate future payment amount under the tax receivable agreement as of such date for previously exchanged KKR Holdings units. This amount would not have changed had the Conversion occurred as of March 31, 2018. See "Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity—Other Liquidity Needs—Contractual Obligations, Commitments and Contingencies."

Following the Conversion, we expect the amount of our cash tax savings from future exchanges to increase materially when compared to when we were a limited partnership. As a result, we expect the amount we will be required to pay under the tax receivable agreement (i.e., 85% of cash tax savings we realize) will become materially higher for future exchanges when we are a corporation when compared to when we were a limited partnership. As of March 31, 2018 (as adjusted to reflect 29.5Annual Report.

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million KKR Holdings units to be exchanged for our common units in May 2018, which include approximately 20.0 million units to be exchanged by or on behalf of our executive officers for charitable donations but not sold into the market for at least a six month period following the date of the announcement of the decision to effectuate the Conversion as noted below), 304.1 million KKR Holdings units (the "Remaining KKR Holdings Units") remain available for exchange into our common units and, after the Conversion, into shares of Class A common stock. Assuming (i) all of the Remaining KKR Holdings Units had been exchanged for our common units on March 31, 2018, (ii) all such exchanges were taxable to the exchanging unitholders, (iii) the market value of our common units was $20.30 per unit (which was the closing price on March 29, 2018) and (iv) a 7% per annum discount rate, we estimate that the present value of our aggregate cash tax savings over the next 15 years attributable to such hypothetical exchange of the Remaining KKR Holdings Units would have been $198.4 million as a limited partnership compared to $759.5 million if the Conversion had already been completed as of such date. Using the assumptions above, we estimate our payments under the tax receivable agreement to KKR Holdings and current and former principals who exchange KKR Holdings units in the future to be 85% of the foregoing amounts, or $168.6 million as a limited partnership and $645.6 million if we already would have been a corporation. The estimates above also assume that we would have taxable income sufficient to fully utilize the deductions arising from the increase in tax basis and any interest imputed with respect to our payment obligations under the tax receivable agreement and that there would be no future change to the federal income tax rates and state, local and foreign income tax rates. The assumptions and estimates described above are for illustrative purposes only. These estimates are not intended to be a projection of any future financial results, and the actual increases in tax basis and any payments under the tax receivable agreement resulting from any exchanges of KKR Holdings units that occur in the future are expected to vary materially from these estimates. Moreover, the method for calculating the estimated aggregate future payment amount recorded in our financial statements differs in material respects from the assumptions used to calculate the present value of our aggregate cash tax savings over the next 15 years attributable to the hypothetical exchange of all Remaining KKR Holding Units. For example, no discount rate has been applied to the estimated aggregate future payment amount for previously exchanged KKR Holdings units.

Finally, the tax receivable agreement provides that we may terminate the agreement at any time by making an early termination payment based upon the net present value of all tax benefits that would be required to be paid by us to KKR Holdings and current and former principals who have exchanged KKR Holdings units. The method used to calculate the early termination payment is prescribed in the tax receivable agreement and the assumptions used for this purpose, including an applicable discount rate, which currently is LIBOR (as defined) plus 1% (LIBOR plus 1% was 2.88313% as of March 29, 2018), differ in material respects from the assumptions used to calculate the estimated present value of our aggregate cash tax savings for the hypothetical exchange of all Remaining KKR Holdings Units or the estimated payment amount for previously exchanged KKR Holdings units that is recorded in our financial statements. Accordingly, as of March 31, 2018, whether as a limited partnership or assuming the Conversion had been completed as of such date, the respective amounts of the applicable early termination payments would have been significantly larger than the present value of the estimated payments under the tax receivable agreement described above. At the time of the filing of this Quarterly Report on Form 10-Q, we have no intention to exercise the early termination right.

Although we believe that the Conversion will, among other things, simplify our tax reporting for stockholders, expand our stockholder base, and increase the liquidity of our Class A common stock, we may fail to realize all or some of the anticipated benefits of the Conversion, or those benefits may take longer to realize than we expected, which could contribute to a decline in the trading price of our common units or, after the Conversion, our Class A common stock. Moreover, there can be no assurance that the anticipated benefits of the Conversion will over time offset the cost of the Conversion.

Other than as set forth above, there were no material changes to the risk factors disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 23, 2018.



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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Common UnitShare Repurchases in the First Quarter of 20182019

As announced on October 27, 2015 and amended on February 9, 2017, KKR was authorized to repurchase up to $750 million in the aggregate of its outstanding common units. On May 3, 2018, KKR announced an increase toincreased the available amount under itsour repurchase program to $500 million. Priormillion, which represented an increase of approximately $247 million from amounts remaining prior to thisthe increase there was approximately $291 million remaining under the program.

Under the current repurchase program, KKR is authorized to repurchase its common units or, after the Conversion, Class A common stock from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any common unit or Class A common stock repurchases will be determined by KKR in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions. KKR expects that the program, which has no expiration date, will be in effect until the maximum approved dollar amount has been used to repurchase common units or Class A common stock.used. The program does not require KKR to repurchase any specific number of common units orshares of Class A common stock, and the program may be suspended, extended, modified or discontinued at any time.
In addition to the purchasesrepurchases of common units and Class A common stock described above, subsequent to May 3, 2018, the repurchase program will be used for the cancellationretirement (by cash settlement or the payment of tax withholding amounts upon net settlement) of equity awards issued pursuant to our Equity Incentive Plan (and any successor equity plan thereto)Plans representing the right to receive common units orshares of Class A common stock. During 2018,From October 27, 2015 through March 31, 2019, KKR has paid approximately $53$236 million in cash to satisfy tax withholding and cash settlement obligations in lieu of issuing shares of Class A common unitsstock or its equivalent upon the vesting of equity awards representing 2.612.6 million shares of Class A common units to satisfy tax withholding and cash-settlement obligations. Since October 27, 2015, KKR has paid approximately $190 million in cash in lieu of issuing common units upon the vesting ofstock. Of these amounts, equity awards representing 11.0 million shares of Class A common unitsstock or its equivalent were retired for $190 million prior to satisfy tax withholdingMay 3, 2018 and cash-settlement obligations.

did not count against the amounts remaining under the repurchase program.
The table below sets forth the information with respect to repurchases made by or on behalf of KKR & Co. L.P.Inc. or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our Class A common unitsstock during the first quarter of 2018. No2019. 1,370,289 shares of Class A common unitsstock were repurchased during the first quarter of 2018 or from April 1, 2018 to May 7, 2018.2019. From inception of the repurchase program through May 7, 2018,March 31, 2019, we hadhave repurchased a total of approximately 31.740.6 million shares of Class A common unitsstock under the program at an average price of approximately $14.47$16.27 per unit.

share.
Issuer Purchases of Common Units
(amounts in thousands, except unit and per unit amounts)
        
 Total Number of Units Purchased Average Price Paid Per Units Cumulative Number of Units Purchased as Part of Publicly Announced Plans or Programs 
Approximate Dollar Value of Units that May Yet Be Purchased Under the Plans or Programs (1)
Month #1
(January 1, 2018 to
January 31, 2018)
—
 $—
 31,674,162
 $291,225
Month #2
(February 1, 2018 to
February 28, 2018)
—
 $—
 31,674,162
 $291,225
Month #3
(March 1, 2018 to
March 31, 2018)
—
 $—
 31,674,162
 $291,225
Total through March 31, 2018—
      
        
Issuer Purchases of Class A Common Stock
(amounts in thousands, except share and per share amounts)
        
 Total Number of Shares Purchased Average Price Paid Per Share Cumulative Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1
(January 1, 2019 to
January 31, 2019)
1,370,289
 $20.85
 40,585,002
 $252,831
Month #2
(February 1, 2019 to
February 28, 2019)
—
 $—
 40,585,002
 $252,831
Month #3
(March 1, 2019 to
March 31, 2019)
—
 $—
 40,585,002
 $500,000
Total through March 31, 20191,370,289
      
        

(1) On May 3, 2018, KKR announced the increase to the available amount under the repurchase program to $500 million.

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Unregistered Sale of Equity Securities

During the first quarter of 2018, 780,578 exchangeable securities issued in connection with the acquisition of Avoca were exchanged for an equal number of our common units. These issuances were exempt from registration in reliance on Section 4(a)(2) of the Securities Act.

Other Equity Securities

During the first quarter of 2018, 2,323,2562019, 435,954 KKR Group Partnership Units were exchanged by KKR Holdings for an equal number of shares of our Class A common units.stock. This resulted in an increase in our ownership of the KKR Group Partnerships and a corresponding decrease in the ownership of the KKR Group Partnerships by KKR Holdings. In May 2018,2019, approximately 29.51.7 million KKR Group Partnership Units are expected to be exchanged by KKR Holdings into an equal number of our common units, which includes approximately 20.0 million KKR Group Partnership Units to be exchanged by or on behalfshares of KKR's executive officers for charitable donations but not sold into the market for at least a six month period following the date of the announcement of the decision to effectuate the Conversion as noted below.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4.  MINE SAFETY DISCLOSURES.
Not applicable.

ITEM 5. OTHER INFORMATION.

We are providing the following disclosure in lieu of filing a Current Report on Form 8-K relating to Items 1.01, 3.01, 3.03, 5.02 and 5.03.

Conversion to a Corporation

On May 3, 2018, we announced our decision to convert KKR & Co. L.P. from a Delaware limited partnership to a Delaware corporation named KKR & Co. Inc. (the "Corporation"), to become effective at 12:01 a.m. (Eastern Time) on July 1, 2018 (such date and time at which the Conversion becomes effective, the "Effective Time"). The Conversion was unanimously approved by our Managing Partner’s board of directors, following our receipt of special approval of the Conversion from the conflicts committee of the board pursuant to our limited partnership agreement. Under Section 14.3(d) of our limited partnership agreement, no vote of the unitholders is required or will be sought for the Conversion.

By converting to a corporation, we believe we can simplify our tax structure (including our tax reporting to our stockholders) and make it easier to invest in our shares. We believe, as a result, we can appeal to a wider universe of public investors, increase the liquidity of our common stock and reduce stock price volatility. We also believe that, as a corporation, we will enhance our access to capital markets and our common stock will be more attractive as a currency in future strategic transactions. There can be no assurance that we can realize all or some of the anticipated benefits in a timely manner or at all. See "Part II. Item 1A. Risk Factors."

The Conversion is expected to qualify for the non-recognition of gain or loss to our unitholders for U.S. federal income tax purposes. The application of the non-recognition rules to non-U.S. unitholders in the context of the Conversion is dependent on the laws applicable to them. All unitholders are urged to consult their own advisors as to the consequences of the Conversion to them. Following the Conversion, dividends will be reported to stockholders on Form 1099-DIV. The Schedule K-1s that we issued previously as a limited partnership will no longer be issued after March 2019, when final Schedule K-1s will be issued in respect of our final taxable period as a limited partnership ending June 30, 2018. We believe this change will simplify our stockholders’ tax reporting obligations.

Following the Conversion, all of our net income will be subject to U.S. federal (and state and local) corporate income taxes, which may reduce the amount of cash available for dividends or reinvestment in our business as well as reduce our reported after-tax earnings. See "Part II. Item 1A. Risk Factors—As a result of the Conversion, we expect to pay more corporate income taxes and also expect to make larger payments under our tax receivable agreement than we would as a limited partnership. We also expect the anticipated amount of annual dividends to our Class A common stockholders immediatelystock.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
followingNot applicable.
ITEM 4.  MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION
KKR will hold its 2019 annual meeting of stockholders (the "Annual Meeting") at 9:00 a.m., Eastern Time, on Monday, June 17, 2019, at the Conversion, if declared, to be lower thanoffices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017. The close of business on May 13, 2019 has been set as the distribution amounts we declared in prior annual periods as a limited partnership. In addition, we may fail to realize all or some of the anticipated benefits of the Conversion or those benefits may take longer to realize than expected, which could have a material and adverse impact on the trading price of our securities."

In connection with the Conversion, the executive officers of our Managing Partner have agreed not to sell or make charitable transfers of equity securities of KKR & Co. L.P. or the Corporation for six months following therecord date of the announcement of the decision to effectuate the Conversion. The foregoing does not apply to approximately 20.0 million Common Units (as defined below) from May 2018 exchanges, which Common Units, or following the Conversion, shares of Class A Common Stock (as defined below), may only be donated for charitable purposes but during such six months period may not be sold into the market.

Furthermore, we announced the increase to the available amount under our repurchase program to $500 million, which may be used immediately for the repurchase of our Common Units or Class A Common Stock and the cancellation (by cash settlement or the payment of tax withholding amounts upon net settlement) of equity awards issued pursuant to our Equity Incentive Plan (and any successor equity plan thereto) representing the right to receive our Common Units or Class A Common Stock. We also announced that we anticipate that our dividend policy as a corporation beginning in the third quarter of 2018 will be to pay dividends to holders of our Class A Common Stock in an initial annual aggregate amount of $0.50 per share, subject to the discretion of our board of directors and compliance with applicable law.

Conversion Steps

On May 3, 2018, in order to implement the Conversion, our Managing Partner, in its capacity as our general partner, filed with the Secretary of State of the State of Delaware a Certificate of ConversionAnnual Meeting (the "Certificate of Conversion") and, in its capacity as sole incorporator of the Corporation, filed with the Secretary of State of the State of Delaware a Certificate of Incorporation (the "Certificate of Incorporation").

At the Effective Time, KKR & Co. L.P. will convert to the Corporation pursuant to a plan of conversion (the "Plan of Conversion") and the Certificate of Incorporation and Bylaws of the Corporation ("Bylaws") will become effective. The Plan of Conversion, Certificate of Conversion, Certificate of Incorporation and Bylaws are filed herewith as Exhibits 2.1, 3.1, 3.2 and 3.3, respectively, and incorporated herein by reference.

As a result of the Conversion, the business and affairs of the Corporation will be overseen by a board of directors of the Corporation, rather than the board of directors of our Managing Partner, which currently oversees our business and affairs, as our general partner. The directors and executive officers of our Managing Partner immediately prior to the Effective Time will become the directors and executive officers of the Corporation at the Effective Time. In addition, the committees of the board, and the membership thereof, immediately prior to the Effective Time, will be replicated at the Corporation at the Effective Time. Information regarding directors, executive officers and committee members is included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 under the headings "Directors, Executive Officers and Corporate Governance," "Executive Compensation—Director Compensation" and "Certain Relationships and Related Transactions and Director Independence" filed herewith as Exhibit 99.1 and in our Form 8-K filed on March 2, 2018 and is incorporated herein by reference.

In addition, on May 3, 2018, the limited liability company agreement of our Managing Partner was amended and restated to make changes relating to the Conversion, including the removal of the board of directors at the Managing Partner, to be effective at the Effective Time (the "Amended and Restated LLC Agreement""Record Date"). The limited liability company agreement of our Managing Partner currently in effect will remain operative until the effectiveness of the Conversion, unless otherwise amended. The Amended and Restated LLC Agreement is filed herewith as Exhibit 3.4 and incorporated herein by reference.

Reorganization and Amendments to Material Agreements

In connection with the Conversion and at the Effective Time, KKR & Co. L.P. will contribute all of its assets and liabilities to KKR Group Holdings Corp., a newly formed and wholly owned subsidiary of KKR & Co. L.P., and each of KKR Group Holdings L.P. and KKR Group Limited, two existing wholly owned subsidiaries of KKR & Co. L.P., will be liquidated, distributing all of their assets to and providing for the assumption of all of their liabilities by KKR Group Holdings Corp., which at such time will become a general partner of KKR Fund Holdings L.P. and KKR International Holdings L.P. and the sole stockholder of KKR Management Holdings Corp. (the general partner of KKR Management Holdings L.P.) and KKR Fund Holdings GP Limited (the other general partner of KKR Fund Holdings L.P. and KKR International Holdings L.P.). 


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In connection with the Conversion and the contribution and liquidations described in the prior paragraph (the "Reorganization" and, together with the Conversion, the "Transactions"), on May 3, 2018:

the Tax Receivable Agreement, dated as of July 14, 2010, was amended (the "Tax Receivable Agreement Amendment");

the Amended and Restated Exchange Agreement, dated as of November 2, 2010 and as amended, was amended and restated (the "Second Amended and Restated Exchange Agreement");

the Second Amended and Restated Limited Partnership Agreement of KKR Management Holdings L.P., dated as of October 1, 2009 and as amended, was amended (the "Management Holdings LPA Amendment");

the Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P., dated as of October 1, 2009 and as amended, was amended (the "Fund Holdings LPA Amendment"); and

the Amended and Restated Limited Partnership Agreement of KKR International Holdings L.P., dated as of August 5, 2014 and as amended, was amended (the "International Holdings LPA Amendment");

in each case, to make changes relating to the Transactions, as applicable, and to become effective at the Effective Time. The Tax Receivable Agreement Amendment provides for modifications relating to the new status of KKR & Co. Inc. as a corporation rather than as a limited partnership and also provides that, in the event the maximum U.S. federal corporate income tax rate is increased to a rate higher than 21.0% within the five-year period following effectiveness of the Conversion, for exchanges pursuant to the Second Amended and Restated Exchange Agreement that take place within that five-year period (other than exchanges following the death of an individual), payments of cash tax savings realized as a result of such exchanges shall be calculated by applying a corporate income tax rate not to exceed 21.0%. The Tax Receivable Agreement Amendment also clarifies that the tax benefit payments with respect to exchanges completed at any time prior to the Conversion will be calculated without taking into account the step-up in tax basis in our underlying assets that we expect to generate in 2018 as a result of the Conversion. Descriptions of the material provisions of the existing agreements were previously reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

In addition, our Managing Partner’s board of directors unanimously approved, following our receipt of special approval from the conflicts committee of the board of directors, a form of an indemnification agreement to be entered into with our Managing Partner and each member of the board (each such indemnification agreement, an "Indemnification Agreement"), which provides for substantially the same rights and obligations for indemnification that are available in our limited partnership agreement to our Managing Partner and in existing indemnification agreements to members of the board, respectively. On May 3, 2018, our Managing Partner executed its Indemnification Agreement, to be effective at the Effective Time. A description of the material provisions of the indemnification set forth in our limited partnership agreement and the existing indemnification agreements with each member of the board was previously reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

The foregoing descriptions are qualified in their entirety by reference to the full text of the Tax Receivable Agreement Amendment, Second Amended and Restated Exchange Agreement, Management Holdings LPA Amendment, Fund Holdings LPA Amendment, International Holdings LPA Amendment, the Indemnification Agreement executed by our Managing Partner and the form of the Indemnification Agreement filed herewith as Exhibits 10.1 through 10.7, respectively, and incorporated herein by reference.

Capital Stock of the Corporation

At the Effective Time, pursuant to the Plan of Conversion and without any action required on the part of KKR & Co. L.P., the Corporation, our Managing Partner, or the former holders of the applicable units, (i) each KKR & Co. L.P. common unit ("Common Unit") outstanding immediately prior to the Effective Time will be converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, $0.01 par value per share, of the Corporation ("Class A Common Stock"), (ii) each managing partner unit of KKR & Co. L.P. outstanding immediately prior to the Effective Time will be converted into one issued and outstanding, fully paid and nonassessable share of Class B common stock, $0.01 par value per share, of the Corporation ("Class B Common Stock"), (iii) each special voting unit ("Special Voting Unit") of KKR & Co. L.P. outstanding immediately prior to the Effective Time will be converted into one issued and outstanding, fully paid and nonassessable share of Class C common stock, $0.01 par value per share, of the Corporation ("Class C Common Stock"), (iv) each Series A Preferred Unit outstanding immediately prior to the Effective Time will be converted into one issued and outstanding, fully paid and nonassessable share of preferred stock, $0.01 par value per share, of the Corporation, designated as

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"Series A Preferred Stock" ("Series A Preferred Stock"), and (v) each Series B Preferred Unit outstanding immediately prior to the Effective Time will be converted into one issued and outstanding, fully paid and nonassessable share of preferred stock, $0.01 par value per share, of the Corporation, designated as "Series B Preferred Stock" ("Series B Preferred Stock"). Forms of the 6.75% Series A Preferred Stock Certificate and the 6.50% Series B Preferred Stock Certificate are filed herewith as Exhibits 4.1 and 4.2, respectively, and incorporated herein by reference.

As a result of the Conversion, holders of Common Units will become holders of Class A Common Stock, which will continue to be listed on the NYSE under the symbol "KKR"; holders of Series A Preferred Units will become holders of Series A Preferred Stock, which will continue to be listed on the NYSE under the symbol "KKR PRA"; and holders of Series B Preferred Units will become holders of Series B Preferred Stock, which will continue to be listed on the NYSE under the symbol "KKR PRB", in each case, at the opening of trading immediately following the Effective Time. Our Managing Partner, an entity controlled by senior executives of KKR and the current general partner of KKR & Co. L.P., will become the sole holder of the Class B Common Stock. KKR Holdings, a separate entity controlled by senior executives of KKR and the current holder of the Special Voting Units, will become the sole holder of the Class C Common Stock.

On May 3, 2018, we notified the NYSE that the Certificate of Conversion had been filed with the Secretary of State of the State of Delaware. Prior to the Effective Time, we will request that,Stockholders as of the openclose of business on Monday, July 2, 2018, the NYSE cease tradingRecord Date may attend the Annual Meeting if they bring valid government-issued photo identification and proof of stock ownership. However, there will not be any matter for the Common Units, Series A Preferred Unitsstockholders to vote on and, Series B Preferred Units on the NYSE and commence trading of the Class A Common Stock, Series A Preferred Stock and Series B Preferred Stock on the NYSE under the existing ticker symbols "KKR", "KKR PRA" and "KKR PRB", respectively. No furtheras such, no action by the current holders of Common Units, Series A Preferred Units, or Series B Preferred Units is currently anticipated. It is expected that new CUSIP numbersto be taken at the Annual Meeting and KKR will be issued for each of the Class A Common Stock, Series A Preferred Stock and Series B Preferred Stock.

The Certificate of Incorporation and Bylaws provide our stockholders following the Conversion with substantially the same rights and obligations that unitholders have in our limited partnership agreement. Therefore, the Class A Common Stock is generally non-voting like the existing Common Units, except as provided in the Certificate of Incorporation and Bylaws and under the Delaware General Corporation Law (the "DGCL") and the rules of the NYSE (as they were generally applicable to KKR & Co. L.P. priornot send any proxy or information statement related to the Conversion). Also, Class C Common Stock, Series A Preferred Stock and Series B Preferred Stock are generally non-voting like the existing Special Voting Units, Series A Preferred Units and Series B Preferred Units, respectively, except, in each case, as provided in the Certificate of Incorporation and Bylaws and under the DGCL and the rules of the NYSE. The Class B Common Stock that will be held by the entity that has served as our Managing Partner is the only class of the Corporation's common stock entitled to vote at a meeting of stockholders (or to take similar action by written consent) in the election of directors and generally with respect to all other matters submitted to a vote of stockholders, except as provided in the Certificate of Incorporation and Bylaws and under the DGCL and the rules of the NYSE. As a result, the Corporation will be a "controlled company" within the meaning of the corporate governance standards of the NYSE and, like KKR & Co. L.P., will qualify for exceptions from certain corporate governance rules of the NYSE.

Annual Meeting.
ITEM 6. EXHIBITS.

The following is a list of all exhibits filed or furnished as part of this report:
Exhibit No. Description of Exhibit
2.1
Plan of Conversion.
3.1
Certificate of Conversion of KKR & Co. L.P.
3.2 
Certificate of Incorporation of KKR & Co. Inc. (incorporated herein by reference to Exhibit 3.2 KKR & Co. Inc. Quarterly Report on Form 10-Q filed on May 8, 2018).
3.33.2 
Bylaws of KKR & Co. Inc.
3.4
Amended and Restated Limited Liability Company Agreement (incorporated herein by reference to Exhibit 3.3 of KKR Management LLC, dated as of& Co. Inc. Quarterly Report on Form 10-Q filed on May 3, 2018.
4.1
Form of 6.75% Series A Preferred Stock Certificate (included in Exhibit 2.1).
4.2
Form of 6.50% Series B Preferred Stock Certificate (included in Exhibit 2.1)8, 2018).
10.1 
Amendment to Tax Receivable Agreement, dated as of May 3, 2018, among KKR Holdings L.P., KKR Management Holdings Corp., KKR & Co. L.P.,Inc. 2019 Equity Incentive Plan (incorporated herein by reference to Appendix A to the KKR Management Holdings L.P. and KKR Group Holdings Corp.& Co. Inc. definitive proxy statement filed on December 14, 2018).

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Exhibit No.Description of Exhibit
10.2 
Second Amended and Restated ExchangeForm of Restricted Stock Unit Agreement dated as of May 3, 2018, among KKR Management Holdings L.P., KKR Fund Holdings L.P., KKR International Holdings L.P., KKR Holdings L.P., KKR & Co. L.P., KKR Group Holdings L.P., KKR Subsidiary Partnership L.P., KKR Group Limited and KKR Group Holdings Corp.Inc. (Directors).
10.3 
Amendment No. 3 to the Second Amended and Restated Limited Partnership Agreement of KKR Management Holdings L.P. dated as of May 3, 2018.
10.4
Amendment to Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P. dated as of May 3, 2018.
10.5
Amendment to Amended and Restated Limited Partnership Agreement of KKR International Holdings L.P. dated as of May 3, 2018.
10.6
Indemnification Agreement, dated as of May 3, 2018, between KKR & Co. L.P. and KKR Management LLC.
10.7
Form of IndemnificationRestricted Stock Unit Agreement for Directors of KKR & Co. Inc. (Executive Officers).
31.1 
Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
31.2 
Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3 
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 
Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 
Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3 
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1
Part II, Item 10 "Directors, Executive Officers and Corporate Governance," Item 11 "Executive Compensation—Director Compensation" and Item 13 "Certain Relationships and Related Transactions, and Director Independence" of KKR & Co. L.P.'s Annual Report on Form 10-K for the year ended December 31, 2017 (incorporated herein by reference to KKR & Co. L.P.'s Annual Report on Form 10-K for the year ended December 31, 2017 filed on February 23, 2018).
101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Statements of Financial Condition as of March 31, 20182019 and December 31, 2017,2018, (ii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 20182019 and March 31, 2017,2018, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 20182019 and March 31, 2017;2018; (iv) the Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 20182019 and March 31, 2017,2018, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 20182019 and March 31, 2017,2018, and (vi) the Notes to the Condensed Consolidated Financial Statements.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.


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SIGNATURES
 
Pursuant to requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  KKR & CO. L.P.INC.
   
By: KKR Management LLC
Its General Partner
   
  By:/s/ William J. Janetschek
   William J. Janetschek
   Chief Financial Officer
   (principal financial and accounting officer of KKR Management LLC and authorized signatory)officer)
    
DATE:May 8, 20183, 2019  


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