Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements of KKR & Co. Inc., together with its consolidated subsidiaries, and the related notes included elsewhere in this report. The historical consolidated financial data discussed below reflects the historical results and financial position of KKR and does not reflect the Global Atlantic acquisition. In addition, this discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including those described under "Cautionary Note Regarding Forward-looking Statements" and "Risk Factors." Actual results may differ materially from those contained in any forward-looking statements.

Overview of Business

For a discussion about our business lines and our firm, see "Business."

Business Environment

Economic and Market Conditions

Impact of COVID-19. The outbreak of COVID-19 continues to impact the United States and other countries throughout the world. For a description of the impact that COVID-19 had and may in the future have on our business, see "Risk Factors—Risks Related to Our Business—COVID-19 continues to impact the United States and other countries throughout the world, and it has caused and may further cause disruptions to our business and adversely affect our financial results" and "Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions and events outside of our control 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."

Economic Conditions. As a global investment firm, we are affected by financial and economic conditions globally. Global and regional economic conditions, including those caused by the COVID-19 pandemic, have 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, European Union, Japan, China, and other major economies are significant contributors to the global economy.

In 2020, the U.S. economy experienced a sharp contraction in the first half of the year, as a result of COVID-19, expanded significantly in the third quarter, as states began to reopen, and experienced moderate growth in the fourth quarter as new COVID-19 restrictions and closures took effect in parts of the country that faced a resurgence of the virus. In the United States, real GDP contracted 3.5% for the full year ended December 31, 2020, compared to expansion of 2.2% in the prior year; the U.S. unemployment rate was 6.7% as of December 31, 2020, up from 3.6% as of December 31, 2019; the U.S. core consumer price index was 1.6% on a year-over-year basis as of December 31, 2020, down from 2.3% on a year-over-year basis as of December 31, 2019; and the effective federal funds rate set by the U.S. Federal Reserve was 0.1% as of December 31, 2020, down from 1.6% as of December 31, 2019.

In 2020, the European Union's economy faced similar challenges due to COVID-19. Following the sharp downturn in the first half of the year, the signs of rebound in the third quarter were cut short in the fourth quarter as certain countries in Europe, including France, Germany, Belgium, Ireland and England, reimposed restrictions and lock-downs as the number of COVID-19 cases surged across Europe. In the Euro Area, real GDP is estimated to have contracted by 7.2% for the year ended December 31, 2020, compared to expansion of 1.3% in the prior year; the Euro Area unemployment rate was 8.3% as of December 31, 2020, up from 7.4% as of December 31, 2019; Euro Area core inflation was 0.2% on a year-over-year basis as of December 31, 2020, down from 1.3% on a year-over-year basis as of December 31, 2019; and the short-term benchmark interest rate set by the European Central Bank was 0.0% as of December 31, 2020, unchanged from December 31, 2019.

In 2020, Japan's economy experienced a record COVID-19-related decline in the second quarter, but exhibited signs of slow recovery in the second half of the year. In China, after the emergence of COVID-19 in the first quarter and the government's efforts to control the spread, its economy experienced a moderate but steady growth for the remainder of the year. In Japan, the short-term benchmark interest rate set by the Bank of Japan was -0.1% as of December 31, 2020, unchanged from December 31, 2019; and in China, reported real GDP growth is estimated to be 2.3% for the year ended December 31, 2020, below the 6.0% reported for the year ended December 31, 2019.

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, economic nationalist sentiments, tensions surrounding socioeconomic inequality issues, and the at-times partisan nature of U.S. government administration, which has potentially global ramifications with regards to policy, (ii) geopolitical uncertainty such as U.S.-China relations, (iii) regulatory changes regarding, for example, taxation, international trade, cross-border investments, immigration, and stimulus programs/rising levels of debt, (iv) volatility or downturn in stock and credit markets, (v) any unexpected shift in the central banks' monetary policies, (vi) technological advancements and innovations that may disrupt marketplaces and businesses, and (vii) further developments regarding COVID-19, in particular the rise of variants hindering the success of the vaccines and the length of time needed to vaccinate a significant segment of the global population. 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."

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, such as the present, raise 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 that 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.

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 year ended December 31, 2020, global equity markets were positive, with the S&P 500 Index up 18.4% and the MSCI World Index up 16.5% on a total return basis including dividends. Equity market volatility as evidenced by the Chicago Board Options Exchange Market Volatility Index (VIX), a measure of volatility, ended at 22.8 as of December 31, 2020, increasing from 13.8 as of December 31, 2019. 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 and events outside of our control 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 see also "—Critical Accounting Policies—Fair Value Measurements—Level III Valuation Methodologies."

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. In addition, Global Atlantic makes significant investments in investment grade 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 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 year ended December 31, 2020, U.S. investment grade corporate bond spreads (BofA Merrill Lynch US Corporate Index) expanded by 2 basis points and U.S. high-yield corporate bond spreads (BofAML HY Master II Index) expanded by 26 basis points. The non-investment grade credit indices were up during the year ended December 31, 2020, with the S&P/LSTA Leveraged Loan Index up 3.1% and the BAML US High Yield Index up 6.2%. During the year ended December 31, 2020, 10-year government bond yields fell 100 basis points in the United States, fell 63 basis points in the United Kingdom, fell 38 basis points in Germany, remained flat in China, and rose 3 basis point 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 and events outside of our control 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."

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 and events outside of our control 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 balance 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." For a further discussion of our valuation methods, see "—Critical Accounting Policies—Fair Value Measurements—Level III Valuation Methodologies."

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 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 year ended December 31, 2020, the euro rose 8.9%, the British pound rose 3.1%, the Japanese yen rose 5.2%, and the Chinese renminbi rose 6.7%, respectively, relative to the U.S. dollar. For additional information regarding our foreign exchange rate risk, see "Quantitative and Qualitative Disclosure About Market Risk—Exchange Rate Risk."

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 year ended December 31, 2020, the 3-year forward price of WTI crude oil decreased approximately 12%, and the 3-year forward price of natural gas increased approximately 2%. The 3-year forward price of WTI crude oil decreased from approximately $52 per barrel to $46 per barrel, and the 3-year forward price of natural gas increased from approximately $2.42 per mcf to $2.47 per mcf as of December 31, 2019 and December 31, 2020, 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, to the extent unhedged. In addition, because we hold certain energy real asset investments, which had a fair value of $0.7 billion as of December 31, 2020 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 "—Critical Accounting Policies—Fair Value Measurements—Level III Valuation Methodologies—Real Asset Investments" and see also "Risk Factors—Risks Related to the Assets We Manage—Our funds and our firm through our balance 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."

Following significant volatility in the first half of 2020, due in large part to the COVID-19 pandemic, oil prices remained relatively stable during the third quarter and saw a meaningful uptick in the fourth quarter, although prices ended the year lower than pre-COVID-19 levels. If demand stays depressed, we expect significant volatility in oil prices to continue. While the impact to longer-term prices of crude oil and natural gas has been less pronounced, we expect downward price movements to have a negative impact on the fair value of our energy portfolio, all other things being equal, given those commodity prices are an input in our valuation models. However, we expect the impact of the decline will be mitigated by the existence of our near-

term commodity price hedges, which make long-term oil and natural gas prices a more significant driver of the valuation of our energy investments than spot prices. As of December 31, 2020, energy strategies make up approximately 1% of our assets under management, 3% of our total GAAP assets and 3% of our book assets.

Business Conditions

Our operating 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 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 real assets, credit, core, impact and, through hedge 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 fund investors, including retail and high net worth investors. However, fundraising continues to be competitive. While our Asian Fund IV, Americas Fund XII, European Fund V, Real Estate Partners Americas II, Global Infrastructure Investors III and Next Generation Technology Growth Fund II 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. 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."

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 Markets business line, which may earn fees in the syndication of equity or debt.

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.

Basis of Accounting

We consolidate the financial results of KKR Group Partnership and their consolidated entities, which include the accounts of our investment management and capital markets companies, the general partners of certain unconsolidated investment funds, general partners of consolidated investment funds and their respective consolidated investment funds and certain other entities including certain 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, 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 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 (loss) attributable to noncontrolling interests on the consolidated statements of operations.

For a further discussion of our consolidation policies, see Financial Statements and Supplementary Data—Note 2 "Summary of Significant Accounting Policies."

Key Financial Measures Under GAAP

The following discussion of key financial measures under GAAP is based on KKR's business as of December 31, 2020 and does not include the effects of the Global Atlantic acquisition, which was completed on February 1, 2021.

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; (ii) transaction fees earned in connection with successful investment transactions and from capital markets activities; (iii) monitoring fees from providing services to portfolio companies; (iv) expense reimbursements from certain investment funds and portfolio companies; (v) revenue earned by oil and gas entities that are consolidated; and (vi) consulting fees. 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 (Loss)

Capital allocation-based income (loss) is earned from those arrangements whereby KKR serves as general partner and includes income or loss from KKR's capital interest as well as "carried interest" which entitles KKR to a disproportionate allocation of investment income or loss from investment funds' limited partners.

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

Expenses

Compensation and Benefits

Compensation and Benefits expense includes (i) base cash compensation consisting of salaries and wages, (ii) benefits, (iii) carry pool allocations, (iv) equity-based compensation, and (v) discretionary cash bonuses.

To supplement base cash compensation, benefits, carry pool allocations, and equity-based compensation, we typically pay discretionary cash bonuses, which are included in Compensation and Benefits expense in the consolidated statements of operations, based principally on the level of (i) management fees and other fee revenues (including incentive fees), (ii) realized carried interest and (iii) realized investment income earned during the year. The amounts paid as discretionary cash bonuses, if any, are at our sole discretion and vary by individual to individual and from period to period, including having no cash bonus. We accrue discretionary cash bonuses when payment becomes probable and reasonably estimable which is generally in the period when we make the decision to pay discretionary cash bonuses and is based upon a number of factors, including the recognition of fee revenues, realized carried interest, realized investment income and other factors determined during the year.

Beginning in 2021, we expect to pay our employees by assigning a percentage range to each component of distributable revenues. Based on the current components and blend of our distributable revenues on an annual basis, we expect to use approximately 20‐25% of fee revenues, 60‐70% of realized carried interest and 10‐20% of realized investment income and hedge fund partnership incentive fees to pay our employees. Because these ranges are applied to applicable distributable revenue components independently, and on an annual basis, the amount paid as a percentage of total distributable revenues will vary and will, for example, likely be higher in a period with relatively higher realized carried interest and lower in a period with relatively lower realized carried interest. We decide whether to pay a discretionary cash bonus and determines the percentage of applicable revenue components to pay compensation only upon the occurrence of the realization event. There is no contractual or other binding obligation that requires us to pay a discretionary cash bonus to the employees, except in limited circumstances.

Assuming we paid (i) 65% of the unrealized carried interest earned by the funds that allocate 40% and 43% to the carry pool and (ii) 15% of the unrealized gains in our Principal Activities business line (in each case at the mid-point of the ranges

above), KKR & Co. Inc. Stockholders’ Equity – Series I and II Preferred, Common Stock as of December 31, 2020 would be reduced by approximately $1.57 per share, compared to $21.15 per share on such date, and our book value as of December 31, 2020 would be reduced by approximately $1.67 per adjusted share, compared to book value of $ 23.09 per adjusted share on such date.

Carry Pool Allocation

With respect to our funds that provide for carried interest, we allocate a portion of the realized and unrealized carried interest that we earn to a carry pool established at KKR Associates Holdings L.P., from which our employees and certain other carry pool participants are eligible to receive a carried interest allocation. The allocation is determined based upon a fixed arrangement between KKR Associates Holdings L.P. and us, and we do not exercise discretion on whether to make an allocation to the carry pool upon a realization event. These amounts are accounted for as compensatory profit sharing arrangements in Accounts Payable, Accrued Expenses and Other Liabilities within the accompanying consolidated statements of financial condition in conjunction with the related carried interest income and are recorded as compensation expense. Upon a reversal of carried interest income, the related carry pool allocation, if any, is also reversed. Accordingly, such compensation expense is subject to both positive and negative adjustments.

In February 2021, upon receipt of approval from a committee representing a majority of our independent directors, we amended the percentage of carried interest that is allocable to the carry pool to 65% for recently formed funds and future funds, while for older funds, it remains 40% or 43%, as applicable. To account for the difference in the carry pool allocation percentages, we expect to use a portion of realized carried interest from the older funds equal to the difference between 65% and 40% or 43%, as applicable, to supplement the carry pool and to pay amounts as discretionary cash bonus compensation as described above to our employees. The amounts paid as discretionary cash bonuses, if any, are at our discretion and vary from individual to individual and from period to period, including having no cash bonus at all for certain employees. The percentage of carried interest allocable to the carry pool may be increased above 65% only with the approval of a majority of our independent directors. See "—Fair Value Measurements—Recognition of Carried Interest in the Statement of Operations" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Financial Measures Under GAAP—Expenses—Compensation and Benefits."

Equity-based Compensation

In addition to the cash-based compensation and carry pool allocations as described above, employees receive equity awards under the Equity Incentive Plans most of which are subject to service-based vesting typically over a three to five-year period from the date of grant and in certain cases vesting is subject to the achievement of market conditions. Certain of these awards are subject to transfer restrictions and minimum retained ownership requirements.

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, expenses incurred by oil and gas entities, CLOs and investment funds that are consolidated, costs incurred in connection with pursuing potential investments that do not result in completed transactions ("broken-deal expenses"), expense reimbursements, placement fees and other general operating expenses. A portion of these 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. Fluctuations in net gains (losses) from 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 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 we and our consolidated investment funds invest. Dividend income is recognized primarily in connection with (i) dispositions of operations by portfolio companies, (ii) distributions of cash generated from operations from portfolio investments, and (iii) other significant refinancings undertaken by portfolio investments.

Interest Income

Interest income consists primarily of interest that is received on our credit instruments in which we and our consolidated investment funds, CLOs and other entities invest as well as interest on our cash 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 investment 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."

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, KKR Group Partnership and certain of its 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.

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, see Financial Statements and Supplementary Data—Note 2 "Summary of Significant Accounting Policies" and Note 11 "Income Taxes."

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 KKR Group Partnership that are held by KKR Holdings. The allocable share of income and expense attributable to these interests is 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 KKR Group Partnership 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 Financial Statements and Supplementary Data—Note 15 "Equity."

Key Non-GAAP and Other Operating and Performance Measures

The following discussion of key Non-GAAP and other operating and performance measures under GAAP is based on KKR's business as of December 31, 2020 and does not include the effects of the Global Atlantic acquisition, which was completed on February 1, 2021.

The key non-GAAP and other operating and performance measures that follow are used by management in making operational and resource deployment decisions as well as assessing the overall performance of KKR's businesses. They include certain financial measures that are calculated and presented using methodologies other than in accordance with GAAP. These non-GAAP measures, including after-tax distributable earnings, distributable revenues, distributable expenses, distributable operating earnings, fee related earnings, book assets, book liabilities, book value and book value per adjusted shares, are presented prior to giving effect to the allocation of income (loss) between KKR & Co. Inc. and KKR Holdings L.P. and as such represent the business in total. In addition, these non-GAAP measures are presented without giving effect to the consolidation of the investment funds and CFEs that KKR manages as well as one or more other consolidated entities that are not subsidiaries of KKR & Co. Inc.

We believe that providing these non-GAAP measures on a supplemental basis to our GAAP results is helpful to stockholders in assessing the overall performance of KKR's business. These non-GAAP measures should not be considered as a substitute for, or superior to, financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP 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 measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, where applicable, are included under "—Reconciliations to GAAP Measures."

Adjusted Shares

Adjusted shares represents shares of common stock of KKR & Co. Inc. outstanding under GAAP adjusted to include shares issuable upon exchange of all units of KKR Holdings L.P. and KKR Holdings II L.P. and the number of assumed shares of common stock issuable upon conversion of our Series C Mandatory Convertible Preferred Stock. We believe providing adjusted shares is useful to stockholders as it provides insight into the calculation of amounts available for distribution as dividends on a per adjusted share basis assuming all units of KKR Holdings L.P. and KKR Holdings II L.P. and all shares of Series C Mandatory Convertible Preferred Stock are exchanged and converted, respectively, to shares of common stock. Weighted average adjusted shares is used in the calculation of after-tax distributable earnings per adjusted share and adjusted shares is used in the calculation of book value per adjusted share.

After-tax Distributable Earnings

After-tax distributable earnings is a non-GAAP performance measure of KKR’s earnings after interest expense, Series A and B preferred dividends, noncontrolling interests and income taxes paid. After -tax distributable earnings excludes mark-to-market gains (losses) and is used by management to assess the net realized earnings of KKR for a given reporting period, after deducting equity-based compensation under the Equity Incentive Plans and adjusting to exclude the impact of strategic corporate transaction-related charges and non-recurring items, if any. 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. Series C Mandatory Convertible Preferred Stock dividends have been excluded from after-tax distributable earnings because the definition of adjusted shares used to calculate after-tax distributable earnings per adjusted share assumes that all shares of Series C Mandatory Convertible Preferred Stock have been converted to shares of common stock. After-tax distributable earnings does not represent and is not used to calculate actual dividends under KKR’s dividend policy. 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. Income taxes paid represents the implied amount of income taxes that would be paid assuming that all pre-tax distributable earnings were allocated to KKR & Co. Inc. and taxed at the same effective rate, which would occur following an exchange of all KKR Holdings units for common stock of KKR & Co. Inc. Income taxes paid also includes amounts paid pursuant to the tax receivable agreement.

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 our strategic BDC partnership and the hedge fund and other managers in which KKR holds an ownership interest. We believe this measure is useful to stockholders as it provides additional insight into the capital raising activities of KKR and its hedge fund and other 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 hedge fund and other managers in which KKR holds an ownership interest; (vi) all AUM of the strategic BDC partnership with FS Investments; and (vii) the fair value of other assets managed by KKR. The pro rata portion of the AUM of hedge fund and other managers is calculated based on KKR’s percentage ownership interest in such entities multiplied by such entity’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 Assets

Book assets is a non-GAAP performance measure that represents cash and short-term investments, investments, net unrealized carried interest, tax assets, and other assets of KKR presented on a basis that deconsolidates (i) KKR's investment funds and collateralized financing entities that KKR manages and (ii) other consolidated entities that are not subsidiaries of KKR & Co. Inc. We believe this measure is useful to stockholders as it provides additional insight into the assets of KKR that are used to operate its business lines. As used in this definition, 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.

Book Liabilities

Book liabilities is a non-GAAP performance measure that represents the debt obligations of KKR (including KFN), tax liabilities, and other liabilities of KKR presented on a basis that deconsolidates (i) KKR's investment funds and collateralized financing entities that KKR manages and (ii) other consolidated entities that are not subsidiaries of KKR & Co. Inc. We believe this measure is useful to stockholders as it provides additional insight into the liabilities of KKR excluding the liabilities that are allocated to noncontrolling interest holders and to the holders of the Series A and Series B Preferred Stock.

Book Value

Book value is a non-GAAP performance measure of the net assets of KKR and is used by management primarily in assessing the unrealized value of KKR’s book assets after deducting for book liabilities, noncontrolling interests and Series A and B Preferred Stock. We believe this measure is useful to stockholders as it provides additional insight into the net assets of KKR excluding those net assets that are allocated to noncontrolling interest holders and to the holders of the Series A and B Preferred Stock. KKR's book value includes the net impact of KKR's tax assets and liabilities as prepared under GAAP. Series C Mandatory Convertible Preferred Stock has been included in book value, because the definition of adjusted shares used to calculate book value per adjusted share assumes that all shares of Series C Mandatory Convertible Preferred Stock have been converted to shares of common stock.

Capital Invested

Capital invested is the aggregate amount of capital invested by (i) KKR’s investment funds, (ii) KKR's Principal Activities business line as a co-investment, if any, alongside KKR’s investment funds, and (iii) KKR's Principal Activities business line in connection with a syndication transaction conducted by KKR's Capital Markets 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 stockholders as it provides a measure of capital deployment across KKR’s business 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’s Principal Activities business line that is not a co-investment alongside KKR’s investment funds, and (iii) capital invested by KKR’s Principal Activities business 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 business line to third parties other than KKR’s investment funds or Principal Activities business line is not included in capital invested. See also syndicated capital.

Distributable Revenues

Distributable revenues is a non-GAAP performance measure that represents the realized revenues (which excludes unrealized carried interest and unrealized net gains (losses)) generated by KKR and is the sum of (i) fees and other, net, (ii) realized performance income (loss) and (iii) realized investment income (loss). KKR believes that distributable revenues is useful to stockholders as it provides insight into the realized revenue generated by KKR's business lines.

Distributable Expenses

Distributable expenses is a non-GAAP performance measure that represents the expenses of KKR and is the sum of (i) compensation and benefits (excluding unrealized performance income compensation), (ii) occupancy and related charges and (iii) other operating expenses. KKR believes that distributable expenses is useful to stockholders as it provides insight into the costs expended in connection with generating KKR's distributable revenues.

Distributable Operating Earnings

Distributable operating earnings is a non-GAAP performance measure that represents after-tax distributable earnings before interest expense, Series A and B preferred dividends, income (loss) attributable to noncontrolling interests and income taxes paid. We believe distributable operating earnings is useful to stockholders as it provides a supplemental measure of our operating performance without taking into account items that we do not believe relate directly to KKR's operations.

Fee Paying AUM ("FPAUM")

Fee paying AUM represents only the AUM from which KKR is entitled to receive management fees. We believe this measure is useful to stockholders 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 hedge fund and BDC partnership management fees and differs from AUM in the following respects: (i) assets and commitments from which KKR is not entitled to receive a management fee are excluded (e.g., assets and commitments with respect to which it is entitled to receive only carried interest or is otherwise not currently entitled 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 non-GAAP supplemental performance measure of earnings of KKR before performance income and investment income. KKR believes this measure may be useful to stockholders as it may provide additional insight into the profitability of KKR’s fee generating management companies and capital markets businesses. Fee related earnings is calculated as KKR’s total Fees and Other, Net, multiplied by KKR’s distributable operating margin. For purposes of the fee related earnings calculation, distributable operating margin is calculated as distributable operating earnings, before equity-based compensation, divided by total distributable revenues.

Syndicated Capital

Syndicated capital is 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 stockholders as it provides additional insight into levels of syndication activity in KKR's Capital Markets business line and across KKR's investment platform.

Uncalled Commitments

Uncalled commitments is the aggregate amount of unfunded capital commitments that KKR’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 stockholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds and carry paying co-investment vehicles to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements or investments we have committed to make but remain unfunded at the reporting date.

Consolidated Results of Operations (GAAP Basis)

The following is a discussion of our consolidated results of operations for the years ended December 31, 2020 and 2019. You should read this discussion in conjunction with the financial statements and related notes included elsewhere in this report. For a more detailed discussion of the factors that affected our non-GAAP operating results in these periods, see "—Analysis of Non-GAAP Operating Results." For a discussion comparing our consolidated results of operations for the years ended December 31, 2019 and 2018, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 18, 2020. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

			Year Ended
			December 31, 2020						December 31, 2019						Change
			($ in thousands)
Revenues
Fees and Other			$	2,006,791					$	1,790,475					$	216,316
Capital Allocation-Based Income (Loss)			2,224,100						2,430,425						(206,325)
Total Revenues			4,230,891						4,220,900						9,991
Expenses
Compensation and Benefits			2,152,490						2,116,890						35,600
Occupancy and Related Charges			72,100						62,728						9,372
General, Administrative and Other			708,542						728,813						(20,271)
Total Expenses			2,933,132						2,908,431						24,701
Investment Income (Loss)
Net Gains (Losses) from Investment Activities			3,642,804						3,161,884						480,920
Dividend Income			352,563						318,972						33,591
Interest Income			1,403,440						1,418,516						(15,076)
Interest Expense			(969,871)						(1,043,551)						73,680
Total Investment Income (Loss)			4,428,936						3,855,821						573,115
Income (Loss) Before Taxes			5,726,695						5,168,290						558,405
Income Tax Expense (Benefit)			609,097						528,750						80,347
Net Income (Loss)			5,117,598						4,639,540						478,058
Net Income (Loss) Attributable to Noncontrolling Interests			3,115,089						2,634,491						480,598
Net Income (Loss) Attributable to KKR & Co. Inc.			2,002,509						2,005,049						(2,540)
Series A Preferred Stock Dividends			23,288						23,288						—
Series B Preferred Stock Dividends			10,076						10,076						—
Series C Mandatory Convertible Preferred Stock Dividends			23,191						—						23,191
Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders			$	1,945,954					$	1,971,685					$	(25,731)

Revenues

For the years ended December 31, 2020 and 2019, revenues consisted of the following:

						Year Ended
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
Management Fees						$	965,664					$	824,903					$	140,761
Fee Credits						(299,415)						(340,900)						41,485
Transaction Fees						950,205						914,329						35,876
Monitoring Fees						127,907						106,289						21,618
Incentive Fees						10,404						—						10,404
Expense Reimbursements						149,522						169,415						(19,893)
Oil and Gas Revenue						21,054						47,153						(26,099)
Consulting Fees						81,450						69,286						12,164
Total Fees and Other						2,006,791						1,790,475						216,316
Carried Interest						1,719,527						2,041,847						(322,320)
General Partner Capital Interest						504,573						388,578						115,995
Total Capital Allocation-Based Income (Loss)						2,224,100						2,430,425						(206,325)
Total Revenues						$	4,230,891					$	4,220,900					$	9,991

Fees and Other

Total Fees and Other for the year ended December 31, 2020 increased compared to the year ended December 31, 2019 primarily as a result of (i) an increase in management fees, (ii) a reduction in fee credits and (iii) an increase in transaction fees.

The increase in management fees was primarily due to management fees earned from Asian Fund IV, Next Generation Technology Growth Fund II, and Asia Pacific Infrastructure Investors which entered their investment periods subsequent to December 31, 2019. These increases were partially offset by (i) a decrease in management fees earned from Asian Fund III as it entered its post investment period in the third quarter of 2020, in which it pays fees based on capital invested rather than capital committed and pays fees at a lower rate and (ii) a decrease in management fees earned from European Fund IV as it entered its post investment period in the second quarter of 2019, in which it pays fees based on capital invested rather than remaining commitments and capital invested during the investment period.

Transaction fees increased overall primarily from a higher level of transaction fees earned in our Capital Markets business line. Partially offsetting this increase was a decrease in transaction fees earned in our Private Markets business line, and to a lesser extent, our Public Markets business line. For a more detailed discussion of the factors that affected our transaction fees during the period, see "—Analysis of Non-GAAP Operating Results—Distributable Revenues."

Fee credits decreased compared to the prior period as a result of a lower level of transaction fees in our Private Markets and Public Markets business lines.

Fee credits owed to consolidated investment funds are eliminated upon consolidation under GAAP. Transaction fees earned from KKR portfolio companies are not eliminated upon consolidation because those fees are earned from companies which are not consolidated. Furthermore, transaction fees earned in our Capital Markets business line are not shared with fund investors. Accordingly, certain transaction fees are reflected in revenues without a corresponding fee credit.

Capital Allocation-Based Income (Loss)

Capital Allocation-Based Income (Loss) for the year ended December 31, 2020 decreased compared to the year ended December 31, 2019 primarily due to lower carried interest allocations from 2006 Fund and Asia Fund II. These decreases were partially offset by an increase in carried interest allocations from Americas Fund XII and Global Infrastructure Investors II.

KKR generally 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 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. Additionally, unrealized carried interest and general partner capital interest reverse upon a realization, and unrealized carried interest and general partner capital interest can be negative if the amount of realized carried interest exceeds total carried interest generated in the period.

Compensation and Benefits Expenses

The increase in compensation and benefits expenses during the year ended December 31, 2020 compared to the prior period was primarily due to (i) a higher level of cash compensation resulting from a higher level of fees earned and (ii) a higher level of equity-based compensation resulting from certain equity awards that were granted in the fourth quarter of 2020, of which a portion vested immediately. These increases were partially offset by a decrease in carried interest compensation resulting from a lower level of carried interest generated in the year ended December 31, 2020 compared to the prior period.

General, Administrative and Other Expenses

The decrease in general, administrative and other expenses for the year ended December 31, 2020 compared to the prior period was primarily due to (i) a decrease in capital raising costs and (ii) a decrease in corporate travel-related expenses as a result of the COVID-19 pandemic. Partially offsetting these decreases were corporate transaction-related charges incurred in connection with the acquisition of Global Atlantic.

Net Gains (Losses) from Investment Activities

The following is a summary of net gains (losses) from investment activities:

			Year Ended
			December 31, 2020						December 31, 2019
			($ in thousands)
Private Equity			$	4,607,181					$	3,110,951
Credit			(251,276)						(242,995)
Investments of Consolidated CFEs			(85,708)						213,038
Real Assets			(85,363)						(34,545)
Equity Method - Other			514,685						611,160
Other Investments			(179,445)						(186,860)
Debt Obligations and Other			(174,546)						(435,071)
Other Net Gains (Losses) from Investment Activities			(702,724)						126,206
Net Gains (Losses) from Investment Activities			$	3,642,804					$	3,161,884

Net Gains (Losses) from Investment Activities for the year ended December 31, 2020

The net gains from investment activities for the year ended December 31, 2020 were comprised of net realized gains of $162.9 million and net unrealized gains of $3,479.9 million.

Investment gains and losses relating to our general partner capital interest in our unconsolidated funds are not reflected in our discussion and analysis of Net Gains (Losses) from Investment Activities. Our economics associated with these gains and losses are reflected in Capital Allocation-Based Income (Loss) as described above. For a discussion and analysis of the primary investment gains or losses relating to individual investments in our unconsolidated funds, see "—Analysis of Non-GAAP Operating Results—Distributable Revenues."

Realized Gains and Losses from Investment Activities

For the year ended December 31, 2020, net realized gains related primarily to (i) the sale of our investment in The Hut Group Limited (LSE: THG), (ii) partial sales of our investment in Fiserv, Inc., and (iii) the sale of our investment in Ivalua SAS (technology sector). Partially offsetting these realized gains were realized losses primarily relating to (i) an $88.3 million impairment charge taken on one of our investments that is accounted for under the equity method of accounting, (ii) a realized loss on the partial sale of our investment in LCI Helicopters Limited (financial services sector) and (iii) realization of losses on certain investments held through consolidated CLOs and alternative credit funds.

Unrealized Gains and Losses from Investment Activities

For the year ended December 31, 2020, net unrealized gains were driven primarily by (i) mark-to-market gains in our growth equity and core investments held by KKR and certain consolidated entities, the most significant of which were BridgeBio Pharma, Inc. (NASDAQ: BBIO), FanDuel Inc. (technology sector), and PetVet Care Centers, LLC (healthcare sector). Partially offsetting these unrealized gains were unrealized losses relating to (i) the reversal of previously recognized unrealized gains relating to the realization activity described above (ii) mark-to-market losses on our investment in Fiserv, Inc., which is held both in our funds and as a co-investment by KKR, and (iii) mark-to-market losses on certain investments held through consolidated alternative credit and real estate funds.

For a discussion of other factors that affected KKR's realized investment income, see "—Analysis of Non-GAAP Operating Results."

Net Gains (Losses) from Investment Activities for the year ended December 31, 2019

The net gains from investment activities for the year ended December 31, 2019 were comprised of net realized gains of $497.3 million and net unrealized gains of $2,664.5 million.

Realized Gains and Losses from Investment Activities

For the year ended December 31, 2019, net realized gains related primarily to realized gains on (i) the sale of our investment in Trainline PLC (LSE: TRN), (ii) the sales of assets in our consolidated real estate funds, (iii) the sale of our investment in Sedgwick Claims Management Services, Inc. (financial services sector) and (iv) the sales of assets in our consolidated special situations funds. Partially offsetting these realized gains were realized losses, the most significant of which related to the sale of investments held by our consolidated CLOs and the sale of our investment in DoubleDutch, Inc. (technology sector).

Unrealized Gains and Losses from Investment Activities

For the year ended December 31, 2019, net unrealized gains were driven primarily by (i) mark-to-market gains on the growth equity investments held by KKR and certain consolidated entities, the most significant of which was BridgeBio Pharma, Inc., (ii) mark-to-market gains in portfolio companies in our core investment strategy, the most significant of which were PetVet Care Centers, LLC, Heartland Dental, LLC (health care sector), and USI, Inc. (financial services sector) and (iii) mark-to-market gains on our investment in Fiserv, Inc., which is held both in our funds and as a balance sheet co-investment by KKR. Partially offsetting the unrealized gains above were unrealized losses relating to (i) mark-to-market losses in our energy investments held through certain consolidated entities, (ii) mark-to-market losses on investments held at our consolidated special situations funds, (iii) mark-to-market losses on investments held at our India debt financing company and (iv) the reversal of previously recognized unrealized gains relating to the realization activity described above. For more details regarding investments held at our India debt financing company, see "—Analysis of Non-GAAP Operating Results—Non-GAAP Balance Sheet Measures."

Dividend Income

During the year ended December 31, 2020, the most significant dividends received included $152.4 million from our consolidated real estate funds, $62.5 million from our investment in Fiserv, Inc. part of which is held as a co-investment by KKR and $48.9 million from our investment in Epicor Software Corporation (technology sector). During the year ended December 31, 2019, the most significant dividends received included $195.3 million from our investment in Fiserv, Inc., $36.0 million from our consolidated real estate funds, $29.1 million from our consolidated special situations funds, $14.1 million from infrastructure investments held by KKR and $12.7 million from our consolidated energy funds. Significant dividends from portfolio companies or consolidated funds 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 "—Analysis of Non-GAAP Operating Results—Distributable Revenues—Principal Activities Distributable Revenues—Realized Investment Income."

Interest Income

The decrease in interest income during the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily due to a lower level of interest earned from (i) investments held at our consolidated special situations funds and (ii) loans held by KREF, a listed REIT. These decreases were partially offset by (i) the impact of closing additional consolidated CLOs subsequent to December 31, 2019 and (ii) an increase in interest income from certain of our consolidated direct lending funds, primarily related to an increase in the amount of capital deployed. For a discussion of other factors that affected KKR's interest income, see "—Analysis of Non-GAAP Operating Results—Distributable Revenues—Principal Activities Distributable Revenues—Realized Investment Income."

Interest Expense

The decrease in interest expense during the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily due to a lower level of interest expense on debt obligations of the consolidated CLOs and KREF due to a decrease in interest rates subsequent to December 31, 2019 and (ii) the redemption of our $500 million aggregate principal amount of 6.375% Senior Notes due 2020 in the third quarter of 2019. These decreases were partially offset by the impact of multiple issuances of senior notes subsequent to December 31, 2019, which included: (i) $500 million aggregate principal amount of 3.625% Senior Notes due 2050, (ii) $250 million aggregate principal amount of $3.750% Senior Notes due 2029 and (iii) $750 million aggregate principal amount of 3.500% Senior Notes due 2050. For a discussion of other factors that affected KKR's interest expense, see "—Analysis of Non-GAAP Operating Results—Distributable Expenses—Interest Expense."

Income (Loss) Before Taxes

The increase in income before taxes during the year ended December 31, 2020 was due primarily to (i) a higher level of total investment income and (ii) a higher level of management fees. These increases were partially offset by (i) a lower level of accrued carried interest and (ii) higher compensation expense, in each case as described above.

Income Tax Expense (Benefit)

For the year ended December 31, 2020, income tax expense was $609.1 million compared to $528.8 million for the prior period. Our effective tax rate under GAAP for the year ended December 31, 2020 was 10.6%. For a discussion of factors that impacted KKR's tax provision, see Financial Statements and Supplementary Data—Note 11 "Income Taxes."

Net Income (Loss) Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the year ended December 31, 2020 relates primarily to net income attributable to KKR Holdings representing its ownership interests in the KKR Group Partnership as well as third-party limited partner interests in those investment funds that we consolidate. The increase from the prior period is due primarily to an increase in the number of consolidated funds, partially offset by a decrease in net income attributable to KKR Holdings.

Net Income (Loss) Attributable to KKR & Co. Inc.

The decrease in net income attributable to KKR & Co. Inc. for the year ended December 31, 2020, compared to the year ended December 31, 2019, was primarily due to (i) a lower level of accrued carried interest and (ii) Series C Mandatory Convertible Preferred Stock dividends in each case in 2020. These decreases were partially offset by (i) lower accrued carried interest compensation, (ii) lower level of General, Administrative and Other expenses and (iii) an increase in management fees, in each case in 2020 and as described above.

Condensed Consolidated Statements of Financial Condition (GAAP Basis)

The following table provides the Consolidated Statements of Financial Condition on a GAAP basis as of December 31, 2020 and December 31, 2019.

(Amounts in thousands, except per share amounts)
						As of						As of
						December 31, 2020						December 31, 2019
Assets
Cash and Cash Equivalents						$	5,363,009					$	2,346,713
Investments						69,274,715						54,936,268
Other Assets						5,168,778						3,616,338
Total Assets						$	79,806,502					$	60,899,319
Liabilities and Equity
Debt Obligations						$	33,423,596					$	27,013,284
Other Liabilities						5,582,990						3,383,661
Total Liabilities						39,006,586						30,396,945
Stockholders' Equity
KKR & Co. Inc. Stockholders' Equity - Series A and B Preferred Stock						482,554						482,554
KKR & Co. Inc. Stockholders' Equity - Series C Mandatory Convertible Preferred Stock						1,115,792						—
KKR & Co. Inc. Stockholders' Equity - Series I and II Preferred Stock, Common Stock						12,118,472						10,324,936
Noncontrolling Interests						27,083,098						19,694,884
Total Equity						40,799,916						30,502,374
Total Liabilities and Equity						$	79,806,502					$	60,899,319
KKR & Co. Inc. Stockholders' Equity - Common Stock Per Outstanding Share of Common Stock						$	21.15					$	18.44

KKR & Co. Inc. Stockholders’ Equity - Common Stock per Outstanding Share of Common Stock was $21.15 as of December 31, 2020, up from $18.44 as of December 31, 2019. The increase was primarily attributable to the net income that is attributable to KKR & Co. Inc. common stockholders during 2020, partially offset by dividends to common stockholders.

Consolidated Statements of Cash Flows (GAAP Basis)

The accompanying 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 investment funds and CFEs.

The assets of our consolidated investment 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 are treated as investment companies for accounting purposes, certain of these cash flow amounts are included in our cash flows from operations.

Net Cash Provided (Used) by Operating Activities

Our net cash provided (used) by operating activities was $(6.0) billion and $(5.7) billion during the years ended December 31, 2020 and 2019, respectively. These amounts primarily included: (i) investments purchased net of proceeds from investments of $(5.9) billion and $(6.0) billion during the years ended December 31, 2020 and 2019, respectively; (ii) net realized gains (losses) on investments of $162.9 million and $497.3 million during the years ended December 31, 2020 and 2019, respectively; (iii) change in unrealized gains (losses) on investments of $3.5 billion and $2.7 billion during the years ended December 31, 2020 and 2019, respectively; and (iv) capital allocation-based income (loss) of $2.2 billion and $2.4 billion during the years ended December 31, 2020 and 2019, 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 $(153.4) million and $(207.4) million during the years ended December 31, 2020 and 2019, respectively. Our investing activities included: (i) the purchase of fixed assets of $(142.3) million and $(194.6) million during the years ended December 31, 2020 and 2019, respectively and (ii) development of oil and natural gas properties of $(11.1) million and $(12.8) million for the years ended December 31, 2020 and 2019, respectively.

Net Cash Provided (Used) by Financing Activities

Our net cash provided (used) by financing activities was $9.8 billion and $6.5 billion during the years ended December 31, 2020 and 2019, respectively. Our financing activities primarily included: (i) contributions by, net of distributions to, our noncontrolling interests of $4.1 billion and $1.5 billion during the years ended December 31, 2020 and 2019, respectively; (ii) proceeds received net of repayment of debt obligations of $5.3 billion and $5.5 billion during the years ended December 31, 2020 and 2019, respectively; (iii) common stock dividends of $(297.3) million and $(271.5) million during the years ended December 31, 2020 and 2019, respectively; (iv) net delivery of common stock of $(78.3) million and $(91.0) million during the years ended December 31, 2020 and 2019, respectively; (v) repurchases of common stock of $(246.2) million and $(72.1) million during the years ended December 31, 2020 and 2019, respectively; (vi) Series A and B Preferred Stock dividends of $(33.4) million during each of the years ended December 31, 2020 and 2019; (vii) Series C Mandatory Convertible Preferred Stock dividends of $(23.2) million during the year ended December 31, 2020 and (viii) issuance of Series C Mandatory Convertible Preferred Stock of $1.1 billion during the year ended December 31, 2020.

Analysis of Non-GAAP Operating Results

The following is a discussion of the results of our business on a non-GAAP basis for the years ended December 31, 2020 and 2019. You should read this discussion in conjunction with the information included under "—Key Non-GAAP and Other Operating and Performance Measures" and the financial statements and related notes included elsewhere in this report. For a discussion comparing the results of our business on a non-GAAP basis for the years ended December 31, 2019 and 2018, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 18, 2020. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

The following tables set forth information regarding KKR's operating results and certain key operating metrics as of and for the years ended December 31, 2020 and 2019.

DISTRIBUTABLE REVENUES
						Year Ended
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
Distributable Revenues
Fees and Other, Net
Management Fees						$	1,417,594					$	1,227,236					$	190,358
Transaction Fees						949,134						910,932						38,202
Monitoring Fees						127,907						106,289						21,618
Fee Credits						(373,643)						(382,940)						9,297
Total Fees and Other, Net						2,120,992						1,861,517						259,475
Realized Performance Income (Loss)
Carried Interest						1,042,204						1,070,788						(28,584)
Incentive Fees						163,050						65,256						97,794
Total Realized Performance Income (Loss)						1,205,254						1,136,044						69,210
Realized Investment Income (Loss)
Net Realized Gains (Losses)						284,521						189,858						94,663
Interest Income and Dividends						360,138						495,915						(135,777)
Total Realized Investment Income (Loss)						644,659						685,773						(41,114)
Total Distributable Revenues						$	3,970,905					$	3,683,334					$	287,571
DISTRIBUTABLE EXPENSES
						Year Ended
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
Distributable Expenses
Compensation and Benefits (1)						$	1,536,777					$	1,446,292					$	90,485
Occupancy and Related Charges						58,859						58,888						(29)
Other Operating Expenses						334,680						343,418						(8,738)
Total Distributable Expenses						$	1,930,316					$	1,848,598					$	81,718
AFTER-TAX DISTRIBUTABLE EARNINGS
						Year Ended
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
After-tax Distributable Earnings
(+) Total Distributable Revenues						$	3,970,905					$	3,683,334					$	287,571
(-) Total Distributable Expenses						1,930,316						1,848,598						81,718
(=) Total Distributable Operating Earnings						2,040,589						1,834,736						205,853
(-) Interest Expense						211,037						183,682						27,355
(-) Series A and B Preferred Dividends						33,364						33,364						—
(-) Income (Loss) Attributable to Noncontrolling Interests						7,842						4,907						2,935
(-) Income Taxes Paid						265,950						207,479						58,471
After-tax Distributable Earnings						$	1,522,396					$	1,405,304					$	117,092

(1)Includes equity-based compensation of $246.4 million and $207.8 million for the years ended December 31, 2020 and December 31, 2019, respectively.

Distributable Revenues

The following sections discuss distributable revenues for each of our business lines on a disaggregated basis for the years ended December 31, 2020 and 2019.

Private Markets

The following table presents Fees and Other, Net and Realized Performance Income (Loss) in the Private Markets business line for the years ended December 31, 2020 and 2019:

						Year Ended
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
Fees and Other, Net
Management Fees						$	958,271					$	780,254					$	178,017
Transaction Fees						398,859						421,494						(22,635)
Monitoring Fees						127,907						106,289						21,618
Fee Credits						(307,432)						(307,716)						284
Total Fees and Other, Net						$	1,177,605					$	1,000,321					$	177,284
Realized Performance Income (Loss)
Carried Interest						$	1,006,564					$	1,046,038					$	(39,474)
Incentive Fees						14,098						2,316						11,782
Total Realized Performance Income (Loss)						$	1,020,662					$	1,048,354					$	(27,692)

Fees and Other, Net

The increase for the year ended December 31, 2020 as compared to the year ended December 31, 2019 was primarily due to an increase in management fees and monitoring fees, partially offset by a decrease in transaction fees, net of associated fee credits.

The increase in management fees was primarily due to management fees earned from Asian Fund IV, Next Generation Technology Growth Fund II, and Asia Pacific Infrastructure Investors which entered their investment periods subsequent to December 31, 2019. These increases were partially offset by (i) a decrease in management fees earned from Asian Fund III as it entered its post-investment period in the third quarter of 2020, in which it pays fees based on capital invested rather than capital committed and pays fees at a lower rate, and (ii) a decrease in management fees earned from European Fund IV as it entered its post investment period in the second quarter of 2019, in which it pays fees based on capital invested rather than remaining commitments and capital invested during the investment period.

The increase in monitoring fees was primarily attributable to an increase in recurring monitoring fees compared to the prior period, as well as higher termination payments. Recurring monitoring fees increased $10.5 million, which was primarily the result of an increase in the number of portfolio companies paying monitoring fees. For the year ended December 31, 2020, we had 66 portfolio companies that were paying an average monitoring fee of $1.7 million compared with 59 portfolio companies that were paying an average monitoring fee of $1.7 million for the year ended December 31, 2019. For the year ended December 31, 2020, we received termination payments of $13.2 million in connection with the IPOs of Academy Sports & Outdoors, Inc. (NASDAQ: ASO) and Calisen PLC (LSE: CLSN LN) compared to $2.1 million of termination payments received in the year ended December 31, 2019 relating to the IPO of Trainline PLC. These termination payments may occur in the future; however, they are infrequent in nature and are generally correlated with the IPO and other realization activity in our private equity portfolio.

The decrease in transaction fees was primarily attributable to a decrease in the average size of transaction fee generating investments. During the year ended December 31, 2020, there were 76 transaction fee-generating investments that paid an average fee of $5.2 million compared to 59 transaction fee-generating investments that paid an average fee of $7.1 million during the year ended December 31, 2019. For the year ended December 31, 2020, approximately 36% of these transaction fees were paid by companies in North America, 34% were paid from companies in Europe, and 30% were paid by companies located in the Asia-Pacific region. Transaction fees vary by investment based upon a number of factors, the most significant of which are transaction size, the particular agreements 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.

Realized Performance Income (Loss)

The following table presents realized carried interest by investment vehicle for the years ended December 31, 2020 and 2019:

			Year Ended
			December 31, 2020						December 31, 2019
			($ in thousands)
North America Fund XI			$	203,606					$	341,602
2006 Fund			181,899						143,692
Global Infrastructure Investors II			148,882						—
European Fund IV			139,948						221,222
Co-Investment Vehicles and Other			93,650						70,179
Asian Fund II			60,647						126,039
Core Investment Vehicles			57,484						14,449
Global Infrastructure Investors			54,729						—
Asian Fund III			46,347						36,707
Next Generation Technology Growth Fund			13,964						—
Real Estate Partners Americas			4,977						7,439
Asian Fund			431						10,913
European Fund III			—						65,700
European Fund II			—						5,058
China Growth Fund			—						3,038
Total Realized Carried Interest (1)			$	1,006,564					$	1,046,038

(1)The above table excludes any funds for which there was no realized carried interest during both of the periods presented.

Realized carried interest for the year ended December 31, 2020 consisted primarily of realized gains from the sales Deutsche Glasfaser (telecom sector), Privilege Underwriters, Inc. (financial services sector), LGC Science Group Limited (health care sector), Epicor Software Corporation, The Hut Group Limited and the partial sales of our investment in Fiserv, Inc.

Realized carried interest for the year ended December 31, 2019 consisted primarily of realized gains from the sales of Sedgwick Claims Management Services, Inc. and Trainline PLC and dividends received from our investment in Fiserv, Inc.

Incentive fees increased for the year ended December 31, 2020 primarily due to fees earned from certain separately managed accounts relating to investments in our private equity, core, and infrastructure strategies.

Public Markets

The following table presents Fees and Other, Net and Realized Performance Income (Loss) in the Public Markets business line for the years ended December 31, 2020 and 2019:

						Year Ended
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
Fees and Other, Net
Management Fees						$	459,323					$	446,982					$	12,341
Transaction Fees						69,792						79,383						(9,591)
Fee Credits						(66,211)						(75,224)						9,013
Total Fees and Other, Net						$	462,904					$	451,141					$	11,763
Realized Performance Income (Loss)
Carried Interest						$	35,640					$	24,750					$	10,890
Incentive Fees						148,952						62,940						86,012
Total Realized Performance Income (Loss)						$	184,592					$	87,690					$	96,902

Fees and Other, Net

The increase for the year ended December 31, 2020 as compared to the year ended December 31, 2019 was primarily due to an increase in management fees, partially offset by a decrease in transaction fees, net of associated fee credits.

The increase in management fees was primarily attributable to management fees earned from new capital raised within the leveraged credit strategy, the issuance of new CLOs and greater overall FPAUM at our direct lending and private opportunistic credit strategies, partially offset by a lower level of management fees earned in certain alternative credit strategies, most notably special situations.

The decrease in transaction fees was primarily attributable to a decrease in both the number and average size of transaction fee-generating investments during the period. During the year ended December 31, 2020, there were 42 transaction fee-generating investments that paid an average fee of $1.7 million compared to 45 transaction fee-generating investments that paid an average fee of $1.8 million during the year ended December 31, 2019. Transaction fees vary by investment based upon a number of factors, the most significant of which are transaction size, the particular agreements as to the amount of the fees, the complexity of the transaction, and KKR's role in the transaction. The decrease in fee credits is due primarily to a lower level of transaction fees.

Realized Performance Income (Loss)

The increase for the year ended December 31, 2020 compared to the prior period was primarily attributable to (i) a higher level of incentive fees earned from our hedge fund partnership, Marshall Wace, and (ii) an increased level of realized carried interest earned in certain of our alternative credit funds, partially offset by a lower level of incentive fees earned from BDCs advised by FS/KKR Advisor.

Capital Markets

The following table presents Transaction Fees in the Capital Markets business line for the years ended December 31, 2020 and 2019:

						Year Ended
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
Transaction Fees						$	480,483					$	410,055					$	70,428

The increase in transaction fees was primarily due to an increase in the size of capital markets transactions for the year ended December 31, 2020, compared to the year ended December 31, 2019. Overall, we completed 193 capital markets transactions for the year ended December 31, 2020, of which 36 represented equity offerings and 157 represented debt offerings, as compared to 192 transactions for the year ended December 31, 2019, of which 28 represented equity offerings and 164 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 business 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 earn for similar transactions generally correlates with overall transaction sizes.

Our capital markets fees are generated in connection with our Private Markets and Public Markets business lines as well as from third-party companies. For the year ended December 31, 2020, approximately 18% of our transaction fees were earned from unaffiliated third parties as compared to approximately 23% for the year ended December 31, 2019. Our transaction fees are comprised of fees earned from North America, Europe and Asia-Pacific. For the year ended December 31, 2020, approximately 58% of our transaction fees were generated outside of North America as compared to approximately 61% for the year ended December 31, 2019. Our Capital Markets business line is dependent on the overall capital markets environment, which is influenced by equity prices, credit spreads and volatility. Our Capital Markets business line does not generate management or monitoring fees.

Principal Activities

The following table presents Realized Investment Income (Loss) in the Principal Activities business line for the years ended December 31, 2020 and 2019:

						Year Ended
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
Realized Investment Income (Loss)
Net Realized Gains (Losses)						$	284,521					$	189,858					$	94,663
Interest Income and Dividends						360,138						495,915						(135,777)
Total Realized Investment Income (Loss)						$	644,659					$	685,773					$	(41,114)

Realized Investment Income (Loss)

The decrease in realized investment income for the year ended December 31, 2020 compared to the prior period is primarily due to a decrease in interest income and dividends, partially offset by a higher level of net realized gains. The amount of realized investment income (loss) depends on the transaction activity of our funds and balance sheet, which can vary from period to period.

For the year ended December 31, 2020, interest income and dividends were comprised of (i) $225.4 million of dividend income from our investment in Fiserv, Inc. ($62.5 million) and Epicor Software Corporation ($27.3 million) as well as distributions received primarily through our real assets investments, including our real estate investment in KREF and (ii) $134.7 million of interest income from our investments in CLOs, investments held at our Capital Markets business line, and to a lesser extent our cash balances.

For the year ended December 31, 2019, interest income and dividends were comprised of (i) $195.3 million of dividend income from our investment in Fiserv, Inc., (ii) $141.4 million of dividend income from distributions received primarily through our real assets investments, including our real estate investment in KREF and our energy investments, as well as certain of our credit and private equity investments, and (iii) $159.2 million of interest income which consists primarily of interest that is received from our Public Markets investments, including CLOs and other credit investments, our cash balances, and, to a lesser extent, our Capital Markets business.

For the year ended December 31, 2020, net realized gains were comprised of realized gains primarily from the sale of our investments in The Hut Group Limited, Deutsche Glasfaser, and Ivalua SAS, and the partial sales in our investments in Fiserv, Inc. and BridgeBio Pharma, Inc. Partially offsetting these realized gains were realized losses, the most significant of which were realized losses on our investment in LCI Helicopters Limited, Yorktown Center (real estate) and various alternative credit strategy investments.

For the year ended December 31, 2019, net realized gains were comprised primarily of gains from the sale of our investments in Trainline PLC, GEG German Estate Group AG (financial services sector), and Sedgwick Claims Management Services, Inc., and the sale of certain investments in our special situations funds. Partially offsetting these realized gains were realized losses, the most significant of which was a realized loss on the sale of our investment in DoubleDutch, Inc.

Subsequent to December 31, 2020, we completed, or signed and expect to complete, sales, partial sales or secondary sales with respect to certain private equity portfolio companies and other investments that, if and when completed, are expected to result in realized performance income and realized investment income in excess of $375 million. Some of these transactions are not complete, and are subject to the satisfaction of closing conditions, including but not limited to regulatory approvals; there can be no assurance if or when any of these transactions will be completed.

On January 1, 2020, KKR Capstone was acquired by KKR and became a wholly-owned subsidiary of KKR. For GAAP purposes, KKR Capstone was consolidated prior to January 1, 2020 and as such the fees and expenses attributable to KKR Capstone were included in KKR's consolidated revenues and expenses. Additionally, prior to January 1, 2020, KKR excluded the results of KKR Capstone from KKR's non-GAAP financial measures since KKR presents these financial measures prior to giving effect to the consolidation of certain entities that are not legal subsidiaries of KKR.

Following the KKR Capstone acquisition, KKR's after-tax distributable earnings includes the net income (loss) from KKR Capstone within realized investment income (loss). For the year ended December 31, 2020, total fees attributable to KKR Capstone were $81.5 million and total expenses attributable to KKR Capstone were $65.7 million. For KKR Capstone-related adjustments in reconciling distributable revenues and distributable expenses to GAAP revenues and expenses, respectively, see "—Reconciliations to GAAP Measures."

Distributable Expenses

Compensation and Benefits

The increase for the year ended December 31, 2020 compared to the prior period is primarily due to higher compensation expense recorded in connection with the higher level of distributable revenues. Equity-based compensation charges were higher compared to the prior period primarily resulting from certain equity awards that were granted in the fourth quarter of 2020, which vested immediately.

Occupancy and Other Operating Expenses

The decrease for the year ended December 31, 2020 compared to the prior period is primarily due to a lower level of expenses that are not creditable to our investment funds, in particular a decrease in travel related expenses as a result of the COVID-19 pandemic. These decreases were partially offset by a higher level of professional fees and other administrative costs in connection with the growth of the firm.

Other Components of After-tax Distributable Earnings

Interest Expense

For the year ended December 31, 2020 and 2019, interest expense relates primarily to the senior notes outstanding for KKR and KFN.

The increase for the year ended December 31, 2020 compared to the prior period is due primarily to the following new issuances during the year ended December 31, 2020: (i) $500 million aggregate principal amount of 3.625% Senior Notes due 2050, (ii) $250 million aggregate principal amount of $3.750% Senior Notes due 2029 and (iii) $750 million aggregate principal amount of 3.500% Senior Notes due 2050. This increase was partially offset by the redemption of our $500 million aggregate principal amount of 6.375% Senior Notes due 2020 in the third quarter of 2019.

Income Taxes Paid

The increase in income taxes paid is primarily due to a higher level of total distributable operating earnings.

After-tax Distributable Earnings

The increase in after-tax distributable earnings for the year ended December 31, 2020 compared to the prior period was due primarily to a higher level of distributable revenues, partially offset by an increase in distributable expenses, interest expense and income taxes paid.

Other Operating and Performance Measures

The following table presents certain key operating and performance metrics as of December 31, 2020 and December 31, 2019:

						As of
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
Assets Under Management						$	251,679,200					$	218,355,100					$	33,324,100
Fee Paying Assets Under Management						$	186,217,000					$	161,209,800					$	25,007,200
Uncalled Commitments						$	66,960,000					$	56,920,600					$	10,039,400

The following table presents one of our key performance metrics for the years ended December 31, 2020 and 2019:

						Year Ended
						December 31, 2020						December 31, 2019						Change
						($ in thousands)
Capital Invested and Syndicated Capital						$	34,541,900					$	28,055,900					$	6,486,000

Assets Under Management

Private Markets

The following table reflects the changes in our Private Markets AUM from December 31, 2019 to December 31, 2020:

			($ in thousands)
December 31, 2019			$	119,274,700
New Capital Raised			28,040,000
Distributions and Other			(12,677,300)
Change in Value			14,051,900
December 31, 2020			$	148,689,300

AUM for the Private Markets business line was $148.7 billion at December 31, 2020, an increase of $29.4 billion, compared to $119.3 billion at December 31, 2019.

The increase was primarily attributable to new capital raised primarily in Asian Fund IV, Asia Pacific Infrastructure Investors, Property Partners America, Real Estate Partners Americas III, Health Care Strategic Growth Fund II, core investment accounts, and Asia Real Estate Partners, and to a lesser extent, an increase in the value of our Private Markets portfolio. These increases were partially offset by distributions to Private Markets fund investors primarily as a result of realizations, most notably in North America Fund XI, Global Infrastructure Investors II, 2006 Fund, European Fund IV, Asian Fund II, and Global Infrastructure Investors.

The increase in the value of our Private Markets portfolio was driven primarily by net gains of $4.4 billion in Americas Fund XII, $1.9 billion in Asian Fund III, $1.4 billion in our core investment accounts, $1.3 billion in North America Fund XI, and $1.2 billion in Global Infrastructure Investors II. These net gains were partially offset by net losses of $0.4 billion in Asia Fund II.

For the year ended December 31, 2020, the value of our private equity investment portfolio increased 17.1%. This was comprised of a 20.7% increase in value of our privately held investments and a 6.4% increase in share prices of various publicly held or publicly indexed investments. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

The most significant increases in value of our privately held investments related to increases in AppLovin Corporation (technology sector), Kokusai Electric Corporation (manufacturing sector), and Internet Brands, Inc. (technology sector). These increases in value on our privately held investments were partially offset by decreases in value relating primarily to Envision Healthcare Corporation (health care sector), Magneti Marelli (industrial sector), and Emerald Media (media sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to an increase in the value of market comparables and individual company performance, and with respect to Kokusai Electric Corporation, an increase in valuation reflecting an agreement to exit the investment. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) an unfavorable business outlook and (ii) a decrease in the value of market comparables, both influenced by the impact of COVID-19 on the economic outlook and overall market environment.

The most significant increases in share prices of various publicly held or publicly indexed investments were increases in Academy Sports & Outdoor Inc., Hensoldt AG (FRA: HAG), and Max Healthcare Institute Limited (NSE: MAXHEALTH). These increases were partially offset by decreases in share prices of various publicly held investments, the most significant of which were Fiserv, Inc., Laureate Education, Inc. (NASDAQ: LAUR) and BrightView Holdings Inc.

For the year ended December 31, 2019, the value of our private equity investment portfolio increased 27.0%. This was comprised of a 60.7% increase in share prices of various publicly held or publicly indexed investments and a 16.7% increase in value of our privately held investments.

The most significant increases in share prices of various publicly held or publicly indexed investments were increases in Fiserv, Inc., Gardner Denver Holdings, Inc.(renamed Ingersoll Rand Inc. (NYSE: IR) in connection with the merger transaction with Ingersoll Rand Inc.), and BrightView Holdings Inc. (NYSE: BV). These increases were partially offset by decreases in share prices of various publicly held investments, the most significant of which were decreases in Coffee Day Resorts Private Limited (NSE: CCD), RigNet, Inc. (NASDAQ: RNET), and Tarena International, Inc. (NASDAQ: TEDU).

The most significant increases in value of our privately held investments related to increases in KCF Technologies Co. Ltd. (industrial sector), Kokusai Electric Corporation, AppLovin Corporation, and Internet Brands, Inc. These increases in value on our privately held investments were partially offset by decreases in value relating primarily to oil and gas assets held in our energy income and growth portfolio, Envision Healthcare Corporation, and Academy Sports & Outdoor Inc. The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance, (ii) an increase in the value of market comparables, and (iii) with respect to KCF Technologies Co. Ltd. and Kokusai Electric Corporation, increases in valuation reflecting agreements to exit these investments. 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.

Public Markets

The following table reflects the changes in our Public Markets AUM from December 31, 2019 to December 31, 2020:

			($ in thousands)
December 31, 2019			$	99,080,400
New Capital Raised			15,750,300
Distributions and Other			(3,561,000)
Redemptions			(11,047,500)
Change in Value			2,767,700
December 31, 2020			$	102,989,900

AUM in our Public Markets business line totaled $103.0 billion at December 31, 2020, an increase of $3.9 billion compared to AUM of $99.1 billion at December 31, 2019.

The increase was primarily attributable to new capital raised related to multiple strategies, most notably $4.5 billion in alternative credit strategies most notably $2.2 billion in our KKR Dislocation Opportunities Fund, $3.9 billion in our hedge fund partnerships, $3.6 billion in leveraged credit strategies, and $2.2 billion in CLOs. Partially offsetting this increase was redemptions and distributions from our hedge fund partnerships and our alternative and leveraged credit strategies. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

Fee Paying Assets Under Management

Private Markets

The following table reflects the changes in our Private Markets FPAUM from December 31, 2019 to December 31, 2020:

			($ in thousands)
December 31, 2019			$	76,918,100
New Capital Raised			24,357,800
Distributions and Other			(6,296,500)
Net Changes in Fee Base of Certain Funds			(2,463,700)
Change in Value			1,680,200
December 31, 2020			$	94,195,900

FPAUM in our Private Markets business line was $94.2 billion at December 31, 2020, an increase of $17.3 billion, compared to $76.9 billion at December 31, 2019.

The increase was primarily attributable to new capital raised of $12.7 billion in Asian Fund IV, $2.4 billion in Asia Pacific Infrastructure Investors, $2.0 billion in our core investment accounts, $1.2 billion in Real Estate Partners Americas III, and $1.1 billion in Asia Real Estate Partners, and to a lesser extent, increases in the value of certain infrastructure funds, which are in their post-investment periods when their fee is based on net asset value. These increases were partially offset by (i) distributions primarily relating to realizations of $1.9 billion in Global Infrastructure Investors II, $1.0 billion in North America Fund XI, $0.9 billion in 2006 Fund, $0.7 billion in Global Infrastructure Investors, and $0.5 billion in Asian Fund II and (ii) net changes in the fee base of both Asian Fund III and Real Estate Partners Americas II as a result of both entering into their post-investment period, during which we earn fees on invested capital rather than committed capital or remaining commitments and invested capital.

Public Markets

The following table reflects the changes in our Public Markets FPAUM from December 31, 2019 to December 31, 2020:

			($ in thousands)
December 31, 2019			$	84,291,700
New Capital Raised			16,025,700
Distributions and Other			(4,323,800)
Redemptions			(7,443,200)
Change in Value			3,470,700
December 31, 2020			$	92,021,100

FPAUM in our Public Markets business line was $92.0 billion at December 31, 2020, an increase of $7.7 billion compared to $84.3 billion at December 31, 2019.

The increase was primarily due to new capital raised related to multiple strategies, most notably $4.5 billion in alternative credit strategies most notably $1.0 billion in our KKR Dislocation Opportunities Fund, $3.9 billion in both our hedge fund partnerships and certain leveraged credit strategies, and $2.2 billion in CLOs. Partially offsetting this increase was redemptions primarily in our hedge fund partnerships and distributions to fund investors in our alternative credit and leveraged credit investment funds. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

Uncalled Commitments

Private Markets

As of December 31, 2020, our Private Markets business line had $56.6 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $46.8 billion as of December 31, 2019. The increase was primarily attributable to new capital raised, which was partially offset by capital called from fund investors to make

investments during the period. See "—Analysis of Non-GAAP Operating Results—Other Operating and Performance Measures—Assets Under Management—Private Markets" for a detailed discussion on new capital raised for the year ended December 31, 2020.

Public Markets

As of December 31, 2020, our Public Markets business line had $10.3 billion of remaining uncalled capital commitments that could be called for investments in new transactions as compared to $10.1 billion as of December 31, 2019. The increase was primarily attributable to new capital raised in various alternative credit strategies, which was partially offset by capital called from fund investors to make investments during the period.

Capital Invested and Syndicated Capital

Private Markets Capital Invested

For the year ended December 31, 2020, Private Markets had $19.2 billion of capital invested as compared to $14.1 billion for the year ended December 31, 2019. The increase was driven primarily by a $4.3 billion increase in capital invested in our private equity strategies (including core, growth equity, and impact investments) and a $0.8 billion increase in capital invested in our real assets strategies. 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 quarterly or year-to-date period is volatile and, consequently, a significant amount of capital invested in one period or a few periods may not be indicative of a similar level of capital deployment in future periods. During the year ended December 31, 2020, 38% of capital deployed in private equity, which includes core, growth equity and impact investments, was in transactions in Europe, 35% was in North America, and 27% was in the Asia-Pacific region.

Public Markets Capital Invested

For the year ended December 31, 2020, Public Markets had $10.3 billion of capital invested as compared to $10.1 billion for the year ended December 31, 2019. The increase was primarily due to capital deployed in our dislocation opportunities strategy, partially offset by a lower level of capital deployed in our direct lending credit strategy. During the year ended December 31, 2020, 67% of capital deployed was in transactions in North America, 31% was in Europe, and 2% was in the Asia-Pacific region.

Capital Markets Syndicated Capital

For the year ended December 31, 2020, Capital Markets syndicated $5.0 billion of capital as compared to $3.9 billion for the year ended December 31, 2019. The increase was primarily due to an increase in the number of syndication transactions in the year ended December 31, 2020 as compared to the year ended December 31, 2019. Overall, we completed 24 syndication transactions for the year ended December 31, 2020 as compared to 21 syndications for the year ended December 31, 2019. The size and frequency of syndication transactions depend in large part on market conditions and other factors that are unpredictable and outside our control, which may negatively impact the fees generated by our capital markets business from syndication transactions.

Non-GAAP Balance Sheet Measures

The following tables present information with respect to our book assets, book liabilities, and book value as of December 31, 2020 and December 31, 2019:

BOOK ASSETS
						As of
						December 31, 2020						December 31, 2019
						($ in thousands)
Book Assets
Cash and Short-term Investments						$	5,961,083					$	2,783,905
Investments						14,991,914						13,026,387
Net Unrealized Carried Interest (1)						2,625,935						1,982,251
Tax Assets						43,446						111,719
Other Assets (2)						4,198,641						3,716,189
Total Book Assets						$	27,821,019					$	21,620,451
BOOK LIABILITIES
						As of
						December 31, 2020						December 31, 2019
						($ in thousands)
Book Liabilities
Debt Obligations - KKR (ex-KFN)						$	4,688,460					$	3,097,460
Debt Obligations - KFN						948,517						948,517
Tax Liabilities						529,412						169,997
Other Liabilities						857,764						514,236
Total Book Liabilities						$	7,024,153					$	4,730,210
BOOK VALUE
						As of
						December 31, 2020						December 31, 2019
						($ in thousands)
Book Value
(+) Total Book Assets						$	27,821,019					$	21,620,451
(-) Total Book Liabilities						7,024,153						4,730,210
(-) Noncontrolling Interests						29,510						26,291
(-) Series A and B Preferred Stock						500,000						500,000
Book Value						$	20,267,356					$	16,363,950
Book Value Per Adjusted Share						$	23.09					$	19.24
Adjusted Shares (3)						877,613,164						850,388,924

(1)The following table provides net unrealized carried interest by business line:

						As of
						December 31, 2020						December 31, 2019
						($ in thousands)
Private Markets Business Line						$	2,560,101					$	1,832,581
Public Markets Business Line						65,834						149,670
Total						$	2,625,935					$	1,982,251

(2)Other Assets include KKR's ownership interest in FS/KKR Advisor and minority ownership interests in hedge fund partnerships.

(3)Includes shares of KKR & Co. Inc. common stock assuming conversion of all shares of Series C Mandatory Convertible Preferred Stock as of December 31, 2020.

Book Value Per Adjusted Share

Book value per adjusted share increased 20% from December 31, 2019. The increase was primarily attributable to (i) the net appreciation in the value of our investment portfolio, including investments held by KKR as well as investments held

through investment funds, such as KKR's private equity, real assets and alternative credit funds, where KKR is entitled to earn carried interest and (ii) after-tax distributable earnings during the period. Partially offsetting this increase is the payment of dividends during the period. For the year ended December 31, 2020, the value of KKR's balance sheet portfolio, on a non-GAAP basis, increased 18% and KKR's overall private equity portfolio increased 17%. The increases in KKR's balance sheet portfolio and net unrealized carried interest was primarily due to mark-to-market net gains in our portfolio companies. For a further discussion, see "—Consolidated Results of Operations—Unrealized Gains and Losses from Investment Activities" and "—Analysis of Non-GAAP Operating Results—Distributable Revenues—Principal Activities." For a discussion of the changes in KKR's private equity portfolio, see "—Analysis of Non-GAAP Operating Results—Other Operating and Performance Measures—AUM." For a discussion of factors that impacted KKR's after-tax distributable earnings, see "—Analysis of Non-GAAP Operating Results" and for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations, see "—Business Environment."

The following table presents the holdings of our investments by asset class as of December 31, 2020. To the extent investments in our book assets 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. For example, we have recognized certain net unrealized losses in our credit investment portfolio held at our India debt finance company, of which we own 50.3% of its equity. As of December 31, 2020, KKR’s 50.3% interest in our India debt finance company had a cost basis of approximately $184 million, comprised of invested capital of $100 million plus reinvested earnings. If the value of our investment is ultimately realized at the current carrying value of $70 million, future realized investment losses of approximately $114 million would be recognized based on valuations as of December 31, 2020, which would reduce after-tax distributable earnings in future periods.

						As of December 31, 2020
						($ in thousands)
Investments (1)						Cost						Fair Value						Fair Value as a Percentage of Total Investments
Private Equity Funds / SMAs						$	3,949,771					$	6,445,077					43.0		%
Private Equity Co-Investments and Other Equity						1,476,638						3,719,477						24.8		%
Private Equity Total						5,426,409						10,164,554						67.8		%
Energy						781,622						724,848						4.8		%
Real Estate						1,247,835						1,324,660						8.8		%
Infrastructure						362,278						428,878						2.9		%
Real Assets Total						2,391,735						2,478,386						16.5		%
Alternative Credit						780,097						689,068						4.6		%
CLOs						866,140						798,279						5.3		%
Other Credit						151,200						161,187						1.1		%
Credit Total						1,797,437						1,648,534						11.0		%
Other						1,012,207						700,440						4.7		%
Total Investments						$	10,627,788					$	14,991,914					100.0		%
						December 31, 2020
						($ in thousands)
Significant Investments: (2)						Cost						Fair Value						Fair Value as a Percentage of Total Investments
Fiserv, Inc. (NASDAQ: FISV)						$	614,098					$	1,332,169					8.9		%
BridgeBio Pharma, Inc. (NASDAQ: BBIO)						70,919						974,317						6.5		%
USI, Inc.						531,425						884,634						5.9		%
PetVet Care Centers, LLC						243,188						559,333						3.7		%
Heartland Dental LLC						320,626						545,064						3.6		%
Total Significant Investments						1,780,256						4,295,517						28.6		%
Other Investments						8,847,532						10,696,397						71.4		%
Total Investments						$	10,627,788					$	14,991,914					100.0		%

(1)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.

(2)Significant Investments include the top five investments based on their fair values as of December 31, 2020. Significant Investments exclude (i) investments expected to be syndicated, (ii) investments expected to be transferred in connection with a new fundraising, and (iii) investments in funds and other entities that are owned by one or more third parties and established for the purpose of making investments. Accordingly, this list of Significant Investments should not be relied upon as a substitute for the "Holdings by Asset Class" pie chart above for information about the asset class exposure of KKR's balance sheet. 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.

Reconciliations to GAAP Measures

The following tables reconcile the most directly comparable financial measures calculated and presented in accordance with GAAP to KKR's non-GAAP financial measures for the year ended December 31, 2020 and 2019:

Revenues

									Year Ended
															December 31, 2020						December 31, 2019
															($ in thousands)
Total GAAP Revenues															$	4,230,891					$	4,220,900
(+) Management Fees - Consolidated Funds and Other															603,508						464,190
(-) Fee Credits - Consolidated Funds															74,229						42,041
(-) Capital Allocation-Based Income (Loss) (GAAP)															2,224,100						2,430,425
(+) Realized Carried Interest															1,042,204						1,070,788
(+) Realized Investment Income (Loss)															644,659						685,773
(-) Revenue Earned by Other Consolidated Entities															21,054						116,435
(-) Capstone Fees															81,452						—
(-) Expense Reimbursements															149,522						169,416
Total Distributable Revenues															$	3,970,905					$	3,683,334

Expenses

									Year Ended
															December 31, 2020						December 31, 2019
															($ in thousands)
Total GAAP Expenses															$	2,933,132					$	2,908,431
(-) Equity-based and Other Compensation - KKR Holdings L.P.															80,739						91,921
(-) Unrealized Performance Income Compensation															467,485						520,033
(-) Amortization of Intangibles															1,570						1,674
(-) Strategic Corporate Transaction-Related Charges (1)															20,073						—
(-) Reimbursable Expenses															177,834						196,694
(-) Expenses relating to Other Consolidated Entities															144,072						187,056
(-) Capstone Expenses															65,666						—
(+) Other															(45,377)						(62,455)
Total Distributable Expenses															$	1,930,316					$	1,848,598

(1)Represents transaction costs related to the acquisition of Global Atlantic.

Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders

									Year Ended
															December 31, 2020						December 31, 2019
															($ in thousands)
Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders															$	1,945,954					$	1,971,685
(+) Net Income (Loss) Attributable to Noncontrolling Interests held by KKR Holdings L.P.															1,207,934						1,369,671
(+) Equity-based and Other Compensation - KKR Holdings L.P.															80,739						91,296
(+) Amortization of Intangibles and Other, net															114,094						226,422
(+) Strategic Corporate Transaction-Related Charges (1)															20,073						—
(+) Non-recurring Items (2)															88,322						22,839
(-) Net Unrealized Carried Interest															1,070,803						1,263,046
(-) Net Unrealized Gains (Losses)															1,697,740						1,854,867
(+) Series C Mandatory Convertible Preferred Stock															23,191						—
(+) Unrealized Performance Income Compensation															467,485						520,033
(+) Income Tax Expense (Benefit)															609,097						528,750
(-) Income Taxes Paid															265,950						207,479
After-tax Distributable Earnings															$	1,522,396					$	1,405,304

(1)Represents transaction costs related to the acquisition of Global Atlantic.

(2)Represents an $88.3 million non-recurring impairment charge taken on one of our equity method investments during the year ended December 31, 2020 and a $22.8 million non-recurring make-whole premium associated with KKR’s refinancing of its 6.375% Senior Notes due 2020 during the year ended December 31, 2019.

The following tables provide reconciliations of certain of KKR's GAAP Consolidated Statements of Financial Condition measures to our non-GAAP balance sheet measures as of December 31, 2020 and December 31, 2019:

Assets

						As of
						December 31, 2020						December 31, 2019
						($ in thousands)
Total GAAP Assets						$	79,806,502					$	60,899,319
(-) Impact of Consolidation of Funds and Other Entities						49,236,961						37,453,629
(-) Carry Pool Reclassification						1,916,669						1,448,879
(-) Other Reclassifications						831,853						376,360
Total Book Assets						$	27,821,019					$	21,620,451

Liabilities

						As of
						December 31, 2020						December 31, 2019
						($ in thousands)
Total GAAP Liabilities						$	39,006,586					$	30,396,945
(-) Impact of Consolidation of Funds and Other Entities						29,233,911						23,841,496
(-) Carry Pool Reclassification						1,916,669						1,448,879
(-) Other Reclassifications						831,853						376,360
Total Book Liabilities						$	7,024,153					$	4,730,210

KKR & Co. Inc. Stockholders' Equity - Common Stock

			As of
			December 31, 2020						December 31, 2019
			($ in thousands)
KKR & Co. Inc. Stockholders' Equity - Series I and II Preferred Stock, Common Stock			$	12,118,472					$	10,324,936
(+) Impact of Consolidation of Funds and Other Entities			538,156						327,826
(-) Other Reclassifications			17,446						17,446
(+) Noncontrolling Interests Held by KKR Holdings L.P.			6,512,382						5,728,634
(+) Series C Mandatory Convertible Preferred Stock			1,115,792						—
Book Value			$	20,267,356					$	16,363,950

The following table provides reconciliations of KKR's GAAP Shares of Common Stock Outstanding to Adjusted Shares:

			As of
			December 31, 2020						December 31, 2019
GAAP Shares of Common Stock Outstanding			572,893,738						560,007,579
Adjustments:
KKR Holdings Units (1)			275,626,493						290,381,345
Common Stock - Series C Mandatory Convertible Preferred Stock (2)			29,092,933						—
Adjusted Shares (3)			877,613,164						850,388,924
Unvested Shares of Common Stock and Other Exchangeable Securities (4)			23,892,201						22,712,604

(1)Common stock that may be issued by KKR & Co. Inc. upon exchange of units in KKR Holdings for shares of common stock.

(2)Assumes that all shares of Series C Mandatory Convertible Preferred Stock have been converted to shares of KKR & Co. Inc. common stock on December 31, 2020.

(3)Amounts exclude unvested equity awards granted under our Equity Incentive Plans.

(4)Represents equity awards and other exchangeable securities granted under our Equity Incentive Plans. The issuance of common stock of KKR & Co. Inc. pursuant to awards and other exchangeable securities under our Equity Incentive Plans dilutes KKR common stockholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business. Excludes 21.9 million of market condition awards that did not met their market-price based vesting conditions as of December 31, 2020. This includes the award of 2,500,000 restricted stock units granted to each of our Co-Presidents/Co-Chief Operating Officers during 2017. Subsequent to December 31, 2020, the market price of KKR common stock maintained a closing market price of $40 per share for 10 consecutive trading days on January 21, 2021, satisfying the market-price based vesting condition for the 2.5 million of restricted stock units granted to each of our Co-Presidents/Co-Chief Operating Officers. See Financial Statements and Supplementary Data—Note 12 "Equity Based Compensation."

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 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 stockholders and holders of our Series A Preferred Stock, Series B Preferred Stock and Series C Mandatory Convertible Preferred Stock; and (vii) paying borrowings, interest payments, and repayments under credit agreements, our senior notes, and other borrowing arrangements. See "—Liquidity—Liquidity Needs—Dividends."

See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

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; 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 is accruing carried interest; and (iii) with respect to investments 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 December 31, 2020, 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, and is otherwise accruing carried interest, 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 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."

As of December 31, 2020, netting holes in excess of $50 million existed at two of our private equity funds, which were Americas Fund XII of $524 million and Asian Fund II of $346 million. 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 Obligation, KFN Securities and Real Estate Financing

For a discussion of KKR's debt obligations, including our revolving credit agreements, senior notes, KFN debt obligations, KFN securities and corporate real estate financing, see Financial Statements and Supplementary Data—Note 10 "Debt Obligations."

Liquidity Needs

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

• continue to support and 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, pay the costs related to fundraising and launching of new strategies, 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;

• pay corporate income taxes and other taxes;

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

• pay cash dividends in accordance with our dividend policy for our common stock or the terms of our preferred stock;

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

• support and acquire other assets for our Principal Activities 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 common stock or retire equity awards pursuant to the share repurchase program or other securities issued by KKR.

For a discussion of KKR's share repurchase program, see Financial Statements and Supplementary Data—Note 15 "Equity—Share Repurchase Program."

Our liquidity needs also included the funding of the acquisition of Global Atlantic, which was completed on February 1, 2021, for which we used $2.9 billion of cash on our balance sheet. In addition, with respect to Global Atlantic's business, their overall liquidity framework and cash management approach is based on: (1) building an investment portfolio that is cash flow matched, providing cash inflows from their assets to meet their expected cash outflows in their base case to pay their liabilities, and (2) maintaining access to sufficient liquidity through other sources to meet their needs under scenarios that differ from their base case. Global Atlantic’s primary sources of liquidity, outside of the inflows from their investment portfolio, generally include: cash inflows in respect of new premiums, policyholder deposits, reinsurance transactions, funding agreements, including through memberships in Federal Home Loan Banks, advances under their revolving credit facility, committed repurchase agreements, uncommitted financing, such as repurchase agreements, which are accessible in normal market environments, and the sale of assets within their investment portfolio. Global Atlantic’s uses of liquidity generally include payments to policyholders, payments related to investment, reinvestment, reinsurance or funding agreement activity, interest expense, collateral posted or returned in respect of their derivative contracts, and operating expenses.

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 generally range from 2% to 8% of a fund's total capital commitments at final closing, but may be greater for certain funds (i) where we are pursuing newer strategies, (ii) where third party investor demand is limited, and (iii) where a larger commitment is consistent with the asset allocation strategy our balance sheet is pursuing.

The following table presents our uncalled commitments to our active investment funds as of December 31, 2020:

			Uncalled Commitments
Private Markets			($ in thousands)
Asian Fund IV			$	1,000,000
Core Investment Vehicles			920,000
Property Partners Americas			355,800
Americas Fund XII			319,100
Asian Fund III			226,800
Asia Real Estate Partners			250,000
Asia Pacific Infrastructure Investors			250,000
Real Estate Partners Europe II			200,000
Global Infrastructure Investors III			185,900
Next Generation Technology Growth II			117,400
Energy Income and Growth Fund II			103,600
European Fund V			96,400
Health Care Strategic Growth Fund			95,500
Global Impact Fund			55,900
Real Estate Partners Americas II			47,700
Real Estate Credit Opportunity Partners II			31,900
Other Private Markets Vehicles			1,261,700
Total Private Markets Commitments			5,517,700
Public Markets
Dislocation Opportunities Fund			310,000
Lending Partners Europe II			41,200
Special Situations Fund II			26,800
Private Credit Opportunities Partners II			16,900
Lending Partners III			13,100
Lending Partners Europe			11,300
Other Public Markets Vehicles			336,900
Total Public Markets Commitments			756,200
Total Uncalled Commitments			$	6,273,900

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 business line and (ii) underwriting transactions, debt financing, and syndications in our Capital Markets business line. As of December 31, 2020, these commitments amounted to $232.0 million and $578.8 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. Our capital markets business has arrangements with third parties, which reduce our risk when underwriting certain debt transactions, and thus our unfunded commitments as of December 31, 2020 have been reduced to reflect the amount to be funded by such third parties. In the case of purchases of

investments or assets in our Principal Activities 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.

On January 14, 2020, KKR committed to invest up to an additional $150 million in our India debt finance company to support its alternative credit business in India. As of December 31, 2020, none of the $150 million commitment has been invested.

Tax Receivable Agreement

We may be required to acquire KKR Group Partnership Units from time to time pursuant to our exchange agreement with KKR Holdings, which may result in an increase in our tax basis of the assets of KKR Group Partnership at the time of an exchange of KKR Group Partnership Units. We have entered into a tax receivable agreement with KKR Holdings, which requires us to pay to KKR Holdings, or to current and former limited partners who have exchanged KKR Holdings units for KKR's common stock 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 we realize as a result of the increase in tax basis described above, as well as 85% of the amount of any such savings we realize as a result of increases in tax basis that arise due to future payments under the agreement. As of December 31, 2020, an undiscounted payable of $204.0 million has been recorded in due to affiliates in the financial statements representing management's best estimate of the amounts currently expected to be owed under the tax receivable agreement. As of December 31, 2020, approximately $43.0 million of cumulative cash payments have been made under the tax receivable agreement.

Dividends

A dividend of $0.135 per share of our common stock has been declared for the quarter ended December 31, 2020, which will be paid on March 9, 2021 to holders of record of our common stock as of the close of business on February 22, 2021.

A dividend of $0.421875 per share of Series A Preferred Stock has been declared and set aside for payment on March 15, 2021 to holders of record of Series A Preferred Stock as of the close of business on March 1, 2021. A dividend of $0.406250 per share of Series B Preferred Stock has been declared and set aside for payment on March 15, 2021 to holders of record of Series B Preferred Stock as of the close of business on March 1, 2021. A dividend of $0.75 per share of Series C Mandatory Convertible Preferred Stock has been declared and set aside for payment on March 15, 2021 to holders of record of Series C Mandatory Convertible Preferred Stock as of the close of business on March 1, 2021.

When KKR & Co. Inc. receives distributions from KKR Group Partnership, KKR Holdings and KKR Holdings II receive their pro rata share of such distributions from KKR Group Partnership.

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. Our current dividend policy is to pay dividends to holders of our common stock in an annual aggregate amount of $0.58 per share (or a quarterly dividend of $0.145 per share) beginning with any dividend to be announced with respect to the results for the first quarter of 2021, subject to the discretion of our board of directors based on a number of factors, including KKR’s future financial performance and other considerations that the board deems relevant, and compliance with the terms of KKR & Co. 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 extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. There can be no assurance that future dividends will be made as intended or at all or that any particular dividend policy for our common stock will be maintained. Furthermore, the declaration and payment of distributions by KKR Group Partnership 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 units of KKR Group Partnership.

Preferred Stock

For a discussion of KKR's equity, including our preferred stock, see Financial Statements and Supplementary Data—Note 15 "Equity."

Other Liquidity Needs

From time to time, we fund various underwriting, syndication and fronting commitments in our capital markets business in connection with the arranging or underwriting of loans, securities or other financial instruments, for which we may draw all or substantially all of our availability for borrowings under both the KCM Short-Term Credit Agreement and KCM Credit

Agreement. We generally expect these borrowings to be repaid promptly as these commitments are 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.

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 December 31, 2020 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)						$	6,273.9					$	—					$	—					$	—					$	6,273.9
Debt payment obligations (2)						—						242.3						48.5						5,345.4						5,636.2
Interest obligations on debt payment obligations (3)						262.8						422.8						421.0						2,991.2						4,097.8
Underwriting commitments (4)						413.1						—						—						—						413.1
Lending commitments (5)						165.7						—						—						—						165.7
Purchase commitments (6)						82.0						—						—						—						82.0
Lease obligations						29.2						48.4						32.0						95.1						204.7
Total Contractual Obligations of KKR						7,226.7						713.5						501.5						8,431.7						16,873.4
(+) Uncalled commitments of consolidated funds (7)						12,522.9						—						—						—						12,522.9
(+) Debt payment obligations of consolidated funds, CFEs and Other (8)						4,814.2						2,407.7						122.2						20,030.9						27,375.0
(+) Corporate real estate borrowings (9)						490.0						—						—						—						490.0
(+) Interest obligations of consolidated funds, CFEs and Other (10)						636.9						933.9						840.6						1,886.1						4,297.5
(+) Purchase commitments of consolidated funds (11)						471.9						—						—						—						471.9
Total Consolidated Contractual Obligations						$	26,162.6					$	4,055.1					$	1,464.3					$	30,348.7					$	62,030.7

(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) $797.1 million aggregate principal amount of 1.625% Senior Notes due 2029 issued by KKR Group Finance Co. V LLC (denominated in euro), $750 million aggregate principal amount of 3.750% Senior Notes due 2029 issued by KKR Group Finance Co. VI LLC, $500 million aggregate principal amount of 3.625% Senior Notes due 2050 issued by KKR Group Finance Co. VII LLC, $750 million aggregate principal amount of 3.500% Senior Notes due 2050 issued by KKR Group Finance Co. VIII 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) $390.6 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 5.500% Senior Notes due 2032 issued by KFN, gross of unamortized discount; (iv) $120 million aggregate principal amount of 5.200% Senior Notes due 2033 issued by KFN; (v) $70.0 million aggregate principal amount of 5.400% Senior Notes due 2033 issued by KFN; and (vi) $258.5 million aggregate principal amount of junior subordinated notes issued by KFN, 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 term of the related debt obligation, which has been calculated assuming the debt outstanding at December 31, 2020 is not repaid until its maturity. Future interest rates are assumed to be those in effect as of December 31, 2020, 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.

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

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

(8)Amounts include (i) financing arrangements entered into by our consolidated funds with the objective of providing liquidity to the funds of $8.5 billion, (ii) debt securities issued by our consolidated CLOs of $17.3 billion and (iii) borrowings collateralized by specific investments and other assets held directly by majority-owned investment vehicles of $1.6 billion. Debt securities issued by consolidated CLO entities are supported solely by the investments held at the CLO 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.

(9)Represents a debt obligation in connection with the ownership of KKR office space.

(10)The interest obligations on debt of our CFEs and other borrowings represent estimated interest to be paid over the term of the related debt obligation, which has been calculated assuming the debt outstanding at December 31, 2020 is not repaid until its maturity. Future interest rates are assumed to be those in effect as of December 31, 2020, 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 KKR's commitment to invest up to an additional $150 million in our India finance company to support its alternative credit business in India. Additionally, 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. See "—Liquidity Needs—Tax Receivable Agreement" in this report and "Risk Factors—We will be required to pay our principals for most of the benefits relating to our use of tax attributes we receive from prior and future exchanges of our common stock for KKR Group Partnership Units and related transactions, and the timing and value of these tax attributes differ from those of our restricted stock units."

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 the financing of KKR's corporate real estate and certain investment vehicles. KKR has also (i) provided credit support regarding repayment and funding 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 a structured investment vehicle and (ii) provided credit support to one of our hedge fund partnerships. We have also indemnified employees and non-employees against potential liabilities, in connection with their service as described under "Certain Relationships and Related Transactions, and Director Independence—Indemnification of Directors, Officers and Others." 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 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. See Financial Statements and Supplementary Data—Note 16 "Commitments and Contingencies—Contingent Repayment Guarantees" for further information on KKR's potential clawback obligations.

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 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 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 discusses certain aspects of our critical accounting policies. For a full discussion of these and all critical accounting policies, see Financial Statements and Supplementary Data—Note 2 "Summary of Significant Accounting Policies."

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.

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at 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.

We classified 6.1% of total investments measured and reported at fair value as Level I at December 31, 2020.

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 37.6% of total investments measured and reported at fair value as Level II at December 31, 2020.

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.

We classified 56.3% of total investments measured and reported at fair value as Level III at December 31, 2020. The valuation of our Level III investments at December 31, 2020 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.

Level III Valuation Methodologies

With respect to our private equity portfolio, which includes growth equity investments, we generally employ two valuation methodologies when determining the fair value of an 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 and events outside of our control 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 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.

Across the total Level III private equity investment portfolio (including core investments), and including investments in both consolidated and unconsolidated investment funds, approximately 60% of the fair value is derived from investments that are valued based exactly 50% on market comparables and 50% on a discounted cash flow analysis. Less than 5% 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 December 31, 2020, 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 39%, 54%, and 7%, respectively.

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 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. Certain real estate investments are valued by KKR based on ranges of valuations determined by independent valuation firms. The valuations of real assets investments also use other inputs.

For GAAP purposes, where KKR holds energy investments consisting of working interests in oil and gas 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 non-GAAP purposes, these directly held working interests are treated as investments and changes in value are reflected in our operating results as unrealized gains and losses.

On a non-GAAP basis, our energy real asset investments in oil and gas properties as of December 31, 2020 had a fair value of approximately $725 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 book value of $72.5 million. As of December 31, 2020, 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 book value would have been approximately $45 million lower.

These hypothetical declines relate only to 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 properties are based on either committed capital or capital invested.

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.

There is inherent uncertainty involved in the valuation of Level III investments and there is no assurance that, upon liquidation, KKR will realize the values reflected in our valuations. Our valuations may differ significantly from the values that would have been used had an active market for the investments existed, and it is reasonably possible that the difference could be material. Furthermore, the recent market volatility caused by COVID-19 and the uncertainty surrounding its full impact have amplified the possibility that our future valuations may materially change from those reflected as of December 31, 2020. See "—Business Environment" for more details on the potential adverse effects of COVID-19 on our business, financial performance, operating results and valuations.

Key unobservable inputs that have a significant impact on our Level III investment valuations as described above are included in Financial Statements and Supplementary Data—Note 5 "Fair Value Measurements."

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 preset value thresholds and which in the aggregate comprise less than 1% 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 in Public Markets 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 proposals are submitted for review and approval by KKR's valuation committees. As of December 31, 2020, less than 4% 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, 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.

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/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 KKR & Co. Inc. and are then reported to the board of directors.

As of December 31, 2020, 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.

There were no changes made to our Level III valuation process as a result of COVID-19.

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 stockholders' 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 December 31, 2020, there were no investments which represented greater than 5% of total investments on a GAAP basis. On a non-GAAP basis, as of December 31, 2020, investments which represented greater than 5% of total non-GAAP investments consisted of Fiserv, Inc., BridgeBio Pharma Inc., and USI, Inc. valued at $1,332.2 million, $974.3 million, and $884.6 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 Fiserv, Inc. and BridgeBio Pharma Inc. See "—Business Environment" for a discussion on the impact of global equity markets on our financial condition and "—Non-GAAP Balance Sheet Measures" for additional information regarding our largest holdings on a non-GAAP basis.

Recognition of Investment Income

Investment income consists primarily of the net impact of: (i) realized and unrealized gains and losses on investments; (ii) dividends; (iii) interest 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.

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 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. Inc. is reflected as an adjustment to net income (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 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 capital allocation-based income (loss) in the consolidated statements of operations. Amounts earned pursuant to carried interest at consolidated funds are eliminated 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 2012, 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 investment funds that provide for carried interest and were launched after 2012, 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 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, see Financial Statements and Supplementary Data—Note 2 "Summary of Significant Accounting Policies."