Confusion At KKR About Consultancy, Fee Sharing

May 22 2014 | 11:02am ET

Kohlberg Kravis Roberts wasn’t entirely honest with investors about a consulting business, the private-equity giant said.

In its 2011 annual report, the firm listed KKR Capstone as a subsidiary. In addition, Capstone is described as an “affiliate” in regulatory filings, and Capstone’s chief has been called a KKR partner. Those statements were not “technically correct,” the firm now says.

Capstone is not owned by KKR but by its own management team; it licenses the KKR names. KKR said the proper term for Capstone is “variable interest entity.”

The semantics matter because KKR shares 80% of “consulting fees” earned by KKR “affiliates.” Most of KKR’s consulting fees come from Capstone. But because the firm doesn’t own the consultancy, it does not fall under the fee-sharing “affiliate” provision.


In Depth

An Interview With Harvest Volatility Management's Rick Selvala

Mar 23 2017 | 5:39pm ET

Several years of extremely low interest rates have pushed some investors into equities...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

SEI: Private Debt Coming Into Its Own

Mar 8 2017 | 9:24pm ET

The explosive growth of private debt over the past few years has caused the lines...

 

From the current issue of