Private equity firm KKR & Co. L.P. (NYSE:KKR) posted better than expected first quarter earnings of $647.7 million on Thursday. KKR & Co. LP (NYSE:KKR) reports profits as after-tax economic net income which measures performance as well as the value of investments, considering realized as well as unrealized gains.

KKR logo

Though the economic net income was down 9 percent to $647.7 million or 88 cents per share from $727.2 million in Q1 2012, it was better than the Wall Street consensus of 79 cents a share. Strong results of KKR & Co. L.P. (NYSE:KKR) and its rival private equity firm The Blackstone Group L.P. (NYSE:BX), that the economic climate remains positive for private equity firms. The rising stock markets have increased the value of their holdings. Taking advantage of the upbeat market, KKR & Co. LP continues to sell shares worth billions of dollars in the companies that it had earlier taken public.

The firm’s overall portfolio grew 5.9 percent during the quarter. Using GAAP, its Q1 profits rose from $190.4 million or 15 cents per share in a year ago quarter to $193.4 million or 27 cents. In the first quarter, the company sold shares in HCA Holdings Inc (NYSE:HCA), Dollar General Corp. (NYSE:DG) and Jazz Pharmaceuticals Plc. Fee-related profits rose 20 percent during the quarter to $88 million. That, coupled with proceeds from the sales, boosted the total distributable earnings by 77 percent to $290.6 million.

Total asset under management also increased 3.7 percent QoQ from $75.5 billion in December quarter to $78.3 billion at the end of March quarter. KKR & Co. L.P. (NYSE:KKR) also announced a change in its dividend policy. Starting with Q1 2013, the private equity firm will distribute 40 percent of its realized balance sheet income to public shareholders every quarter. Previously, the company used to pay a single dividend only once a year at the end of the fourth quarter.

JPMorgan Chase & Co. (NYSE:JPM) said in a research report that KKR & Co. L.P. (NYSE:KKR)’s after-tax economic net income of 88 cents was above the Wall Street consensus, but far below JPMorgan’s estimate of $1.14. The portfolio growth of 5.9 percent was below JPMorgan’s estimate of 7.5 percent. At the end of the first quarter, KKR & Co. LP had $2 billion in cash, $1 billion in debts and $653.3 million in outstanding commitments. The book value was $7.1 billion. JPMorgan Chase & Co. (NYSE:JPM) maintains its Overweight rating on the company.

KKR & Co. L.P. (NYSE:KKR) shares were up 4.95 percent to $21.19 at 10:51 AM EDT.