Private equity firm KKR posted higher-than-expected quarterly earnings as the value of its private equity investments rose 6.5 percent and fee income increased, the company said on Wednesday.

Kohlberg Kravis Roberts & Co said it generated profits from taking a number of its portfolio companies public. During the quarter, KKR-backed Nielsen Holdings , HCA Holdings Inc and Far East Horizon <3360.HK> went public.

Private equity firms have been benefiting from an improving economy and rising stock market valuations and seen the value of their portfolios increase. They have also taken advantage of increasing M&A and improving IPO markets to exit some of their investments.

KKR's economic net income, a measure used by private equity firms to report earnings, was $742.5 million for the first quarter, compared with $674.8 million a year earlier. Fee-related earnings were $126.2 million, up from $90.4 million a year earlier.

ENI after tax per adjusted unit was 96 cents, KKR said, up from 93 cents in the same period a year ago.

That was ahead of analysts' average expectations of 61 cents per unit. KKR's shares rose 2.2 percent to $18.65 in early trading.

KKR said assets under management totaled $61.0 billion, up from $54.7 billion a year earlier. It will pay a first-quarter distribution of 21 cents per unit.

KKR has started raising money for its latest buyout fund, which has a target size of $8 billion to $10 billion, according to a recent publication by the Oregon Investment Council, which committed $525 million to the fund.

Investors had been anticipating a new KKR fund for more than a year, but did not expect it to be close to the size of the global $18 billion buyout fund it raised in 2006.

KKR trades at a multiple of about 6.4 times its 2010 economic net income. That compares with rival Blackstone Group LP , which trades about 14.8 times its 2010 economic net income and Apollo Global Management LLC , which trades at about 5.8 times.

Rival Blackstone reported first quarter earnings in April, with first-quarter economic net income of $568 million, up from $360 million a year earlier.

(Reporting by Megan Davies, editing by Gerald E. McCormick, Dave Zimmerman)