00:00raise money. Where does that leave the private markets then? Join us now as Alyssa Wood,
00:04partner at private equity firm KKR, who is in Berlin for the Super Return Conference. Alyssa,
00:10thank you for your time. What are the ripple effects to private equity as a result of these
00:15mega IPOs? You know, this is a moment where I think the market really likes a simple, clean
00:24narrative. And that's not what we're seeing around the world today, whether it's in the IPO market
00:29with what you just mentioned, or what we're seeing in the geopolitical complexity world,
00:35the volatility across the markets. But if you are a cycle tested manager, complexity is a good thing.
00:41You can navigate through that. You could be decisive. You could be deliberate. And you can
00:45actually be very disciplined. So this is a moment in time where if you can take that global complexity,
00:53whether it's in the public markets or in other parts of it, and lean in, it is actually a really
00:58great time to be putting capital to work. Now, I also think it's important to remember, though,
01:04that you never should be trying to time the market. We're private investors, right? That's what we've
01:08spent our 50 years at KKR doing and leaning into, is buying good companies we can make great on the
01:16private equity side. So trying to time the market is probably one of the biggest mistakes folks make.
01:21If you're very linear and deliberate in how you access opportunities around the world,
01:27what's happening, the volatility that's happening in the public markets actually could be your friend
01:33in trying to take advantage of some of that complexity and navigating through that.
01:38So Alyssa, what is the AI play for KKR? Where are you finding opportunities?
01:45We think about AI as a way to add value in the companies that we buy, right? It is all
01:52about the value
01:53creation toolkit. How can you make companies more effective, more efficient? How do you think about
01:58really growing the bottom line of the business you buy? That's where the value comes from, right?
02:03This is not about trying to time big themes. That's not what we're about, right? In the buy good,
02:08make great world, you're trying to have a toolkit of ways that you can grow the asset alpha in the
02:14businesses
02:14that you buy. It's all about that bottom line of earnings growth, right? So if you can help supercharge
02:20that bottom line growth, whether it be through operational efficiencies, client solutions,
02:27marketing solutions, that's how we're using AI in the businesses that we buy, right? It's about that EBITDA,
02:33that earnings growth in the businesses. It's not about trying to make bets on which is going to be
02:38the model that wins at the end of the day. Yeah. Elisa, good morning. And for a long time,
02:44we've seen the private equity and private credit worlds being quite focused on the software side of
02:51technology and the asset light models, business models. And now we're moving to a world where a
02:55lot of the technology conversation is not asset light. It's talking about a lot of asset investment.
03:00Does that, is that something you're investing into or staying clear of?
03:05Listen, we're looking at all of this all over the world, right? Whether it's, you know,
03:11the software piece of it, we don't believe software is dead by any means. We actually think AI can help
03:17enable software in a very different way. But we're also investing in things well beyond this,
03:24right? We like the boring businesses, right? Like we buy companies fundamentally that you use every
03:31single day that you don't even know you do. And you, by the way, couldn't live without,
03:35right? So I think that is, is very much how we've always approached it, right? When you think about
03:41industrials, when you think about healthcare, I always like to say we're, we're investing in the,
03:45the unsexy things, right? So yes, we're looking at all of this, but we also do it in a very
03:50global way,
03:51right? You know, just because, um, you know, when you think about the world and how asynchronous the
03:56world is today, being able to invest across Europe, across the U S across Asia gives you so
04:03many different opportunities at different moments in time, regardless of the theme and regardless of
04:08the sector, right? So when you think about the businesses we're buying, it's public to privates,
04:13it's buying non-core assets out of large conglomerates. It's about buying businesses in
04:18Japan. It's about investing in, we just invested in a business in Korea. It's about investing here in
04:23Germany where we've been investing for, you know, 30 years now. So that for us is the key, taking
04:29these thematics across industries, across geographies, and looking at interesting places
04:35to put capital to work. So much of what we do being 50 years old, we just celebrated our 50th
04:41anniversary on May 1st, is being that cycle tested manager, right? Is understanding where the
04:47complexity is in the world. And this is about high grading. This is not about de-risking and
04:53manager selection today is actually more important than the themes or, or anything else that you can
04:59use to dictate where you put capital to work, right? If you've been through this before, it matters.
05:05Okay. Yeah. So manager experience, having that long time horizon, you've talked about the, you know,
05:10the long history at KKR, at least that you talked about investing in Germany. And I think you're
05:14there because we're heading towards super return. I wonder if you think the mood in the room at
05:18super return for private markets is going to be different though, to other years. We've seen,
05:24of course, a lot of news coverage of private credit and the way that various investors have
05:28wanted money back from, from private credit funds. And I wonder if that's going to change the narrative
05:33as well as what Tom started this conversation talking about that kind of the, the return to public
05:37markets for some of the big tech players with their hyperscaler rollout. So will the mood be
05:42different this year? Do you think, you know, and I think it'll be very interesting to see how this
05:48plays out. I think there could be a bit of concern about what's going on in the market with the
05:54volatility and the complexity. Um, there's a bit of a, a paralyzation that we're seeing of this wait
06:01and see to, you know, to see where some of this plays out. And I think investors, if I could
06:07stress
06:07one thing in the conversations I'm going to have over the next few days at super return,
06:11it's that not being invested is actually your greatest risk, right? You need to be invested
06:17in this type of environment to be able to take advantage of what's happening in the market today,
06:23sitting on the sidelines and foregoing that potential return in these moments of complexity
06:28is typically the biggest thing that you can do wrong as an investor. So even though we've seen
06:33heightened concerns around whether it's private credit or AI and software, some of the things that
06:38you just mentioned, you need to be, if you're with a manager and you can navigate through that,
06:44you actually can make very outsized returns in, in markets like this. And I think that's going to
06:49be one of the themes of super return this week. How do you navigate through that? Who are the managers
06:54that you can lean in and support? Because I do think this is a market where it's not all created
07:00equal, right? Like if you look at private market investing and private equity in particular,
07:04and this is something super returns focused on for many years now, right? The who matters more
07:09than the what, right? So private equity is an asset class where the best managers versus the rest of
07:14the market can have over 1400 basis points of dispersion of return. In public equities, that's two to
07:20300, right? So making sure that you can be with the manager that navigates through that,
07:26finds the opportunities to buy good companies, make them great, exit those companies, which I know is
07:32another big topic that super return will be focusing on. I really hope that's the takeaway.
07:37It's about high, you know, high grading your portfolio, not de-risking and being invested and
07:43not sitting on the sidelines. Yeah. Alyssa, what on, on exits, because there is that perception that,
07:49that the private equity space is struggling with exits. What is the divergence or at least the spread
07:54that you're seeing across, across managers, when it comes to the story of exits, those who are
07:58managing to get those exits and those who are constrained? It's, it's such an important topic,
08:05right? Because I look at KKR, right? This year alone, we've had 15 exits in the last two weeks.
08:12We've had three, right? We've made 10 new investments this year. This is business as usual in a lot of
08:17respects. And I think on an exit standpoint, we're on track for this to be a record year for us.
08:22Now, how can we do that when the headlines across the industry are that exits are down and that
08:28the industry as a whole is struggling to put capital back? I think it really comes down to
08:33what are the companies you own and how do you actually effectuate an exit in those businesses? If
08:39you're reliant on the IPO market for the right business, that may be just fine. But what we're
08:45really leaning in on over 70% of our exits are about some type of strategic sale, sale to either
08:50a
08:50corporate, sale to a family, sale to another sponsor. If you look at the cool IT exit, now this is
08:55in the
08:56liquid cooling space for data centers. We announced this a couple of weeks ago. We were able to sell
09:00that business, you know, bought that business three years ago, bought good, helped make it great,
09:05grew the bottom line profitability of that company. And in three years was able to sell that to Ecolabs,
09:10a strategic in, in, in the space for 15 times our capital, right? That at the end of the day
09:16is a game changer in our portfolio. And that's one of many, right? That's the difference today.
09:22If you can buy companies, what we do is we buy complexity. We buy those public to privates,
09:27those corporate carve outs, partner with families, especially markets like here in Europe and create
09:33simplicity through our operational value creation through that asset alpha. And then what do corporates
09:38and strategics want to buy on the other end of it? They want to buy that simple growth. They want
09:43to
09:43buy that simplicity. And if you can take that through the value stage of the ownership of the
09:48life of your business, you're going to have lots of opportunities and lots of ways to win in that
09:53exit framework. And I think that's the key, right? If you're with those cycle tested managers.
Comments