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Speaker 1: Bloomberg Audio Studios, podcasts, radio news across Mole Street. And

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Speaker 1: we're going to get to some of the things underpinning

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Speaker 1: those goals. But first we're going to start with a

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Speaker 1: big view on where the world stands today. And as

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Speaker 1: we've been talking about Joe in the US, investors are

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Speaker 1: trying to shake off that tariff hangover that exists right now.

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Speaker 1: The markets have been very jittery, investors are digesting how

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Speaker 1: these trade policies could be in the future. How do

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Speaker 1: you view the impact from your seat?

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Speaker 2: Sure, I think it's obvious to everybody.

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Speaker 3: That we're in an environment right now where there's a

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Speaker 3: lot of uncertainty around trade tariffs, but it's not necessarily new.

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Speaker 3: Even with the first Trump administration, he was focused on

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Speaker 3: tariffs and trade. Biden kept most of those tariffs in place.

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Speaker 3: So I think in our business, you know, we're very

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Speaker 3: long term investors. We need to be thinking about these

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Speaker 3: issues over time, not just in one administration. And what

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Speaker 3: it's say is, you know, we have teams at KKR

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Speaker 3: who focus on all these areas of macro risk, whether

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Speaker 3: that's currency risk, tariff and trade, geopolitical risk, regulatory risk

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Speaker 3: in each of the.

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Speaker 2: Different markets that we're investing in.

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Speaker 3: I think this issue around supply chain security and resiliency,

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Speaker 3: which relates to tariffs, is obviously front and center for

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Speaker 3: all long term investors, but people are trying to parse

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Speaker 3: through what this all means. The final policies are not

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Speaker 3: in place. The actions of other countries and governments in

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Speaker 3: reaction to what Trump may or may not do is

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Speaker 3: still unknown, so it's very fluid at the moment, and

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Speaker 3: I think that's obviously creating some uncertainty and volatility.

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Speaker 1: You know, It's interesting in conversation with you, you had

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Speaker 1: mentioned that this was a risk that you should have

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Speaker 1: seen coming in a lot of ways. So from where

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Speaker 1: I'm sitting, it looks like KKR has been preparing for

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Speaker 1: this in a way that many investors have kind of

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Speaker 1: very obviously have not been. So what have you been

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Speaker 1: doing to prepare for all of this uncertainty knowing that

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Speaker 1: there's even more of it ahead?

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Speaker 3: Yeah, so I think you know, we have over one

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Speaker 3: hundred and fifty companies in our private equity portfolio around

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Speaker 3: the world, so again, supply chain resiliency multiple sourcing avenues

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Speaker 3: for our companies has always been a part of the

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Speaker 3: risk mitigation approach, and we've spent a lot of time

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Speaker 3: really over the last five six seven years understanding that

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Speaker 3: risk and mitigating that risk, and when it comes to

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Speaker 3: new investments, I think a big part of our job

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Speaker 3: thematically is understanding the risk environment we're in and choosing

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Speaker 3: those themes and sectors and opportunities that really have less

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Speaker 3: exposure to terrorf risk or trade risk. So maybe a

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Speaker 3: couple of examples of that is, you know, healthcare services

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Speaker 3: are very domestic, whether it's in the US, Europe, or Asia.

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Speaker 3: You know, that's an area where we feel like the

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Speaker 3: terrriff risk at least is not a pronounced risk. You

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Speaker 3: could look at certain services businesses. We've made a number

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Speaker 3: of investments in companies like home services, foundation inspection maintenance

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Speaker 3: companies in the US for an aging housing stock, you

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Speaker 3: look at it services and software investments in different countries. Again,

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Speaker 3: very little terror risk, so you're able to really zero

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Speaker 3: in and target those industries and sectors where you don't

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Speaker 3: think this.

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Speaker 2: Is going to be a big problem.

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Speaker 1: When you think about the ripple effects that you might

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Speaker 1: see from the terror strategy, there are a lot of

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Speaker 1: concerns about inflation, sure growth.

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Speaker 4: How are you.

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Speaker 1: Thinking about the economic headwinds that the US is facing.

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Speaker 3: Listen, I think that's one of the big uncertainties out

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Speaker 3: there that people are trying to figure out. Tariffs are

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Speaker 3: inflationary by design, So I think if that leads to

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Speaker 3: an escalated level of inflation in US economy, obviously that's

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Speaker 3: going to slow GDP growth.

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Speaker 2: It may put some pressure on.

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Speaker 3: The FED obviously in a more tough economic environment, to

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Speaker 3: lower rates faster over time. But we've always felt that

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Speaker 3: the bigger trends happening in the world, whether that's energy transition,

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Speaker 3: the massive investments into data, a lot of these things

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Speaker 3: are in inflationary by its nature. Putting aside tariffs, Right,

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Speaker 3: so we have a higher resting heart rate for inflation

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Speaker 3: globally today than we've had in the last decade, and

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Speaker 3: you expect that to continue and potentially even get higher inflation.

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Speaker 3: Right if these tariff and these trade wars continue, it's

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Speaker 3: not an unreasonable expectation that in the near term you

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Speaker 3: can see higher inflation.

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Speaker 1: Well, it doesn't that mean higher rates or do you

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Speaker 1: think that the FED is going to have to lower

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Speaker 1: rates into.

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Speaker 4: The face of that.

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Speaker 1: People are starting to use the words stagflation, an awful

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Speaker 1: lot these days.

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Speaker 3: I think it's going to be different in different markets,

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Speaker 3: and I think the FED is going to have to be.

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Speaker 2: Very nimble in how they navigate this risk.

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Speaker 3: Obviously, if the US is headed towards an economic downturn,

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Speaker 3: cutting rates is probably going to be the policy response.

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Speaker 2: If rates are high and.

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Speaker 3: We're not headed down that recession path or deceleration of

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Speaker 3: growth path, then rates could actually be a little bit

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Speaker 3: higher in the near term.

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Speaker 1: So let's look at this from a global perspective as well.

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Speaker 1: I think one unique view you can bring from KKR

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Speaker 1: is that you are very global in nature. So you

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Speaker 1: see the way that the changes are happening in a

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Speaker 1: teriff strategy, the way that nations are kind of separating

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Speaker 1: in their relationship to each other. You see that on

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Speaker 1: the ground through your portfolio companies. What are then other

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Speaker 1: areas of the worlds that are maybe even more attractive

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Speaker 1: to you than the United States right now?

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Speaker 3: Well, you know, I think it's not a secret. You

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Speaker 3: had it up on the slide. We're big fans right

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Speaker 3: now of Japan. We think that is a really really

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Speaker 3: underpenetrated opportunity, especially among US investors.

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Speaker 2: They really haven't figured.

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Speaker 3: Out how to get the exposure they want in a

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Speaker 3: market like Japan where they're coming out of two and

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Speaker 3: a half decades of deflation. So finally positive wage growth,

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Speaker 3: pricing power, inflation is very modest, but positive inflation right now,

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Speaker 3: and rates are actually increasing modestly in Japan. That's a

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Speaker 3: completely different macro picture than what we've seen in Japan

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Speaker 3: for the last three decades, and a really exciting time

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Speaker 3: when you marry that with shareholder reform, activism, activism, corporate

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Speaker 3: governance reform in that market outside of the United States,

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Speaker 3: Japan is the largest destination of our.

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Speaker 1: Capital, so it's interesting. In addition to Japan, KKR has

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Speaker 1: maintained a commitment to China as well. In fact, there

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Speaker 1: are big deals that are in the market that KKR

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Speaker 1: may be involved with at this very moment. So a

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Speaker 1: lot of other investors are very worried about China, the

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Speaker 1: internal economics and the relationship that China has to the

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Speaker 1: United States.

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Speaker 4: Yeah, how do you view that dynamic?

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Speaker 3: Yeah, listen, I think the geopolitical tensions right now obviously

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Speaker 3: are front and center for us as we think about

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Speaker 3: where to invest in how to invest, and in China

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Speaker 3: in particular, you have to avoid those sectors that have

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Speaker 3: sensitivity on both sides of the ocean, both the US

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Speaker 3: government and the Chinese government. So we have not invested

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Speaker 3: in some of these sensitive sectors like electric vehicles or

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Speaker 3: semiconductors or AI.

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Speaker 2: That's not the focus of our China investment strategy.

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Speaker 3: We're really focusing on super high quality domestic businesses that

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Speaker 3: are around domestic and asumption and services. So we in

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Speaker 3: our portfolio today we have one of the largest or

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Speaker 3: the largest Chinese pet food company, again geopolitically not sensitive.

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Speaker 3: We own one of the largest pharmacy chains in China.

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Speaker 3: We own the largest white mushroom grower in China, all

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Speaker 3: geared towards the domestic market, a growing middle class who

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Speaker 3: wants higher quality goods and services and food, you know.

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Speaker 3: And I think that's the sweet spot of where we're

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Speaker 3: focused to the market today.

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Speaker 1: That's interesting because even if you're focused on the Chinese

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Speaker 1: consumer that might be a little more insulated to let's say,

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Speaker 1: the global macro challenges. There are a lot of concerns

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Speaker 1: about the Chinese economy.

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Speaker 4: Why are you seeing through them?

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Speaker 3: Yeah, listen, I think the overall long term trend in

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Speaker 3: China is the middle class is growing, and the expectations

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Speaker 3: of the middle class are really for higher quality goods

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Speaker 3: and services, safer food, safer services, and that's what these

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Speaker 3: companies that we're investing behind are really catering towards. No doubt,

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Speaker 3: the macro growth China has slowed from a decade ago, right,

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Speaker 3: you were talking about a country growing at double digits GDP.

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Speaker 3: They're targeting four to five percent growth today, right, So

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Speaker 3: there has been a slow down. There's clearly challenges in

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Speaker 3: terms of the real estate market in China, and you

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Speaker 3: have to factor all that in in terms of the

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Speaker 3: growth rate you're underwriting, and largely the entry multiple. You know,

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Speaker 3: the Chinese stock market today is one of the most

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Speaker 3: interesting value markets in the world in terms of the multiples.

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Speaker 3: So if you know what you're looking for, the type

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Speaker 3: of risk you're trying to mitigate against, you could still

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Speaker 3: find some interesting opportunities.

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Speaker 4: You know.

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Speaker 1: Yes, Jay, I asked the question, is American exceptionalism dead?

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Speaker 4: In addition to that, I ask you, is.

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Speaker 1: Globalization or diversification play? Is it a safety trade? How

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Speaker 1: do you think about it?

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Speaker 3: But we are a very very global firm and we

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Speaker 3: have a lot of different ways to participate in those

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Speaker 3: opportunities private equity, real estate, private credit, and infrastructure. So

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Speaker 3: in really volatile periods like we're in right now, having

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Speaker 3: that flexibility of capital, we could partner with companies management

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Speaker 3: teams as a provider of anything from senior investment grade

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Speaker 3: debt right to non investment grade debt, to structured credit solutions,

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Speaker 3: structured equity solutions, growth equity capital, to buy out capital.

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Speaker 3: So today it's an interesting market. When volatility spikes, that

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Speaker 3: usually leads to really really interesting deployment opportunities for our firm.

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Speaker 3: You need to be nimble, you need to have the

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Speaker 3: local reach in all these different markets. But we're excited,

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Speaker 3: quite frankly about twenty twenty five.

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Speaker 2: They're going to be hiccups.

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Speaker 3: There's going to be some headwinds in terms of some

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Speaker 3: of these macro policies, but our ability to deploy scale

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Speaker 3: capital around the world we think is quite high.

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Speaker 1: I will still ask you, if not dead, then is

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Speaker 1: American exceptionalism then overblown?

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Speaker 3: Now listen, I think this notion that the US is

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Speaker 3: going to win alone has never been the case. I

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Speaker 3: think the strength of the United States is really the

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Speaker 3: resiliency of the economy, the strength of our capital markets,

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Speaker 3: to mobilize capitals, to support companies in the private sector,

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Speaker 3: and labor productivity.

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Speaker 2: Right when you think.

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Speaker 3: About why the US has grown faster than Europe or

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Speaker 3: faster than Japan, it's really about labor productivity in the

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Speaker 3: United States. A lot of that is technology driven and

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Speaker 3: innovation driven, but a lot of that is our unique

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Speaker 3: mobility of labor in this country. You think about Japan,

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Speaker 3: which is going through this resurgence. Structurally, they've done the

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Speaker 3: best job of any country in terms of women participation

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Speaker 3: in the workforce, people working longer in Japan, right, They've

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Speaker 3: got real demographic challenges.

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Speaker 2: They've done an excellent.

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Speaker 3: Job around automation and robotics in their industrial base, but

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Speaker 3: they're not getting the labor productivity because the mobility of

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Speaker 3: labor in Japan is quite constrained, and their investment in

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Speaker 3: software and tech is a fraction of.

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Speaker 2: What you see in the United States.

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Speaker 3: So the real superpower of the United States is labor productivity.

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Speaker 1: At the end of the day, I do want to

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Speaker 1: spend the remaining time here and gear is talking about

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Speaker 1: the future of KKR because it's been fascinating to watch

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Speaker 1: the change from an iconic private equity company to what

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Speaker 1: you are today. There was the full acquisition of your

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Speaker 1: insurance company last year, Global Atlantic, and it's made KKR.

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Speaker 4: Look more and more like Berkshire Hathaway.

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Speaker 1: And there's one part of your business that's far less

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Speaker 1: understood that I think makes you look like the most

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Speaker 1: like Berkshire Hathaway, and that's your strategic holdings business. Many

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Speaker 1: people don't know that KKR owns eighteen companies on your

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Speaker 1: own balance sheet at KKR, what is this business going

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Speaker 1: to be in maybe ten years and why is it

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Speaker 1: valuable to you?

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Speaker 2: Sure?

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Speaker 3: So when you think about KKR as a business, we

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Speaker 3: really have three core strategic parts of our business. Strategy

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Speaker 3: asset management, I think is well understood. That's what we're

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Speaker 3: known for for the last fifty years. So that's our

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Speaker 3: third party private equity again, real estate and infrastructure, a

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Speaker 3: private credit business, and that's a six hundred and fifty

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Speaker 3: billion dollar business that you mentioned.

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Speaker 2: At the start.

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Speaker 3: The second big pillar of our business today is Global Atlantic.

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Speaker 2: It's one hundred percent.

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Speaker 3: Owned insurance company in the life and annuity space, roughly

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Speaker 3: one hundred and ninety billion dollars of valuem there and

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Speaker 3: again playing into all of these trends around retirement savings,

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Speaker 3: retirement security, and being able to offer individuals compelling products

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Speaker 3: for their own long term savings. The third piece of

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Speaker 3: it is a segment that we introduced last year at

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Speaker 3: our investor Day, but it's been a segment we've been

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Speaker 3: incubating for well over a decade now at KKR, and

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Speaker 3: that's Strategic Holdings. So what we're trying to build in

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Speaker 3: Strategic Holdings is, in some ways the mini Berkshire Hathaway.

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Speaker 3: These are companies where we own large stakes, sometimes controlling stakes,

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Speaker 3: sometimes not, but businesses that we think we could own

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Speaker 3: literally forever, Businesses that have the potential to compound in

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Speaker 3: mid teens over a very very long period of time,

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Speaker 3: very defensive, innate, sure. So we have eighteen companies in

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Speaker 3: that portfolio today. We're going to continue to redeploy our

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Speaker 3: free cash flow at KKR to invest in more of

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Speaker 3: these types of businesses.

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Speaker 2: And it's not just private equity.

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Speaker 3: Over time, it's going to include certain platforms, probably in

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Speaker 3: infrastructure and real assets, maybe certain build ups you know

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Speaker 3: that we're going to do in different sectors. You know,

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Speaker 3: when Scott Knuttell and I, my co CEO, joined KKR.

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Speaker 3: Back in nineteen ninety six, Berkshire Hathaway had a market

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Speaker 3: cap of forty billion dollars and roughly nav balance sheet

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Speaker 3: of forty billion dollars. You fast forward twenty eight years,

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Speaker 3: they have a trillion dollar market cap on the back

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Speaker 3: of long term compounding of their balance sheet and their investments. Right,

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Speaker 3: some version of that is what we're going to be

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Speaker 3: doing with strategic holdings, but leveraging all of the skills

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Speaker 3: and expertise we have in our private equity teams, our

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Speaker 3: infrastructure teams around the world.

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Speaker 4: So what's an interesting parallel here?

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Speaker 1: If you think about Berkshire Hathaway, is it almost like

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Speaker 1: Global Atlantic is your own Geico, and these future infrastructure

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Speaker 1: holdings will be your BNSF and your private equity holdings

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Speaker 1: would be kind of like your stock portfolio.

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Speaker 3: Yes, it's imperfect analogy, but directionally you are absolutely right.

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Speaker 3: I think listen strategic holdings for us, you got to

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Speaker 3: think about it as a way, how do we think

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Speaker 3: about redeploying our free cash flow as a business back

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Speaker 3: into the most attractive areas.

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Speaker 2: Some of that might be.

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Speaker 3: In our traditional third party asset management business. Right, we

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Speaker 3: find great ways to deploy capital across those investments.

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Speaker 2: We will deploy that capital.

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Speaker 3: A lot of the capitals reinvested back into Global Atlantic.

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Speaker 3: We acquired our first controlling stake in Global Atlantic in

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Speaker 3: twenty twenty and GA at that time had around seventy

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Speaker 3: billion dollars at AUM. Four years later it has one

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Speaker 3: hundred ninety billion dollars at AUM, so we've supported that

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Speaker 3: growth with more investment. And then this third segment of

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Speaker 3: strategic holdings, obviously, which is what we're super excited about,

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Speaker 3: is one where we're going to be continuing to invest

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Speaker 3: a lot more of our free cash flow.

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Speaker 2: As a business.

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Speaker 3: So our guidance to this treat today is by twenty

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Speaker 3: twenty six, that portfolio will be generating around three hundred

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Speaker 3: and fifty plus million dollars of after tax dividends for US.

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Speaker 2: That's growing to seven hundred.

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Speaker 3: Million dollars by twenty twenty eight and one point one

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Speaker 3: billion dollars by twenty thirty. So it is a very

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Speaker 3: very visible, recurring, growing cash flow stream at KKR.

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Speaker 1: So you essentially have a kind of a future Unicorn

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Speaker 1: of sorts being built inside of KKRE. If you're going

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Speaker 1: to be bringing in a billion dollars over time in

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Speaker 1: this business. Do you think it's built into KKR stock

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Speaker 1: that assumption yet?

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Speaker 3: I think people are starting to appreciate what we're trying

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Speaker 3: to build. But I think the bigger picture is when

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Speaker 3: you look at our universe in the alt space five

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Speaker 3: years from now, ten years from now, I think many

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Speaker 3: of the public peers in the sector are going to

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Speaker 3: actually take very different approaches to how do they grow

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Speaker 3: their firms.

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Speaker 2: I think the approach we have was.

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Speaker 3: With third party asset management, insurance and strategic holdings is

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Speaker 3: quite differentiated and different than the way most of our

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Speaker 3: peers are trying to grow their firms today.

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Speaker 1: Now, I want to spend a little time talking about

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Speaker 1: not just institutional capital and how you are deploying capital

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Speaker 1: in your own balance sheet. We've been talking so much

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Speaker 1: about how there's been a massive push for retail. When

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Speaker 1: it comes to the world of private assets, everyone is

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Speaker 1: doing it differently. You have a relationship with Capital Group

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Speaker 1: in order to make this available in.

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Speaker 4: A mutual fund form.

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Speaker 1: So how available is it to invest in private assets

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Speaker 1: from where you're sitting. What's the minimum amount you would

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Speaker 1: need to put into a fund to.

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Speaker 4: Start to get access to what you're offering.

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Speaker 2: Sure.

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Speaker 3: So the way to think about the bigger picture opportunity

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Speaker 3: is for most of our history at KKR, we were

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Speaker 3: found in nineteen seventy six, our core client base was

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Speaker 3: really large institutional investors, pension funds, insurance companies, sovereign wealth

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Speaker 3: funds around the world. The individual investors who participated with

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Speaker 3: us were really ultra high networth families and family offices

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Speaker 3: who could allocate capital as part of their diversification as

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Speaker 3: really LPs in our funds. They were willing, they were

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Speaker 3: sophisticated investors, willing to take at ten or twelve year

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Speaker 3: you know, illiquidity risk, just like a pension fund would.

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Speaker 3: So that's a very small percent of the household obviously in.

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Speaker 2: The United States, but that's how they've accessed and partnered

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Speaker 2: with us historically.

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Speaker 3: What's relatively new for us in the last two to

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Speaker 3: three years is we've introduced a series of private wealth

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Speaker 3: products for individual investors who are accredited investors. Okay, so

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Speaker 3: those are investors with a net worth of call at

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Speaker 3: one to five million dollars.

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Speaker 2: These open ended.

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Speaker 3: Evergreen products have semularquidity of features, so you're not locking

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Speaker 3: up your capital for ten to twelve years, you have

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Speaker 3: the ability if you needed to redeem a portion of.

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Speaker 2: Your capital every quarter.

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Speaker 3: So it's a slightly different format, but it's it's investing

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Speaker 3: in exactly the same deals that our flagship funds are

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Speaker 3: investing in, right So that's we're trying to deliver that

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Speaker 3: same institutional quality experience, the same portfolio, the same access

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Speaker 3: to deal flow, whether that's in private equity, real estate, infrastructure,

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Speaker 3: of private credit to individual accredited investors. Right in that

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Speaker 3: one to five million dollars in net worth, that's around

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Speaker 3: ten percent of the households in the United States in

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Speaker 3: those first two buckets ultra high net worth and accredited investors,

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Speaker 3: and roughly half the AOM in the individual channel. With

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Speaker 3: Capital Group, we have an exciting new partnership which really

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Speaker 3: addresses the next ninety percent of US households. These are

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Speaker 3: mass affluent individual investors who probably wouldn't be buying our

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Speaker 3: private wealth product and wouldn't be LP's in our traditional fund.

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Speaker 2: So we're creating.

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Speaker 3: Hybrid products with Capital Group in a mutual fund format.

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Speaker 3: We're starting with credit in the second quarter, where we're

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Speaker 3: going to be putting a portfolio together where Capitol Group

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Speaker 3: manages the public credit. We will manage the private credit

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Speaker 3: allocation in that mutual fund and deliver a product to

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Speaker 3: the mass affluent that looks very different and from anything

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Speaker 3: they've been able to buy before.

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Speaker 1: You know, it feels like the holy grail for this

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Speaker 1: industry is making private assets available in four one K plans. Yes,

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Speaker 1: how soon do you think that happens? And if not

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Speaker 1: that soon, what's the biggest barrier?

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Speaker 3: Well, listen, I think again, at a high level, when

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Speaker 3: you think about some of the societal challenges, we have

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Speaker 3: a big part of that is securing your retirement right

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Speaker 3: as you retire from work.

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Speaker 2: Kr co Ceo Jove Demographic along with Blue Meg, Shinali

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Speaker 2: Bassek from Bloomberg invest