WEBVTT - KKR Co-CEO Joe Bae Talks Tariffs, Inflation

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news across Mole Street. And

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<v Speaker 1>we're going to get to some of the things underpinning

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<v Speaker 1>those goals. But first we're going to start with a

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<v Speaker 1>big view on where the world stands today. And as

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<v Speaker 1>we've been talking about Joe in the US, investors are

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<v Speaker 1>trying to shake off that tariff hangover that exists right now.

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<v Speaker 1>The markets have been very jittery, investors are digesting how

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<v Speaker 1>these trade policies could be in the future. How do

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<v Speaker 1>you view the impact from your seat?

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<v Speaker 2>Sure, I think it's obvious to everybody.

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<v Speaker 3>That we're in an environment right now where there's a

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

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<v Speaker 3>Even with the first Trump administration, he was focused on

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<v Speaker 3>tariffs and trade. Biden kept most of those tariffs in place.

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<v Speaker 3>So I think in our business, you know, we're very

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<v Speaker 3>long term investors. We need to be thinking about these

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<v Speaker 3>issues over time, not just in one administration. And what

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<v Speaker 3>it's say is, you know, we have teams at KKR

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<v Speaker 3>who focus on all these areas of macro risk, whether

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<v Speaker 3>that's currency risk, tariff and trade, geopolitical risk, regulatory risk

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<v Speaker 3>in each of the.

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<v Speaker 2>Different markets that we're investing in.

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<v Speaker 3>I think this issue around supply chain security and resiliency,

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<v Speaker 3>which relates to tariffs, is obviously front and center for

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<v Speaker 3>all long term investors, but people are trying to parse

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<v Speaker 3>through what this all means. The final policies are not

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<v Speaker 3>in place. The actions of other countries and governments in

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<v Speaker 3>reaction to what Trump may or may not do is

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<v Speaker 3>still unknown, so it's very fluid at the moment, and

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<v Speaker 3>I think that's obviously creating some uncertainty and volatility.

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<v Speaker 1>You know, It's interesting in conversation with you, you had

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<v Speaker 1>mentioned that this was a risk that you should have

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<v Speaker 1>seen coming in a lot of ways. So from where

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<v Speaker 1>I'm sitting, it looks like KKR has been preparing for

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<v Speaker 1>this in a way that many investors have kind of

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<v Speaker 1>very obviously have not been. So what have you been

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<v Speaker 1>doing to prepare for all of this uncertainty knowing that

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<v Speaker 1>there's even more of it ahead?

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<v Speaker 3>Yeah, so I think you know, we have over one

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<v Speaker 3>hundred and fifty companies in our private equity portfolio around

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<v Speaker 3>the world, so again, supply chain resiliency multiple sourcing avenues

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<v Speaker 3>for our companies has always been a part of the

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<v Speaker 3>risk mitigation approach, and we've spent a lot of time

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<v Speaker 3>really over the last five six seven years understanding that

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<v Speaker 3>risk and mitigating that risk, and when it comes to

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<v Speaker 3>new investments, I think a big part of our job

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<v Speaker 3>thematically is understanding the risk environment we're in and choosing

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<v Speaker 3>those themes and sectors and opportunities that really have less

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<v Speaker 3>exposure to terrorf risk or trade risk. So maybe a

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<v Speaker 3>couple of examples of that is, you know, healthcare services

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

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<v Speaker 3>You know, that's an area where we feel like the

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<v Speaker 3>terrriff risk at least is not a pronounced risk. You

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<v Speaker 3>could look at certain services businesses. We've made a number

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<v Speaker 3>of investments in companies like home services, foundation inspection maintenance

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<v Speaker 3>companies in the US for an aging housing stock, you

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<v Speaker 3>look at it services and software investments in different countries. Again,

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<v Speaker 3>very little terror risk, so you're able to really zero

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<v Speaker 3>in and target those industries and sectors where you don't

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<v Speaker 3>think this.

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<v Speaker 2>Is going to be a big problem.

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<v Speaker 1>When you think about the ripple effects that you might

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<v Speaker 1>see from the terror strategy, there are a lot of

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<v Speaker 1>concerns about inflation, sure growth.

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<v Speaker 4>How are you.

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<v Speaker 1>Thinking about the economic headwinds that the US is facing.

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<v Speaker 3>Listen, I think that's one of the big uncertainties out

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<v Speaker 3>there that people are trying to figure out. Tariffs are

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<v Speaker 3>inflationary by design, So I think if that leads to

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<v Speaker 3>an escalated level of inflation in US economy, obviously that's

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<v Speaker 3>going to slow GDP growth.

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<v Speaker 2>It may put some pressure on.

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<v Speaker 3>The FED obviously in a more tough economic environment, to

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<v Speaker 3>lower rates faster over time. But we've always felt that

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<v Speaker 3>the bigger trends happening in the world, whether that's energy transition,

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<v Speaker 3>the massive investments into data, a lot of these things

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<v Speaker 3>are in inflationary by its nature. Putting aside tariffs, Right,

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<v Speaker 3>so we have a higher resting heart rate for inflation

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<v Speaker 3>globally today than we've had in the last decade, and

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<v Speaker 3>you expect that to continue and potentially even get higher inflation.

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<v Speaker 3>Right if these tariff and these trade wars continue, it's

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<v Speaker 3>not an unreasonable expectation that in the near term you

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<v Speaker 3>can see higher inflation.

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<v Speaker 1>Well, it doesn't that mean higher rates or do you

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<v Speaker 1>think that the FED is going to have to lower

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<v Speaker 1>rates into.

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<v Speaker 4>The face of that.

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<v Speaker 1>People are starting to use the words stagflation, an awful

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<v Speaker 1>lot these days.

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<v Speaker 3>I think it's going to be different in different markets,

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<v Speaker 3>and I think the FED is going to have to be.

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<v Speaker 2>Very nimble in how they navigate this risk.

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<v Speaker 3>Obviously, if the US is headed towards an economic downturn,

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<v Speaker 3>cutting rates is probably going to be the policy response.

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<v Speaker 2>If rates are high and.

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<v Speaker 3>We're not headed down that recession path or deceleration of

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<v Speaker 3>growth path, then rates could actually be a little bit

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<v Speaker 3>higher in the near term.

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

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<v Speaker 1>I think one unique view you can bring from KKR

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<v Speaker 1>is that you are very global in nature. So you

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<v Speaker 1>see the way that the changes are happening in a

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<v Speaker 1>teriff strategy, the way that nations are kind of separating

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<v Speaker 1>in their relationship to each other. You see that on

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<v Speaker 1>the ground through your portfolio companies. What are then other

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<v Speaker 1>areas of the worlds that are maybe even more attractive

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<v Speaker 1>to you than the United States right now?

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

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<v Speaker 3>had it up on the slide. We're big fans right

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<v Speaker 3>now of Japan. We think that is a really really

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<v Speaker 3>underpenetrated opportunity, especially among US investors.

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<v Speaker 2>They really haven't figured.

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<v Speaker 3>Out how to get the exposure they want in a

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<v Speaker 3>market like Japan where they're coming out of two and

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<v Speaker 3>a half decades of deflation. So finally positive wage growth,

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<v Speaker 3>pricing power, inflation is very modest, but positive inflation right now,

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<v Speaker 3>and rates are actually increasing modestly in Japan. That's a

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<v Speaker 3>completely different macro picture than what we've seen in Japan

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<v Speaker 3>for the last three decades, and a really exciting time

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<v Speaker 3>when you marry that with shareholder reform, activism, activism, corporate

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<v Speaker 3>governance reform in that market outside of the United States,

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<v Speaker 3>Japan is the largest destination of our.

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

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<v Speaker 1>maintained a commitment to China as well. In fact, there

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<v Speaker 1>are big deals that are in the market that KKR

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<v Speaker 1>may be involved with at this very moment. So a

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<v Speaker 1>lot of other investors are very worried about China, the

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<v Speaker 1>internal economics and the relationship that China has to the

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<v Speaker 1>United States.

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<v Speaker 4>Yeah, how do you view that dynamic?

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<v Speaker 3>Yeah, listen, I think the geopolitical tensions right now obviously

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<v Speaker 3>are front and center for us as we think about

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<v Speaker 3>where to invest in how to invest, and in China

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<v Speaker 3>in particular, you have to avoid those sectors that have

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<v Speaker 3>sensitivity on both sides of the ocean, both the US

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<v Speaker 3>government and the Chinese government. So we have not invested

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<v Speaker 3>in some of these sensitive sectors like electric vehicles or

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<v Speaker 3>semiconductors or AI.

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<v Speaker 2>That's not the focus of our China investment strategy.

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<v Speaker 3>We're really focusing on super high quality domestic businesses that

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<v Speaker 3>are around domestic and asumption and services. So we in

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<v Speaker 3>our portfolio today we have one of the largest or

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<v Speaker 3>the largest Chinese pet food company, again geopolitically not sensitive.

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<v Speaker 3>We own one of the largest pharmacy chains in China.

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<v Speaker 3>We own the largest white mushroom grower in China, all

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<v Speaker 3>geared towards the domestic market, a growing middle class who

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<v Speaker 3>wants higher quality goods and services and food, you know.

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<v Speaker 3>And I think that's the sweet spot of where we're

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<v Speaker 3>focused to the market today.

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<v Speaker 1>That's interesting because even if you're focused on the Chinese

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

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<v Speaker 1>the global macro challenges. There are a lot of concerns

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<v Speaker 1>about the Chinese economy.

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<v Speaker 4>Why are you seeing through them?

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<v Speaker 3>Yeah, listen, I think the overall long term trend in

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<v Speaker 3>China is the middle class is growing, and the expectations

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<v Speaker 3>of the middle class are really for higher quality goods

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<v Speaker 3>and services, safer food, safer services, and that's what these

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

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<v Speaker 3>the macro growth China has slowed from a decade ago, right,

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<v Speaker 3>you were talking about a country growing at double digits GDP.

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<v Speaker 3>They're targeting four to five percent growth today, right, So

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<v Speaker 3>there has been a slow down. There's clearly challenges in

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<v Speaker 3>terms of the real estate market in China, and you

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<v Speaker 3>have to factor all that in in terms of the

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

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<v Speaker 3>the Chinese stock market today is one of the most

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<v Speaker 3>interesting value markets in the world in terms of the multiples.

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<v Speaker 3>So if you know what you're looking for, the type

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<v Speaker 3>of risk you're trying to mitigate against, you could still

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<v Speaker 3>find some interesting opportunities.

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<v Speaker 4>You know.

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<v Speaker 1>Yes, Jay, I asked the question, is American exceptionalism dead?

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<v Speaker 4>In addition to that, I ask you, is.

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<v Speaker 1>Globalization or diversification play? Is it a safety trade? How

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<v Speaker 1>do you think about it?

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<v Speaker 3>But we are a very very global firm and we

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<v Speaker 3>have a lot of different ways to participate in those

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<v Speaker 3>opportunities private equity, real estate, private credit, and infrastructure. So

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<v Speaker 3>in really volatile periods like we're in right now, having

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<v Speaker 3>that flexibility of capital, we could partner with companies management

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<v Speaker 3>teams as a provider of anything from senior investment grade

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<v Speaker 3>debt right to non investment grade debt, to structured credit solutions,

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<v Speaker 3>structured equity solutions, growth equity capital, to buy out capital.

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

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<v Speaker 3>usually leads to really really interesting deployment opportunities for our firm.

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<v Speaker 3>You need to be nimble, you need to have the

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

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<v Speaker 3>quite frankly about twenty twenty five.

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<v Speaker 2>They're going to be hiccups.

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<v Speaker 3>There's going to be some headwinds in terms of some

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<v Speaker 3>of these macro policies, but our ability to deploy scale

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<v Speaker 3>capital around the world we think is quite high.

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<v Speaker 1>I will still ask you, if not dead, then is

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<v Speaker 1>American exceptionalism then overblown?

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<v Speaker 3>Now listen, I think this notion that the US is

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<v Speaker 3>going to win alone has never been the case. I

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<v Speaker 3>think the strength of the United States is really the

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<v Speaker 3>resiliency of the economy, the strength of our capital markets,

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<v Speaker 3>to mobilize capitals, to support companies in the private sector,

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<v Speaker 3>and labor productivity.

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<v Speaker 2>Right when you think.

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<v Speaker 3>About why the US has grown faster than Europe or

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<v Speaker 3>faster than Japan, it's really about labor productivity in the

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<v Speaker 3>United States. A lot of that is technology driven and

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<v Speaker 3>innovation driven, but a lot of that is our unique

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<v Speaker 3>mobility of labor in this country. You think about Japan,

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

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<v Speaker 3>best job of any country in terms of women participation

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<v Speaker 3>in the workforce, people working longer in Japan, right, They've

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<v Speaker 3>got real demographic challenges.

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<v Speaker 2>They've done an excellent.

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<v Speaker 3>Job around automation and robotics in their industrial base, but

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<v Speaker 3>they're not getting the labor productivity because the mobility of

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<v Speaker 3>labor in Japan is quite constrained, and their investment in

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<v Speaker 3>software and tech is a fraction of.

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<v Speaker 2>What you see in the United States.

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<v Speaker 3>So the real superpower of the United States is labor productivity.

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<v Speaker 1>At the end of the day, I do want to

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<v Speaker 1>spend the remaining time here and gear is talking about

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<v Speaker 1>the future of KKR because it's been fascinating to watch

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<v Speaker 1>the change from an iconic private equity company to what

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<v Speaker 1>you are today. There was the full acquisition of your

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

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<v Speaker 4>Look more and more like Berkshire Hathaway.

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<v Speaker 1>And there's one part of your business that's far less

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<v Speaker 1>understood that I think makes you look like the most

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

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<v Speaker 1>people don't know that KKR owns eighteen companies on your

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<v Speaker 1>own balance sheet at KKR, what is this business going

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<v Speaker 1>to be in maybe ten years and why is it

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<v Speaker 1>valuable to you?

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<v Speaker 2>Sure?

0:11:42.720 --> 0:11:45.960
<v Speaker 3>So when you think about KKR as a business, we

0:11:46.040 --> 0:11:50.559
<v Speaker 3>really have three core strategic parts of our business. Strategy

0:11:51.240 --> 0:11:53.760
<v Speaker 3>asset management, I think is well understood. That's what we're

0:11:53.800 --> 0:11:56.400
<v Speaker 3>known for for the last fifty years. So that's our

0:11:56.440 --> 0:12:00.040
<v Speaker 3>third party private equity again, real estate and infrastructure, a

0:12:00.120 --> 0:12:02.720
<v Speaker 3>private credit business, and that's a six hundred and fifty

0:12:02.720 --> 0:12:04.839
<v Speaker 3>billion dollar business that you mentioned.

0:12:04.559 --> 0:12:05.199
<v Speaker 2>At the start.

0:12:06.360 --> 0:12:09.640
<v Speaker 3>The second big pillar of our business today is Global Atlantic.

0:12:10.000 --> 0:12:11.280
<v Speaker 2>It's one hundred percent.

0:12:11.040 --> 0:12:14.439
<v Speaker 3>Owned insurance company in the life and annuity space, roughly

0:12:14.440 --> 0:12:17.320
<v Speaker 3>one hundred and ninety billion dollars of valuem there and

0:12:17.360 --> 0:12:20.280
<v Speaker 3>again playing into all of these trends around retirement savings,

0:12:20.360 --> 0:12:25.199
<v Speaker 3>retirement security, and being able to offer individuals compelling products

0:12:25.320 --> 0:12:28.360
<v Speaker 3>for their own long term savings. The third piece of

0:12:28.400 --> 0:12:30.880
<v Speaker 3>it is a segment that we introduced last year at

0:12:30.880 --> 0:12:33.559
<v Speaker 3>our investor Day, but it's been a segment we've been

0:12:33.559 --> 0:12:36.520
<v Speaker 3>incubating for well over a decade now at KKR, and

0:12:36.559 --> 0:12:39.840
<v Speaker 3>that's Strategic Holdings. So what we're trying to build in

0:12:39.880 --> 0:12:43.440
<v Speaker 3>Strategic Holdings is, in some ways the mini Berkshire Hathaway.

0:12:44.040 --> 0:12:48.360
<v Speaker 3>These are companies where we own large stakes, sometimes controlling stakes,

0:12:48.360 --> 0:12:51.520
<v Speaker 3>sometimes not, but businesses that we think we could own

0:12:51.800 --> 0:12:55.720
<v Speaker 3>literally forever, Businesses that have the potential to compound in

0:12:55.800 --> 0:12:58.400
<v Speaker 3>mid teens over a very very long period of time,

0:12:59.040 --> 0:13:01.920
<v Speaker 3>very defensive, innate, sure. So we have eighteen companies in

0:13:01.960 --> 0:13:05.040
<v Speaker 3>that portfolio today. We're going to continue to redeploy our

0:13:05.040 --> 0:13:08.120
<v Speaker 3>free cash flow at KKR to invest in more of

0:13:08.160 --> 0:13:09.160
<v Speaker 3>these types of businesses.

0:13:10.000 --> 0:13:11.560
<v Speaker 2>And it's not just private equity.

0:13:11.640 --> 0:13:14.720
<v Speaker 3>Over time, it's going to include certain platforms, probably in

0:13:14.720 --> 0:13:17.960
<v Speaker 3>infrastructure and real assets, maybe certain build ups you know

0:13:18.000 --> 0:13:20.400
<v Speaker 3>that we're going to do in different sectors. You know,

0:13:20.440 --> 0:13:23.480
<v Speaker 3>when Scott Knuttell and I, my co CEO, joined KKR.

0:13:23.520 --> 0:13:27.000
<v Speaker 3>Back in nineteen ninety six, Berkshire Hathaway had a market

0:13:27.000 --> 0:13:30.400
<v Speaker 3>cap of forty billion dollars and roughly nav balance sheet

0:13:30.400 --> 0:13:33.680
<v Speaker 3>of forty billion dollars. You fast forward twenty eight years,

0:13:34.080 --> 0:13:36.720
<v Speaker 3>they have a trillion dollar market cap on the back

0:13:36.760 --> 0:13:40.319
<v Speaker 3>of long term compounding of their balance sheet and their investments. Right,

0:13:41.000 --> 0:13:42.480
<v Speaker 3>some version of that is what we're going to be

0:13:42.480 --> 0:13:45.960
<v Speaker 3>doing with strategic holdings, but leveraging all of the skills

0:13:46.000 --> 0:13:48.240
<v Speaker 3>and expertise we have in our private equity teams, our

0:13:48.240 --> 0:13:49.920
<v Speaker 3>infrastructure teams around the world.

0:13:50.000 --> 0:13:52.079
<v Speaker 4>So what's an interesting parallel here?

0:13:52.080 --> 0:13:54.680
<v Speaker 1>If you think about Berkshire Hathaway, is it almost like

0:13:54.760 --> 0:13:59.160
<v Speaker 1>Global Atlantic is your own Geico, and these future infrastructure

0:13:59.200 --> 0:14:03.000
<v Speaker 1>holdings will be your BNSF and your private equity holdings

0:14:03.080 --> 0:14:05.520
<v Speaker 1>would be kind of like your stock portfolio.

0:14:06.960 --> 0:14:10.199
<v Speaker 3>Yes, it's imperfect analogy, but directionally you are absolutely right.

0:14:10.400 --> 0:14:13.679
<v Speaker 3>I think listen strategic holdings for us, you got to

0:14:13.720 --> 0:14:15.360
<v Speaker 3>think about it as a way, how do we think

0:14:15.360 --> 0:14:19.920
<v Speaker 3>about redeploying our free cash flow as a business back

0:14:19.960 --> 0:14:21.440
<v Speaker 3>into the most attractive areas.

0:14:22.200 --> 0:14:23.080
<v Speaker 2>Some of that might be.

0:14:22.960 --> 0:14:26.560
<v Speaker 3>In our traditional third party asset management business. Right, we

0:14:26.600 --> 0:14:29.400
<v Speaker 3>find great ways to deploy capital across those investments.

0:14:29.600 --> 0:14:30.760
<v Speaker 2>We will deploy that capital.

0:14:31.320 --> 0:14:33.960
<v Speaker 3>A lot of the capitals reinvested back into Global Atlantic.

0:14:34.680 --> 0:14:37.800
<v Speaker 3>We acquired our first controlling stake in Global Atlantic in

0:14:37.840 --> 0:14:41.120
<v Speaker 3>twenty twenty and GA at that time had around seventy

0:14:41.120 --> 0:14:44.080
<v Speaker 3>billion dollars at AUM. Four years later it has one

0:14:44.120 --> 0:14:46.920
<v Speaker 3>hundred ninety billion dollars at AUM, so we've supported that

0:14:46.960 --> 0:14:50.440
<v Speaker 3>growth with more investment. And then this third segment of

0:14:50.440 --> 0:14:53.480
<v Speaker 3>strategic holdings, obviously, which is what we're super excited about,

0:14:54.120 --> 0:14:56.200
<v Speaker 3>is one where we're going to be continuing to invest

0:14:56.320 --> 0:14:57.880
<v Speaker 3>a lot more of our free cash flow.

0:14:57.640 --> 0:14:58.280
<v Speaker 2>As a business.

0:14:58.800 --> 0:15:01.520
<v Speaker 3>So our guidance to this treat today is by twenty

0:15:01.560 --> 0:15:05.200
<v Speaker 3>twenty six, that portfolio will be generating around three hundred

0:15:05.200 --> 0:15:08.360
<v Speaker 3>and fifty plus million dollars of after tax dividends for US.

0:15:08.960 --> 0:15:10.400
<v Speaker 2>That's growing to seven hundred.

0:15:10.200 --> 0:15:12.680
<v Speaker 3>Million dollars by twenty twenty eight and one point one

0:15:12.720 --> 0:15:16.280
<v Speaker 3>billion dollars by twenty thirty. So it is a very

0:15:16.440 --> 0:15:21.160
<v Speaker 3>very visible, recurring, growing cash flow stream at KKR.

0:15:21.320 --> 0:15:23.800
<v Speaker 1>So you essentially have a kind of a future Unicorn

0:15:23.840 --> 0:15:26.320
<v Speaker 1>of sorts being built inside of KKRE. If you're going

0:15:26.360 --> 0:15:28.720
<v Speaker 1>to be bringing in a billion dollars over time in

0:15:28.720 --> 0:15:31.280
<v Speaker 1>this business. Do you think it's built into KKR stock

0:15:31.600 --> 0:15:32.840
<v Speaker 1>that assumption yet?

0:15:33.040 --> 0:15:35.400
<v Speaker 3>I think people are starting to appreciate what we're trying

0:15:35.400 --> 0:15:37.800
<v Speaker 3>to build. But I think the bigger picture is when

0:15:37.800 --> 0:15:40.160
<v Speaker 3>you look at our universe in the alt space five

0:15:40.200 --> 0:15:43.080
<v Speaker 3>years from now, ten years from now, I think many

0:15:43.080 --> 0:15:45.200
<v Speaker 3>of the public peers in the sector are going to

0:15:45.200 --> 0:15:47.600
<v Speaker 3>actually take very different approaches to how do they grow

0:15:47.680 --> 0:15:48.200
<v Speaker 3>their firms.

0:15:48.800 --> 0:15:50.320
<v Speaker 2>I think the approach we have was.

0:15:50.400 --> 0:15:54.520
<v Speaker 3>With third party asset management, insurance and strategic holdings is

0:15:54.600 --> 0:15:57.360
<v Speaker 3>quite differentiated and different than the way most of our

0:15:57.360 --> 0:15:58.920
<v Speaker 3>peers are trying to grow their firms today.

0:15:59.280 --> 0:16:01.600
<v Speaker 1>Now, I want to spend a little time talking about

0:16:01.920 --> 0:16:05.800
<v Speaker 1>not just institutional capital and how you are deploying capital

0:16:05.840 --> 0:16:08.440
<v Speaker 1>in your own balance sheet. We've been talking so much

0:16:08.560 --> 0:16:12.080
<v Speaker 1>about how there's been a massive push for retail. When

0:16:12.120 --> 0:16:14.520
<v Speaker 1>it comes to the world of private assets, everyone is

0:16:14.560 --> 0:16:17.360
<v Speaker 1>doing it differently. You have a relationship with Capital Group

0:16:17.760 --> 0:16:20.240
<v Speaker 1>in order to make this available in.

0:16:20.200 --> 0:16:21.840
<v Speaker 4>A mutual fund form.

0:16:22.320 --> 0:16:26.560
<v Speaker 1>So how available is it to invest in private assets

0:16:26.560 --> 0:16:29.400
<v Speaker 1>from where you're sitting. What's the minimum amount you would

0:16:29.400 --> 0:16:30.720
<v Speaker 1>need to put into a fund to.

0:16:30.680 --> 0:16:32.880
<v Speaker 4>Start to get access to what you're offering.

0:16:33.600 --> 0:16:33.880
<v Speaker 2>Sure.

0:16:33.880 --> 0:16:36.640
<v Speaker 3>So the way to think about the bigger picture opportunity

0:16:36.720 --> 0:16:40.000
<v Speaker 3>is for most of our history at KKR, we were

0:16:40.000 --> 0:16:44.520
<v Speaker 3>found in nineteen seventy six, our core client base was

0:16:44.600 --> 0:16:49.440
<v Speaker 3>really large institutional investors, pension funds, insurance companies, sovereign wealth

0:16:49.440 --> 0:16:53.680
<v Speaker 3>funds around the world. The individual investors who participated with

0:16:53.800 --> 0:16:57.000
<v Speaker 3>us were really ultra high networth families and family offices

0:16:57.520 --> 0:17:01.560
<v Speaker 3>who could allocate capital as part of their diversification as

0:17:01.600 --> 0:17:04.639
<v Speaker 3>really LPs in our funds. They were willing, they were

0:17:04.640 --> 0:17:07.520
<v Speaker 3>sophisticated investors, willing to take at ten or twelve year

0:17:08.040 --> 0:17:11.240
<v Speaker 3>you know, illiquidity risk, just like a pension fund would.

0:17:12.160 --> 0:17:14.639
<v Speaker 3>So that's a very small percent of the household obviously in.

0:17:14.640 --> 0:17:17.159
<v Speaker 2>The United States, but that's how they've accessed and partnered

0:17:17.160 --> 0:17:18.080
<v Speaker 2>with us historically.

0:17:19.000 --> 0:17:21.159
<v Speaker 3>What's relatively new for us in the last two to

0:17:21.200 --> 0:17:24.800
<v Speaker 3>three years is we've introduced a series of private wealth

0:17:24.840 --> 0:17:29.679
<v Speaker 3>products for individual investors who are accredited investors. Okay, so

0:17:29.720 --> 0:17:32.239
<v Speaker 3>those are investors with a net worth of call at

0:17:32.280 --> 0:17:33.439
<v Speaker 3>one to five million dollars.

0:17:34.560 --> 0:17:36.280
<v Speaker 2>These open ended.

0:17:36.080 --> 0:17:40.399
<v Speaker 3>Evergreen products have semularquidity of features, so you're not locking

0:17:40.480 --> 0:17:43.119
<v Speaker 3>up your capital for ten to twelve years, you have

0:17:43.200 --> 0:17:45.720
<v Speaker 3>the ability if you needed to redeem a portion of.

0:17:45.720 --> 0:17:46.800
<v Speaker 2>Your capital every quarter.

0:17:47.520 --> 0:17:52.400
<v Speaker 3>So it's a slightly different format, but it's it's investing

0:17:52.440 --> 0:17:55.560
<v Speaker 3>in exactly the same deals that our flagship funds are

0:17:55.640 --> 0:17:58.479
<v Speaker 3>investing in, right So that's we're trying to deliver that

0:17:58.520 --> 0:18:02.840
<v Speaker 3>same institutional quality experience, the same portfolio, the same access

0:18:02.840 --> 0:18:06.240
<v Speaker 3>to deal flow, whether that's in private equity, real estate, infrastructure,

0:18:06.240 --> 0:18:10.520
<v Speaker 3>of private credit to individual accredited investors. Right in that

0:18:10.640 --> 0:18:13.359
<v Speaker 3>one to five million dollars in net worth, that's around

0:18:13.400 --> 0:18:15.359
<v Speaker 3>ten percent of the households in the United States in

0:18:15.359 --> 0:18:19.119
<v Speaker 3>those first two buckets ultra high net worth and accredited investors,

0:18:19.440 --> 0:18:24.000
<v Speaker 3>and roughly half the AOM in the individual channel. With

0:18:24.119 --> 0:18:27.720
<v Speaker 3>Capital Group, we have an exciting new partnership which really

0:18:27.760 --> 0:18:32.440
<v Speaker 3>addresses the next ninety percent of US households. These are

0:18:32.520 --> 0:18:36.800
<v Speaker 3>mass affluent individual investors who probably wouldn't be buying our

0:18:36.800 --> 0:18:40.600
<v Speaker 3>private wealth product and wouldn't be LP's in our traditional fund.

0:18:40.880 --> 0:18:42.040
<v Speaker 2>So we're creating.

0:18:41.720 --> 0:18:44.600
<v Speaker 3>Hybrid products with Capital Group in a mutual fund format.

0:18:44.760 --> 0:18:48.040
<v Speaker 3>We're starting with credit in the second quarter, where we're

0:18:48.080 --> 0:18:51.080
<v Speaker 3>going to be putting a portfolio together where Capitol Group

0:18:51.080 --> 0:18:54.479
<v Speaker 3>manages the public credit. We will manage the private credit

0:18:54.600 --> 0:18:58.320
<v Speaker 3>allocation in that mutual fund and deliver a product to

0:18:58.400 --> 0:19:00.520
<v Speaker 3>the mass affluent that looks very different and from anything

0:19:00.560 --> 0:19:01.639
<v Speaker 3>they've been able to buy before.

0:19:01.760 --> 0:19:04.040
<v Speaker 1>You know, it feels like the holy grail for this

0:19:04.240 --> 0:19:08.480
<v Speaker 1>industry is making private assets available in four one K plans. Yes,

0:19:08.760 --> 0:19:11.000
<v Speaker 1>how soon do you think that happens? And if not

0:19:11.119 --> 0:19:12.919
<v Speaker 1>that soon, what's the biggest barrier?

0:19:13.680 --> 0:19:16.120
<v Speaker 3>Well, listen, I think again, at a high level, when

0:19:16.119 --> 0:19:18.679
<v Speaker 3>you think about some of the societal challenges, we have

0:19:19.440 --> 0:19:22.880
<v Speaker 3>a big part of that is securing your retirement right

0:19:23.400 --> 0:19:24.639
<v Speaker 3>as you retire from work.

0:19:24.880 --> 0:19:28.240
<v Speaker 2>Kr co Ceo Jove Demographic along with Blue Meg, Shinali

0:19:28.320 --> 0:19:29.760
<v Speaker 2>Bassek from Bloomberg invest