Transcript for:
KKR Investor Relations Presentation Summary

investor relations Craig [Music] lson good morning everybody my name is Craig Larson I'm head of invest relations a partner of the firm thank you everybody for joining us uh everybody in the room here a special thank you to all of our out of town guests who come to New York to join us in person and then welcome everybody who's joining us globally through the live webcast now before we begin in Earnest I do get to First review our legal disclosure page here so our presentations today will contain forward-looking statements which do not guarantee future events or performance and actual results May differ materially we will be referring to non-gaap measures over the course of the presentations that are reconciled to the most directly able Gap figures uh those are on our in the presentation and also on our website and the presentation materials contain other important information about forward-looking statements non-gaap measures and other legal disclosures and for the further discussion of some of the risks that could affect results please also refer to the risk factor sections in our 10K as well as other SEC filings for additional cautionary factors so we're excited to be here it's actually been really fun for us preparing for this event because it's given all of us internally the opportunity to look back and reflect on all of the growth and development across Kar and perhaps even more importantly it's given all of us the opportunity to look back and think about all of the hard work all of the business building and all of the investment that's taken place back into the firm that positions us so well as we think about KR going forward before you hear before us here you see our agenda you're going to be hearing from many members of our senior team who are here on a global basis I'm sure you'll gain a very good sense of the enthusiasm that we all have as a team in terms of the morning sessions you'll see that that should take us up to right about 11:00 at which point we plan to have a 15minute break and that will lead right into a conversation with Henry kravis and Henry McVey that's one of the sessions I know many of us are most looking forward to and then four additional items before we uh begin in Earnest first please everybody save your questions you'll see at the end we have a separate Q&A session scheduled with Joe and Scott secondly as it relates to lunch everybody here in the room we're hoping you'll be able to join us for lunch excuse me a lunch is going to be held in the room that's right behind us here behind the glass doors you're going to see a whole series of tables there'll be senior Kar Folks at each of those tables and we've sprinkled in the equity research Community across those tables hopefully to help spur conversation and dialogue uh third we do have a gift for everybody is a small thank you for attending you see on this page a picture of the edge Observation Deck The Edge is 100 Floors above us at 30 Hudson yards uh The Edge is actually investment in our credit business in partnership with our real estate franchise so we do have a gift certificate for everybody that includes an annual pass to go to the edge as well as for those of you who are a little more adventurous tickets uh for what is is called uh City climb again for those of you who are more adventurous uh so at the end of lunch please go downstairs and you'll receive that gift certificate at the uh check-in desk where you registered this morning and then finally to hopefully bring things make things a little more engaging we have asked everybody uh for a snippet of their favorite song So for those music of fishing in the room we have some walk up music for all of our presenters for you to enjoy as we think more broadly about uh uh an area for us like music publishing we do think of music publishing as an example of an area honestly that five or six years ago was probably not thought of as being a mainstream opportunity for our credit franchise it's actually been a really interesting area for our credit business and it's just one example of how our opportunity set as a firm has continued to expand that's another theme that you're going to hear uh over the course of the day now before Scott and Joe come on stage Scott and Joe have a presentation that's f focused very much on the go forward we thought it made sense for me to level set for a few slides to help review how we got to where we are today and as I mentioned you've seen a lot of growth across Kar a lot of that growth really began on the heels of the global financial crisis and that happened to correspond to when KKR was first listed on the New York Stock Exchange in the middle of 2010 so if you go back in time and look to where KKR was in 2010 we had 13 offices if you look at where we are today we have 25 offices we've gone Global it's interesting looking at that footprint only six of those 25 offices for us are in the United States and if you include the incremental nine offices from Global Atlantic we've gone from 13 to 33 offices over this time frame alongside that Global expansion you've seen of course a meaningful expansion in terms of our products and strategies so this was where we were in 2010 we had four investing businesses a very private Equity Centric group of business lines and if you compare that to where we are today we are in over 40 businesses and strategies meaningfully more Diversified by strategy up and down the capital structure again on a global basis alongside of that of course you've seen a meaningful investment in our people and over the course of the presentations you're going to hear all of our team members talk about the Investments that we've made in all of our investment teams in addition to that uh the Investments we've made we've also meaningfully expanded our toolkit so a handful of areas across KKR that allow us to be better investors that allow us to be better Partners to our corporate clients and of course we've welcomed 1550 employees from Global Atlantic at the same time now everybody in this room everybody's in the results business at KKR we have a 48-year track record of delivering and differentiated investment performance on behalf of our clients here you see gross performance figures across our recent mature funds uh I think this picture says a lot by itself it's also enhanced when you look at performance relative to the corresponding public benchmarks over time and with the growth that we've had in our strategies alongside strong investment performance that allows you to earn the right to scale so that again is something that we've seen in 2010 we had 60 billion of AUM round numbers you look at where we are today we a 550 billion of AUM at 1231 an 18% compound annual growth rate and I think if you look at the right-and bar in isolation we as a firm have become meaningfully more Diversified than I think somebody uh would expect at the outset and then this is actually one of my favorite slides it shows our management fee profile of course with the growth in AUM you're going to see a growth the management feas but this chart also says something that's unique about us in our positioning so if you think to what I said a moment ago we have a 48-year track record in our mind we the youngest 48y old firm you may meet because again if you think of our Evolution we have we are now in 40 investment strategies and it takes time takes time for these businesses to grow build and scale in a way that can really result in that that interesting part of the inflection curve and so if you look at this trajectory for us we have a wonderful Foundation of management fees in a number of wonderfully solid industry-leading businesses and then we have this layering effect of uh all of these 40 strategies which are in the midst of that curve and again we think there's a lot of Runway from here you're going to hear more about this going forward and alongside of course of management fee growth you see growth in a lot of our more bottomline metrics Fe related earnings 7x what they were in 2010 our net adjusted net income 5x where we were in 2010 again that's recognized and even last year was a very difficult monetization environment for us and over this time frame we believe we've shown real leadership across our industry we were the first of our peers to convert from a publicly traded partnership through to a C Corp I expect there are many of you in the room that'll remember that event we think we've shown real leadership in the evolution in terms of financial disclosure and financial measures we had after a very thoughtful review led by Henry kravis in George Roberts you also saw a very methodical smooth transition in day-to-day lead leadership at KKR Joe B and Scott nuttle were named co-presidents in 2017 they subsequently were named co-ceos in 2021 at the same time that Henry and George were names co-executive chairman at KKR and all along the way we repurchased 2 and a half billion of stock at a weighted average purchase price of $27 a share now there are a lot of very familiar faces in the room for those of you who've been alongside of us for all of this journey you seen wonderful performance in our stock price uh you've seen our share price increase from $10 a share at July 15 2020 or excuse me 2010 through to $101 per share as of last Friday that's a 23% annualized total return meaningfully ahead of the S&P 500 and as we think of our performance since our last investor day we actually have two thoughts this first one is actually very important it's simple but it's important because in our view we have demonstrated track record of tell of doing and executing on what we tell you we're going to do so our last invester was in April of 21 that was shortly after we closed on the acquisition of global Atlantic and we reviewed with you a number of growth items that gave us the confidence to introduce a whole series of financial metrics and a whole bunch of guidance items we gave a multi-year fundraising Target we gave guidance on few related earnings earnings per share uh Joe reviewed our infrastructure business he gave an AUM Target for our infrastructure platform and related gave a management fee estimate for our infrastructure platform in terms of all of those metrics we met or exceeded all of those some of those quite meaningfully and importantly that growth and development on those initiatives also helps position us as we look forward and build on all that we accomplished and the second point that you note here is again 2010 in that trajectory when we look relative to where we were in 201 21 we've just seen growth continue to accelerate again at that point at year ends of 2020 we had 250 billion of AUM proformer for Global Atlantic you've seen our AUM increase from 350 to 550 billion of AUM in this three-year period again three years you've seen meaningful growth our management fees more than doubled from a billion four to over $3 billion Fe related earnings almost doubled in the three-year period from 1.3 to $2.4 billion and embedded gains in The Firm which is an important statistic for us as it helps gives a sense for the opportunities that we'll have to see earnings growth from here increase 40% from 9 billion to 12.3 billion again during a period of which we all saw meaningful volatility so in terms of our stock price again since this investor day our stocks increased from $52 per share to 101 we're 2.6x the return of the S&P 500 and the other statistic we find interesting is if you went back to April 21 in a very simple way just looked at a price a PE multiple price to after tax de at that point we were trading at 16.2 times forward after tax de you look at where we are today we're trading at 16.6 times so we've seen wonderful growth we've seen wonderful Equity value creation that has not been driven by multiple expansion and again this gives us confidence as we think about the go forward recognizing both the growth that we think we can deliver looking forward and on top of that the opportunity for our stock in the sector to rate over time in particular as we believe over time will be more relevant to some of the larger indices and so with that I'm very pleased to turn things over to our co-ceos Scott nuttle and Joe Bay and I'm first going to turn the stage over to Scott thanks Craig welcome everybody thanks for joining us today as you heard from Craig we've had a lot of growth since we became a public company and since our last investor day Joe and I want to end this presentation with you understanding this we're just getting started despite all the growth we have a lot of Runway ahead of us and we've only just begun and we think that's true in the near term and the long term let's talk near-term first we expect to raise over 300 billion dollar from 2024 through 2026 called over the next three years that compares to roughly 270 billion dollars that we raised in the last three years and given the investment performance we've had all of the growth that we've seen across the firm and that you're going to hear about today the growth in global Atlantic the opportunity in private wealth we feel very comfortable with this 300 plus billion dollar number and let's go through some Financial metrics targets for 2026 we expect fee related earnings per share to be over $4.50 in 26 that implies a ker of about 20% our last threeyear ker has been about 21% so consistent growth with what we've seen we're introducing a new Target today which is total operating earnings per share this is the most recurring portion of our earnings so this is a new metric for us so think fee related earnings Plus Insurance Plus strategic Holdings operating income we expect that to be over $7 per share by 26 an adjusted net income per share we expect to be in the $7 to8 range and that's a kager of roughly 30% compared to the $34 42 cents we posted last year so we're very comfortable with these numbers and to be really clear we have a lot of visibility on all this this is all coming from what's already happening in the firm and investments in growth we've already made but it's not just the near-term that we're focused on we're not just focused on the next three years the next five years we're focused on years 6 to 15 and Beyond and so we've built KKR to grow EP s for a very long time at very attractive growth rates as I mentioned last year $342 of adjusted net income per share we expect that number will be over $15 per share in 10 years or less and as a reminder we expect approximately 70% of those earnings to be recurring in nature that total operating earnings metric I mentioned on the prior slide so it's not just the near-term it's the midterm and the longterm that we're focused on and we think we've positioned ourselves to be able to make that happen so that's the punchline on where we're going and why we feel like we're just getting started but let's talk about why we have such confidence in the near term it's very clear we can already see it and feel it happening in The Firm these businesses are growing you'll see a number of charts up and to the right today we've got a lot of momentum across everything that we're seeing in The Firm so that the confidence comes from several places the near-term straightforward next 3 to five years is already basically done with Investments we've made and what's already happening Beyond year five we're positioning ourselves and to be able to grow in a Quantum level beyond that and the confidence comes from several places first we're in a high growth industry and we've positioned ourselves where we want to be so the wind is at our back second we've been incredibly purposeful about building a business model that allows us to grow for the long term we have three growth engines to drive recurring earnings they all work together as you'll hear and critically all of this was built to be able to leverage our core strengths as a firm investing Acumen Capital allocation and our collaborative culture when we say Purp built we built this model to be able to leverage the culture that we've built at KKR so all of this gives us a lot of conviction but it requires execution and another main source of confidence in our is our team we have a highly aligned and motivated team as a reminder people at KKR own over 30% of the stock let's talk about the team a bit as you know Henry George and Jerry Colberg founded the firm 48 years ago Joe and I joined about 20 years in so the four of us have been working together for the last 28 years one of the best things about today is you're going to get to see roughly 15 other members of our management team this is a team that's a great combination of experience and Runway if you look at our heads of investing in distribution across The Firm average 15 years with KKR but at the same time most of the team is in their 40s and early 50s we have immense confidence in this team and the people in The Firm and this is the team that wants to build KKR together for the next 10 to 20 years so the point on Runway we expect to be together for a long time but you need both great people and a great culture to drive the scale outcomes that we're talking about driving you can see the Le hand side of this chart these are the Seven Pillars of K's culture this is the culture Henry and George put in place 48 years ago we've kept this basic DNA in The Firm it is the DNA of KKR it it's what drives the place we've been able to retain it as we've gone Global and multi-asset class it allows us to attract best-in-class talent and to be clear we we still run KKR as one firm one p&l one compensation pool it's a we not I place everybody helps each other relationships travel ideas travel Lessons Learned travel it's a critical part of how we generate Alpha that allows us to drive collaboration and we can do more with fewer people across the firm ideas don't just travel people do so people move to different parts of the firm different geographies to start businesses and build new parts of the firm over time it allows us to innovate and as you'll hear it allows us to maximize the impact of our model the bottom line is that our culture really facilitates our strategy and vision it's the critical enabler of KKR and the model we're going to talk about today so now we want to go a bit deeper on three sources of our confidence starting with our industry and markets Joe thank you Scott and thank you all for being here with us this morning so let me start giving you a little bit of context about the industry you know we're really blessed to be operating in what's fundamentally a high growth industry where we're focused on taking leadership positions in the segments of the market that we think have the greatest growth potential not only over the next 5 years but 10 to 20 years as all of you know the alternative Asset Management industry has been growing at a very healthy double-digit rate and it's 15 trillion dollar in size today and we expect that growth to continue into the future roughly $24 trillion by 2028 and that's because there's a lot of very interesting secular and macro Tailwinds driving this growth what Scott and I want to focus on today are four areas where we are purposefully building leadership positions trying to create a competitive Mo around our business in these particular areas let me start with Asia as all of you know the asia-pacific region today is one of the most dynamic parts of the world already the largest economic block globally representing around 60% of global GDP growth and what's interesting for the alt space it is also the geography where alts are the least pated 9% relative to GDP in Asia versus 26% in the US and 16% in Europe and that creates enormous opportunity for us across private Equity Real Estate infrastructure and private credit this is a part of the world where you have 820 million Millennials 12 times the number that we have here in the United States it's a population of 2.2 billion people with a rising middle class very healthy urbanization Trends growing demand for value added services and goods all a great backdrop for us to invest behind we've seen the growth in our own business we started our Asia business back in 2005 so we've been added for almost two decades now our business has grown in The Last 5 Years alone from $18 billion of AUM to $65 billion of a so we're the largest private Equity player in Asia today we're the largest infrastructure player today and we have very rapidly growing real estate and credit Platforms in the region our scale is unmatched in this part of the world we have 570 Executives on the ground across nine Regional Offices so we're highly localized business in this Marketplace and we have $40 billion invested since we started and our success in the region has been well recognized by our peers this past year in 2023 we won for the eth consecutive year large cap manager in Asia within the Asia context there's a really exciting opportunity that is emerging where again we have been building a position to really capture this going forward and that's Japan obviously an enormous economy fourth largest economy in the world second largest savings Market in the world in terms of life and annuity products third largest real estate market in the world and this is a market where we have true leadership ship almost 40% of our capital in Asia is invested in Japan and when you think about the opportunities for us just take private Equity we've generated more Alpha in this market than many other places for a lot of reasons that probably aren't obvious it's low valuations big conglomerate structures with a lot of non-core businesses massive room for operational Improvement in these companies when we buy them and a very low cost of capital and that 9% private Equity penetration in Asia is even lower in the Japanese market today I have two of my partners uh in town today are of Tran and David luboff who co-head our Asia business who are going to share more of this story with you later today we also have Alan Lavine the CEO of global Atlantic will'll talk about the emerging opportunity we see in Japan for insurance the second Mega Trend that we've been building an incredible franchise behind is is the explosive growth in the need for infrastructure investment globally it's estimated that A1 trillion dollar needs to be invested between now and 2040 and that's for a lot of different fundamental macro drivers as the global economy grows especially in areas like Asia and the Emerging Markets there's going to be a tremendous need for traditional infrastructure you think about Transportation roads Bridges utilities industrial infrastructure and social infrastructure like h hospitals this is a growth Market globally but what's new today are two new trends energy transition and decarbonization if the world is to meet its Net Zero emission targets by 2050 we are going to collectively need to invest $7 trillion doll a year between now and 2050 to support the energy transition think about Renewables carbon capture electrification these are all major themes within our infrastructure business and third the digitalization of the world computing power digital connectivity AI it's driving an incredible opportunity set for us in terms of areas like data centers fiber and Towers so when you think about these Mega Trends and how that's impacting our business you just have to look at the last five or six years alone our infrastructure business globally has scaled organic ly from $13 billion in 2018 to $59 billion today it's our Flagship Global infoproduct it's our recent leadership in Asia in infrastructure our core infrastructure business and most recently our climate fund that we're raising for the first time and again our platform globally in infrastructure is well recognized for its leadership and its leadership in the most important areas in Asia in energy transition in and digital transformation Scott back over to you great the third Mega theme we want to talk about really is back to the comment I made about having a lot of wind at our back it's quite literally demographics this chart shows you people aged 65 and up around the world it's sused to double between now and 2050 but look at the right hand side of the chart this is just us pensioners data the beginning of this chart is about when KKR was founded we've been around since 1976 you can see at that time roughly 40 million pensioners in the United States at that time 75% of them were in defined benefit plans you can see on the chart it's grown to 100 million from the 40 million the 75% has dropped to 12% over that period of time the combination of the leftand and right hand sides of this chart are incredibly powerful for our business we expect this to continue this drives both our insurance and our private wealth businesses so let's start with insurance this is annuity issuance in the US in 2020 as a reminder we announced the global Atlantic acquisition in summer of 2020 so it gives you a sense of where we were this is where we were last year indivi individuals managing more of their own retirement wealth investing more of in annuities and a higher rate environment we think this opportunity is immense in the United States but as you'll hear and Joe mentioned it's significant in places like Japan as well where we see a lot of growth but it's not just an insurance this private wealth opportunity that we've talked about for a while is also benefiting meaningfully from this theme here's some data here's how we look at it internally if you look at Global wealth so combine institutional and individuals you can see it's roughly 337 trillion in 2022 and roughly 60% of that is in the hands of individuals estimates are that today or in 22 anyway 2% of that was in private wealth alts so call that $4 trillion Now by 2027 the 337 trillion is expected to grow by about hundred trillion dollar in global wealth and the 2% is expected to go to 6% that means the four becomes 15 trillion said simply it's an 11 trillion growth opportunity for Alternatives and if if you think back to the chart that Joe showed before all of alts today is roughly 15 trillion so this is a significant opportunity we expect a significant portion of the share of that 11 trillion to go to scale players with brand and product and the team to be able to get after it we think we're really well positioned to be a winner here and we've built multiple ways to benefit as this theme plays out Global Atlantic on the life and and annuity side K series that's the term we use for our private wealth Suite so the four main product areas of KKR each in this private wealth Evergreen format we have a direct team that calls on family office and Ultra highet worth and we've been focused on ease of access traditional funds Perpetual funds co-invest basically making it easy for people to invest with us individually around the world and across our product set so a lot of ways to grow around this theme but let me give you a quick update on our case Series this is that private wealth Suite I mentioned it's early days a bunch of these products we launched just last year we're coming up on the first anniversary of our private wealth launch we wanted to share the most recent data so you can see end of 22 2.3 billion last year we raised about $4 billion and think of that as getting on more platforms launching private equity and infrastructure just getting going in different parts of the world if you look at what we've done year-to date $2.8 billion so to be clear that includes the first quarter and the April 1 subscription date but we're seeing the momentum pick up so the 2.3 has gone to about $9 billion in a very short period of time and we're seeing increased momentum and critically the thesis that I laid out that we're really well positioned to win is playing out in the market the brand matters 48 years of experience matters as is the fact we've invested a lot in product and team and we're across multiple different asset classes so we're really well positioned to win here against that 11 trillion opportunity the fourth Mega theme we want to hit on is that the provision of Global Credit has changed since the financial crisis you're going to hear later from my partner Chris Sheldon who runs our credit business about this in more detail so I'm going to hit this slly but A lot's been written about the fact that there's been a structural shift in some parts of credit away from the traditional banking model but it's created a massive opportunity for firms like ours there's a desire for investors to have more risk adjusted spread issuers want to have more certainty of execution they want tailored terms what that's Meant For Us is a meaningful change in the opportunity that we have Global Credit Market is a $40 trillion market and growing very rapidly we've listed on the right hand side a lot of the places that we participate but let's just pick one asset-based Finance these these areas are very very large this is A5 trillion doll market today it is larger than the direct lending Market leverage loan and high yield markets combined it's expected to go to 8 trillion by 2027 significant growth opportunity and very few scale players in this space of which we're one but I could give examples like that for each of the line items on the right we're seeing an immense opportunity here and what that's Meant For Us is a step function change in what our credit business can be in partnership with global Atlantic and just share some charts so this is our total credit AUM up three times in less than four years leverage credit three times direct lending two times asset-based Finance eight times real estate credit 10 times so this theme is driving a lot of growth across our credit platforms at KKR both corporate and real estate and it's made us a better partner to third party insurers so this is what's happened with our third party Insurance AUM it's also doubled over this less than fouryear period and with global Atlantic we're extraordinarily well positioned to keep winning here and keep seeing a lot of growth now we could have talked about 10 more themes we hit four but we have a lot of these themes globally that are benefiting us and so hopefully it gives you a sense for where that first pillar of our confidence comes from but let's pivot to our second big source of confidence which is our business model as I mentioned the next 3 to 5 years we already taken care of from growth we already see inside The Firm Investments we've already made but what we're focused on is not just the next 5 years we're focused on the next 20 so we've been incredibly purposeful about building our business model and so we want to share a little bit of background about how we got to the model that we're going to talk to you about today so as you've seen we've grown meaningfully AUM has grown a lot our market cap has gone from 7 billion to 90 and we think a lot of that growth in our value has come from our asset management business growing AUM diversifying The Firm but we've spent a lot of time on the fact that our job is quite different from here we believe we're going to have a lot of growth in asset management but we're going to need other ways to grow to be able to keep compounding at the level that we like and that's what we've been putting in place for the last many years and we talk a lot about firm how are we going to double again and then double again and as you saw young management team ideally be able to work together and double again and so we've looked at what we can learn from others in terms of how they've grown from size like ours today so it's just some interesting data I want to tell you a little bit of what we've been looking at inside the firm there's roughly 4,900 public companies across the New York Stock Exchange in NASDAQ 4550 of them give or take have a market cap less than $25 billion roughly 360 have a market cap more than $25 billion this is where we are roughly $90 billion this is where we want to go 200 plus so we've been studying what can we learn from companies that get above a certain size that we can apply to our business as we think out beyond the next five plus years and we have a few observations to share with you once companies especially financial services companies get to $50 billion market cap their stock performance suffers investor returns become more anemic their growth slows and it's not just that there risks to scaling right because you get incented to get into more businesses maybe those further from your core competency you add a lot of people when you add a lot of people you get siloed people start working not for the overall firm but maybe for the group they're in Risk Management suffers and we've all seen what happens on the back of that and that's part of the reason that you've seen returns become anemic but there are firms that have managed to grow in compound into the hundreds of billions of market cap and there are things you can learn from them you can see it on the slide there's an ability to permanently own and compound earnings a lot of them been able to do that they have recurring revenue and high market share businesses they're good organic and inorganic growth and critically they're great at Capital allocation and so we've been looking at what we can learn from those companies and those are the some of the things that we've learned and the answer for us in terms of how do we get this right is this model on the slide it's been intentionally created so that we can scale our market cap into the hundreds of billions of dollars and keep growing at very attractive annual growth rates and critically keep our culture while we do all that and so we're going to talk a lot today about these three growth engines and what you'll hear is they all work together they feed each other they feed off each other and this model gives us a lot of conviction in scaling our net income to that 15 plus dollars per share we mentioned earlier and part of the reason that we did this is we wanted to make sure we had a bigger addressable Market to go after to use our capability set so 2018 investor day we might have talked about Alternatives as a$1 trillion market today that's 15 trillion give or take if it was just that as our addressable Market the ability to compound into hundreds of billions would be much more difficult but with adding core and core Plus real estate strategies and infrastructure strategies we've more than doubled that addressable Market with global Atlantic we've added this 40 trillion corporate credit opportunity that is significantly expanded what we can do and with strategic Holdings we think we're pretty unconstrained so when you put all that together we have a dramatically expanded total addressable market for KKR and we've built this model that I mentioned to be able to get after that addressable market and scale without a lot of constraints with very few people at KKR relative to the impact that we can have so what you're going to hear over the course of dayto day is what we expect from these three growth engines we got multiple paths in a and asset management to surpass a trillion dollars in the next 5 years we believe despite all the growth we can double Global Atlantic again and strategic Holdings we expect more than a billion dollars of annual operating earnings by 2030 so that's what you're going to hear from Joe and me for a bit now is we're going to Pivot to each of these engines and why are we so comfortable with the words on that slide Joe so let me start with Asset Management this is the segment of our business that you all in this room probably know the best it's what KK has been doing for nearly five decades and our Founders Henry kravis and George Roberts were truly Pioneers in this industry building the private Equity industry in the 60s and 70s we've obviously expanded and diversified our investment platform meaningfully since then but very few firms out there that have this track record and this level of experience investing in the alt space we are truly a global firm today and we manage a little over $550 billion so in the last 15 years alone when you just focus on Asset Management we've seen significant scaling of our business from around $62 billion back in 2010 to $553 billion today roughly an 18% kager in this segment that growth has come obviously from Geographic diversification as well as product diversification so if you look at that $553 billion today it's well Diversified across different segments of the alts where we're we're working to be a top three player in everything we do it really takes four things in our minds to be a winner in the alt space as an asset manager it all starts and ends with team and human capital Scott's talked a lot about that already this morning we are blessed to have a team of 2700 people at KKR across 25 different offices and with the addition of global Atlantic another 1500 Executives joining us it also takes incredibly distinctive and unique origination capabilities to grow a platform like this over the last 50 years we've built a lot of Industry specialization a lot of localization in different markets around the world incredible networks of of relationships in different Industries with CEOs with management teams with boards to make sure we are a partner of choice a trusted partner when they have something important to do either transactionally or from a financing standpoint we've complimented our internal capabilities oops can we go back one slide with a number of external platforms we'll give you two examples so in the asset-based finance space and in real estate we have 35 bespoke platforms around origination and servicing as you think about the different types of credit and the different types of real estate that we're seeking to pursue the third thing you really need to have in the asset management industry is a differentiated Playbook on how you create value once you make these investment many of these Investments are very long term 3 5 7 10 years in time and our job is not just to deploy capital but to create value in these businesses and Investments consistently once we are the owner or the investor and over the last 20 years we've had to build different capabilities to make sure we maintain that Competitive Edge I'll just touch on a couple here you're can hear a lot more about this from my partners during the course of the morning Kare Global Institute it's run by my partner General David Petraeus and his team advises each of our industry teams our deal teams and Country teams around geopolitical risk that is an incredibly important skill set and perspective to have if you're a global investor today it's not just us China relationships but government risk trade risk anywhere in the world a highly integrated part of the firm today KKR Capstone it's a business and a capability we started building 20 years ago this is our in-house operations team over a 100 Executives that work hand in glove with our management teams and our deal teams around operational value Creation in their companies sourcing Tech implementation sales and marketing effic uh Effectiveness again you're going to hear a lot about that during the course of the day and then Adam Smith my partner is here to talk about KKR Capital markets a business we started building 15 years ago to really Source the most efficient capital for our companies's debt and Equity so in tough financing markets we still have that edge that we can get transactions done Finance them Flex L with the most attractive cost of capital and it's not just for today KKR transactions but it's for third party transactions and fourth you need incredibly strong distribution capabilities to grow a business like Asset Management we've made an outsized investment recently in this area in the last 5 years we have tripled our headcount in our distribution platform to nearly 300 Executives at KKR that is both in the institutional space as well well as in the private wealth space more recently so as we enter this super cycle of fundraising which I'll talk about in a little bit we are a better position than ever with the right resources the right coverage across both the institutional and the private wealth sectors you know Craig Larson stole the slide for me early this morning it's one of my favorite slides when you put those four pieces together this is result you generate attractive consistent Alpha and performance for your partners and that's particularly important relative to the public benchmarks that we get measured and with performance it gives you the right to scale it gives you the right to continue growing if you look at what we've done in the last 3 to four years since 2020 our private Equity business has doubled in size organically our infrastructure platform has tripled in size our credit business has tripled in size and our real estate business the youngest of our platforms has grown 5x since 2020 but I don't want to confuse people we're not in the business of asset Gathering that's not what we do we only want to compete as KKR in segments with large end markets where we legitimately have the conviction and the right to win and be a top three player in that segment there are plenty of areas within the alt industry that we do not participate in today because it does not fit these criteria and to be a top three player it takes time this is not something you do overnight in our experience it takes 10 plus years to truly scale a business and get the financial uh benefits of that scale so let me walk you through a couple of examples infrastructure is a great case study for us it's a business we started to build around 12 13 years ago from a pretty low base as you can see in 2011 we had around $2 billion of AUM it was a firsttime fund we were building the team it was primarily a us and European business at that time with a$1 billion fund over time as we've invested Capital well return Capital to our investors we earned the right to raise fund two which was $3 billion in size then fund three which was even bigger and fund four we also earned the right to build adjacent strategies our Asia real uh infrastructure business our core infrastructure business and most recently climate so infrastructure has gone from two billion of AUM back in 2011 to 59 billion of AUM today but that scaling that INF inflection point was really around years 9 101 you can see a very similar uh fact pattern with credit a business again in 20 2004 we were just a billion in a versus close to $220 billion today in the last three years we clearly had the benefit of the global Atlantic acquisition giving us a much bigger presence in the marketplace but you can see we've also Diversified the product set that we're offering across leverage Credit asset-based Finance direct lending Etc but a meaningful scaling opportunity over the long term in real estate we're just getting started on this journey a little over the 10 year anniversary but you're seeing the benefits of scale kick into our real estate business this business today is roughly 50% equity and 50% debt and even in private Equity the business that we have been in for nearly five decades we have doubled the size of this business organically in The Last 5 Years it's scaling our Flagship products it's incubating and growing newer growth Equity Funds that are now into fund two format it's launch ing our first-time mid-market fund here in the United States and building the largest core private Equity business in the world so when you think about KKR one way to think about our asset management business is we've been very busy over the last 10 to 15 years setting up these platforms and these strategies are a different stages of development some are early stage in fund one some are developing moving from fund one to fund two two some are maturing from fund two to fund three and ultimately you reach that escape velocity and hit scale so we have over 40 strategies in the asset management space at KKR only six of those strategies today have reached the scale so what we get excited about is not what we accomplished over the last 5 years but what we think we can accomplish organically in Asset Management over the next 5 to 10 years only 50% of our a today has hit that scale and 80% of our strategies are yet uh to hit that scale point so we have a lot of line of sight to growth in the next 12 to 18 months we're going to have 30 different strategies at KKR in the market raising Capital including many of our Flagship funds in US private equity and Global infrastructure which is why we have so much confidence when we say we know we can uh surpass a trillion dollar a mark in the next 5 years in many ways the next 5 years is going to be a lot easier for us to double than the prior 5 years when we're building these new platforms when we're hiring teams and trying to scale the business from early stage to developing to mature we've got a lot of visibility here and a lot of confidence we can get to this number thank you great let's flip to insurance so we announced the global Atlantic acquisition in the summer of 2020 at that time GA had $72 billion of invested assets this is what's happened since assets have grown by roughly $100 billion just shy of 100 billion or a 28% ker over that period of time and that's really happened and candidly it's been faster than we expected because of the symbiotic relationship between KKR and Global Atlantic it creates a virtuous growth cycle and the way this works is kare's investment origination has allowed GA to grow faster so if you look at the left hand side of the slide you can see 2018 to 2020 so before we showed up Global Atlantics was originating $17 billion or so a year last three years 36 so a double but at the same time GA growth has scaled KKR investing businesses multiple of them this is just direct lending asset-based finance and real estate credit you can see first quarter of 2020 right before we announced the ga deal $28 billion across the three it's now $122 billion so back to this symbiotic relationship this virtuous growth cycle it is showing up at scale in our numbers but the multiplier effect we get from GA is really important to understand I mentioned that our businesses our business model they feed each other and they feed off each other this is a great example of that so when GA grows multiple things happen we get more Insurance operating earnings that that shows up in that toe metric we mentioned but we also get more fee related earnings because our management fee goes up because we're managing the assets for GA but it's not just that we think insurance is emerging as a third party asset class so when we do these bigger block transactions at Global Atlantic we'll often have third parties alongside we have created a fund complex called Ivy think of that as third party fund like any other KKR fund that pays us fees and carry we believe that will continue to scale meaningfully we're on iv2 we're going to be raising iv3 here before too long you will continue to see that grow so and we've done a bunch of these block deals recently 75% of the capital is coming from third parties including IV so it shows up in our asset management business through IV and through the F from the management feas but it's not just that right we have more deal flow that's allowed us to scale third party Capital faster especially in areas like asset based finance and we think there's a very meaningful Capital markets transaction opportunity here in terms of the fees that we can generate together with GA so the multiplier effect is very meaningful for us and all of this increases the stability visibility scale and diversification of our earnings and gives us a lot of the confidence you're hearing in our voices today but part of the reason we're so confident about the go forward is everything that I just talked about we did with us owning 63% of global Atlantic as of January 2nd this year we own 100% so in our first few years together we found several ways to grow together that we couldn't get after with thirdparty clients alongside so at 100% we're able to get after those opportunities and they're meaningful we think there's more that we can be doing across the rest of KKR is investing businesses infrastructure is just one good example distribution think Global Atlantic Salesforce selling kare's private wealth products KKR Salesforce helping to scale IV faster Capital markets we think is a several hundred million dollars a year opportunity in fees for our KCM business and then Asia and Europe GA historically largely us we think there's a real opportunity to take G truly Global and be consistent with kkr's footprint and that's why we have such strong conviction that despite the roughly hundred billion do of growth we can double GA again from here let me pass it back to Joe to hit strategic Holdings thanks we'll finish our segment this morning talking about strategic Holdings and then I'll wrap up so many of you know strategic Holdings is our newest segment we introduced a segment last November on the earnings call to really talk about a business that we've been incubating for the last 78 years before I jump into the details let me just share one high Lev observation so when you look at the market cap and the valuation of all publicly listed asset managers both traditional asset managers and the alt space that's roughly $875 billion today when you look at the market cap of Berkshire hathway today it's a little over $900 billion you know when Scott and I joined KKR back in 1996 The Berkshire pathway market cap was $41 billion so over 28 years they've compounded around 12% and grown their business to obviously a tremendous size so there's a real learning in here the learning is about the power of long duration ownership of great businesses the learning is about the power of compounding and the learning is about the power of smart strategic Capital allocation and when you cut through it all that's what we're trying to build in our strategic Holdings segment today so what is strategic Holdings what we have in strategic Holdings today is our core private Equity uh business the equity interests that are directly owned by KKR we are looking to build a portfolio of great businesses globally that we expect to hold long duration 10 15 20 years businesses with great management teams defensive businesses with great cash flows and margins businesses that have real competitiveness in the sectors in which they operate and businesses that we control today we have a portfolio of 19 companies that we've assembled and invested behind over the last eight years some great businesses like 1 1800 contacts ERM the largest environmental consulting firm in the world USI one of the best brokerage firms in the insurance segment and this portfolio is very well Diversified within the sectors at KKR that our private Equity teams have great industry expertise and thematic investment strategies so when you look at our lookth through ownership again on average we own 20% directly as KKR of these companies the like for like growth in revenues has delivered exactly what we were hoping for consistent durable growth on the top line 16% since we started the strategy roughly $3.3 billion on a lookr basis and on an EA basis similarly 16% compounded annual likeforlike growth in the profitabilities of these companies our lookth through ownership is around $800 million today and the consistency of earnings I think is particularly interesting when you think about the volatility we've just lived through in the last three or four years this is through covid this is through an extreme macro cycle with inflation and interest rates these businesses are resilient they're durable they defensive and growing so why did we introduce this segment just last November when you think about how we built this portfolio they started off as control buyouts they're growing at a nice clip but they're also deleveraging their balance sheets materially year over-year so we have companies eight years old in the portfolio we have companies just one year old in the portfolio the more mature portfolios have obviously delived their balance sheet pretty materially and these companies are starting to pay after tax dividends to shareholders including KKR for our direct ownership stake so last year in 2023 this was a relatively di minimist number right we generated 15 million in dividends last year on an after tax basis out of this portfolio by 2026 we think that's going to grow to over 300 million dividends by 2028 600 million in dividends and as Scott mentioned by 2030 line a sight to over a billion dollars annually of operating income from this segment this is incredibly predictable recurring cash flows in our strategic holding segment so how do we think about valuing this part of our business there's one very simple framework I want to walk you through today which we think is actually quite conservative but here we go you take the dividend stream that we talked about 300 doubling to 600 growing to a billion dollar by 2030 and you simply apply the free cash flow yield of the S&P 500 of 3 and a half% what that would result in is that by 2026 a valuation of $8.6 billion or roughly $10 a share by 2028 $20 a share and by 2030 $30 per share those are meaningful numbers in the context of roughly a $100 per share stock price today for KKR but we think this framework meaningfully undervalues this segment of our business and part of it is the implied EV to eida valuation at those same levels would imply that our portfolio is worth somewhere between 10 to 16 times iida over time a meaningful discount to the S&P 500 which trades at 21 times today I would argue that this portfolio 19 companies that we put together is a better portfolio than the broader S&P 500 more durable more growth ability to deliver greater after tax dividends at a faster rate over time so again we're super excited about this part this new segment that we've introduced uh at KKR as the third pillar of our model so maybe I could wrap up just trying to summarize many of the messages and uh uh themes that we talked about today today you know we really have a lot of excitement our entire management team at KKR about the future we've had a lot of growth historically and we've planted the seeds and built the platforms for sustainable growth for not only the next 5 years for the next 10 15 20 years in Asset Management again a very clear path to getting to a trillion dollars of AUM in the next 5 years an ability to double Global Atlantic again and this new a segment creating tremendous value for all of us in this room driving this operating earnings out of strategic Holdings to north of a billion by 2030 as we do that the financial implications are significant our after tax net income We Believe will be growing from $342 last year to north of $15 per share within the next 10 years and importantly those three growth engines totaling up the total operating earnings will drive 70% of pre-tax earnings so stable predictable growing cash flows so let me end where we started the future we believe is very bright for KKR over an extended period of time we're blessed to be in a high growth industry and we have leadership positions in the most important growth segments within the alt space today we've purposefully built this model with these three growth engines to drive compounding of earnings and free cash flow in our business over time and it is leveraging what we're already very good at our investing capabilities Capital allocation and the culture that Scott talked about that really ties all of this together so thank you again for coming today we've got a great day ahead for you and let me turn it now over to my partners Nate and Pete who are the global heads of our private Equity business thank you very much okay good morning my name is Pete stavas I'm our uh co-head of global private Equity at KKR together with my longtime colleague and good friend Nate Taylor Nate and I joined the firm in 2005 in fact about two weeks from one another prior to our current roles as co-heads of global PE we ran our America's private Equity business together we'd like to take just about 25 minutes and walk you through our private Equity franchis just kind of Baseline you on what we've got today our performance all of our different funds our strategy and we're going to talk importantly about our growth where we've been and where we think we're headed in private equity the key takeaways from our perspective are first of all we are the most tenured private Equity franchise in the world however we continue to grow you saw this from Scott and Joe's slides sometimes private Equity within our firm can be called the the mature business and Nate and I always scratch our heads at that and we'll show you some data around how we've continued to grow and we've growed by scaling everything we've got and we continue to do that we've got some newer strategies that are still scaling and we continue to scale our our Flagship funds as well and we've expanded into and continue to expand into synergistic adjacencies new strategies that make us better investors and are important opportunities in their own right and this is all enabled as Scott and Joe said by performance our performance in private Equity has been outstanding for decades through Cycles across geographies and across product strategies and our strategy is pretty simple it's it's really based on what Jo and Scott talked about finding good companies that are fundamentally sound and making them great that's what we're good at then that's at the asset level so at the level of the individual investment then at the portfolio level we work with Henry mcve and and the macro team and we optimize the overall construction of the portfolio so we figure out how to minimize risk without sacrificing any return and lastly I'd note we aspire to be the most globally connected private Equity Firm in the world both within our private Equity franchise meaning across geographies and funds and then how we interface with the firm and this is not just a culturally aligned you know nice thing to do this delivers better outcomes the way we operate actually creates value and we'll give you a bunch of examples of that so quick snapshot we've got within Global private Equity today $176 billion of assets we are responsible for more than 230 companies and8 50,000 employees that is a massive responsibility that we take very seriously Nate's going to talk to you about efforts we've got underway around Workforce Development and employee engagement and employee ownership and teaching financial literacy and really changing the cultures of our businesses with a human capital orientation now again despite how long we've been at this and the scale at which we're operating we are still growing as Joe said we've doubled our AUM this is all organic so since 2018 we've gone from 81 billion of AUM to 176 billion and then looking forward when you think about how many strategies how many strategies are still scaling the fact that our flagships are going to go on our next Super Cycle uh fundraising effort core private Equity the K series which was only briefly touched on by Scott and Joe you hear more about it from Alisa that's our democratized uh product strategies there's so much yet to come in private Equity the best years for this business are definitely ahead of us before passing it over to Nate I'm just going to touch on each of our three businesses so we've got traditional PE we've got core and then we've got our growth Equity business traditional PE think of this as mainly our Flagship Regional funds across us Asia and Europe you can see in the lower left we continue to grow Even in our Flagship strategies and the the growth is not going to be linear because we have a as we say a super cycle of fundraising across our flagships every four or five years and that's when we get our big step UPS in AUM and in the lower right again this is all enabled by outstanding performance our performance has been exceptional for decades and our recent performance parallel some of our really early outstanding funds in the 70s and 80s and in the top right we've got a lot of dry powder we'll talk more about this but one of the mistakes that has been made in private equity in recent years was over deploying right before rates went up and multiples came down and we avoided that thanks in large part to the work we've done with Henry and uh and our macro team we've got an enormous focus on linearly deploying a fund and removing vintage risk and that's put us in really good stead and we'll show you some more data on that okay core PE I think the only incremental thing I would add to what Joe mentioned is how our culture enabled this so we've now got $35 billion of AUM we did not add a single increment person that has to do with how we run our firm and how we run private Equity as one integrated entity Joe touched on the performance of our 19 Investments that's going to allow us to continue to grow this franchise our culture also has enabled our expansion into adjacencies it helps us because we can leverage our relationships our toolkits our playbooks all of our resources when you think about Capital markets and and Capstone and our fundraising machine all of these new businesses ride on that infrastructure it's what in large part why these have been so successful again it's enabled by the culture so this page shows you our Healthcare growth franchise our Tech growth franchise and impact as Joe and Scott mentioned we've also just launched a new strategy in the Middle Market you can see here we've got 18 billion of AUM and growing and the performance in the the top right has been outstanding here again so Pete and I are investors just like everybody in this room and we sit through presentations like this and we ask ourselves in particular when we're looking at a company and trying to decide whether or not we want to invest do they have a recipe for Success do they have a formula that can produce consistent repeatable results over time so we think we have exactly that inside of our KKR private Equity business and while it's simple to articulate it relies on Decades of experience and a really collaborative and unique culture first and foremost it's about growth it's about taking this leading franchise that Pete was just talking about and adding to its scale and its scope next it's about performance it's taking that strong track record and continuing to build upon it through a focus on asset selection value creation and portfolio construction disciplines and then finally it's about integration you heard a lot about this from Joe and Scott but this is fundamental collaboration inside of private equity and around the firm so I'm going to start by double clicking on the growth portion of this algorithm that we talked about and again you you heard it from Pete it's a bit of a sensitive subject for us but uh while we may be in almost 50y old business this is still a growth engine for the firm so on the left hand side of the page we're looking at Flagship private Equity AUM so Flagship that is our most mature strategy inside of private equity and over the last eight years it doubled so tremendous growth for a mature business and as you know it's a great business as well highly profitable so a lot of that growth drops to the bottom line the nice thing is the p&l impact of all these bigger funds is still yet to be fully felt the management fees obviously immediately step up but the carry is still largely on the come and as Pete referenced we're getting ready to start this cycle all over again as we Embark upon our next Flagship fundraising super cycle the other great thing about the flagship strategies is that they've helped spawn new strategies inside of private Equity as well so today we're managing $60 billion of capital from stre from 7 strategies that didn't even exist in 2015 so to say that another way these seven strategies these new strategies didn't exist in 2015 on a standalone basis would be one of the largest private Equity firms in the world really speaks to the power of growth inside of this business and it's been done in a really synergistic way most of the leadership of these new strategies came from our Flagship private Equity strategies and that's good for two reasons keeps our teams motiv ated energized stretch opportunities for them and it ensures quality as we extend into these new strategies we're at a really interesting moment with the new strategies um Pete alluded to it uh as did Joe and Scott but we're well past the proof of concept phase with with these strategies so if you look at next Generation Tech healthc care strategic growth and Global impact we've moved on from fund one to fund two with some meaningful scaling and again management fees have stepped up but the carry from those second and third generation funds is still largely on the come Pete referenced uh what we're doing in the Middle Market one of our newest strategies Middle Market America we're calling it ascendant we're right in the middle of fundraising so we're a little bit limited on what we can say but Pete and I are really excited about this um we're heartened by the demand we're getting from potential investors and as importantly we're really excited by all the opportunity we we're finding to deploy this Capital so ascendant a great reminder of what we can do and how much growth is available to us inside of private Equity so uh brand new strategy large addressable Market a place where we think we have a a real right to win and again being done in a highly synergistic way we're leveraging our existing teams our existing intellectual property we're deal sourcing together creating value from playbooks that we've used across the firm we've done that in core private Equity we've done that with ascendant you'll hear more about the cas series and how again it continues to rely upon everything that we already do same thing with our single name continuation Vehicles all great proof that there's tremendous growth in our private Equity business in AUM management fees and carry and that we can do all of this in a way that is consistent with the high standards that you've come to expect from us okay so let's talk about performance as we've said multiple times that really enables our growth so the strategy in private equity which Henry and George set up many years ago is taking good companies and making them great the question Henry still asks us today and we talked about with George yesterday every time we go to investment committee their question is what are we going to do with this why should we own this what are we going to make that someone else is not seeing or hasn't already done and so we've got a whole process for first of all how we find these fundamentally solid businesses that are not optimized so we have an entire process around that and then we've got an enormous set of resources which I'll talk about in a second which helps us identify the Improvement opportunity and then get after it the recipe each time we do this is bespoke but we tend to look in the same places so we're looking for opportunities to top grade Talent grow through m&a take margins up unlock new vectors for growth strategically reposition a business in that kind of menu Nate and I and our teams pick through each time we're looking at an investment and ask ourselves the the Henry and George question of what are we going to do with this how can we make this something totally different than what exists today and the way we do that relies on a tremendous number of colleagues around the firm so we have 600 Executives who make our investors more efficient and they help them make better decisions and get better outcomes Joe briefly touched on Kare Capital markets let me try to bring that to life a little bit for you from an investor perspective so day-to-day our investment team 20 years ago they would have to raise all the debt financing any debt repricing they'd be on the hook for any dividend Recaps if we went public they were driving it secondary trades block trades and on and on and on first of all our investors are not world class at that we dabble in the Capital Market our Capital markets team this is what they do so they get better outcomes and think of all the work that they're taking off of the plates of our investment teams we don't have to worry about any of this stuff it's in the hands of worldclass professionals who are going to get better outcomes than we could get last thing I'll say on this page is we are constantly innovating here we are always adding new resources and finding new ways to make our companies better inside a Capstone right now we're building out what we're calling the human capital Center of Excellence this will be the Clearing House for Best Practices around Employee Engagement teaching financial literacy how to really create an ownership culture not just hand out stock but change the culture of the company and make employees less likely to quit happier on the job and Nate's going to talk uh about what we do there and how it delivers real impact okay it's one thing for us to tell you about all these resources and all these strategies but the proof is in the pudding and we've just shared with you here four recent exits and keep in mind the scale at which we're operating there just are not that many 6X deals 7x deals 10x deals at our scale also keep in mind we are often buying these from professional investors these some of these businesses had been owned by private Equity not once not twice but three times before us and then we go off and make 10 times our money so clearly KKR is doing something different and it's all about this opportunity and this ability to identify these unloved assets that are not optimized but are fundamentally sound we are not buying broken broken businesses okay so that's what we do on the asset individual asset side now at the portfolio level again working with and this is something Henry McVey brought to our firm a number of years ago which was to figure out how you construct a private Equity portfolio and minimize risk and honestly having many of us have worked at other private Equity firms there's not a lot of thought at the portfolio level what bubbles up from the industry groups people buy at our firm we've got a really sophisticated group of brilliant people who are sitting down with all of our strategies and figuring out how to minimize risk without sacrificing any return and that has to do with lots of things from position sizing sector diversification looking inside of a fund for hidden correlations between assets but this is a key one this linear deployment concept what you've got here on the Y AIS is the percentage of a fund deployed and on the x-axis time measured in months so 60 months would be five years and then the straight lines show you fouryear and fiveyear perfect linear pacing and you can see how religiously we follow this of course it's going to bump around a bit but we always want to stay in this range and it's because no one can time the market no one can sit there and say Now's the Time to invest now is the time to really dive into software or avoid Industrials the landscape is littered with people who have tried to make money that way Henry's model here is hey remove vintage risk and then outperform based on the assets you're selecting and what you're doing with them and that's what we're trying to accomplish here we have that same mindset around returning Capital don't try and time the market no one's that smart when you've accomplished 80% of what you came to do with a business as long as the markets are orderly head for the exits that's going to hold you in really good stead with your investors because you are going to you know continuously return capital and as you can see here return more Capital than you're taking in and if we were to show you the years prior to 2017 this has been a very steady stream of returning more than we take in so what do all this add up to our strategy our resources it adds up to outstanding performance across Cycles across geographies across individual strategies and you can see some of our recent performance again it Rivals the 70s and 80s and what the firm was able to accomplish this is not about a couple of brilliant investors this is about a firm with massive massive resources and a globally connected franchise that has figured out how to apply process to investing and deliver repeatable results Okay so we've talked about the growth and performance part of this uh recipe for Success this algorithm I'm going to wrap up by talking about the integration piece of it and collaboration and how important that is inside of private equity and around the firm again you heard Pete talk about it Joe and Scott talk about it this is fundamental to who we are as a business so when Pete and I took over us private Equity six seven years ago this was a big point of emphasis for us we go to market in US private Equity with seven vertical teams you can see them in the center of this page and they're great teams great people great track records great resources that they bring to bear but they were largely operating in silos they weren't really collaborating as much as they could have on the left hand side of the page you can see five examples of how these teams went to Market together uh at least two vertical teams sourced ing a deal together executing a deal together creating value in that deal together and these are five examples but to be honest this is pretty much just standard operating procedure inside of America's private Equity at this point and rest assured this says a lot easier than it does uh it takes great people it takes this collaborative culture that we're talking about and it takes years of trial and error to get this right which is exciting because we've invested that time in energy and for us it's a real competitive advantage that we're going to continue relying upon specifically we've taken the same concept of collaboration and extended it across private Equity strategy so on the right hand side of the page you can see examples of this so 123 dentist is an interesting one um it is an ascendant investment but it was facilitated by a core investment that we already had in a business called Heartland dentl and it really is a virtuous circle here so Harland created the proprietary angle to go find this investment for ascendant but one two three Dennis is more of an attacker brand so there's lots that we can learn from that business and Port back over to our core portfolio we're taking the same idea around the globe so Pete and I have been leaning into this idea of global collaboration us Asia and Europe over the last year and have lots of early signs of success there's going to be big wins from getting our teams even more tightly integrated than they already are and once again we believe this is something that our competition is largely not even attempting so when we get this right it's going to really distance us even further from the pack collaboration within private Equity is important to us but it's also fundamental around the firm so given the size and scale of our private Equity business there's almost no part other part of KKR that private Equity doesn't touch and it really is a a virtuous cycle so Pete I think did a nice job talking about KKR Capital markets KKR private Equity had the size and scale to help that business get going but today KR Capital markets is incredibly important to us in continuing to sustain this leading private Equity franchise we have so one of our our favorite examples or ways of talking about this integration or collaboration around the firm is how we share best practices and specifically how we share best practices with respect to Value creation plans um Pete touched on it but it really is so fundamental and a really important part of differentiation for KR private Equity this idea of value creation and there is certainly nothing more differentiated in our value creation Playbook than broad-based employee ownership so my buddy Pete here has been working on this idea for literally most of his adult life he incubated it inside of our America's private Equity Industrials portfolio and you can see that on the Le hand side of the page a bunch of us myself included were really impressed with what Pete was doing and intrigued about whether or not we could Port it over into other Industries so we invested time and energy to do that fast forward to today and quite frankly for the last two to three years every control investment that we're making in America's private Equity has a broad-based employee ownership program we're now extending that globally and frankly Beyond just private Equity so what exactly is broad-based employee ownership we have a lot of great content on our Kar website so for those of you who are interested I I would encourage you to poke around a little bit more here but for today we're going to use a case study so ingersol ran was a Industrials investment that Pete and our us Industrials team made and like Pete was talking about this was a solid business but one that we thought we could make a lot better specifically we thought we could do a lot with the way they engaged with employees so we rolled out a broad-based employee ownership plan so what does that mean it certainly means that all employees participate in the equity Equity value creation Journey but it also means we're investing in uh measurement in communication in engaging with our employees and educating them on how individual actions can affect overall Equity value creation and the results which you can see on this page they they speak for themselves so we took Employee Engagement from a pretty dismal 20th per to an industry leading 90% that in turn drove quit rate from 20% down to less than 3% so to make that tangible thousands of employees were retained every year that would have otherwise had to have been hired and trained at Great expense to the company that in turn drove operational value creation more than a thousand basis points of margin expansion during our hold period that in turn drove a great investment 4.2 times gross multiple of invested Capital so a great outcome for our investors a great outcome for the management team and importantly a great outcome for all 16,000 non-management employees where over $750 million of wealth was created the great thing is this is not just an isolated example this is our way of doing business today so on the Le hand side of the page you can see nine fully exited Investments where we had very similar results and 35 active programs in the center of this page by the time this is all said and done we're going to have dozens and dozens of compan companes and hundreds of thousands of employees where billions of dollars of value is going to be created and the great thing is this is not only the right thing to do not only hugely impactful to the communities that we serve but great business driving great operational outcomes so I'm going to start to wrap us up at this point um what Pete and I hope you take away from today is that KKR private Equity has a unique combination of scale scope and performance that we believe is without peer in the industry through the decades and years we've developed a winning impr proven formula for delivering success and we believe as Pete says The Best is Yet to Come As we walk off stage we're going to leave you with a little video reminder of what all this looks like when it comes together a reminder that great companies can do great things a decade ago K's Industrials team had a concept with management where we saw a bonus plan in a small plant in Minnesota that could be so much more it could be shared ownership it could be Global and everyone could participate and that was really the start of this all employee ownership effort so we started talking about whether or not this could extend itself into other verticals and what we've seen so far is it actually works for all of them today we're doing this across our entire portfolio software compan companies e-commerce companies services companies the exception to the rule would be where we don't do it we really believe it can be applicable anywhere the scale of this is what's exciting it could impact millions of people to a meaningful extent well great it is fun to be here with you guys today I have a few things first we're rolling out some really unique uh employee benefits we are uh giving the opportunity for every single employee of the organ ation the chance to participate meaningfully in the success of the company you get to be an owner and it's your chance to build equity because you're the ones that make this happen every damn day the foundation of the program is around broad-based ownership where everyone in the company participates in the ownership of the business has a stake in the outcome by essentially giving every employee in the business an opportunity to benefit from that growth in value we're all rolling in the same direction and we all want the same thing when you have shared ownership you should be able to affect all the different levers in the business you have less turnover you have better employees people don't want to leave you spend less money hiring and training it's easier to recruit people to bring people in in aggregate what that should mean is that you just grow the company more quickly this is a way for businesses to go actually bend the curve on a policy issue that's really frustrated State local anded Federal governments over time how do you close this Gap it's the right thing to do Equity should not be so concentrated at the tops of companies business is a team sport everyone participates everyone deserves to share in the value creation and by the way it happens to be smart business it just so happens to be the case that when you do that you get better outcomes because you've got happier more productive employees who are less likely to quit seeing the joy and the happiness uh that it puts on people's faces to receive cards about how first down payments are being made on homes you know that people are paying off crippling debt that it's really fundamentally changing the way they live I think this is where the passion comes from just being here it brings me peace and that is something that I need we're put on this Earth to give back to share I think that's what life is really about you build a culture with kindness first and you know good work ethic and it spreads through everyone I feel like I am valued as a person and an employee I'm just not here because I'm a hard worker I'm here because I'm a good person I feel so strongly this is going to work because um because I know our people um and they just care I just uh yesterday sorry I'm just a little bit emotional cuz yesterday um I got to to speak with some of our managers about it and you know it's just you see people people just crying it's uh it changes it can change their lives and so when you give people the chance to change their lives I think they'll step [Music] up please welcome co-founder chairman and chief executive officer Global Atlantic Alan Lavine hello everyone it is great to be here with all of you and to have the opportunity to discuss our insurance business I'm Alan Lavine co-founder chairman and CEO of global Atlantic and I have the unique privilege having been the only CEO of the business over the past two decades that includes originally founding the business back in 2004 with my partner at the time Tim O'Neil leading the separation of global Atlantic in 2013 raising money from 1,00 Individual shareholders a 63% ownership transaction with KKR 3 years ago and then most recently 100% ownership at the end of the year given my tenure I'm in a unique position to talk about our business and the opportunity today and what I'm incredibly excited about is to talk to you about why I've got such strong conviction that we can double from here I'm going to cover four themes over the course of my remarks in the next 20 minutes or so number one we already operate a leading Insurance business two over the last three years we've established a very strong track record with KKR you heard from Scott and Joe already the success that we've had and clearly under 100 % we've got even more conviction that we can unlock further value third the markets that we in are incredibly compelling meaningful Tailwinds and lastly given all of these points we've got multiple ways to grow from here if we do all of this well we executed a really really high level we continue to grow assets earnings continue to remain focused on protecting our policy holders provide an incredible employee experience and provide more value to more of our clients all right let me start with an overview of global Atlantic over the past 20 years we've quietly and patiently built one of the fastest growing one of the highest returning Insurance businesses we've done this with an incredibly focused strategy focusing on lines of business that have strong fundamentals and Plato our competitive advantages these include three themes the ability to track and retain the the best talent in our industry two a deep expertise from a risk and Investment Management perspective and lastly the ability to build deep client relationships we've done this over multiple cycles and multiple ownership structures in including the convergence between asset management and insurance because of our quiet impatient approach investors are often surprised by the size and scale of our business so let me share something facts at the bottom of the page over $170 billion in assets under management because of our Focus strategy we like KKR want to be top three or top five in every business that we're in we've achieved that today in the retail fixed anity business and in our flow and block re Insurance business consistent top quartile returns and growth and you can see 25% compound anual growth from an asset management perspective and over $1.3 billion earnings key to our business it's what our policy holders are looking for it's what our clients are looking for strong balance sheet strong Capital base and ratings we're a-rated across the board and lastly as I mentioned cor to everything we do is around risk and Investment Management that has gotten even better as a result of our transaction with KKR we spent a little bit of time talking about our two businesses today we operate today we operate in the $4 trillion us life and enuity Market talk about how how we're expanding globally and we sell products to both individuals and institutions and we do this leveraging the same approach to risk and asset liability management and the same scalable operating platform today we directly and indirectly Support over 3 and a half million policy holders in growing let me start with our individual markets business this is a business run by a gentleman by the name of Rob Arena one of our two presidents here what we're trying to do is serve clients in retirement or planning for their retirement and we provide a range of products that provide income accumulation or protection those products primarily are fixed in fixed index annuities today we sell our products through a nationwide Salesforce of over 200 professionals we sell through over 200 Banks and broker dealers including household names like Wells Fargo Morgan Stanley and LPL Financial last year we did over 11 billion we've been consistently a top five player in this growing space we talk about our institutional Market business which is run by Mono serin our other co-president here we cover the top 50 US life insurance companies what we do for them is provide customized solutions to enable them to free up Capital reduce risk or exit non-core lines of businesses we do those through block flow and P pension risk transfer reinsurance transactions this is a franchise we've been in for 20 years we've done more transactions with more clients than anyone else in the space this is a true proprietary business for us our most recent transactions with metti and manual life both customized Solutions over $10 billion each very few firms could have brought what we delivered top three player consistently we did over $30 billion doll of transactions between what was closed and announced at the end of the year all right let me spend a few minutes talking about our operating model here's what I know most people in the room probably find insurance and the idea of investing Insurance complicated and these are currently businesses I have deep respect for those who can operate well but our business is a little bit different we have a very straightforward business model that all of the folks at both global Med KKR are focused on maximizing first of all what do we do we originate lowcost predictable liabilities how do we do this through our individual institutional channels where remember last year we raised over $40 billion across the platform we match those liabilities with high quality fixed income oriented assets originated by KKR and if we do a good job and we can generate a higher yield on the assets then we're pay paying on the liabilities we can generate a positive net spread we've been doing this consistently now for a very long period of time that gives us the opportunity to generate strong earnings but it also gives us the opportunity to drive capital and that Capital then could be used to support future growth and support our clients needs and underlying all of this is our consistent framework around risk and investment management now let me talk a little bit about the KKR transaction and why we're all here today was thinking about this 40 years ago Global Atlantic clearly recognized a tremendous opportunity to grow with the platform that we had built we were looking for a partner we're looking for a firm that had the same vision culture and values as we did and it also could bring us some very tangible things that included institutional asset management capabilities deep access to Capital and all the other benefits that a global financial institution could bring Scott mentioned this a little bit in his remarks from an investment collaboration we've clearly seen the benefit in the last three years Global Atlantic was averaging less than $20 billion a year in production today that's almost $40 billion but as we noted it's not just what Global Atlantic has been able to get from KKR at the same time we'd be able to scale meaningful KKR strategies whether that's in real estate credit that Ralph Rosenberg will talk about during his remarks or Chris Sheldon on asset based Finance we've meaningfully scaled these businesses that benefits both KKR and Global Atlantic as we get to see bigger and better opportunities ultimately from a capital raising perspective what we've been able to do is truly start to leverage the full scope and scale of kprs fundraising capabilities growing from team of just five professionals to now having hundreds of team members to help us raise third-party Capital talk about that more as I think about growth opportunities and then on the international side we finally were able to put the global in global Atlantic having early success entering into transactions in Hong Kong Singapore and Japan clearly given our strong track record over the last three years we felt like there was a lot more we could collectively do together and that's why at the end of the year we announced a transaction for KKR to go from 63% to 100% of global Atlantic we really did believe that we had the opportunity in this transaction to provide more value to more clients and at the same time unlock additional value across a number of areas let me touch briefly on four of them first from an investment perspective here's one of the things we realize even 3 years in we only leveraged about half of kkr's investing capabilities there's a lot more we can collectively do together in areas like infrastructure but also internationally the other piece is we did believe that we could leverage Global Atlantic's larger balance sheet to able to Source assets not just for Global Atlantic but also for our thirdparty insurance clients leveraging our Capital markets business and I know Adam Smith will touch on that in his remarks from a fundraising perspective we clearly see a lot of opportunity given what we're uh experiencing on the fundamentals the ability to leverage the full Suite of kpr capabilities from a fundraising perspective at 100% we think will drive further growth from a wealth perspective what we realized we're in the wealth space and KKR is in the wealth space whether there's KKR selling kseries products or Global Atlantic selling annuities turned out we're in a lot of the same firms we both cover financial advisor what are the opportunities as we look to leverage our 200 person Salesforce 11 billion a year in sales with what KKR is trying to do well we think from an education distribution and potentially product development perspective over time there's some unique things we have the opportunity to take advantage of that we are truly positioned to do here's one thing we're experimenting with right now we had our entire Salesforce licensed to sell K series products and in one of our largest distribution firms were experimenting selling a single Cas series product today we'll see its early days there's clearly upside potential here for our Collective firms and lastly I mentioned our early wins from an international perspective with success Singapore Hong Kong Japan We Believe working much more closely and collaborative together we are uniquely positioned I will cover that as I talk a little bit more about our growth opportunities all right let me turn into fundamentals a little bit we believe there are incredible Tailwinds for what we do across the retirement space and in the industries that we serve today start on the chart lower left the population of folks 65 and older continues to grow meaningfully in the next 5 years the tail end of the baby boomer generation will retire here's what we know about that cohort number one they are not prepared for retirement and number two they can rely less and less on defined benefit plans our industry is uniquely positioned to be able to provide the products that this demographic needs we've already seen success and growth in our markets Scott mentioned this earlier going from $120 billion in 2020 in annuity sales to almost 300 billion this trend continues between our flow reinsurance and our individual markets retail business again Global Atlantic is able to provide Capital to these markets and at the same time where we're seeing strong growth and need public insurance companies are returning Capital you can see the majority of capital that these companies have earned has been returned as companies look to go balance sheet light and their stocks have traded below Book value and that has created a real demand for Capital to give this industry the the opportunity not just to support demographic needs but also to help the industry restructure as well and as a result 26 billion dollars of capital has entered the business in the last four years and what that has led to is over $300 billion do in reinsurance transactions $300 billion of assets transferring from traditional insurance companies as they look to be risk exit non-core lives business and ultimately free of capital all right let me shift to growth one of the things that I opened up with as we see a clear path to double from here so let me talk a little bit about the conviction that we've got when we entered into the KKR transaction originally we stood at $72 billion that was the time that deal was ultimately announced and when we closed 98 billion today we're north of $170 billion I've always thought about growth the same way through a strategic lens and then a highly methodical lenss let me spend a little bit of time how we segment our opportunities think about things first from a franchise perspective these are businesses we're already top three or top five in we already have a leading position think about that as our block business or our individual markets annuity business second piece is in our maturing businesses these are businesses that we've entered recently over the last couple of years but we believe we have the ability to get to top three or top five and lastly emerging opportunities these are the newest markets that we've entered where we believe strong fundamentals and our industry positioning will give us potential opportunities for growth and then lastly underlying all this if we do all of this really well and we can continue to drive third party fundraising I'll talk a little about how we're thinking about insurance as an asset class we can see a clear path to double from where we are let me walk through these individually so let me start with our franchise and maturing businesses start with the table on the left we view these businesses as markets that we compete in every single day we are selling to our clients driving growth and in markets we've already had meaningful success here compound annual growth rate of 32% a lot of this driven by our retail annuity business and our flow reinsurance business we believe we can continue this growth trajectory because we can continue to add new distribution Partners add new products and increase our market share with our existing clients give me give one metric that I'm incredibly focused on here the gap between Global Atlantic and our number one competitor just in the retail annuity space alone is $20 billion a year a high level of conviction between now and the next time we're all together for investor day we will have close that Gap I'm going let me talk about the block business a lot of people view this business as opportunistic or episodic in some ways but we have a totally different model we've been at this for 20 years we've entered into more transactions with more clients got the deepest relationships and this is a highly customized business and as a result we've been able to average $15 billion a year in Block transactions what we do is truly unique from what anyone else is doing in the market right now and our pipeline remains incredibly strong so as I think about our first area for growth very strong momentum from an organic perspective given our current industry leadership and a deep Pipeline on the Block side to be able to grow and drive now let me shift to the emerging opportunity Joe mentioned Asia and the opportunity that we see collectively here talk about the US market that we're in today 4 trillion do if you just look at Japan Singapore Hong Kong and Korea those markets combined are bigger than the US market today and there's no one better position to be able to take advantage of that opportunity to collectively serve our clients in these regions is global Atlantic and KKR on the global Atlantic side we are already have clients that we've entered into transactions with who are Global in nature who have needs in the region we've already been building up a deep pipeline of relationships and we have a playbook for how to execute in country capabilities that we've got today and we've had success that includes entering into one of the largest transactions in Hong Kong and in Japan recently and on the KKR side this will get covered over the course of the day they already have the leading franchise in Asia over 500 Professional on the grounds this is a unique compination to be able to take advantage of this very large and growing opportunity set and what highlighted that was the joint venture we entered into our strategic Partners we enter with Japan post that brought the best of both what is capable between Global Atlantic and KKR let me spend a little bit more time on Japan second largest developed Market in the world it's interesting to do a side by side and think about what we saw many years ago in the US and how it compares to what we see in Japan today $3 billion addressable Market versus $4 trillion in the US same Trends as we see growing demand for retirement products in aging population interest rates that have been low for a sustained period of time that are finally rising and public companies trading well below Book value now looking to figure out how to optimize Capital exit noncore Alliance business and really start to think about growth no one is better positioned to be able to help our clients and expand and scale in global Atlantic and KK here's other thing that I spent a lot of time thinking about size of markets we talked about three trillion versus 4 trillion remember in the US market we discussed $300 billion of block transactions and $300 billion a year in annuity sales in the Japanese market today it's only1 billion or less than in annuity sales and less than $25 billion in Block transactions that have been done there is a lot of room to run in Japan alone for us to be able to collectively scale and grow our businesses let me wrap up with fundraising and this concept of insurance is an asset class remember I talked about our straightforward business model if we do a really good job and we Source stable lowcost liabilities we match them up against assets originated by KKR and we earn a positive net spread we can generate consistent stable earnings and dividend capacity that is what investors have chosen to do when they invest behind our IV franchise investors receive uncorrelated high returns and as a result they've been willing to put a billion dollars into our iv1 franchise that we raised in 2020 $2.4 billion in iv2 we'll be back in the market again for Future IV Rays this is a unique franchise where we develop the unique track record this benefits our clients as well it gives us the opportunity to have more Capital to solve more of their needs and at the same time gives us the opportunity to be more meaningful and as noted 75% of the capital that backed our last two reinsurance deals came from third parties either through our Ivy franchise or through co-invest this starts to look like a lot of the other KKR asset management businesses over time think about the growth that we talked about earlier in products like infrastructure insurance has the opportunity to be same kind of vertical and if we do this really well how does it help Global Atlantic and KKR gives us the opportunity need to generate more fees and ultimately care if we perform for our clients let me conclude where I started and as you'll hear from my remarks from Scott and Joe's remarks we have meaningful confidence in our ability to continue to scale and double Global Atlantic from here we have that conviction for these four points number one we already operate a leading Insurance franchise top three or top five in many businesses two what have the past three years shown us we've already developed an incredible track record of working closely together and having shared success we had so much conviction in fact that we believed at 100% we can unlock further value the com Market fundamentals remain incredibly compelling especially in the US and in Japan in particular and lastly we've got a methodical and strategic approach to grow we've got multiple ways to grow from here and look if we do all of this well if we execute it a very very high level we can generate strong assets and earnings growth can remain focused on protecting our policyholders provide an incredible employee experience truly be an employer of choice and provide more value to more clients with that thank you for your time and I'll turn it over to my partner Chris Sheldon [Music] good morning everyone um it's really nice to be here as Alan mentioned I'm Chris Sheldon a uh partner with the firm based in San Francisco and I co-head our credit and capital markets business for KKR I co-head that business with Adam Smith um who you will hear from later this afternoon he'll talk about the CR the capital markets business and I'm here to talk about our credit business some of you may not know but we're coming on our 20th year anniversary of credit I'm also coming on my 20th anniversary of of KKR and we've seen a lot of different Cycles a lot of different Market volatility and we've had a lot of Adventures maybe not as much as Indiana Jones based on the theme song but nonetheless it's been a great through decades my goal for the next 20 minutes is for all of you to walk away with the following four things one we're large and scaled we're Diversified we're Global and we're still growing we're growing across our public business we're going across our private business we're going across our corporate and our asset-based finance business as a result of that scale we also deliver differentiated origination coupled with that origination and the one from culture we've delivered distinguished outcomes we leverage that large Capital base we lean into the one from model and we have a leading Capital markets business that coincides with our credit business and coincides with all the different businesses at KKR one of the more important things is number three now is the opportunity for credit not just for our investors but for the asset managers and more specifically for KKR credit we are positioned to win right now significant amount of growth coming from our the expansion of some of our complimentary strategies and our younger vintages in addition to just the compounding of interest and taking more share and taking advantage of some of the technical talin in our maturing businesses so where are we today we're 220 billion of AUM that's the largest business within KKR it represents 40% just about 40% of K's total AUM and we think about our business in three different segments first our leverage credit business think of that as anything traded corporate bonds leverage loans High bonds multi-asset class products in addition to anything traded in the structure credit space both from a qip ABS standpoint to structures that we manage like Clos what you'll see later is we're really proud of our track record here it's exceptional performance and a lot of investors are noticing this and growth is is coming even more second is our private credit business and I think of that as two different businesses within that first our corporate private credit business so I think about that as like direct lending or Junior debt which is about 40 billion and the remaining is in our asset based Finance so anything about against collateral black cash flows or financing hard assets both of those businesses have material Tailwinds which I'll go into in a little bit and our third business which is our youngest business we started in 2020 the beginning of 2020 is our Strategic investment group think about that as what we did is we took a a team we put them in the center of KKR to trap all the origination we were seeing all that proprietary deal flow that we were seeing that didn't necessarily fit the traditional Flagship funds so what we've been doing there is actually a lot of bespoke Capital Solutions for our partners and as you can see with in this market where valuations are low uncertainty the capital markets are a little bit finicky that team has been extremely busy and a lot of interesting risk reward list the Capal markets business here we run those things together as I mentioned super important to to show that I won't steal Adams Thunder but we do think of that as one cohesive unit it makes us stronger it makes us better similar to what you saw from Nate and Pete we've grown a lot since the last two investor days up nearly 250% or 3.7 times exciting thing about this is we're still growing lot of opportunity both market tawin and KKR specific situations when you're a scaled player and you're in the market all day every day this is what it looks like 445 billion of origination over the last handful of years a 100 billion of deployment in our leverage credit business 43 billion in asset based Finance I bring that up because Scott mentioned it we're scale there and it's growing into some Market Tech technicals 81 billion of additional origination coming out of GA this works because of our collaboration because we lean into that integrated origination ma machine and engine we m 1,900 of our existing issuers relationships we already have with those companies or management teams or owners we've evaluated 15,000 Investments that just go through our screening process don't even get to our ic's and there's about 500 or 5,500 Investments that actually hit our ic's just in our more mature strategies we also partner a lot with our different counterparties we participated in 800 new issues we trade 25 billion annually with the street we leverage the one firm to get real relevancy it's powerful not only are we scaled we're Global we've been we've been growing but we're also Diversified and we're active this is what a a full weatherproof diversification business looks like we're Diversified by investment strategy and more importantly we're Diversified by source of capital what's exciting is if you look at the source of capital a lot of it is permanent Perpetual or sticky in nature think about an insurance company think about our Clos which are Perpetual structures and long-dated think about our listed BDC which is permanent actually let's focus on the only 6% of our business is in draw down lpgp structures that have fun lives or maturities this enables us to weather multiple different Cycles um through multiple different uh periods of time in the in the future what's also exciting I'm very proud to be partnered with 650 of our partners across 47 countries if any of you are here today I just want to say thank you we don't take that trust for granted so what enables us to get large Diversified and scale is delivering for our clients and we we have done that and we will continue to do that and a big part of it is leaning into our culture and our collaboration a and tapping into all the tools we have in our toolkit you know if I if I go back years and years before KKR and I think about my first job in credit my first boss said to me Chris if you want to stay in credit you have to be right 99% of the time it's pretty intimidating as a 23y old the reality is if you think about it it's right you invest in credit you're upside to get your money back you get some coupon along the way and you're downside zero on a law adjusted basis you need to be right 99% of the time this allows us to maximize the impact of our model find better Investments and more importantly avoid the ones that we shouldn't be in and the results speak for themselves this is our leverage credit business we are ranked number one in our opportunistic strategy across all below investment grade managers not only one and Below all below investment gr manager we're number one in that period across all Global fixed income managers we produced 24,000 basis points of cumulative outperformance since that period of time 24,000 not 2400 we did almost 800 last year we take that framework and you look at the rest of the leverage credit composits and and strategies top five percentile in our multi-asset class more Diversified product for 15 plus years in all our more sing assoss uh single asset class leverage composits we are TP quall over those periods period if I go back to the 99% stat of the of the large scale clo managers we have the lowest default rate and if you look at our alternative credit you've seen the slide already a couple times I think uh I think Joe mentioned you stole it from Craig I think you guys stole this one from me but um in in all seriousness no double digigit teens types returns relative to the benchmarks super proud of this exciting thing about this and and similar to what Nate said about the PE business a lot of this the carry Is Yet To Come these are higher yielding carry performance fee strategies that is on the come and should come over the future years so if I shift a little bit from KKR Centric and focus a little bit on the on the market now is the time for credit there's a ton of Market Tailwinds that are increasing asset allocation to credit the first one elevated rates for longer we're just at a higher resting heart rate and REMC B says that a lot but we're also not going to have a big spike in in defaults is our view there's a growing consensus around a softer Landing for a credit geek like myself that is nirvana particularly if you can pick the right credits compounding that interest most of the mandates we have we reinvest that that income you compound that at a higher rate business grows I think it was Albert Einstein said that the eighth wonder of the world is interest compounding I like that investors are noticing allocations are coming back into the market so we're getting the double whammy we're growing and compounding but we're also getting increased allocations two Scott touch on this a little bit ongoing Bank d leveraging and a lot of pullback on non-core lending this is fueling our asset-based finance business we're seeing more and more activity we're seeing more and more portfolios coming for sale we're seeing it shift we're positioned well for this this slide shows and this chart just shows the the number of US Banks and how they've been declining three there's just record levels of dry powder private Equity out there last I checked I do not think they're going to give that money back so what does that mean they need to buy things m& is going to increase when they buy things they need to they need financings we're here to finance that we have a leverage credit business we have a private credit business we have a Strategic investment they're going to come to us financing is going to be at in high demand and finally Joe touched this a little bit the developing Asia Pacific Capital markets are just at the embassy there's a huge amount of resources we're putting into Asia Pacific if you look at just the the market now there's just not enough flexible capital and demand and the demand is there if you just look at this chart 80% of the financing is trapped in the banks that compares to 50% in Europe and 30% in the US that's a decade plus Trend that's going to continue to be a Tailwind for us there is so much untapped potential as this Market is growing and the market is Big today at $40 trillion and we're big to get at 220 billion but credit is is there there's going to be continued growth and demand for credit just as there was from since the dawn of civilization in addition it's evolving it's evolved post GFC you saw it with a direct lending Market you're now seeing that shift in the asset-based finance Market third investors are just getting more and more access to Diversified pools of of credit portfolios across the public space across the corporate space across the asset based Finance space a decade ago a lot of investors could not build a diversified portfolio across multiple different asset types in scale you can now which is all resulting in increased portfolio allocations to Credit in a diversified way and on a scaled way and that was just not available and that's the power of of what's happening in this evolution of the market is we're going to benefit from that so how do we go do this this is our recipe to for Success four things one continue to do what we're doing continue to grow our scaled strategies and continue to watch our younger strategies that we put into the ground to continue to monetize to continue continue to perform continue to realize performance fees two lean into insurance as an Nas lean into the partnership with global I I'll touch it about it a little later but there's a huge opportunity there three capitalize on where we have first move or advantages two of those one is asset-based finance the second one is Asia credit and then three I'll talk about all our investment what we've been doing in distribution I won't steal too much of Eric's Thunder but I'll focus more on what we've been seeing and what we've been doing in the credit distribution space you do that you couple that together with our culture and our KKR Brands and our brain and we're we're positioned to win so first of those we're we're growing you look at our mature strategies lever credit and direct lending up 3x and 2x continue to compound that interest continue to deliver results continue to take advantage of those Market Tailwinds they're going to continue to grow and then our newer strategies Sig which is strategic Investments is our our youngest up 14% over the those few years continue to grow as we get later and later vintages and start realizing Real Performance income there asset-based Finance we've talked a little bit about I'll dig in a little bit deeper and Asia Pacific although small today huge opportunity over the coming decades you heard Allan talk about global Atlantic and how excited he is about global at KR now I get to hear about how excited I am as Scott alluded global Atlantic is an economic multiplier The increased origination and scale that it brings along with being able to speak for up and down the capital structure just unlocks so much incremental origination origination but gets origination so when you put those together and you're increasing origination for GA on the high-grade ABF side and you're increasing origination for our third party Capital whether it be our Flagship funds our Cas series our BDC or even all our strategic Partners it's powerful and what it leads to is increased Insurance operating income for that segment increasing performance income for our Flagship funds and our Partnerships and this is where it gets fun double two times the fee related earnings the multiplier effect and then double on the capital markets effect I I won't jump too much into the capital markets because I know Adam's going to spend some time there super powerful and we're leaning into it and super excited about that partners ship we talked about asset-based Finance with the market Tailwinds we've talked about asset based finances in terms of How It's grown for us we talked about asset based Finance both high grade and with regards to our Global Atlantic think it's worth sort of digging in and why we think we have a differentiated asset based fance platform and why we think we have a little bit of a first mover Advantage here one we're scale 48 billion of AUM a 50 person team that's seasoned with 22 years of experience it's growing Market 5 to 7 plus billion this fourth one is pretty interesting it offers 350 basis points in our high-grade ABF strategy over IG corporates that's getting noticed by insurance companies in addition to public pension plans it's a great way to diversify their corporate macro exp exposure particularly as we're going into slowing economy and we can do it in a diversified multi-asset type approach from aircraft leasing to Auto lending all the way to resi having a global Diversified platform offering attractive income with a loss downside protection of which that downside protection and income is often not correlated to corporate macro risk in this economy is super compelling for investors but it's not just us that are originating all these ideas we have 19 captive platforms 6,700 employees there adding an incremental 20 billion of origination a year for us super powerful it's a global platforms you can see the map it's also very Diversified by atite leading to our first move Advantage second first move Advantage is building on what we've have in Asia and you hear from David later in gorov we have a true competitive advantage and platform there you heard from Joe just how the the regions growing based on percentage of growth of GDP or how much that region represents of global GDP but right now the demand for credit outstrip Supply and given all the market inefficiencies there given it's still developing andang in and evolving if you can have fundamental credit expertise you couple that with local knowledge a large team that's broad-based across those offices with a lot of relationships you can you can actually perform really really well and you you just look at the market here it's pretty powerful it's right now if you just look at the European market 28% of of credit relative to private equi and private credit right now in Asia it's 3% if you just get the equilibrium of where Europe is that's almost a 700 billion need and growth opportunity and I think we're the right ones to do it almost 14 billion of transaction volume 4 A5 billion deployed in Asia private credit and we're delivering results at 18% gross IRS now let's focus on our our distribution you'll from Eric and you've seen the slide that we've grown distribution as a global basis just about three and a half times however we've evolved the credit model we used to fundrais based on generalists that distribution team selling everything across KR few few years ago we made a change real estate did the same where we have dedicated credit fundraising People boots on the ground to talk about credit we supplement those teams with credit product Specialists that can talk the talk let the investment professionals invest get get progress you put all of that together equals increased growth and more prospects bottom right plus 200% increase in dedicated credit people credit salese 160% increase in product people the people that can talk to talk what's that's resulted in is 80% increase in meetings and 5 and a half times increase in prospects fun fact we had more Prospect meetings in the first half of 2023 for our credit business than we did in all of 18 19 and 20 it's working the team seasoning we're going to see more and more results so I hope what's come across is I've never felt better about the credit business today than I have ever in my 20 years here we're large we're scale we're growing we have the right products we have the right team we have the right younger strategies with the roots in the ground to grow and we're going to continue to grow and mature as as we see it and you're getting that compounding of Interest second we have the insurance and we have Global Atlantic that's the economic multiplier which is super powerful third we need we're going to capitalize on first mover advantages whether it be ABF or Asia or in structures that are first mover like our Evergreen Direct lending structures as direct lending is becoming and private credit is becoming more permanent in the asset allocation and finally the investment we've made in distribution is working and we'll see a lot of a lot of benefits as a result of that so I'll be around at lunch I want to thank you for your time and I'm GNA pass it to my colleague and partner Raj AG thank you Chris morning everybody Raj AAL I joined the firm in 2006 in the Meno Park California office and I run our Global infrastructure business wanted to talk about two things today first is that we've built a leading platform in infrastructure really with with performance as the Bedrock of that growth today we have nearly $60 billion of AUM across three dist distinct strategies Global infrastructure Asia infrastructure and core that $60 billion makes each of these strategies number one number two or number three in its respective Market and we've got to that position for performance clearly and the easy thing to say is everything that we've done we've exceeded our Target returns by 200 to 400 basis points in the infrastructure business that's a country mile but that's not the only Factor equally important while we've overd delivered on our returns equally important we've protected capital in every point in the cycle and every time this is a sector where people flock to to protect capital and we've done so better than our peers that combination of delivering returns plus protecting capital in all environments that is what is at the heart of our growth the second key point is that infrastructure remains very much a growth engine at KKR in a few different ways first and foremost right our most mature business Global infrastructure very much still has multiple Revenue drivers built in it we'll talk through those most of our business is very much in the early Innings Asia infrastructure core infrastructure where we have Global Leadership positions we're still very early in our life cycle clearly a lot of growth ahead in these we'll talk through that as well I'll spend some time on our pattern of growth and infrastructure time and again in Asia core in our Global business we put together leading teams in a market opportunity that was right we had earned the right to grow that business or to go into that market earned the right through performance and we launched a business that that grew that pattern is very relevant and we'll spend time on it because today we're laying the seeds for the next big things we're following the same pattern we're entering two new businesses our climate strategy and of course wealth serving infrastructure to wealth these are massive opportunities and we think we can similarly similarly be Market leaders in the two of these we start on the leading platform very basic Joe started with this I won't spend much time but infrastructure essentially covers everything you need to go about Daily Life as we know it so clearly there's some you know whether it's utilities water power some traditional sectors but it's hard to imagine having more exciting growth sectors than Digital Data Centers fiber than energy transition massive amounts of growth in these sectors across it all hard assets contracts great counter parties critical assets really you know it's what you need to make everyday life it's what you what's what gives you security and protection of capital in this sector and it's a big growth area hundred trillion dollar over the next 20 years why does it have so much Focus from an investing perspective just to give you some context 20 years ago if you put all of vaults together infrastructure private Equity Real Estate Alternatives in credit you put it all together infrastructure 20 years ago was less than 1% of that combined today infrastructure is 15% of alts and growing alts as a sector you've seen the tremendous growth within that infrastructure is the fastest growing sector why is that fundamentally it starts with these two points downside protection and upside potential let's take an example if you can invest today in the data center business assets 30 40e lives if you can invest in that business and protect your Capital through contracts 10 15 20 year contracts with hyperscalers invest in data centers protect your Capital but you have a chance to participate in all the growth that data centers promis to bring that's exceptional risk return profile and that fundamentally is why the sector has garnered so much attraction right I could be wrong about the equity markets I'm putting capital in the equity markets but I can do so in a downside protected way and I can still participate on the upside that's what's made it so compelling that's why it's 15% of allocation today and by the way along the way you can collect a consistent Cash coupon typically four to 5% dividend yield and you get inflation protection before the last couple years I used to say four to 5% dividend yield and people's eyes would light up and I'd say inflation protection and they'd yawn now it's flipped 4 to 5% cash dividend yield hoan but inflation protection is exciting depending on the time one matters more than the other and infrastructure you get both and then there's inherent diversification the idea that you have correlation between exporting natural gas to Europe global data centers private aircraft Aviation terminals these are vastly different geographies sectors key demand drivers and so inherently Diversified within infrastructure we've delivered on the two key Promises of infrastructure we've we've delivered more than expectations both on downside protection and on value creation and on return from a downside protection perspective our realized multiple on deal deals that we've exited is 2.2 times across everything in the small type our single we've made over 80 Investments we've realized over 20 our single worst performing investment we still got 90% of our money back that's capital protection at work the biggest stress that we've had since our Inception was during the covid crisis in the first quarter of 2020 broad markets were down 20 to 30 30% even the listed infrastructure index was down 20% KKR infrastructure was up 6.7% in the first quarter of 2020 downside protection working we actually got a call I got a call from one of our longtime clients first quarter of 2020 was a tough time if you were a capital manager and he called and he said thank you thank you for paying the distributions this quter we're the across all of our asset classes we're the only you're the only fund the only firm that gave us a distribution this quarter it was that unique in that first that short-lived distress but that that massive distress that you felt in the first quarter and we're positioning our portfolio to continue to be low risk we're on average leveraged 42% that tends to be investment grade or just below investment grade preserving Capital but also delivering on returns so I'll walk through in our Global infrastructure strategy our funds to date our first fund is complete at a 17.6% gross irr and you can see the return Evolution over the years they tend to increase until you have final exits our second fund is still live uh but it's almost complete and it's running higher than 17.6 it's at 19.7 mind you the target IR in this strategy is a mid- teens irr so you you can see the over performance 200 to 400 basis points are greater now we're getting into the more recent funds so was still a long way to play out in fund 3 but the performance today at 16% it's trending to be somewhere right in the ballpark of where fun 2 and fun one were so again over performance and the most remarkable thing given the increased scale if you look at our most recent vage super early here but you look at what we can measure our oneyear return in in the most recent vintage 7.8% that is higher than the first year return in any of our prior funds at this point in time while it's way too early to call it it's our highest performing fund today so again consistency on returns consistency on Capital preservation this performance is the key to growth and we've seen that growth so this just Maps out our four funds that have been active in global infrastructure land with the top bullet on across all of them a billion dollar first fund that's what led the performance the growth the capital protection leading to a$7 billion fund for that fund today is nearly complete in terms of investing the interesting thing is if you look at our new seeds we see some similar phenomenon so Asia Pacific fund one 2020 vintage still very early in its life cycle at this point in its life cycle delivering a 14.4% gross irr and protecting Capital every bit as well as we've done in the global infrastructure Series this bodess well right if we can overd deliver on returns and protect capital in the Asia series like we did in the global series that bodess well we've seen that play Same in our core infrastructure business this is our only open-ended fund always available for Capital to come in always available for redemptions we haven't seen any yet we it's a$1 14 billion strategy it's targeting 8 to 10% gross returns today it's delivering 11% and protecting Capital well again over performance protecting Capital well leads to growth early in its life cycle but promising how do we do it the truth is we could not do it as an infrastructure team no way we have tools in culture and together there are secret sauce when we talk to the tools briefly just give you an example you know we we with Telecom Italia in Italy we own the leading fiber to the home business if you want highspeed internet access in Italy you go through Telecom Italia most likely and we own we own that business with them in a joint venture we had to raise $4 billion of debt and equity in 2020 in Italy when Italy was the hardest hit country by Co that doesn't happen by us as an infrastructure team that happens with Adam and his Capital markets team and our Capital Solutions team raising the debt and Equity to get us that it was highly differentiated frankly we didn't think we could do it but our our brethren in The Firm did this was a critical asset to the country it literally needed government and legislative approval in Italy we had no hope as an infrastructure team to get that approval but working with our colleagues at the global Institute public policy and stakeholder group we got the support of the deal from the president of Italy from both leading political parties from the treasury Department of Italy we even had the US ambassador to Italy working on our behalf to get this approved that doesn't happen as an infrastructure team I could go on and on Kare Capstone our operations team it Telecom metalia had never done a car out our Capstone operations team actually went into the offices in Rome and helped identify where does all their cable sit today they didn't have it accurately mapped if we're doing a carve out we need to figure that out we have incredible tools it's an unfair Advantage but it's not just the tools we're not the only ones on the street with the tools the culture that Scott referred to the we culture not the eye culture you got to use the tools the other your your your your colleagues in The Firm have to want to help out you need the culture and the tools when they come together it can't be matched that's a huge barri you know we're resting on the should ERS of Henry and George and Joe and Scott and 50 years of history for that culture it's a huge barrier to entry very difficult to pull off and we couldn't pull it off without it Joe's covered this so I'll skip over second key point we're still a growth engine two key drivers of future Revenue growth in the global infrastructure strategy you can see historical fund commitments as they've marched up and the beauty about being in such a fast growing business even if you believe I don't believe this but even if you believed that future funds in this strategy were of the same size of the current fund those new funds are coming on as your billion dollar fund your $3 billion doll funds are rolling on off there's a structural even if we stop growing from here again which I don't believe there's a structural wind at our backs that that provides future Revenue growth and then if you look at Revenue composition as we raise larger funds the purple here shows management fees as we raage raise larger funds the management fees that's really the only contemporaneous Revenue that we get as we raise the dollar we turn the fund on we get paid on that dollar the other Revenue lines come with some DeLay So Capital markets fees those are based on transactions it takes us a couple years within a couple years we hit our stride with a larger pool of capital and generating Capital markets fees it comes with a delay but not a big delay the rest of the revenues come with a big delay our average real carried interest realized investment income dollar that we're generating that might be five six seven years after we rais the first dollar capital in a fund and so the realized carried interest and investment income today we're generating on the back frankly of a$3 billion fund another big structural Tailwind for growth in this business the global infrastructure strategy is not done growing now let me spend a minute on the new businesses and importantly our pattern of growing those businesses in our first 10 years of existence we were really just trying to establish ourselves you know fund one put us on the map I believe in the top 100 top 50 asset managers in infrastructure by the time we got around to fund three we were protecting Capital we were overperforming I think we had made the top 10 to 20 lists in terms of asset managers we had a team that was performing stuck together we had earned the right to grow and so what did we do this was this is our Global infrastructure fund but really it was just investing in Europe and North America it's a misnomer um so we we took what we had and we just extended it into Asia with a terrific management team uh David luboff who we hired to start our Asia infrastructure fund and from the get-go we started in 2019 by the time 2020 rolled around we had the largest Asia dedicated Fund in the business and we didn't stop there again with the momentum from our Global business the performance the investor support we also launched a core infrastructure fund going at the low end of the risk return it was our first open-ended fund always taking Capital redeeming Capital we did that on the heels we had great leadership we found an internal leader Tara DAV is one of my partners and that business uh very quickly by 2021 became the number three player in that business so now we go back we're in 20120 we've launched these two businesses very successfully and the covid crisis hits and recall in the covid crisis our performance was even more differentiated right we posted 6.7% returns first quarter of 20 nobody else did our team was together results look strong we Lin into that and we raised our fourth Fund in global infrastructure massively outgrew the industry the other our top two competitors who had roughly $7 billion funds in 2018 they grew their next vintage series to roughly 11 12 13 billion we were clearly grabbing share in the industry and it was because of that performance the growth the cohesion and then of course we've come back and continued to scale our Asia business two points important to take away number one really frankly in all these series these are still scaling growing businesses a lot of room to run in particular in Asia and in the core infrastructure business but the second key takeaway is the pattern the pattern of Leaning into strength performance timing events leaning into strength to launch new businesses because that's what we're doing again right now today we come from a position of strength each one of these businesses is outperforming and protecting Capital well and so what are we doing it with it we're launching our climate business massive Market opportunity Joe talked to that we think it's underserved we think the most capital in climate is at the low end of the risk return Spectrum focusing on operating assets or it's at the high-end Venture Capital breakthrough Technologies we're planning to attack the middle we've earned the right these are all sectors we've invested in quite a bit we come from strong performance we're attacking the Middle with an infrastructure-led mindset massive market and we think we can be a market leader here much following the same pattern that we did with Asia and core infrastructure my partner Elise we'll be talking a little bit later our second key growth initiative where we think the market is huge and where we can be a leader is is bringing infrastructure to the individual investor with that I'll wrap up you know we clearly have come a long way in this business very grateful for the support of the firm for all the support of the different functions in the firm uh I do think Scott said it best I think in this business we are just getting started that's true with respect to our existing businesses and the scale that I expect and it's certainly true as well with the new businesses that we have that are attacking what I think are T tremendous markets with that thank you and I'll hand it over to my partner Ral Ralph Rosenberg so if you don't like the song you can call my wife or I'll give you her cell phone uh you can text her uh I'm Ralph Rosenberg and I run our Global real estate business here at KKR I joined KKR in 2011 when senior leadership wanted to create a global real estate franchise so today I'm going to tell you a little bit about from where we've come I'm going to tell you a lot about where we're going so let's start with the key takeaways um you've seen similar slides from my partners uh earlier this morning uh importantly we have built a global scaled real estate franchise that is really hard to replicate that franchise not only spans all three regions of the world but also is relevant across real estate credit and real estate equity and that combined integrated approach in both credit and Equity is a very very meaningful competitive Advantage for us second takeaway is really that we're at an inflection point in my opinion in the global real estate markets there's going to be a massive deleveraging cycle here and we are incredibly well positioned to take advantage of that deleveraging cycle which I'll touch on in more detail in a couple minutes third takeaway is that we have lots of ways to win I'm going to walk you through four different levers that are easily easily actionable for us to really create significant scale here from where we've uh we we've come and then lastly I I do want to just touch on up front there's a lot of press and and discussion around uh real estate valuations and the disruption of Technology particularly in the office sector and the retail sectors globally and importantly we have very very little exposure to collectively these two property types in fact if you look at total KKR AUM I think about 1.7% of all of our AUM is exposed to retail and office and the office exposure is predominantly in senior secured mortgages that have 35 to 40 points on average of subordination behind them so let's get into it from where we've come we currently control $69 billion of third party AUM importantly that controls about $251 billion of underlying real estate uh why why does that matter there's a lot of pattern recognition that you see in terms of what the behavior is across real estate of all different property types of across the globe and you can use that pattern recognition to either be nimble in terms of what to exit or aggressive in terms of what to lean into importantly we have 150 professionals directly on the real estate headcount inside of KKR in 16 offices in 11 countries uh Nate Taylor Made the point earlier about the private Equity franchise being able to take our existing headcount and create significant scale without adding a lot of heads the same is absolutely true in our real estate strategies as well these 150 professionals are really the engine room of the the system that we have in place to continue to significantly scale our AUM I'm going to touch on something that that Joe mentioned earlier in a couple of minutes around uh these operating platforms that we also control which give us off balance sheet capabilities that support the real estate franchise as well so the circles in the center of this slide really touch on like what the winning formula is for us in in real estate at KKR and why why we really matter and why we're relevant in a very mature sector of the alternative space globally number one we've got this Global platform it's not only important because uh we can touch real estate markets all over the world but we also are deeply integrated with the other parts of KKR in each of these locations globally and that's very very important for our ability to identify themes to create sourcing channels intermediary relationships and of course uh capture um value creation once we own properties or platforms this one firm approach is really meaningful this theme identification comment I made comes from private Equity comes from credit comes from Global macro comes from our Capital markets franchises in each of these parts of the world the transaction capabilities come from this scaled approach that we have to these markets controlling this $251 billion doar of underlying real estate we're constantly in the market transacting in both real estate credit and real estate equity and this operating expertise circle on the on the end of the page it's really two twofold number one we control our own operating and management capabilities in lots of different parts of the real estate market and also our relationship with KKR Capstone allows us to not only use that expertise to enhance these real estate dedicated operating platforms but also to be really really Nimble in terms of doing everything from the benign single asset purchase all the way up to the complicated platform creation or take private of a public to private so collectively this slide sort of captures like the scale and the power of the KKR real estate franchise this is a more detailed version of the slide that Joe put up earlier today but I think it's super important to understand like the journey that we've been on in real estate so uh as I mentioned I came here to to start and build the real estate business 2013 we raised our first real estate strategy with external Capital it was in our highest margin product in the United States which is a closed end opportunistic strategy and then we approach the scaling of the real estate franchise almost like uh moving chess pieces across a chess board where we systematically set up a real estate credit business then we systematically built a high margin business in Europe then we built a high margin business in Asia and then as we started to organically grow each of these parts of the puzzle we tucked in adjacent products the safer return lower risk strategies that are often times the the product of choice institutional investors and then we partnered with our our balance sheet team to identify two really significant ways to capture real estate market share one is of course the relationship that Allan mentioned with global Atlantic and then secondly as was mentioned by Joe and also by Allan this acquisition of one of the largest real estate Asset Management Platforms in Japan allowed us to capture permanent AUM and also give the firm a strategic uh valve to create more asset identification and uh and capture that AUM in Japan I'm going to talk more about that in a couple couple of minutes so this is from where we've come and now we're going to talk a little bit about where where we're heading so this Mosaic is a visual of all the independent real estate strategies that we run there are really two takeaways here number one we're across the capital structure in both credit and in equity and secondly the way we constructed our business with these independent products gives all of our LPS the agency to think about where we can be the most effective thought partner in the real estate investment space to fulfill their portfolio allocation needs so we can be a partner of choice to somebody who wants senior secured credit exposure or real estate Securities exposure or the partner of choice who's looking for higher octane exposure to the opportunistic equity space and we can do this globally that is a very very powerful Eng room or Suite of products that we can offer our LP community and then the last Takeaway on this slide is because we have the capability to do all of the things that I just mentioned we are really really relevant to all the financial intermediaries in the world that are responsible for connecting real estate Capital to solve real estate problems Joe mentioned this very briefly but it's super important to just dig into it a little in a little bit more detail in addition to the 150 professionals that are effectively on on my team globally with a KKR business card we have all of these operating platforms around the world that are set up by property type and by region to effectively make us better uh acquirers of product and identifiers of opport unities in in each of these um these marketplaces so what's a simple example of that uh we built a student housing platform here in the United States that student housing platform owns and operates about 13,000 beds in student housing those people in that platform Do not sit on the KKR headcount they are sitting inside of an operating subsidiary that is owned by by one of our opportunistic funds and the way our funds are set up is we transfer each of these operating platforms from fund to fund as the investment periods expire so if you extrapolate off of that example on this slide in each region of the world we have this type of expertise in lots and lots of different property types and what does that mean it means we can continue to grow our a and are investing Acumen around the world without adding really much meaningful headcount to the KKR team on the bottom of this slide I want to point out two things um first on the very bottom Kar is our fully owned on balance sheet credit asset management and Loan Servicing platform that we built in Dallas Texas why did we do that number one we control a lot of real estate Securities and controlling those Securities often times you have the right to control the special servicing of cnbs structures Kar is a certified special serer so we can capture those fees for KKR secondly by building out a asset management team in Dallas we can effectively migrate out of High Cost of Living High Cost of doing business centers like San Francisco and New York with respect to asset managing and servicing a very very large credit portfolio and put all those activities down in Dallas where a lower cost of living Highly Educated Workforce high quality of of Lifestyle can attract real talent at a fraction of the cost that would be required if we were to build that here in New York and to put an asteris on that as we continue to scale our credit business in real estate in Europe we're going to migrate that kstar franchise actually to Dublin and effectively rinse and repeat that formula kgrm hold off on that for one minute because we're going to get to that uh in more detail in a second punchline here we can scale very efficiently with dedicated captive resources without adding a lot of head count at the KKR level so why are we super pumped about the the runway here for our real estate franchise uh we're 69 billion today that's pretty big but we can double that pretty easily in my opinion why why is that number one the investable market place is very very large it's a$ 28 trillion doll industry it's one of the biggest you know Industries in the world secondly we've got this this moment in time that Joe actually referred to where the world is under allocated to Alternatives generally and then of course within Alternatives one can extrapolate on that observation that the world is incredibly uh interesting opportunity to capitalize on both the institutional and the individual investors under allocation to the sector as I've mentioned we've got a global scale platform very tough to replicate puts us in a position to win and then lastly to reiterate what I mentioned at the beginning of the the presentation we're really on our front foot we really are spending most of our time being intellectually honest and curious about where to take advantage of real estate opportunities that are presenting themselves so let's go into these four levers that we can pull opportunistic equity which is um basically uh the code words for our high margined uh High fee and and carry paying closed end products uh secondly is this real estate credit franchise that I've touched on in this relationship with with global Atlantic thirdly we're going to talk about Asia uh I'm not going to repeat uh Joe's comments around the the scale of the opportunity but I really want to peel back the onion on how we're set up there in the relationship with kgrm and then lastly it's important to understand this opportunity set that really we've not even tapped in to any real extent around Perpetual open-ended products that are lower risk low lower returning products that are very much the comfort zone of lots and lots of institutional and individual investors around the world so let's hit each one of these briefly this is a visual of each of our opportunistic Flagship closed end fund strategies by region two important takeaways and others have have mentioned similar observations earlier today Raj most recently that every time we raise a closed end fund the successor fund happens to be bigger and we happen to be able to do that without adding more resources to our team so the expectation is in a business that is relatively young we've only been raising third party capital for 10 years that we will be able to continue to raise successor strategies that are larger than the predecessor strategies and as Joe pointed out our performance is VE has been very very strong relative to any relevant Benchmark the second really important Takeaway on this slide is the the light blue bar uh at the end of each of these sections it just shows you a snapshot of the largest the largest competitor in each of these markets in the same similar type strategy similar type structure and the scale that that competitor is currently running relative to our scale goes back to a comment that that Allan made when he made a similar observation like there's a lot of room for us to compress the the multiple in which we are subscale relative to the largest player in each of these markets wanted to make a M around the the connectivity of our real estate franchise to the rest of the firm just to bring it bring it a little bit to life on the left hand side of this slide in one of the largest public to private transactions that has ever been created in anything that touches commercial real estate really Raj and the and the infra team and my team partnered to take private take private Cyrus 1 which of the largest data center operators in the world uh why is that significant it demonstrates this ability to connect the dots across the firm to leverage expertise and to find a convergence of where this expertise can create real real value for our LPS and also it demonstrates the ability to do very very large deals that touch commercial real estate in the center of this slide this is this logo has shown up in a couple of the other presentations but I think the team left it for me to bring it a little bit to light in Japan one of our private Equity companies called loged which was a spin out of Itachi transport basically had significant ownership of logistics facilities the private Equity team and the real estate team collaborated and about a month ago we spun out of the private Equity company all of the logistics assets subject to a sale lease back with the private Equity company and captured the value of the real estate inside of one of the two publicly traded reads that we control in Japan the day this happened the equity community that supports our REITs was incredibly excited about the fact that it could capture in scale access to very very high Quality Logistics assets subject to a a lease Covenant that was very strong with our PE company and in the same day that that happened we unlocked a lot of value from our from our PE investment and took a significant markup on that investment very very hard to replicate it really was the convergence between PE and real estate and this relationship with this Asset Management platform that we control in Japan called kgrm and then lastly very simple example so it might be a little boring but I think it's important identified a single asset opportunity in Soul Korea which happens to be the strongest office Market in the world 100% occupied building by SK Telecom with two years of lease term remaining we put the deal under exclusivity teamed up with our private Equity team in soul went right to the parent company before we even went hard we had a Loi in place to extend that lease term by 10 years and effectively to capture a lot of value by extending the duration of a lease with a investment grade Credit in Soul it sounds simple it's connecting the dots but it comes back to what Scott and Joe mentioned earlier it's all about culture it's all about a shared Vision to be intellectually honest to theme identify and to capture really interesting opportunities that are not un offer to a regular way Standalone real estate investor want to touch on This Global Atlantic relationship in a little bit more detail number one as Chris Sheldon mentioned scale beget scale the credit relationship we have with global Atlantic makes us an incredibly relevant player in the real estate Capital markets and importantly FS a strategic need for Global Atlantic to get exposure to the real estate credit uh industry where the the Nim is actually quite uh compelling relative to the cost of liabilities inside Global Atlantic I mentioned this in particular to loop back to what I said about where we are in the real estate markets currently we are entering into by any measurement a massive deleveraging cycle during that deleveraging cycle lots and lots of capital structures are going to need to be uh recast it's going to create lots and lots of opportunities not only for our Equity franchise but also for our credit franchise when you layer on top of that observation that the money center banks have significantly pulled back and the regional banks in the United United States are basically out of the market collectively the banking sector in the US is about 40% historically of all the mortgage originations in the United States in in the real estate sector so why does that matter when you have the relationship with global Atlantic and when you have access to the liabilities that Global Atlantic is creating and you can complement that relationship with exposure to a very very investable and scalable Market opportunity that's a winning formula kgrm we purchase one of the largest real estate asset managers in Japan there are 150 people inside of this platform why does that matter Japan is the third largest real estate market in the world and it is a very very hard Market to penetrate if you're a foreigner overnight we became one of the largest most important players in that marketplace with the scale that we captured not only in terms of personnel but as I mentioned we captured permanent AUM in scale collectively about 12 billion US equivalent in two publicly traded J reads that are listed on the Nik when you combine that scale with the size of the market and this relationship with our private Equity franchise that I brought the light with this log estate example it puts us in an incredible position to capture huge opportunities in Japan not just for the private Equity team our infrastructure team and these two publicly traded J reads but also importantly for our Pan Asian real estate products that are the core Plus lower risk product as well as the higher octane closed end opportun fund product in addition to that it gives us the ability to create AUM new AUM in Market in Japan that is Yen denominated that unto itself is a huge breakout opportunity that quite honestly we don't even model internally in my projections the last leg of this scale of the of the um the the stool to scale is really this optionality around capturing AUM that's more permanent in the institutional in the wealth channels so in the last four years we set up in each of Europe the US and the Americas a open-ended core Plus strategy that is really designed for institutional investors who want a substitute for those of you who understand what the Odyssey fund is who want a a substitute like a a 2.0 version of the of the Odyssey fund uh product The Odyssey fund product is is the historic incumbent product that's institutional open-ended um exposure to real estate uh as all of you might expect all of those managers have massive overexposure to retail and office which isn't probably a great thing to to have exposure to to as I mentioned uh earlier we in this 2.0 version have literally no exposure to these sectors and therefore if they can migrate their positioning out of those incumbent Vehicles into our vehicles that is a very very important strategic initiative in the institutional context and the scalability is incredible just to give you context The Odyssey Fund in Agri is about a $280 billion industry the second comment I'd make is that we set up I guess uh two and a half years ago three years ago a a private reate that is part of the casite series that Al Alisa is going to touch on later this afternoon that that that product which called Crest is very very small relative to the largest player in the marketplace that I'm sure you all know is is B this puts us in a position when that market reopens in terms of retail High net worth Capital flows to capture more than our fair share of a market that is very nent importantly collectively each of these strategies is thematically associated with the same concept that the world is underallocation and between institutional and wealth when we get this right it's going to give us massive diversification in terms of our fee streams in the real estate business unit so let me sum this up we have a huge Market opportunity on offer for us we have an incredible Market opportunity in the coming years to take advantage of dislocation in the real estate Capital markets and the Del leveraging of the industry and we've got multiple ways to win between our high margin products in real estate Equity our credit franchise in conjunction with global Atlantic the Asia franchise in conjunction with kgrm and this optionality that I mentioned embedded in these Perpetual open-ended funds if you believe as strongly as I believe that the footprint that we've established that's Global that's across the capital structure and that's relevant across the real estate risk return spectrum is collectively in valuable to the marketplace in terms of LP partnership interest with KKR then you have to believe that this business is imminently scalable in multiples of where we are today so with that I'm going to pause and offer you guys the opportunity to take a 15minute break thank you for your time [Applause] [Music] [Music] [Applause] [Applause] n [Music] [Music] [Applause] [Applause] n [Music] [Applause] [Applause] [Music] [Music] [Music] [Applause] [Applause] [Music] [Music] [Applause] [Applause] [Music] [Music] [Applause] [Applause] [Music] [Applause] [Applause] [Music] please welcome co-founder and co-executive chairman Henry kravis and partner head of global macro balance sheet and risk and CIO of KKR balance sheet Henry McVey okay um thanks everybody um so I know this is supposed to be a Henry and Henry conversation but when you talk about KKR there's really only one Henry so uh uh what why don't I start off with uh roasting you a bit and then we can have some response after that how's that sound that's all right we'll go back and forth because I to pick on you too that's fine all right good okay um look you ultimately you founded this industry of private Equity it's had tremendous growth talked a lot today as a partnership about the potential out there why don't you level set just about the growth and evolution of the industry where have we been where we are and where are we going where are we headed well people have asked me in the past um did you think you'd ever be as big as as you are and you got to be kidding me first of all you have to understand when we got started there were three guys in a broom there was Jerry Colberg George Roberts and myself we could not raise a $25 million fund uh on terms that made any sense to us so we had to do deal by deal to get started there was nobody doing what we were doing at the time we started buying companies before uh starting KKR back in 1969 at be Sterns till 76 and so uh the world has changed tremendously uh you think about it uh for years Henry it was only um private Equity we used to call it bootstrap Acquisitions and and then they became leverage buyouts management buyouts Etc you know you name it and then finally it's now alternative Investments um what started out as um a focus on and why we got started was we thought we could improve business businesses we thought we could bring something and we saw a dislocation in the market where companies were not particularly well-managed that uh there was not an owner's mentality and uh there was really only uh you know there was uh uh companies just ran the way the management wanted run but shareholders had basically no say and we thought we can make companies better so fast forward forward to today there's probably not a uh a country that doesn't have a bank at least that does alternative investment financing there's what started out as a handful of banks that would Finance uh in the US uh on a unsecured basis you had you had first Chicago you had count of Illinois you had um Bankers Trust and you had um uh Continental uh uh uh uh manufacturing Handover so you had four Banks and those four Banks uh as it turned out are all gone but others have now taken over there was no high yield Market you know Drexel hadn't come up with the high yield idea so people that are going into the business today just think all this stuff has just been here well it hasn't and so today here's what's changed first of all much more competition than we ever had before I sort of like the old days you know it wasn't any competition it was just us and it was okay second you had um uh very few sources of financing in fact the financing that we had to do we actually George and I would back into a capital structure depending upon availability of capital so I remember when we bought hudai Industries in 1979 for 3 $55 million we sat down and we said well first of all we have to get the credential insurance company to give us a big commitment because if they don't and they were one of the very few that would make large commitments senior datb and subordinated Deb if we didn't get them you couldn't do a deal of any size so we backed into the capital structure Bas how much Bank debt is there how much long-term senior debt subordinated debt preferred stock and then some common Equity because be Sterns where we came from never put any any money in any deal we ever did they were sales and trading firm and that was their interest not what we what we were doing so you have first of all uh competition you have much more financing today it's it's very broad today and it's it's almost everywhere um individuals had no role in in being able to even participate you had a handful of insurance companies a couple banks as I mentioned and that was it today what you have is you got practically every institution is now saying we need to have more of our capital in the alternative space why because they have uh to meet certain hurdle rates and they can't meet the hurdle rates if they're just going to buy stocks in the market and and and and bonds so uh they moved into the alternative space and some institutions as all of you in this room know much better than I uh you know it's 30 40% of uh of their assets under management the thing that has really changed though is the ability for family offices for individuals to now participate our democratized product as we as we call it uh which is uh open-ended funds enables people to participate just like the institutions have been participating with us since we started the firm so and the last thing I would say that has really changed is firms have gotten obviously much much bigger I said we started with three of us and then today you saw what we have 2750 people plus what we just brought in from all the people from uh uh Global Atlantic and so today um the our focus is making sure in our companies and I thought Pete and Nate talked about it very well and showcas it very well something extremely important to us is the whole idea of employee ownership not just a handful of Executives but everyone in the company today has an opportunity to participate and we're putting it into every single company as they talked about uh as standard procedure and I'm going to give you just one very quick uh example of that uh chi which is an Overhead Garage Door business we owned we owned it for about 7 years we told everybody when we bought it that we would have the ability uh they would have the ability to maybe get $115,000 if they stayed with the company uh over and above what they were paid in salary and bonus fast forward seven years we called them in we said well if you were with the company just from January to May of a year or so ago so 5 months you're getting $20,000 but if you were with a company at the beginning so 7 years before you're getting $800,000 now think about what that does uh to to families to a community and so forth that averaged if I correct I think around 175,000 per employee uh there of extra income that they didn't have before so this is critical so had a hot CPI print today uh people were worried about rates being higher when you started in the industry rates rates were extraordinarily High how do you think about that as a potential headwin to to the alternative space well first of all I I'd love to have just $5 that's all I need $5 for every article I've read or for every time somebody has said on in in uh on the news uh private equities dead interest rates go up you can't buy anything um you know let me tell you I don't know how many of you were in this room when inflation was really high inflation in uh the the uh the period 19 uh 7879 period to about 81 uh you had 13.5% inflation you had a prime rate which we don't have anymore but prime rate of 21% worse than that Paul vulker put on credit controls which me which said no more non-purpose lending which meant anything other than working capital you couldn't borrow any money and we've only done only had one deal we announced that we could not close because we couldn't get the financing and that was because the FED basically shut us down today you've got inflation is a high at a high of 8% you're I don't know what it is Henry now three and a half plus percent today um people forget that there's always opportunity um we always tell the people when we got into the global finan crisis and none of us including George and myself and we've been investing 55 years but George and I said very clearly to everybody at the firm focus on what you can control uh don't worry about all the noise in the system there's a lot of noise in the system you can't do a darn thing about that but you can do something about your companies and focus on them as soon as the markets open again get the debt paid down uh Etc and that's that's a message we give all the time second message we give all the time everybody all the leadership at the firm gives is get out and spend time with people because the during the time that inflation's high and or or you're in a global financial crisis period CEOs want to hear from you and you'd be amazed what you can find out and just showing up the fact that you got on a plane and you went out to visit with them that means a for a ton to them and then when they think about well you know I want to refinance my balance sheet or I want to make an acquisition that I can't uh do on my own they're going to call us and so even though we're in a period of inflation right now we're putting a lot of money to work we're exactly on target for this year and where we thought we would be at the beginning of the year um there's a lot of places because we're investing around the world we're not just stuck in the in the US and so we've got the you know the whole world to go after we're a Solutions provider too in addition to being an investor we want to help any company where can we we can invest today up and down the capital structure that wasn't possible before but because of how we're integrated uh today that's that's how it works so look you're the economist Henry so I want to ask you something so several years ago um we asked you to become the CIO of balance sheet and uh you've done a superb job of repositioning the balance sheet at KKR uh so all of us as shareholders have certainly benefited from that uh can you talk about the evolution and how is our balance sheet uh position today and a lot of people don't understand the importance of our balance sheets I like you to also talk about the advantage that we have by having the balance seat and having this Perpetual Capital what does that mean okay so I think about the balance sheet in kind of three different phases phase one was when we went public uh reverse merger we got assets at cheap prices phase two was when we cut the dividend at the end of uh 2015 we started compound our Capital we had four objectives we wanted to build a mode around Asia we wanted to build real assets into a scalable business we wanted to establish core around permanent you know successful companies and then ultimately we wanted to be dominant in retirement savings and we found a Crown Jewel and Global Atlantic right those four things are now done and we compounded the balance sheet at about 15% and created a multiplier effect now I think we're moving from strategic asset allocation to Capital allocation and those are really our tools I think Rob lean's going to talk more about that so I won't I won't steal his Thunder what I would say from my dayto day is it infiltrates everything we do from Acquisitions kgrm right huge Advantage we've created for ourselves in in Japan to Global Atlantic to the K series to what we do with Adam and KCM so every single thing that we do has done that but we're now at a point where we have less earnings volatility we have more free cash flow and we can be more in the capital allocation business and that's an important change so maybe let me add on to that for just a minute you're constantly thinking about themes that we should be thinking about where we should be putting Capital where are we putting Capital can you talk about that today where are we putting money to work so let me spend a second on what I think we're uh I think there are a couple things that that that are jumping out one is you'll hear from David luboff in a second intra Asia tra trade is starting to to ratchet up it went from 48% in Asia trade 1990 to now 59% that's probably going to 70% that's wildly bullish for what we're doing in Asia infrastructure Point number one point number two is you heard this from Ralph you heard this from Pete you heard this from Raj buying complexity selling Simplicity Telecom Italia Hatachi Ki I mean excuse me Hatachi Logistics um S&P Global when you go and you look at our PE returns over the 48e history our best performing deals are actually when we do corporate car bouts and so yeah maybe rates aren't low and you can't lock in that spread but that's actually incredible opportunity set for what we do as a firm if we really believe what you said about operational Improvement and I do um and then I would say the kind of final thing is this thing what I call the security of everything started with covid then you had Russian invasion of Ukraine then you had the Gaza issues and what that's made every CEO think about is their Global footprint and it's not just security of energy security of data water um transportation and that's leading to it's one of the reasons the econom is running harder it's leading to a bigger Global cback cycle so those are things where I think we got to get the price right we got to make the company better but those are all kind of Mega themes that we're we're investing behind um Henry I want to before we while we're on I just want to mention one thing that a big difference at KKR literally in the last you've now been with us 11 12 years now 14 feels like 28 but it's only 14 14 wow you're the one that made me have the 36 interviews I I lost I lost after those 36 interviews we had have you okay I'll tell you the mistakes we made and and I don't want us all standing up here and saying well we haven't made any mistakes uh we made a lot of mistakes over the years and fortunately we've learned from from those mistakes but one of the mistakes that we had made over the years was not focusing enough on the macro side we were too micro focused focused on the company and that was the reason we bought Henry over from Morgan Stanley uh where he'd been doing the same thing for them I think you came with seven people in total and now you've got what 43 or so people in your group this is a really important piece and you all need to understand that uh just like ESG uh and Regulatory issues and our Global uh KKR Global Institute these are all very important pieces and not to be minimized as to why we've been successful as we have across all of our assets yeah so I'm I'm going to switch a little bit to culture um I felt pretty good this morning untila I saw some of this Rogue slide stealing that took place between our IR Department our CEOs and all the way the management committee but generally feels like things are functioning pretty well um we're growing fast when I got to the firm you know I covered financial services companies for a decade I was I was shocked by how strong the culture is how do you how do you feel about our culture today particularly in light of of the growth that we've we've had well you've just hit on something Henry that I I think all of us in leadership at KKR would say is the most important thing that's our DNA it's our culture our value system that we have at Kar so let me just take you back a minute what what got us to where we are today well the second conversation that Jerry colber George Roberts and I had uh was when we got started what kind of culture do we want to a have we came out of Bear Sterns and for better for worse Bear Sterns was an eat what you kill culture everybody ran around said I did this I did that we did not want an i firm we wanted a Wei firm where everybody at the firm participated absolutely everything that we did and this was this was critical and one of the reasons that we actually left be Sterns was we didn't agree with their culture so as you think about it uh if everybody on the team gets compensated on how well the firm does whether you're a partner at the firm or you're not a partner at the firm in those days we started we only had two offices George was in San Francisco Jerry and I were in New York today we've got you saw 25 offices around the world different countries uh uh Etc we've got over 45 different products that we have at KKR everybody is compensated on how well the firm does and paid off the balance sheet and there's a reason for that it's a very important reason uh there and that is that everybody will help each other if you think about a football team an American football team um yeah you got a quarterback and you've got other players but if everybody plays their position and works together the team's going to score and so that's sort of how we we think at KKR we are very well integrated we talk about the culture all the time I'm often asked well as you grow can your culture stays the stay the same it can how do we do that what what is it that we do that is uh to make sure our culture actually continues well one of the thing we do is we talk about it constantly we uh it's on our website internally we talk about it the two 360 degree reviews that we do mid year and at the end of the year one of the four areas uh that we uh uh interview people on is culture and values now we've had people at the firm Henry that uh made us a lot of money we had to let them go because they could not live by our culture culture of helping each other working together and so I hope what's coming through from the presentations you've seen today so far is we work really really well together and uh it's uh it's something that we're going to do uh do everything we can to preserve it's our DNA if we ever lose that the DNA uh of this firm KKR will not be the same C can I push you on that a little bit one of the things that struck me is you look at Pete and Nate kind of following each other and you and George and Joe and Scott I mean most of the times when you look at financial services companies co-heads as usually means there's going to be a tussle and somebody's going to leave that hasn't happened here what are we doing differently well before we get to the c-head thing I want to just add one thing on this on the culture it's a culture of innovation too one of the things that George and I have always done and and to this day you know I think some some people at the firm particularly younger ones are are tired of hearing us say it all the time but we'll push them really hard to innovate uh as George and I have always said throw enough stuff up something will stick and uh you know so let's try new things you know and you'd be surprised how much of it actually will work and will stick and you have to understand what's a corporation a corporation is an evolving entity we always say our job Begins the day we make the investment whether it's in credit or in in infrastructure real estate private Equity whatever it is what can we do to make that project or that company a better company than what it was when we found it and that's our whole Focus so we tell everybody at The Firm you have to innovate you've got to be willing to take uh take risk why we're where we are today is we're getting better at it at taking risk be willing to speak up that's the culture now to lead into the uh the co-head situation um you know one of the most important things that George and I uh emphasize is the culture the one of the most important things that we uh factored in when we decided that Joe and Scott uh in 2017 should become uh co-chief operating officers and at that point they were at the firm about uh maybe 22 uh years 21 years at the firm and um was how well they work together very few co-heads actually work we know other firms in the private Equity industry that have tried it and have blow was apart but if people have been working together for so long uh have grown up at the firm together as Joe and Scott have they came in together uh their families are extremely close friends they travel together and yes they're not cousins like George and I are where we you know grew up uh knowing each other from Age Two uh they work exceptionally well together and this was a very important part that each brings strengths as we've gotten bigger and more complicated there's a huge Advantage by having co-heads Joe was the one that went out to Asia in 2005 and he set up our Asia business and it was a home run and you got to understand Joe wasn't even a partner at the time I I actually said to Joe after spending three weeks with him out there trying to figure out should we open an Asia or not and we concluded we should I said Joe you know keep in mind mine you've never managed anything I'm not even sure you managed your children yet so uh and that was true but Joe went out there and just did a phenomenal job we picked really good people of which he oversaw and and pulled them together and brought that culture and that way of investing that we did uh in the states Scott on the other hand brought enormous creativity he brought the the idea of our of our credit business and our and our Capital markets business and and the balance sheet and so on and so they had complimentary skills that they brought together so at our case I will say two is much better than one I think the same I would say the same thing for for uh Nate Taylor and and Pete stabos they're co-heads and they're really working well together they've been friends for a long time they ones on the west coast ones on the East Coast they can just cover much more ground Nate had been out in Asia for a while for number of years working in India and so he brings that experience so we're trying to bring what we can uh of the firm together and we just think we can cover more ground having two people rather than one as long as they're complimentary so I want to ask you you um have seen uh enormous growth at KKR uh our macro positioning has played I think a really important uh role um talk a little bit about how your team integrates with uh the the deal teams the credit business the infrastructure real estate business Etc Capital markets business what role do you play so I think there there are four things if I was an investor I'd want to know if you go through our 48 years of data not that we're an i AI firm but we use technology pretty effectively youd know that one linear pacing Works Pete talked about that the worst thing we can do is make a macro bet either be bullish or or or too bearish and it's totally different than the cell side it's exact opposite where you're trying to pinpoint something second is um around sizing of positions uh the third is around leverage and the fourth is around correlations and if you go through our data you can build portfolios that you saw that with the PE team um but it's true across the rest of the franchise that stuff works and what we've seen over time is about a you know somewhere between a a third to two3 uh decline in our loss ratios it's pretty meaningful because what the papers talk about all the winners what they don't talk about is is the losers and if you actually uh you know the eighth wonder of the world you compound your Capital at a higher rate it works that's one part of it the second part is around the power of the firm if you take everything Adam Smith's doing on Capital markets and our fees that we're paying the street we can create create competitive advantage through financing right and that's across interest rates that's across leverage um excuse me sublines uh leverage as well as the way we think about FX all the things we're talking about today are a globally integrated firm that doesn't work unless you're you're truly globally integrated and so that's something over the last 13 or 14 years where I think we've created a core competen competency and you can measure the alpha that you can deliver and so that doesn't make the headlines a lot but when you do it concert and you believe in what we're doing together it works quite effectively so now I'm going to go back my last question to you Henry uh I'm going to have you put on your old uniform uh when you were at uh Morgan Stanley and as uh I remember well from our interviews and before you came over that before you did macro and asset allocation you actually were an analyst and you were an analyst in the financial services world now if you're sitting in this audience today and you're listening to what uh you saw presented would you short the stock or would you go long the stock I'll tell you a couple things that jumped out to me one is I'd spend more time in Japan we're exiting deflation I don't say that uh lightly that's a 30-year Trend and if you look at the mouse trap we built there the the example on the Hitachi Logistics that's a big deal put a marker on it second is what Raj talked about all our client surveys are telling us that people want to increase their their uh their their infrastructure and so understanding that and just generally real assets across real estate credit across asset-based Finance if I'm right that we're in this higher resting heart rate of inflation and this regime change that business is going to have really successful growth I think the third thing I would highlight is what Pete talked about we have a massive Global funnel for deal flow and if you think about core you think about a senate those are incredibly profitable businesses that we're adding by putting very few resourc and we just told you that we're not going to add anybody to strategic Holdings that's pretty powerful and I think that the last thing I'd close on is you know you talked about culture I spent a lot of time doing initiation reports and I always spend the time looking at the models I see everybody typing in their computers culture and Alignment is what drives success and we went to our management committee offsite uh we all got you know we got up we worked out in the morning we worked all day we played all night wash rinse and repeat the next day watch the management team around here and whether they get along see whether they're economically incentive see if they're following your cultures and values if we do that right um I'm definitely not on the short side of the stock so Henry thanks very much okay thank you very much great to be with you thanks sir [Music] [Music] SK JT good morning everyone I'm Tran head of our Asia bu private Equity business and co-head of Asia I've been at KKR since 2020 and I'm based in Mumbai good morning everyone my name is David luboff I'm the co-head of Asia I'm the head of our Asia infrastructure business I joined KKR 5 years ago before that I was at the mcari group for 18 years most recently running MC's funds businesses in Asia David and I are Partners in Asia we are very close friends we both love cricket and we both are really excited to talk to you about Asia today so let's start before we take you through the Journey of Asia there are some key messages we want to share with you first we are the largest and the most Diversified alternative manager in Asia Asia is growing and within Asia each of our countries the our industry is growing so when bring it all together we believe we are uniquely positioned to really tap on this Market opportunity and Contin scale up our business so as we go through the next 15 20 minutes we want to talk to you about what we are in Asia how did we get here and where are we headed so what are we we started the business in 205 and Joe Bay moved to Hong Kong since then we built a very large scalable business at $65 billion of AUM we have four different strategies we started with private equity and the last few years we have added INF structure real estate and credit and each one of those is scaling up we are in every major economy of Asia we have local presence we have local teams in all the key countries we have nine offices and close to 600 people on the ground more than anybody else when we started the business in 2005 we were largely private Equity it took us 13 years to go from 0 to 18 billion of a and the last 5 years we have quadrupled the business to 65 our private Equity business which has been around for two decades in Asia has doubled in The Last 5 Years but we've added infrastructure credit and real estate and we are just starting out so there's been tremendous growth you've heard about that we attribute this growth to our Pan Asian presence depth and breadth our Global connectivity this has allowed us to expand into new strategies driving AUM growth importantly this has all been made possible by our wonderful secret Source our culture one firm collaborative let's spend a bit of De let's go into each one of these in a little bit more detail this is a huge competitive Advantage this cannot be taken for granted I'll highly localized boots on the ground approach we have 570 employees across the region we have nine officers each which is Each of which is multi strategy importantly for each of our strategies they are amongst the market leaders in each country in which we operate truly differentiated from our competition we've spoken a lot today about the KKR toolkit that is fully embedded into our operations so having this flexible approach flexibility by geography flexibility by strategy that gives us so much optionality it allows us to dynamically allocate Capital where the risk return tradeoff is best that is incredibly valuable in such a big fast growing region like Asia and particularly valuable in terms of volatility so I just go back we've invested $40 billion of capital across the region importantly we've had the ability by Dent of this Pan Asian presence to build balanced portfolios balance between developing Asia and developed Asia this is something that our LP Partners really value we're very proud of our track record you've heard tenants of that today we've been investing in the region for 20 years over that period we've learned valuable lessons we we've established very deep relationships and we've built worldclass investment teams teams that know their local markets intimately this sets us up so well for even further growth so our Pan Asian footprint our depth and our breadth our connectivity to our Global headquarters to Global KKR this has given us the license and the mandate to scale into new strategies our Asia private Equity business I won't go into too much detail here garv is going to go through in a few moments but notice the scaling what's really interesting is the inflection point after our second fund this is something that we speak about a lot of kar it's something that we've seen globally once a track record is established you do see that inflection point that's really really exciting for us when we think about the newer strategies Asia infrastructure I'm going to give a case study on the next slide but again we are at that point of inflection our second fund $6.4 billion we're preparing for the next series the next fund will come back to that inflection point Asia credit Chris Sheldon spoke about this what an exciting strategy to have in Asia we feel that the demand for private credit far outstrips the supply we have one of the leading teams in the region we have we're one of the largest managers of private credit and there's been great scating we launched our first Fund in 2021 that fund has established a great track record and again we start thinking about that inflection point and Asia real estate you heard from Ralph how strategic you can see that stepup kgrm has been Perpetual capital in a market that we keep hearing about Japan how strategic it is for us importantly we are we are active across core core Plus and opportunistic strategies across Asia so with this increase in strategies increase in AUM there's obviously been an increase in capital investment you can see roughly 2x relative to the same period relative to 5 years prior that's driven an increase in management fees and an Associated increase in capital markets fees what is not captured on the slide is the composition the breakdown underpinning these Revenue lanss that is far more Diversified than before we're also increasingly managing longer duration pools of capital again kjm that is Perpetual infrastructure this is is a longer dat strategy that we did not have 5 years ago so not only has the absolute value of fees stepped up significantly the diversification the composition of such fees has become has become more diverse and the quality of the earnings I believe is far greater given this duration point so let me just spend a few minutes talking about as your infrastructure we launched this business on the back of our success of our Global infrastructure business Raj spoke about this we also had the Pan Asian footprint that we've been highlighting we started this business 5 years ago today we have $14 billion of AUM Equity under management that is all being built organically our first fund closed at $3.8 billion back then it was the largest ever fund our second fund we closed earlier this year at 6.4 billion that is by far the largest fund Ever Raised in the region now what's interesting is we are today 60% committed so we are now preparing for the next iteration of this vehicle of the series of funds we've made 24 Investments 21 have been sourced bilaterally Joe spoke about the power of origination this morning that is not to say we're not active in auctions we look at everything we've got a highly motivated and hungry team but we are losing on auctions we are finding the best value is in our bilateral and proprietary relationships and how they unlock more complex transactions for us we've built a balanced portfolio between developing and developed Asia again it's this is a big point because not many others can do this we can do this because of our presence and our on theground presence in the regions we're Diversified by countries we're also Diversified by sectors some of the big themes that Raj spoke about digital infrastructure has been a big big market for US Energy including energy transition and transportation some just to give some examples we are the owner of the largest independent telecommunications Towers portfolio in the Philippines super exciting business given the the requirement for greater connectivity in that country fast growing we are the owner of the largest Environmental Waste Management business in Korea this is a transaction that was formed by merging two comp companies in Korea this would not have been done without our Capstone team there is no way a traditional infrastructure manager without the toolkit could have done this transaction in Korea we have 22 dedicated investment professionals 22 infrastructure Specialists this does not do justice to the network effect the power of the KK platform the synergies the benefits The Leverage that we get that is how this team has been able to grow and finally with super humbled by the industry recognition we've been voted infrastructure fund management year in Asia for the last four years so we believe the capital support is there the capital support is growing I've been investing in the Asia infrastructure market for many years I have never been as optimistic as I am today about the supply of transactions primary transactions government privatization secondary transactions we look ahead the supply of transactions is growing we think the supply of capital so long as we continue to perform Joe Joe used the expression this morning your track record it's your license to grow we've got to make sure we're performing well we are performing well there's tremendous growth ahead of us thanks David do we talk about our Asia private Equity business this is a business we first ventured into Asia with Joe moved there in 2005 we launched our first Asia fund it was a $4 billion fund and now we are investing out of our $15 billion fund we are very Pan Asia we are in every major economy we have local teams advisors senior advisors country advisers operating professionals who work very closely with each of our investment teams to make deals happen and we are just starting out but that's not the most important thing on this slide if you look at the middle part of the slide since 2005 we've invested $26 billion in more than 100 companies and you look at everything that we monetized so far we monetized at 2.2x and a 21% IR now if you just think about the complexity of what we're doing we're investing in Philippines Japan Korea China across different economic Cycles India political instability in different countries macros shocks and through all of that over two decades nearly two decades these are our returns and the industry is recognizing us and for the eighth year running we've been voted the private Equity Firm of the year but like I said we are still in the early stages of private Equity Asia this is a slide you'll seen probably every KKR deck that you'll ever come across but this is truly what makes us tick teamwork collaboration our one firm culture our like and Trust whether it's working with Eric mof or Henry McVey or Ralph Rosenberg or Raj agrawal we are all friends we are all Partners we spend time with each other we get to know each other we get to learn about our businesses and really help each other out and that's why we are able to take a lot of our learnings from the US from Europe into Asia and vice versa and that's how it makes us successful just a couple examples of our culture and the collaboration my partner Ral spoke about logist Ste and kgrm we can't stress enough how unique we are in this by the way this is just the first of many to come we will do many more of these over the next few years and really keep differentiating ourselves the one on the bottom right Max Healthcare one of the largest exits ever done in the capital markets in India we exited a $2 billion Block in the Indian Capital markets in 9 months in three tranches at a sub 5% discount never done and the reason we were able to do it was with Chris and Adams team the capital markets team on the ground focused efforts with Specialists who specialize in how to monetize Assets in the Capital Market bushu farmer this was a name it was an example on Nate's slide earlier this morning so Nate was talking about the collaboration with our American Healthcare private Equity team and our infrastructure team on the ground in Asia our Japan team was super helpful our Capstone team this again is a transaction that I don't believe many infrastructure managers would have been able to execute we only executed on this transaction because of the kgr toolkit the connecting the dots the collaboration that GT has highlighted Reliance industry a few weeks ago our credit team our infrastructure teams and GA worked together to invest with the Reliance group the largest corporate in India highly contracted long duration investment importantly this was bilateral and it was formed on the back of an existing relationship a a relationship that our firm our PE colleagues established as early as 2020 with the first investment with the group so where are we going what's our vision for Asia but let's look at what's exciting about Asia first we work with Henry mcque and the macro team to have a very nuanced view on each country that we invest in but when you bring it all together in Asia where there urbanization digitalization consumerism everything is growing in Asia and Asia is going to be the Big Driver of global growth our industry is growing as well in each of the countries where we operate our industry is going to grow it'll keep growing and when you have the multiplier effect of growth in the economy and our industry in each country you can just imagine the kind of opportunity it presents us it says you can see it's a $9 trillion opportunity to deploy even if we get a normative market share that's a huge runway for growth we think we have the right to win to get more than our normative market share given the presence on the ground Japan just double clicking clicking into private Equity Japan for a second Henry pravis has a great story about 10 years ago he went into a CEO meeting in Tokyo and asked the CEO how many subsidiaries and Affiliates do you have they said 2,000 his next question was okay how many of these are Court to you and his next answer was 2,000 that just tells you about the mindset of corporate Japan 10 years ago well it's changing we've done more car V outs than anybody else in Japan and if you look at the chart on the left if you look just some of the conglomerates and added up these are more than 5,000 subsidiaries and Affiliates that need they need to do something about they they need to optimize their balance sheets get Focus from their boards and the management teams and we are truly their Partners who can help them them help them with that if you look at the Tokyo Stock Exchange it has nearly 4,000 companies 40% of those are trading below Book value and some of these are very high quality companies with global customers but just haven't been managed as well Pete and Nate spoke about the global private Equity model how we are bringing it into different parts of the world the idea is to make sure can we partner with some of these companies bring in the global toolkit of private Equity Capstone macro value creation advisers experts and just bring it all together and really create a lot of value over time so we've spoken a bit about our activities in the region what's really important as well is that we are a major exporter of capital in Asia for KKR products our strategy around Capital raising and Eric is going to obviously spend some time on this is is consistent with our overall strategy get the very best people we can locals underground embed them in our local operations and get the platform effect and the success of the strategy has been borne out by the Numbers we've got incredible savings pools in Asia 25 to 30% of the in institutional Capital raised has come from Asia we spoke about our expectation to raise $300 billion over the next 3 years a significant amount of that is going to be exported by our teams in Asia the wealth channel that was discussed this morning Alisa and Eric will spend some time on that this is a tremendously exciting channel for us in Asia huge Market its early days we're really pleased with the momentum and the ramp that we see coming through this channel so looking ahead we think we have all the elements to contribute for for our growth engines to hum we got to grow our leading Asset Management business we are the market leader our newest strategies are at that point of inflection we need to keep performing we need to keep delivering on our track record our our Revenue lanss will increase they'll become more Diversified even more Diversified and that will flow through to our earnings but what a privileged Head Start we have over anyone else in our Core Business Asset Management insurance we think GA can be transformative for us in Asia same philosophy we're moving GA professionals to embed themselves in our footprint with our teams to get that synergistic collaboration I like the expression this morning speaking out the symbiotic relationship with ga and KKR we've already executed on liability trades Alan spoke about that this morning and asset trades in Asia for GA you look at Japan we've spoken a lot about Japan I was amazed to hear the stat that Japan is $3 trillion I actually double confirmed it with alen this morning $3 trillion life in Insurance Market relative to four in the US but block trades in the US in the last three years have been 300 billion from day one it's only been 20 billion in Japan so it just feels like such an enormous opportunity and an opportunity that we can unlock we feel best because we have investment teams rounded Diversified investment teams by strategy in Japan that are second to none and then strategic Investments KKR has a strong flexible balance sheet we generate a lot of earnings we have world-class investors World leading investors across Asia we have a collaborative team culture we've got a backdrop that we're in the growth engine of the world with that we ought to be able to find highly strategic Acquisitions for the firm so what a privilege what a privilege it is for garv and I to stand here what a privilege it is to be part of this amazing story that is KKR Asia we are in a growing industry in a growing region and we are the market leader our platform buildout has been done so when we look forward at growth I truly believe that the hardest bit has been done and we are at that inflection point we have the team we have the culture we have the momentum if any of you are in Asia we would love to H you gar and I would love for you to come into any of our officers come and meet the team come and see that crackling energy the enthusiasm the motivation we're staying hungry and humble that's really really important the team recognized we have a purpose what we do matters to the retirement of millions of individuals and policy holders that's really important so we intend to seize the opportunity that we have ahead of us we have so many competitive advant vantages and I love the way the day started with we're only just getting started so thank you everyone thank you and would now like to welcome our friend and partner Adam Smith good morning my name my name is Adam Smith I've been at the firm for 17 years and I'm a partner in our New York office I co-head our credit markets group with Chris Sheldon who spoke earlier my focus is on the capital markets activities of the firm you heard this morning from our investment heads about the growth that they see in their business I want to spend a few minutes today talking about how we can help Drive their performance and how they can in turn help us grow our business there are three big takeaways that I'd like to leave you with today and you'll see these themes run through our business first we're the largest and most developed sponsor based Capital markets platform in our industry we serve both KKR companies and independent thirdparty clients we've often been referred to as the gold standard for what a capital markets team should look like in investment firm second we've aligned our Capital markets business and our credit businesses together in a way that gives us a competitive advantage and allows us to originate more transactions third we build a scaled and ified business that still has a meaningful growth orientation we see a continued opportunity to grow our revenues across private Equity infrastructure and real estate as those parts of the firms grow we also see an opportunity to expand and increase our presence in thirdparty capital markets and Global opportuni has presented us with a new opportunity has expanded our opportunity set is giving us more ways to win particularly in the structured markets I'll talk about a little more of that in a minute so for people L are newer to our firm our Capital markets group is a centralized financing group for all of kar's investment activities we arrange debt and Equity financing to complete transactions across all our investment businesses globally we operate among four key business areas debt Capital markets Equity Capital markets structured Capital markets and co-invest indications the magnitude of these activities together is massive since we began this endeavor we've raised over $1.6 trillion of debt and Equity financing for our companies and third party clients across more than 2,000 transactions and today we have 67 Professionals in our Capital markets group that are dedicated solely to Capital markets activities that makes us the biggest team among all of our firm peer firms our business Evolution can be divided into two key phases for the first part of our our um Evolution we really focused on growing our business and esta lishing Us in the market that activity focused on our traditional private Equity activities as a firm and we added a third party Capital markets capability to that we grew revenues from $1 million in 2007 to a business that was averaging about $170 million a year at fees towards the end the second phase of our business has really been about growing scaling and diversifying our our business here we've both grown our existing traditional private business and our third party business and we've added capabilities to capture a growing set of opportunities from infrastructure real estate growth and our core investing activities through these Collective efforts we've been able to increase our deal counts meaningfully and grow our Revenue base over the last four years we've been averaging $626 million of Revenue on average and prior to the most recent Market disruption we achieved almost $850 million of Revenue now our third party business has been a big part of this this is a business where we provide other companies with the same services that we provide Kare portfolio companies and Kare deal teams our clients here come from four different sources there are sponsors and corporates that we cover directly through a combined origination effort with K credit they're former portfolio companies that continue to use our services even after we exit those positions and we also Source transactions through a broader Kare Network whether that's the 700 investors we have in our firm our outside investors client referrals from third parties that had a positive experience with us we've even had shareholders some people in this room refer transaction to us we appreciate that this business has grown pretty meaningfully in 2016 we did 19 deals and generated $49 million of third party fees by 2021 we did almost 100 transactions and generated $192 million of fees that $192 million Fee number is bigger than our entire Capital markets business business KKR and third party in 2016 we attribute the growth in this business to our focus on origination a strong Partnership of our business with KKR credit which we'll spend a little more time on in a minute but what makes this really effective is our scale our scale is powerful on average every year we're Distributing $ 1880 billion dollar of financing across 200 to 250 to 300 different transactions that puts us in the market every day we we we follow transaction volumes for two important reasons first we generally earn transaction fees as a percent percentage of deal size so transaction volumes are part of the calculus of our Revenue equation more importantly though our transaction volumes allow us to be more effective in our jobs the scale breadth and frequency of our interactions with the market really helps us deliver for our clients it gives us more power and Market relevance it gives us opportunities to inform ourselves and markets and develop better Market judgments that gives us the ability to innovate it also improves our dialogue with investors all of these combin to help us drive better execution and outcomes for our companies and that helps us win more business and I think that's one of the reasons that our that our Capital markets group has become a widely recognized market leader in our space IFR previously named us the America's Loan housee of the year they named as the top adviser for financial sponsors and last year called us the capital markets adviser for the year these are all roles that were previously given to banks in fact the second award used to be called the bank for financial sponsors when they gave us that award they decided to rename it I think this shows how we've grown from being an outside force that's disruptive to very much part of the mainstream financing markets and how we're leading from the front so KKR Capital markets is a real differentiator for our firm there's a lot of different ways that we add to our firm's investment performance and then we can create value I want to focus on just a couple of those today in verdor we're looking to acquire waste management recycling business in March of 2020 when Co hit as the world economies locked down markets sced out and liquidity became scarce our team was able to secure committed financing to allow us to submit a bid for that acquisition in fact we were the only firm that showed up to the table with the fully financed bid that allowed us to win the transaction and ultimately make the investment what I think that really shows is that in many instances access to Capital can itself be a competitive advantage and the things that we do to help accelerate that really benefit our firm that matters most in harder or more disruptive markets where in fact it's the best time to invest the second example I'd like to give is Metronet Metronet is a high-speed internet service provider that's building out a fiber netri it traditionally is Finance itself in The Leverage Finance markets using Term Loan bees when those markets dislocated in the last two years our team repositioned that company to access the securitization market and at first of its kind transaction we structured and led a securization of a buildout of a direct to premises fiber business this allowed the company to access the liquidity it needed to support its growth Ambitions and do so at a cost of capital that was much cheaper than otherwise available I think this shows how having specialized resources allows you to innovate and create differentiated outcomes for your portfolio companies but we do more than just drive investment performance for our firm we actually generate an attractive earning stream if you think about it when we buy a company we have an opportunity to finance the debt and Syndicate the equity as we own a company our portfolio we have an opportunity to participate in the financing and refinancings that go along with that and when we exit a company we have an opportunity to particip ipate in the exit through an IPO follow an offering or provide acquisition financing to the buyer and every one of our portfolio companies has the opportunity to become a third party client for that reason I look at our business is really a revenue multiplier on everything that KKR does and the revenue multiplication for us can be very meaningful since we started this endeavor we generated over billion doar of capital markets fees around our firm's other investing activities half of that our $2 and a half billion dollars has has occurred in the last four years which I think shows the momentum in our business but our work does not end when we sign up a transaction rather our Capital markets team stay involved in the companies that we own throughout the life of their Investments internet brands is another example of this internet brands is a company that we acquired in 2014 alongside its founder we built up the company through Acquisitions we spun off and sold one of its divisions to another sponsor that ultim became a third party client of ours and then we recently transferred ownership to a continuation vehicle that allowed us to return Capital to our LPS while staying invested in the business that we liked throughout the life of this investment we were able to lead 20 different financing transactions that generated over $6.75 billion do of debt financing to fund Acquisitions that generated2 and A4 billion of debt proceeds that were that we use to pay dividends to our sholders and return capital and over time generated $45 million of transaction fees I think this is a great example how we can drive performance and create an attractive earning stream at the same time I think it also shows how sticky some of our business can really be what also differentiates us is our business model we've combined our KKR credit origination and our KKR Capital markets origination into a single team to drive better outcomes if you think about what Chris Sheldon talked about earlier today we've got a scaled credit business is able to land up and down the capital structure across the public and private markets across different asset classes and on a global basis what I've been talking about is how we can deliver scaled Capital Market solutions to companies that are looking for market-based financing by combining these two things together we can provide people that are looking for for financing with a range of financing Alternatives we can act as a principle and provide credit card Capital we can act as an intermediary and Provide Capital Market Solutions or we can combine those and what we call hybrid transactions and tailor solutions to what the consumer that Capital really wants to to have this ultimately is a more client Centric approach it allows us to be more effective at originating transactions because we can structure things to meet the needs of the sponsor or the issuer the borrower that's looking to obtain the financing and allows us to stay invested and incumbent in companies as markets or transactions evolve and in the aggregate all these activities really allow us to be a scaled and diversified business diversification provides us with two really important benefits first as we expand our Revenue sources we're able to meaningfully increase the fee opportunities that we have and each year those fee opportunities accumulate it increases our total revenue potential you can see this in the chart on the left between 2012 and 2015 91% of our revenue is generated from our traditional private Equity activities and our thirdparty Capital markets activities and collectively those activities generated on average $170 million of Revenue while we grew both of those businesses after that time we also added capabilities to provide financing around our infrastructure business our real estate business our core investing strategies our growth investing strategies and our credit business by accumulating those additional Revenue sources we're able to grow the size of the pie to a business in the last four years has generated $626 million of Revenue on average and that reached 100 reached $850 million just before the prior dislocation the second thing that diversification does is it reduces our exposure or Reliance on any particular area as a result helps us create more durability in our earnings we're also Diversified by geography by virtue of the fact that many of markets that we operate in act independently of one another and by virtue of the fact that our companies have financing needs throughout their life cycles I think you can see these two concepts interact pretty well over the last four years in 2021 we experienced Market um records we had a record level of activity in the capital markets and as a result we achieved a record level of Revenue that $850 million that I just talked about in the following two years what I think is more interesting is is as those markets dislocated and activity in the capital markets decreased materially we were still able to generate a healthy amount of Revenue we we stayed at a $600 million level in 2022 and achieved almost that same amount in 2023 so if 2021 shows you how you can have record levels of Revenue in record years as a result of diversification 2022 and 2023 show you how you can have resilient years and more disruptive times what I really like about our business though is that we have a growth orientation and there are two components of that growth first we have an embedded sense of growth from the fact that we work on behalf of ker companies I like to say we grow as the firm grows and you can see that in this chart as the firm got bigger and added more strategies added more funds grew bigger funds and accumulated portfolio compan IES our revenues went up think about that internet Brand's example the second source of our growth is our thirdparty business and this is a business that we've been able to grow to generate over a billion dollars of thirdparty capital markets fees since we began here we have a large and growing addressable Market that we can go after we have the opportunity to win more clients and grow our market share with clients and we also have the opportunity to expand the services that we offer to other products and areas structured Capital markets is one example and we think that the acquisition of global Atlantic will help us grow this effort and I'd like to spend my last minutes on stage with you today on that topic you heard from Ralph and Raj and Chris today about the opportunities they see ahead in their business and how many of those are going to be accessible through Global Atlantic Global Atlantic with its Insurance Capital has expanded our ability to deploy investments in a broader range of investment activities the same thing is true with our structured Capital markets business all of those Investments that we're going to be making will require financing and that financing is often specialized we've got that capability in our structured Capital markets business that we started in 2019 this is a business that we created as we grew and started to expand our activities in infrastructure real estate and asset-based lending to date that team is uh distributed 90 billion of financing in the structured markets AS Global Atlantic allows us to scale infrastructure and real estate and asset-based lending it should also allow us to scale the financing that we're providing along those strategies whether that's for Kar companies or third parties and what we like about that market is two things one it has large Capital structures which gives us the opportunity to participate in size and scale and two all the different transactions that we a were able to look at have multiple ways to win so if you look at the graphic at the bottom right of this page you can see the purple areas represent areas of the firm where we're able to invest principal Dollars around those principal dollars or opportunities for us to finance the transaction through our Capital markets group so we look at those blue squares or blue rectangles as opportunities there opportunities to help drive performance but they're also opportunities to help arrange financing and for us that's opportunities to generate Revenue we think this opportunity can be meaningful and we're excited about the opportunity that Global land because they're foreign locked so that concludes my presentation and as I leave you I want you to remember the three big things we talked about today first we have the most developed and largest Capital markets platform in our industry second we've combined our Capital markets business and our credit market and our credit business in a way that drives performance and gives us Competitive Edge and third we build a business that is both scaled and diversified and that has a meaningful growth orientation looking forward with that I'd like to turn it over to my friend and partner Eric mogulof all right good afternoon everybody I hope everyone's doing well as Adam mentioned my name is Eric mogulof and I lead our Global Client Solutions effort and I'm really excited to provide an update on fundraising and distribution as quick background I've been here at KKR going on four years and before that I spent 17 years at Pimco in various leadership roles across distribution working with both institutional and wealth clients all right let's get into it so my hope as I leave you all with four key takeaways the first is we have made a meaningful investment in distribution that includes institutional wealth product and marketing second we have got a really exciting fundraising calendar ahead of us over the next 12 to 18 months and that includes over 30 investment Solutions and three of our Flagship strategies third and you heard a little bit from Allan about this this morning but we are really excited to be working with global Atlantic to deliver synergies as it relates to distribution and then fourth last but definitely not least there is a transformational opportunity for us in private wealth and we are positioned to win and in fact we are already winning like I want to share one other quick thing before we really jump in here you've heard a number of my partners talk about our culture at the firm I want to share with you all my my favorite part of our culture and it's our client Focus this slide you see in front of you is something that Scott and Joe share at every single quarterly firmwide update and it's such an important reminder of why we are here it's about the millions of individuals and policy holders that we are here to support and in my 25 years of distribution experience of I've learned one thing it's if you take care of your clients and you deliver for your clients great things happen in your business and you'll see that in the slides I go through okay um I thought it would be interesting to share with you all some of the key trends that we are hearing from our clients first as many of you may know last year was a little bit more of a challenging Capital raising environment well this year the denominator impact is starting to subside we're seeing an opening up of alternative budgets and that's good for the industry and that's good for us second we are hearing from LPS that they are inundated with GPS in the market some GPS have over deployed in 21 and 22 and then they're back to the market a lot sooner than many of the LPS that anticipated at the same time we're hearing from those LPS that they want to reduce the number of GPS with whom they work and they want more from those GPS good news is you know we obious obviously offer primary funds co-invest multi asset Solutions and so this is a very positive trend for us as well third and you heard a little bit about this this morning from Chris and from Raj we are seeing allocations to private credit and infrastructure growing within private credit last year there was a big focus on uh direct lending we're seeing that continue now but we're all see also seeing investors diversify into asset-based Finance within infrastructure the macro environment given higher resting heart rate for inflation we're seeing investors increase their allocations to everything from core infra all the way to Value ad fourth Trend structure really matters we're hearing this from institutional clients we're hearing it from wealth clients more and more clients are focused on gaining exposures to Alternatives through Evergreen investment strategies and then fifth every corner of the wealth Market we're hearing it from Global private Banks Regional private Banks wires Independents Ras we're hearing it at the platform level we're hearing at the advisor level everybody's increasing their allocation to Alternatives okay let's talk about the fundraising Outlook and this slide here is very consistent with what we're hearing from our clients directly the market for Alternatives and alternative a has been growing at Double Digit rates and is forecasted to continue to grow at double digits and if you look on the right hand part of the slide you'll see the areas that clients are focusing more and more on are the things that we're focused on private debt infrastructure private equity and real estate now I know we as an industry have been talking a lot about private wealth and there's a lot of excitement around private wealth and and just to be clear we are excited about private wealth but we're also excited about the institutional client segment and feel that there's a huge opportunity for us to grow on this you can see Sovereign wealth funds and Pion public pension plans are expected to grow in total a close to 20 trillion dollar and as many of you know the uh sovereigns and public pension plans they allocate a meaningful portion of their portfolios to the things that we do so if you believe these numbers there's another four to five trillion dollars of assets that is going to be invested into Alternatives into the things that we do and we're really excited to work with institutional clients okay so hopefully have a sense that there's a large Tam and a growing Market that's the reason why we at KKR have been making a meaningful investment in distribution today we have over 280 distribution professionals across 20 different offices if you look at the chart on the left hand side you'll see the growth in our headcount in 2018 we had 84 people focused on distribution at the end of last year we had 282 we've added 200 people and I'll tell you the overwhelming majority of those individuals we brought on in 2021 and 2022 so today if you look at our broad team they're um across six different areas institutional sales insurance sales family Capital sales Global wealth product strategy and marketing now I want to spend a little bit more time talking about our institutional sales model because not only have we grown the team but we've also changed the way we're engaging with institutional clients many years ago our model was essentially taking a single relationship manager who covered a particular territory or region and they covered all the different types of institutional clients in that market and they represented all of the KKR products two things have changed quite a bit by the way one is our institutional clients they've grown their allocation to Alternatives and they've invested in their own alts investment teams so today a big public pension plan they have a private Equity investment team they've got a real estate team a private credit team an infrastructure team we at KK we've evolved quite a bit too we've grown the number of investment solutions that we have and so what we've decided to do is organize our institutional sales team the way our clients are organized so today instead of having just one person in a territory we have multiple relationship managers we have ones that are focused on credit sales ones that are focused on real estate sales and individuals that are focused on private equity and infrastructure and that enables us to do two things with those institutional clients and Prospects number one we can deliver a whole lot more value the second thing we can do which is really important we can parallel path our fundraising effort so at the same time we can engage with clients in multiple different investment strategies the other thing we did with our institutional sales model is we built out a dedicated insurance sales team what we've learned is Insurance clients need different things they have different goals and objectives than other institutional investors and we have found that we're able to deliver a whole lot more value when we're specialized okay so large and growing Market much more resourced resources allocated to distribution what's happened we've grown the number of clients that work with us and we've gone deeper with those clients so you can see the chart on the Le hand side of the page shows our total LP base in 2018 we had roughly 960 LPS at the end of last year we have over 1,800 LPS so we basically doubled the number of LPS that work with us in addition to doing that we've gone much deeper if if you look on the right hand part of this chart you can see on average our clients our LPS have two or more products with us and if you look at the 50 largest relationships we have at the firm on average they have more than a dozen products with KKR we've gone wider we've gone deeper okay by the way as you get a bigger client base and you go deeper you raise more Capital there's a lot going on in this chart so let me just walk you through it briefly we're showing our annual Capital raising over the last six years and we broken this down into two periods 2018 to 2020 and 2021 to 2023 now if you focus on the purple bars for a moment that's our nonf Flagship Capital raising on average between 2018 and 2020 we raised approximately $25 billion per year that has jumped to 71 billion dollar on average per year from 2021 to 2023 and when you overlay on top of that our Flagship fundraising strategies we've gone from Raising $34 billion per year on average to raising $90 billion so meaningful scaling and it's a little hard to see on the slide but if you look at the bottom you can see our distribution headcount over the different years and it shouldn't come as a surprise that when we bring more people on and you've got good products by the by the way that builds a lot more capacity to raise more capital and so we're really excited to have over 280 people today as we're entering that next Flagship super cycle now in addition to raising more Capital we've also uh have our Capital raising more Diversified so you can see on this chart you can see over each year where the capital is coming from by asset class and I would just point out last year in 2023 we raised $69 billion of that only5 billion was in traditional PE all right I want to spend a little bit of time talking about the matur maturation of our funds and you heard a little bit about this earlier from some of my partners in 2018 of all the funds we had and strategies we had in the market a third of them were fund one and I think many of you know raising fund one is a lot harder than raising fund two 3 4 6 12 14 fast forward to last year only 7% of the funds we had in the market were fund one and by the way 40% of the funds we had in the market were Evergreen when you combine a strong track record and moving through to fund two three Etc it puts the wind at your back and you've seen all of this data already it's just showing here whether it's ngt Global impact Asia infra which by the way were the three last fundraisers we've completed you can see how meaningful the scaling is ngt going from um $700 million 4X to 2.7 billion similar with global impact fund one to fund two 2x Asia infa fund one to fund two 2x okay one of the things I mentioned up front was I wanted to make sure you took away that we have a really exciting fundraising calendar for the next 12 to 18 months this is it we'll have over 30 strategies in the market across all five of our asset classes private Equity infrastructure real estate credit and you may have heard earlier Allan say insurance as an asset class by the way we're going to come up with a better name but for now insurance as an asset class and that includes across those 30 plus strategies are three flagships North America PE a as PE Global infra all right so if you put together a large and growing Market a meaningful investment in distribution and a really exciting jam-packed fundraising calendar we expect to raise over $300 billion from 2024 through 2026 all right let me switch gears I want to talk a little bit more about global Atlantic so I mentioned we are working on developing some really great synergies in distribution with global Atlantic I'd like to cover two areas the first relates to third-party insurance so when we started working with global Atlantic and our colleagues at Global Atlantic we learned a whole lot about their needs their goals their objectives and we built out a number of new and Innovative investment solutions to help them Reach their goals great news is we have been able to take that thought leadership that intellectual capital and those Innovative investment Solutions and offer them to our thirdparty insurance clients so if you look at the chart on the right hand side of the page you'll see first quarter 2020 when we announced the acquisition we had $26 billion in third-party Insurance AUM at the end of last year that number was 2X or roughly $60 billion second area of focus insurance as an asset class so Allan shared that insurance as an asset class is essentially the opportunity to invest right alongside Global Atlantic in reinsurance transactions historically when we've gone out to the market and engag with clients and Prospects we talked about PE INF for real estate and credit we are incredibly excited and have already been educating our client base about the opportunities in insurance and that's through our IV investment strategies and by by the way insurance as an asset class is relevant for wealth it's relevant for family Capital it's relevant for institutional clients and it's relevant for insurance clients all right let's get to my last topic which is private wealth and I said right up front private wealth is a transformational opportunity for KKR this is a slide that Scott and Joe shared earlier this morning so I won't dig into it too deeply other than to to say private wealth is large it's growing quickly and importantly allocations to Alternatives in this space are only going in One Direction and that is up and what that translates into are trillions and trillions and trillions of dollars of money in motion that is getting invested in the things that we do and we are so excited to be partnering with wealth clients to help them invest in alternatives so I want to share with you our Playbook our strategy for wealth it's five-fold and I'll tell you this if you can do these five things right you will win in wealth and by the way again we are already doing them so let me walk you through these five things first if you want to be successful in wealth in Alternatives you have to have a strong Alternatives brand so we at KKR have been leaning into our 48-year brand at the the end of the day the individual investors they care who they invest with they look at their statements and they see who they're with and they and it matters your brand matters second thing you need you need differentiated products that are customized for wealth now some asset managers will take their institutional draw down funds and they'll plug them into the wealth Channel and that's okay you can raise Capital but you're operating and you're looking at a pool of capital that's much smaller if you want to compete for all of the wealth Market you need customized products for wealth the third thing you need are real relationships with platforms before you can sell a dollar of Alternatives in the wealth Market you need to be available for sale on the platforms you need shelf space we have been working hard and leveraging the longstanding relationships we have with some of the largest wealth Platforms in the world to secure spots for our wealth products fourth thing you need boots on the ground sales these products are not bought they are sold and so you need sales professionals that are working hand inand with financial advisers and private Bankers but the type of sales professionals you need are very different than 10 years ago now you need not only people that are heavily relationship focused but you need sales professionals that are technical that are investment professionals and that are delivering value to the advisers because if you're not doing that advisers are not going to spend time with you and then last thing you need is you need marketing you need analytics you need digital and data you need them as Force multipliers as many of you know the the wealth Market in the US has over 300 ,000 financial advisers no firm will or should build a Salesforce to touch every single one of them directly you need to leverage marketing data digital analytics to deliver the right messages at the right time to the right advisors bring them into your funnel and then engage with them and position alternative Solutions okay let me tell you where we're at we have now built out a global wealth team we have boots on the ground in the US covering the W dedicated to covering the wires the independent BDS and the RAS we have folks in Canada focused on the Canadian wealth platforms we have folks sitting in Miami that are engaging with the onshore and offshore ladam wealth Market we have folks in Europe and London and Switzerland covering European wealth and Middle East wealth and then we have individuals sitting in Hong Kong Singapore China Tokyo and Sydney that are engaging with the wealth distribution platforms and advisor and private Bankers in in the Asia region all of those sales professionals are supported by a strategic accounts team that wakes up every day engaging with all of the leading wealth platforms we have product Specialists and Originators that are bringing deep subject matter expertise to the clients we have an investors relation team they're focused on delivering best-in-class client service pre-sales and post sales and then again we built out our marketing and data and analytics teams to help us deliver all of this in a very scaled way okay we've got one more thing and you've heard this all throughout the day the case series the case series the case Series this is our differentiated wealth products platform in my opinion we have the most differentiated most Innovative wealth products that are customized for wealth that you'll find across the entire industry we have them in private Equity infrastructure real estate and credit and we when we created these strategies we followed three principles that nobody else has followed number one we focused on accessibility all of our products are designed to get to the accredited investor or below many of our competitors out there they just focused on the qualified buyers which was only a portion of a of the financial advisor client base we want to be relevant to the full client base of a financial advisor and if we are they'll want to spend more time with us the second principle we focused on was direct access to deal flow we wanted to create weth solutions that benefited from our time- tested investment process that are institutional clients have had access to for close to five decades so for all of our case series they invest Perry pesu right adjacent right alongside the institutional draw down funds we have some of our competitors that's not how they've done it they've in they're investing in something totally different than they did with their institutional clients or they're using a fun to fund structure which brings me to my third really important principle all of our products have a single layer of fees many of our competitors out there are using again some type of fun of funds process and ultimately they're delivering multiple fee layers which will deliver to end investors a a much less desirable client experience okay okay I'm going to turn things over now to Alisa wood my partner she is the co-ceo of kek and K Prime our case series she's going to dig into our case Series in even more detail but I want to leave you all with one teaser the K series is not just for wealth we have been starting to engage with some of our institutional clients on the K series and they are starting to share with us that they believe that the K series could be a good fit with their portfolios so with that thank you very much and I'll pass things over to my partner Alisa thank you good afternoon as Eric said I'm Alisa wood I'm a partner in our private Equity office here in New York I've been a KKR for 21 years I clearly started a KKR when I was 3 years old um you could laugh at that and I also am the co-ceo of kpac kkr's private Equity conglomerate what you have heard over the last several hours is the word K series time and time again across all of our different speakers you have heard it in the context of a major growth engine for the firm you have heard it as one of the many ways we act as Solutions providers to our clients you've also heard it as a way that we continue to innovate we've heard the word democratize how we are taking what we do for institutional clients over 48 years and how we are constantly trying to evolve that to touch different parts of the market and to allow for different types of investors to invest in what we do and honestly what we do very well so what we're excited about to talk to to you today is about K series K series are evergreen strategies we have created to access four main asset classes private Equity infrastructure real estate and credit we are the only GP in the market that has a Full Slate of these Evergreen open-end strategies across all of these different asset classes now the size and the magnitude of what we are doing is very very real and we're going to walk you through that in the course of the next couple of slides just to put it into a little bit of context across these four strategies we have over 25,000 underlying clients now where am I spending my time these days honestly it's on the road and I'm doing two key things on the road every day one is I'm working with platforms and Distributors to put us on now what does that mean it means to put these kseries products on their platform to sell us the second thing that I'm doing and we're doing as a team is that we are driving sales we are having over 2,000 sale interactions On Any Given month when you think about the magnitude of that back to the point of the size and scale of this it's massive massive it's nothing like KKR has ever seen before now we are working really hard to have multiple products on each of these platforms and to spend a second to think about how many platforms there are in the world we went from a world where at the end of the day we were on about 11 of them and we grew that to over 70 this hard work is resulting in the numbers and it's translating to the numbers on this page the relationships the platforms that we now are selling multiple K series products on that's the goal right it's not just one solution to one distributor it's multiple Solutions it's about buying the full Suite allowing KKR to provide a One-Stop Shop full Suite of solutions to an individual client at the end of the day now what I find so interesting about especially the chart showing the sales is that the majority of our Cas series Solutions and strategies have only launched in the last 12 months this is really new but the momentum is building so while it's early days I think everyone has said this many many times now this is truly just the beginning now what we thought would make sense was to spend a second and dig in on the private Equity solution and the infrastructure solution so that's what I will spend a little bit of time on in doing I really want to make sure everybody understands what financial advisors and clients alike are both seeing in these strategies but also why they believe they are so interesting and differentiated in the market why are they buying them so I'm going to start with private Equity first and one of the questions that I always answer and I talk about on the road every day is why should you invest in private equity and why should you do it now why is today the day so when you think about what institutional investors have seen for decades it's the importance of private equity in an asset class allocation they have used private Equity as a way to close the return Gap that they are seeing from the compression of returns in other asset classes so when you look at private equity if you do it well if you invest with the right managers and and we're going to come back to that for a minute because that's a big point that we we should cover you can generate over 600 basis points of return on average above the public markets now in periods of dislocation like the one we're in right now we've actually seen decade after decade dislocation after dislocation periods of volatility after periods of volatility that that cr performance actually could be even greater it could be two to three times that 600 basis points if you're with the right manager now why do I keep coming back to the right manager what institutional investors have seen at the end of the day is that private Equity there are many many private Equity firms in the world there are thousands of them literally they are all not created equal now what makes the difference between different private Equity managers is their toolkit you've heard that all morning it's the resources we bring to bear to drive returns to drive the bottom line performance of our businesses that's what we do that's the secret sauce I think it was Nate Pete who said that's how we create our own luck but when you look at private Equity the problem is that the spread and the experience across private Equity managers is greater than any other asset class the spread of performance could be over 1,500 basis points if you're investing with the best in-class managers or if you're investing with the third quartile I'm not even saying bottom quti just say third for a minute now if you compare that to other asset classes that spread is much much more narrow so what does that tell you it tells you who you invest with matters more than just investing and that's why we like to say we are so well positioned to take advantage of this opportunity investors in the market institutional investors have been the only ones historically that have been able to access private equity and to use this as a tool in their portfolio so what we're trying to do with K series is change that allow for individual investors in many cases for the first time to be able to access the same type of private Equity returns that their larger institutional Brethren have been able to take advantage of for many many decades and their portfolios and their returns have benefited for that now what have we done in kseries for private Equity we have created two vehicles now when I talk about infrastructure in a minute it's going to sound pretty similar we've created two vehicles two solutions one solution is focused on domestic investors at the accredited investor level which we think is very important and the other is one for international investors this is a One-Stop shop in to everything we do in private Equity no cherry-picking these are now I think about this in two different ways one is what is the vehicle and two and and the structure and what is what are you actually investing in now what's really interesting is the structure itself is these are evergreen strategies we've we've created ways to mitigate jcurve uh investment jcurve we've created ways for greater compounding because of the recycling of profits and we've created ways to have greater liquidity through more of a quarterly type mechanism in these in these structures that's different and that's the same for both private equity and infrastructure but what it actually invests in is really the secret sauce of this so the One-Stop shop nature into all the strategies Pete and Nate talked about these earlier two handfuls of private Equity strategies that we do we do us Europe and Asia we do midsize deals large deals long-dated private Equity deal we do growth Equity we do all of that what these strategies access is that full Brain Trust in private Equity they sit side by side on a direct basis in the deals now what does this mean it's not it's not a fund of funds so no two layers of fees right it's not a co-invest vehicle you're not getting the leftovers you're sitting side by side with our institutional clients that's what this is that's what makes this so unique so at the end of the day what we've really tried to do is take a very creative more efficient way to invest in the asset class we have tried to create a way that is accessible to individual investors and we've tried to give access to the same deals around the world from the same teams using the exact same toolkit that we have done for 48 years so we think that is really important at the end of the day that that's what financial advisors that's what platforms are excited about in what we are providing and the differentiated approach that we're delivering now we're going to switch for a second and go to infra it's going to sound very similar Raj covered some of this earlier in terms of the opportunity set we think infrastructure is very compelling especially in this market but even more generally depending on different points in time and different economic Cycles the three points I'm about to go through on why we like infrastructure why financial advisors why platforms like it it changes but they're all important the first is volatility private infrastructure has demonstrated resilience to economic shocks and you can see this from the performance it truly shows that this asset class has lower levels of volatility relative to other parts of the market that's attractive the second part is inflation the cash flow profile when you look at the Investments That infrastructure our infrastructure teams are investing in it has inflation pass through mechanisms whether on an explicit or or an implicit basis that provides a huge amount of hedging in inflationary periods without sacrificing performance in low inflationary environments it's that balance that is very very attractive especially in an environment like this one the third point is the potential for upside so when you hear from Henry McVey and others the broad themes that we're seeing in the market digital infrastructure energy transition industrial infrastructure you'll hear us say these time and time again leaning into those to those themes allows for us to invest behind areas with long-term Tailwinds so you get the inflation protection the potential upside and the lower Val that is super interesting that's a great place to put Capital to work today now K series you heard me just say everything I said in private Equity we've literally created the exact same structures in infrastructure we have created very interesting and I would say efficient structures for individual investors to access our infrastructure Investments now these Investments once again it provides a One-Stop shop into a diversified solution across kkr's private infrastructure platform it invests in a direct basis side by side in everything we are doing once again not a fund of funds once again not a co-investment vehicle this is a side by-side direct vehicle and it invests in those same institutional infrastructure strategies with the same operational ease and the same access to those types of Investments so when all is said and done across K series whether it's private Equity whether it's infrastructure or whether it's our credit or real estate Evergreen strategies as well what we are hearing day after day in the market from clients from advisers from platforms is that we have crack the code on a very interesting structure but what makes it so interesting is what it is accessing it is accessing what you've all sat in these chairs and heard all morning it's that differentiated approach and it's done through that collaborative connecting the dots nature that KKR really believes is in our DNA and is in our culture so as we've said now many times I hope you can hear my voice we are really excited about what we're doing here we think we're really at the beginning of this it's just the beginning there's a lot more to come I hope we'll be back talking about the success that we continue to have and where those charts go going forward but thank you for your time I'm going to hand it over to my partner Rob Luen thank you [Music] hi good afternoon everyone and thank you very much for sticking with us we know it's been a very long day I'm going to take us home in terms of prepared remarks uh but again a lot of appreciation for uh the partnership and support and and uh for spending your day with us today my name is Rob Luen I am the CFO I've been a care a little bit over 20 years I started my career on the private Equity side of our business and actually spent 5 years uh living out in Asia with Joe as we started our business out there so I was going to take you through three uh key points today uh number one I'm going to walk you through our p&l and why our very purpose-built business model generates durable recurring and growth oriented earnings per share number two I'm going to take you through our Capital allocation strategy we expect to generate 25 plus billion dollars of cash over the next 5 years it's a massive opportunity for us almost 30% of our existing market cap today and the good news this is a core competency of ours and we have a track record of very strong success that I will take you through and then number three our business model is just different differentiated in terms of its ability to achieve long-term growth you don't need to believe that we're going to start something new in order to be able to achieve the numbers that we put in front of you so we don't need as much people or headcount growth we don't need all that much more operational complexity in our business that allows us to maintain that collaborative and small culture that we've talked about and ultimately Drive even more operating leverage in our business over time so uh let's get into topic number one which is really a walkthrough of our p&l you've seen this chart before of course but it's an important one three different parts of KKR three segments Asset Management insurance and strategic Holdings all working synergistically together to generate much greater outcomes and ultimately sustained and long-term growth from an earnings per share perspective so in a couple weeks we're going to uh release our q1 earnings and we're going to um have two new Financial metrics the first is total operating earnings we've heard a bit about it today or toe for short uh we expect this to be the much more stable and recurring component of our p&l you take our operating earnings and you add that with our investing earnings more function of the monetization environment and performance you subtract taxes and interest expense and that's going to build to adjusted net income and let me take you through each of these component parts and how each one of them we think will help deliver the outcomes that we've been talking about through the day so starting first on total operating earnings you know we're introducing this metric because we really do believe that as you evaluate our performance our financial performance as a firm that this is really the best indicator of how we're doing quarter in quarter out year in year out I would also argue it's a pretty good forward-looking indicator for how we're going to perform in the future and so what is total operating earnings it is really the most recurring and stable forms of income that we have in each one of our three segments so that's fee related earnings from Asset Management our insurance operating earnings plus the operating earnings that we expect to generate from strategic Holdings we would expect our toe to be roughly 70% of our go forward pre-tax earnings so let's break toe into its component parts starting first with our fee related earnings and I'm going to spend a couple extra minutes on fee related earnings as for the foreseeable future our expectation is our F will be the high majority of our total operating earnings so how do you build to F uh pretty straightforward it is 100% of the fee revenues that we generate in our asset management segment less a compensation charge and less 100% of the operating expenses in our asset management segment today we benefit from industry-leading F margins and what we have communicated to our shareholders is that we have an expectation that we can operate at the mid 60% range on a sustained basis but that's not our cap and I'll bring you back to how we started this discussion if we can execute on our plan we've got more ability to generate operating leverage here and increase what is already an industry-leading margin and so now as you build up to fee related earnings there's probably no more important metric than our fee paying assets under management and I have uh two takeaways for you on this slide number one our fee paying assets have grown dramatically at the end of 2020 they were 186 billion today almost 450 billion but I think the second Takeaway on this slide is even more meaningful and that's that we've at the same time that we've grown our fee paying assets we've also extended their duration so our Perpetual capital or our Capital base that has duration of at least eight years from inception was 77% at the end of 2020 today it's 91% and I'm going to talk to this in the capit allocation section but we have really used m&a as a tool to extend the duration of our capital and of course long duration Capital drives management fee visibility and stability now this is the second time you've seen this slide as well and for good reason I think it really tells the story of what we're talking about from a management fee perspective you see that Baseline level of stability and then the layer growth on top of it as we scale existing strategies launch new strategies and new products in a lot of ways I think it's reasonable to look at kkr's management fee business very comparably to a best-in-class SAS software business that has that base level of fees with Excuse me base level of Revenue with layered revenue on top of it and I would have every expectation that if we're sitting in a room like this one 3 years from now what you're going to see on this chart looks very much the same Baseline stability in our management fees but a continued inflection upward of our growth because we know where that growth is going to come from and so what does this all translate into you look at the end of 2019 not that long ago we did a128 per share of fee related earnings and what we're telling you as a management team is we have a lot of conviction that by the end of 2026 our F per share will be north of $4.50 so that's three and a half times growth in only a 7-year period of time if we're successful in what is one of our most important Financial measures next up component two of total operating earnings is our insurance segment you know Allan said it earlier today you know our insurance business a lot of ways is a relatively simple business model I also believe it's a relatively simple economic model to understand our net investment income is really our net yield from the leftand side of our balance sheet our asset portfolio you subtract out the cost of our acquired liabilities which are fairly known and predictable at the time we acquire them less 100% of the operating expenses and compensation of the business no change here to how we've previously reported our in our insurance operating earnings other than the fact we'll now gross up our ownership from 63% to 100% what we've told our investor base is that we target overtime generating a 14 to 15% pre-tax Roe I think that remains the right level to model this business as I look at how q1 is trending my expectation is we're going to be right in that range there's lots of reasons to be excited about the future of global Atlantic and what we're doing in Insurance we've talked a lot we've talked a lot about many of them today we've listed on this page six different areas of opportunity but what I thought I would do this afternoon is from my vantage point explain what I think truly differentiates our insurance franchise from any other and it's really four things when you take them together number one I believe we have a best-in-class management team that is great at sourcing lowcost and predictable liabilities at scale number two I would go take our Global investment platform up against anybody in the world number three we have the ability to access meaningful thirdparty Capital to allow Global Atlantic to grow faster in a higher Roe way and where we could make management fees and Hope carry over time and then number four and this Point's important too it's our Geographic reach we talked about the Japan opportunity second largest Insurance Market in the world our platform in Japan is multiples the size of any of our competitors take those four things together that's why we feel great about what the go forward opportunity is for Kare and Global Atlantic in insurance strategic Holdings our newest segment a very straightforward segment today you see the leftand side of the slide these are the cash dividends that we expect to generate from our direct core private Equity Holdings we've told you we expect 300 plus million of operating earnings by 2026 600 plus Million by 2028 and growing to a billion plus by 2030 second box on this page AG potential future earnings from other long-term strategic Holdings now to be clear we have nothing identified in this box today but do I think that there could be areas in the future where our business model will allow us to own assets for the long term and be the best buyer of those to generate the best returns and the best outcomes for our shareholders I think there will be and so over time we believe it'll be a summation of these two boxes that will equal our operating earnings from strategic Holdings you know since we first introduced strategic Holdings as a segment a few months back our team gets asked a lot what is the right multiple to ascribe to strategic Holdings and Joe earlier this morning if you remember laid out what I thought was a very reasonable valuation framework But ultimately multiple should be a function of the durability of cash flow stability of cash flow and the growth orientation of that cash flow now I tell you go compare what we're building in strategic Holdings relative to the alternative asset Management's industrywide F and I would tell you that I believe the cash flow here is every bit as durable every bit as visible and more growth oriented and clearly fee related earnings in our industry for a good reason gets a very high multiple in the market today so that's a buildup to Total operating earnings next up are investing earnings summation of our realized performance income and realized investment income now my expectation going forward is this will be a smaller percentage of kkr's financial picture than it has been historically but still meaningful and still with quite a bit of growth in front of us so let's go through each one by one starting with our realized performance income which is largely our carried interest got a very simple message on this page if you take a look at the two gray boxes on the left from 2014 to 2018 on average we deployed 13 billion of capital per year it's really that Capital base that is going to generate the carry of 2019 and 20 to 20123 in the second grade box which averaged roughly a billion and a half per year because it generally takes about 5 years to monetize our investments so as you're thinking about what carry could be over the next 5 years it would be the capital that we've deployed from 2019 to 2023 which you can see in the purple bar 2.2 times higher than the prior 5 years so all things equal performance equal monetization Tim table equal the expectation would be that we'd be able to scale our realized performance income by two plus times over the coming 5 years on average and what you've heard from a number of our businesses today is we feel really great about our portfolios and performance next up is our Investment Portfolio and realized performance income and it is very much the same story and while there is much less of an emphasis here than there has been historically it can still be meaningful and so let's take a look back at some history in terms of where our balance sheet Investment Portfolio was positioned in 2018 8.4 billion fair value of the portfolio 500 million of embedded gains in the gray box in the middle embedded gains just the difference between the fair value of the portfolio and invested costs but really the best forward indicator of what Revenue will be in the future you look at the following five years this is the third grade bar our average investment income was right around 950 million per year now what are the forward indicators for the next 5 years that's in purple our Investment Portfolio is up 40% but that tells only a partial part of the story our embedded gains are up over five times from where they were in 2023 and that is the best indicator of what future Revenue could be and so as we look forward over the coming 5 years what you see on this page is really a summary of why we've got a lot of confidence in our ability to continue to scale this aspect of our p&l so that was section one really a walk through our p&l and hopefully gave you a little bit more of a sense of where we see our growth coming from through the coming years this next section on Capital allocation will probably be the most important that I go through 25 plus billion dollars of cash generation that is a very significant opportunity for us on this page I'm going to introduce um a couple different topics number one our objective and we've been very consistent on this now for a while we look to use our excess cash to generate recurring and durable and growth oriented earnings per share you have a management team that is maniacal about Roe and moving our cash flow to the highest Roe we opportunities that are in service of our objective we think we've got a track record here of success that I'm going to take you through and we have multiple different Avenues to take our excess cash and invest it back into our business in service of this objective if you look at the bottom left of this chart strategic m&a Insurance core private equity and share buybacks all delivering recurring and growth oriented earnings per share and if you look at the the past 5 years at KKR and Henry McVey um started to talk about this as well earlier 100% of our net deployment has gone into these four areas and if you look forward over the coming five years my expectation is that somewhere around 100% of our net Deb will still go into these four areas and so I'm going to bring you through each one by one give you a sense of our track record give you a sense of how it can impact our p&l and why we are so confident that we're going to take this big opportunity on cash generation and translated into p&l outcomes over time starting first with strategic m&a over the past 5 years we've completed four material transactions Global Atlantic kgrm FSK and Marshall was they all have similar attributes in many ways number one it's about business business building very large addressable markets where it is challenging for us to grow organically on our own number two and I briefly touched on this earlier but we have used m&a as a real tool to both diversify and elongate our Capital base you look at Global Atlantic kgrm and FSK that is as close to permanent Capital as you get in our industry Dr risks those m&a transactions and really we've used it as a tool to drisk The Firm moving on to a creation of these transactions now each one of these four I believe has economics that stand up in their own right in terms of their impact on our p&l but I don't think that tells the full story in aggregate these four transactions cost $10 billion a purchase price and we funded that 10 billion with 8 billion of cash and only two billion of equity so the per share impact of each one of these transactions is very magnified by how we capitalize them and then finally this last point I think is a really important one it gives you a sense for how we think about m&a we've talked about how keeping a small collaborative culture is so important to us at KKR and m&a is no different $10 billion of purchase price and in in aggregate we have only integrated approximately 30 people into kkr's Asset Management business so as you think about what we might do do in the future from an m&a perspective I think this page gives you a good sense of the attributes that we look for insurance is obviously an area where we have a ton of conviction in our business model right best-in-class management team insourcing liabilities at scale our worldclass investing platform third party Capital at scale and our Geographic reach we've been through that and so what I wanted to take you through today was a little bit of a case study on a recent block transaction that we completed in q1 and talk through all the different ways just one transaction impacts our pnl number one you can see this on the top left hand side of the chart we funded 25% of this block deal with capital from ga's balance sheet which we would expect over time to generate Insurance operating earnings number two bottom left of the slide we funded 75% of this transaction with capital from third parties paying us management fee and if we're successful hopefully carried interest over time number three there is a syndication here to co investors and of course our Capital markets business was very involved with that and number four this transaction does not come together without our investing platform and our confidence that we're going to be able to redeploy the assets in higher yielding instruments with commensurate levels of risk and ultimately generate additional management fees for our asset management platform so one transaction four direct ways that it can impact our p&l but I think there's a fifth way too that is a little bit more hidden and a little bit more long-term oriented but very important in this transaction we structured a really creative rein reinsurance solution for a longstanding and key client of global Atlantic in manual life but manual life is not only a client of global Atlantics manual life is also a long-standing client of KKR is on the asset management side and it just shows how our world is getting smaller and how that's a good thing and we can deliver as an institution way more for some of our long-standing clients that I think will have long-term p&l implications over and above just this transaction the third area where we're excited about deploying capital is in core private equity and ultimately what that can mean to strategic Holdings you know we got into the core private Equity business several years back because we firmly believed that we would be the best Global player in this asset class really because of a combination of our investing teams our collaborative culture our industry depth Geographic breadth really our core competency of being able to build businesses and so so far we're seven years into this strategy and our clients have really affirmed that view we have roughly $35 billion of AUM and I think we are approximately two times larger than our next closest competitor and as you think about core private equity and its impact on RPL it's much the same narrative it impacts multiple different aspects of our p&l and ultimately can drive greater returns for our shareholders of course we've talked about how core private Equity can impact strategic Holdings and its operating earnings growth from here but we manage a significant amount of third party capital for our clients generating management fees and carry and on top of that we have a portfolio today of roughly 20 companies and likely growing that should be long-term issuers in both the debt and Equity Capital markets creating more opportunities for transactions and revenue for our Capital markets franchise so one Str straty impacting multiple different parts of the firm in a way that creates more value and more returns our fourth area for Capital deployment is really around share BuyBacks and we get asked uh for good reason from our shareholders around share buybacks all the time and the answer is really simple KKR employees own over 30% of KKR so we are highly aligned to move every dollar of marginal cash to the highest Roe opportunities that drive the most amount of long-term earnings per share share BuyBacks have been and will continue to be a really core part of our Capital allocation framework and if you look at history as a guide we have a really strong body of work since we initiated our buyback plan we have bought back or retired over 90 million shares that's more than 10% of our shares outstanding and somewhere around 15% of our free float so that's capital allocation and the four different ways that we would expect to be able to deploy our cash generation over 5 years all of which a track record of real success and a business model that I think enables these types of transactions so now on to my final section our business model one area that I hope we've done a good job at being able to get across today is that we believe that our business model gives us the highest likelihood by far of generating long-term and sustained earnings growth and to me really the most important aspect to consider is that in order to achieve the financial outcomes that we put forward we just need to execute well on the opportunities that are in front of us today we don't need to start anything new that allows greater focus and ultimately I believe a higher likelihood of success and if we are successful we are going to scale our Revenue dramatically and we won't need a commensurate amount of operational complexity or headcount growth in order to achieve that and the opll all of that is increased operating leverage you look across our three paths here Asset Management you heard earlier multiple opportunities because of our brand and our capabilities and track record to achieve a trillion plus of AUM just in the things we are in today insurance is a massive opportunity for us and we've got the model to be a real winner in this space over time and strategic Holdings we are just getting started in an area where we believe we have a right to win and with an unconstrained addressable Market and my final Slide the decision you'd be making to invest alongside KKR is really a different one I think it comes down to two things it comes down to our business model which we have already built and our management team and people to be able to go at an exit execute and we feel really great about both that's why we are so confident that's why this management team is really locked arms in our conviction to be able to go out and generate the outcomes that you see here growing our earnings per share from $342 to 15 plus dollars inside of the next 10 years we've got a lot of conviction that we are going to be able to deliver that for all KKR shareholders and with that I'm gonna hand it off to my partner uh Craig Larson who's going to give you some closing remarks thank you very [Music] much okay well I'm going to be brief thank you everybody for joining us we've run along I know we've kept everybody in these seats for five and a half hours at this point so we're effectively going to move the Q&A and discussions to the lunchroom and our respective tables so again thank you everybody for joining us everybody on the webcast thank you for your time and more importantly thank you for your support and continued partnership thank you once again