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Global Macro Trends

Swing Factor: Asia’s Growing Role in the Global Economy

By Henry H. McVey, November 15, 2011

Economic development has spawned a broad and vigorous ‘new’ middle class, which is creating outsized growth in select parts of the global economy. Yet, we believe that the truth about generating returns from this opportunity is, to borrow an adage from Oscar Wilde, rarely pure and never simple: Current allocations to emerging markets must be done actively and through non-traditional approaches if they are to be successful.

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Upon returning recently from a visit to China, I recalled my first-ever trip there in the summer of 1995, shortly before my opening semester at Wharton Business School. With my student coffers too low on cash to pay for the pricey ticket, I had no choice but to use my frequent-flyer miles, which meant booking a nightmarish itinerary of no fewer than four connecting flights in order to satisfy the airline’s requirements for using its rewards program: from my hometown of Richmond, Virginia, I was forced to fly to Chicago, then to San Francisco, Tokyo and Hong Kong—and finally to Beijing.

The trip turned out to be worth every leg of that 30-hour journey.

Yet, even more compelling than what China was back then is how remarkably it has changed in the last 16 years. Granted, the trip is still a long one to endure—even on a direct flight—but one I still try to make at least once or twice each year because of its increasing significance in the global marketplace.

Without question, China has emerged as a major “swing factor” in the trajectory of global economic growth—and the numbers speak for themselves. In 2012, Asia (excluding Japan) is expected to account for a sizeable 37% of incremental growth worldwide, with China alone contributing nearly half of that total (Exhibit 1). China and its 1.3 billion inhabitants are enjoying an unprecedented period of industrialization that has given rise to mushrooming economic activity, a burgeoning middle class with its own set of unique interests and tastes, and escalating consumption to match—all of which have dramatically increased the world’s utilization of commodities, from copper and coal to corn and cocoa. China has also been a major beneficiary of globalization, with excess reserves now exceeding $3 trillion (Exhibit 2).

Exhibit 1

We Are Comfortable That 2012 Global Growth Is Essentially a Bet on Asia ex-Japan

Nominal GDP

Nominal GDP

Nominal GDP

2012 Nominal
GDP Growth

To 2012 World GDP Growth













Euro Area






Other Europe
























Other Advanced Economies











E=Estimate, GDP = Gross Domestic Product. Nominal GDP in US$ Billions. IMF definition of Advanced Economies can be found at Source: IMF World Economic Outlook September 27, 2011, KKR Global Macro & Asset Allocation.

Exhibit 2

China Reserves Are at Record Levels

Data as at October 31, 2011. Sources: IMF, Bloomberg.

So visiting China and Hong Kong again last week naturally helped inform our macro worldview at KKR, and here are some highlights discussed in greater detail in the following pages:

Rising Emerging-Market Consumption is the Single Largest Long-Tail Investment Opportunity

‘Sticky’ Inflation is Finally Beginning to Abate in China

Many Institutional Investors Still Appear Inadequately Exposed to Emerging Markets

We Urge Investors to Think More Flexibly and Unconventionally About Deploying their Capital

China is a Country in Transition, and More than
a Destination for Low Cost Labor or Exports.

Perhaps Chairman Mao’s famous comment—“The world is in chaos; the situation could not be better”—was more prescient than he realized, as it seems to bear relevance to today’s competitive landscape. Between geopolitical turmoil and disarray in the global financial markets, Asia is doing quite well economically, particularly compared to the U.S. and Europe. Importantly, it does not suffer from a Phase III government debt hangover (see our previous paper from October 2011 entitled “Phase III: The Last Stage of a Bumpy Journey”), valuations have compressed in many sectors, and at the same time earnings expectations look more realistic than in the developed markets.

That said, some of our near-term excitement about Asia’s growth will eventually become more tempered by what we see as the potential for unsustainable monetary and fiscal policy. In particular, we think that there are three areas on which to keep an eye. First, real rates need to be higher for inflation not to become a more structural issue. Second, the capital allocation process across emerging markets needs to continue to improve. As these economies mature, solving for return on capital, not just growth in capital, becomes paramount. Third, demographic trends will ultimately require a broader government safety net to ensure ongoing social stability, particularly in China as the multi-generational households become less prevalent.

Exhibit 3

China Stands Out as One of the Few Large Economies Not Encumbered By Excessive Debt

Data as at December 31, 2010. Source: IMF World Economic Outlook September 2011.

Exhibit 4

China’s Influence on World Growth Is
Large and Growing

Data as at December 31, 2010. Source: BP Statistical Review of World Energy June 2011, U.S. Department of Agriculture, IMF World Economic Outlook April 2011, International Cement Review 9th Edition, Food And Agriculture Organization Of The United Nations.

China as a Swing Factor

Though I have been to China many times over the years, there is so much change that I discover and add to my chronicles each time that it seems worthwhile to complete what actor Chevy Chase called a “refresher course” in the movie Fletch. Just consider the following developments of late, as illustrated in Exhibit 5:

Gross Domestic Product (GDP): By 2016, the IMF estimates that China’s GDP will reach an astounding $11.8 trillion, nearly 70% higher than Japan’s expected GDP of $6.8 trillion. In 2009, by comparison, the IMF reported that the two countries had similar GDPs of approximately $5 trillion.

Commodities: Per the International Energy Agency (IEA) China now consumes 9.6 million barrels of oil a day, up from 4.6 million barrels a day in 2000—a sizeable increase of 109%. All told, China now constitutes 10.7% of global oil consumption, and now commands a 48–56% share of the worldwide consumption of coal, pork, and cement (Exhibit 4).

Environmental Trends: During 2000–2009, carbon dioxide emissions in China increased by 170%, compared to just a 27% increase for the entire world during the same period. Put another way, China accounted for 75% of the world’s increase in carbon emissions during the last decade.

Money Supply: Though China’s economy is still smaller than the U.S.’s $15 trillion economy, its money in circulation (also known as M2, or the broader money base) is larger and growing faster. China’s M2 is now already at $11.0 trillion—versus $8.9 trillion in the U.S.—and has been growing at an annualized rate of 20.2% since 2009, in contrast with 5.6% in the U.S.

These are just a handful of countless “fun facts” about China—all indicative of the country’s high-octane growth. Our point in singling them out is to highlight the outsized influence—positive and negative—that one country can bring to bear on many different aspects of the global economy. In particular, commodity demand in China remains voracious, which we perceive as a structural shift that will continue lifting the prices of such key inputs as corn, oil and coal prices. If our prediction proves correct, input costs are likely to continue running above overall consumer prices in most regions and keep the spread between the consumer price index (CPI) and the producer price index (PPI) in negative territory among developed economies like the U.S. and Europe. This viewpoint is central to our Phase III outlook, and it suggests an upward revaluation of companies with global pricing power in such sectors as energy, infrastructure, railroads, and cellular tower companies.

Exhibit 5

China: A Global Force in Essentially All Aspects

CO2 = Carbon Dioxide; M2 = Money supply. Data as at December 31, 2010 except CO2 emissions where latest data available is as at December 31, 2009. Source: International Monetary Fund (IMF), U.S. Energy Information Administration (EIA), British Petroleum Statistical Review, Bloomberg.

But while China is clearly the fulcrum of today’s global economic growth, there are several other critical economic influences in Asia that contribute to growth and are worthy of investor attention. For example, while India has lost momentum after over-stimulating domestic consumption in 2008 and 2009 (as opposed to investing heavily in its much-neglected infrastructure), the country’s long-term prospects are among the most compelling in the region. According to UN World Population Prospects, India’s population is expected to exceed 1.2 billion—17.8% of the world’s population—by year-end 2011; the country is host to a growing number of top-flight entrepreneurs; and the IMF notes that GDP per capita is still rising impressively.

We believe Indonesia is also noteworthy, with a population inching toward U.S. levels and its real GDP likely to grow at 6–7% over the next five to six years, compared to only 1.5–2.5% for the U.S. Indonesia also boasts rich natural resources and is therefore less subject to some of the upward pressure on global input costs that other emerging markets often face.

The Emerging Market Consumer: Still Lots of Running Room

Part of our Phase III thesis was that any sustainable rebound in U.S. economic growth could only be propelled by increasing corporate activity, not an increase in government or consumer spending. After all, U.S. consumption as a percentage of GDP stands at 71% (Exhibit 6), and so the already-extended U.S. consumer can’t be significantly additive to growth more than at current levels; nor can the U.S. government, with its ratio of gross debt to GDP at 100%, according to the IMF.

In contrast, China’s consumption needs to rise to a greater—not smaller—share of GDP if it intends to rebalance its economy. We expect an evolution, rather than a revolution, in the Chinese rebalancing act. We are certainly not bearish on consumption trends; in fact, we expect consumption in China to grow at about 12–15% annually over the next 5 years. But we do think that the growth rate of fixed investment, which now accounts for 49% of China’s total GDP, is at best likely to continue moderating—rather than sharply decline—relative to consumption during the same period.

Exhibit 6

The Chinese Economy...Rebalancing Will Take Time

Data as at December 31, 2010. Exports are on a gross basis and as a result, total Gross Domestic Product is in excess of 100%. Source: China National Bureau of Statistics, Bureau of Economic Analysis.

Exhibit 7

China Private Consumption Trends Are Powerful

Private Consumption US$ Trillions

CAGR 2010 vs.

Private Consumption



2005 (%)


United States















United Kingdom




























GDP = Gross Domestic Product; CAGR = Compound annual growth rate. Data as at December 31, 2010. Source: IMF.

Interestingly, to date, we have actually not seen any marginal shift away from savings towards consumption in China. In fact, as Exhibits 8 and 9 show, savings rates are still high and actually higher than they were a decade ago. What happened? From what we can tell, rapid income growth has driven savings rates even higher, particularly among the growing number of urban households. This trend toward increased income generation and savings by urban citizens is not to be underestimated. In 2000, for example, only 35.8% of China’s population lived in urban areas—whereas in 2010, the percent of urban population had grown to 44.9%, a 25% increase in just one decade (Exhibit 10). Meanwhile, during this same period, annual average income per urban Chinese citizen has increased to 36,539 yuan from 9,333 yuan, a 292% increase, according to China Economic Information Network.

Exhibit 8

Higher Savings Rate Suggests a Lot More
Consumption Potential

Data as at December 31, 2008. *China National Savings Rate using data from China Flow of Funds. **China Urban Savings rate using data from China Household Survey. Source: Haver.

Exhibit 9

Savings Rate Has Actually Been Rising in China

Data as at December 31, 2010. Source: China National Bureau of Statistics.

Yet despite such rapid growth in urbanization, China is among the least developed in terms of population percentages living in urban areas (Exhibit 11). From almost any vantage point, we think that China still has a very long way to go until it reaches saturation. In fact, we believe there are 300 million or more Chinese that may elect to urbanize at an annual rate of approximately 15 million per year.

Exhibit 10

Urbanization is a Huge Driver of Growth…

Data as at December 31, 2010. Source: IMF, World Bank.

Exhibit 11

…And China Has A lot More To Go

Data as at December 31, 2010. Source: World Bank.

As demographics shift, we eventually expect consumption’s relative share of overall GDP to rise and savings to fall. According to population statistics compiled by the United Nations, China’s population will “only” grow by 6.2 million people this year, compared to the pre-2000 population growth of 10-20 million per year. By 2017, though, the working population will begin to actually shrink by 1 million per year. This decline is a direct result of China’s birth-rate policy (limiting families to only one child), which was introduced in 1978. All told, the percent of China population aged 60 and above will rise rapidly to 24.4% in 2030 from 12.3% in 2010. If the U.S. example is relevant, China’s domestic consumption should rise significantly as its population ages. One can see these trends in Exhibits 12 and 13. Not surprisingly, this significant aging of the population also raises questions about whether a more comprehensive government ‘safety net’ will eventually be necessary for retirees in China.

Exhibit 12

China’s Population Is Aging Rapidly

Data as at May 31, 2011. Source: United Nations World Population Prospects.

Exhibit 13

As the U.S. Population Aged, Consumption Rose.
China Could Be Next to Follow This Trend.

Data as at September 30, 2011. Source: IMF, Haver.

Investors May Be Underexposed to Emerging Markets

“Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.”

I could never have said it as eloquently as Mark Twain, but it’s a good summary of my advice about allocations to emerging markets—and not just to China, but also to Asia more broadly and other such markets at large, including India, Indonesia, Brazil and Vietnam. At the moment, many CIOs remain wedded to developed-market equities and bonds (Exhibit 15) despite the reasonable valuations, improving returns, and superior growth profiles of the emerging markets. And that’s before one even considers the favorable currency tailwinds linked to many developing market stories these days.

Public and private equity allocations to emerging markets should, in our view, exceed 12%; at the moment, however, many pension funds only allocate 5-7% to the entire asset class. Key to our thinking is that, the emerging market contributions to world output and equity market capitalization are now multiples of the typical U.S. institutional allocation to the asset class (Exhibit 14). Also, we believe EM allocations appear low when compared to certain developed market country allocations. For example, we think total emerging market allocations in the low single digits looks tiny compared to Japan’s 7-10% in the MSCI AC World Index, particularly when one considers that Japan faces significant structural challenges in its economy for the foreseeable future. Bottom line, we deem a low, double-digit allocation to high-growth emerging-market equities a reasonable, and potentially even conservative, target. We also believe allocations to emerging-market bonds should be at least 3–5%, and not zero as it is among many pension funds.

Exhibit 14

Emerging Capital Markets Have Yet to Catch Up
With GDP Growth

Data as at December 31, 2010. Source: World Bank, MSCI, IMF World Economic Outlook September 2011.

Exhibit 15

US Investors Are Underinvested In Emerging Markets

Source: Pensions & Endowments September 2010, Cambridge Associates Data as at December 31, 2010.

Looking for Non-traditional Ways to Capture Emerging-Market Growth

While emerging markets certainly exhibit significant economic growth (notably evidenced by rising consumption), achieving returns through prudent risk-adjusted exposure to those markets can be challenging. This is because many strong businesses based in emerging markets are family-run, privately held, and/or obscure to the common investor—and because public indices are dominated by state-run companies, often in the financial-services sector. For example, state-owned businesses in China represent a sizeable 76% of the major Chinese equity index that foreigners can buy (Exhibit 16) whereas the entire consumer discretionary sector is less than 3% of that index. In Brazil, just two companies—Petrobras and Vale—now account for 25.6% of the entire market capitalization of the Brazil Bovespa equity index (and that is down from 40%+). From a broader asset-allocation perspective, Brazil and China now account for 32.4% of the entire MSCI emerging market equity index, with 13.6% of the total index coming from just 10 companies.

So, similar to what we are recommending in the commodity arena, we believe that asset allocators should look outside of the box when it comes to investing in emerging markets. In particular, we think that China and Brazil represent important countries to seek customized solutions, including concentrated active managers, hedge funds, private equity and/or direct investments. The alternative, in our opinion, is to rely on returns from exposure to slow-growing, government-linked businesses concentrated primarily in financial services—rather than to capitalize on exposure to more rapidly growing businesses in such other sectors as consumer goods, technology and infrastructure.

Exhibit 16

State-Owned Businesses Make Up 76% of the
China H-Share Index Market Capitalization

Hang Seng China Enterprises Index (H-Shares Index)

State Owned



Consumer Discretionary




Consumer Staples












Health Care








Information Technology








Telecom Services












Data as at October 31, 2011. The Hang Seng China Enterprises Index consists of Chinese companies whose shares are issued in China but are traded in Hong Kong. Source: Bloomberg.

Exhibit 17

Some of the Best Risk Adjusted Performance From
Asian Investors is Coming From Alternative Sources

Data as at December 31, 2010. Asia Emerging Market Private Equity & Venture Capital return is an end-to-end calculation on a pooled basis based on data compiled by Cambridge Associates net of fees, expenses, and carried interest. Source: Cambridge Associates, Bloomberg.

Inflation: Finally Headed in the Right Direction

That emerging-market growth is superior to developed markets is no longer up for debate. What’s still in question is whether emerging markets can generate growth without a corresponding increase in inflation. Thus far in 2011, the performance of several major emerging economies—including China, Brazil, and India—has lagged, owing in part to rising inflation expectations (Exhibit 18). Though I cannot offer a current firsthand assessment of India and Brazil (as they were not included in my recent trip), my visit to China has led me to conclude two things. First, given China’s extraordinary demand for agricultural commodities—as well as the potent effect of its money multiplier—investors should expect continuing cyclical bouts of inflation. Second, all near-term indications point to an oncoming period of slowing—not accelerating—inflation. We believe this deceleration is a big deal and represents an important positive data point in our macro framework. We link this downshift to favorable comparisons and slower overall economic growth. Supporting our view is that October’s inflation rate in China dropped to 5.5% from 6.1% in the prior month (Exhibit 19), which was the first substantial decline since December 2010.

Exhibit 18

Emerging Market Inflation is Highly Influenced
by Commodity Prices

Data as at December 31, 2010. Source: Haver, UBS Emerging Economic Perspectives 1 March 2011.

Exhibit 19

China Can’t Promote Growth Until Inflation Dissipates

LA = Left Axis; RA = Right Axis; CPI = Consumer Price Index. Data as at October 31, 2011. Source: Bloomberg.

Looking ahead, the Bloomberg consensus inflation forecast for 4Q11 is 4.85%, while yearly predictions for 2012 and 2013 are 4.0% and 4.5%, respectively. We think that these estimates appear reasonable. Key to our thinking is the expected leveling-off of the rising trend in pork prices. After bottoming out in June 2009 at 14 yuans (CNY) per kilogram, pork prices spiked 89% to CNY 26.4 per kilogram in 2011. Year-to-date prices are up 34.3% through October 28, 2011, though it appears that pork prices are finally peaking (Exhibit 20). And with the correlation between pork prices and Chinese headline inflation at about 85%, we believe this data point is crucial.

Exhibit 20

It Appears Pork Prices Have Begun To Fall

Data as at October 28, 2011. Source: China Ministry of Commerce, Bloomberg.

In recent quarters China’s stock market appears to have suffered mightily from investors’ concerns about a “hard landing” after the one-two punch of upward inflationary pressures and concerns surrounding near parabolic loan growth in the 2009-2010 period. But if inflation does indeed ease as we predict, Chinese authorities may finally have the flexibility to shift their restrictive monetary policy into neutral or accommodative gear, which should reduce the risk of such a landing and also potentially translate into stronger equity performance. As one can see from Exhibits 21 and 22, valuations in China are currently trading near one standard deviation below historical norms.

Exhibit 21

China Equities Cheap Relative to Its History…

Data as at October 19, 2011. Source: Factset Aggregates, Factset Estimates.

Exhibit 22

…and Relative to Other Markets

Forward Price-to-Earnings Ratio


Avg. 2001 to 2011

Standard Deviation










































South Africa






























*Current as at October 19, 2011. Source: Factset Aggregates, Factset Estimates.

Besides an improving inflationary backdrop in several emerging markets, including China, we also find it reassuring that these countries are not as encumbered by heavy government debt and social entitlements, unlike their U.S. or European counterparts. Indeed, their government debt is not a big overhang and deficits appear more manageable (Exhibits 23 and 24). This lack of outsized government indebtedness is a positive for valuation multiples in the current Phase III environment. Their unemployment rates, too, are not at burdensome levels, though their central banks naturally focus their policies on employment growth.

Exhibit 23

Debt Loads Affect Equity Valuations Too

GDP = Gross Domestic Product; NTM = Next 12 Months; P/E = Price to Earnings Ratio; E = Estimate. Data as at September 30, 2011. Source: IMF World Economic Outlook, Factset.

Exhibit 24

Emerging Markets are Much More Attractive
in Many Respects

Developed Economies

Emerging Economies

2011E Debt % GDP



2011E Government Expenditure % GDP



2011E Fiscal Deficit % GDP



2011E Current
Account % GDP



2011E Real GDP Growth



Forward P/E



Forward P/B



E = IMF Estimate; GDP = Gross Domestic Product; P/E = Price-to-Earnings Ratio; P/B = Price-to-Book Ratio. Forward P/E and P/B as at October 31, 2011. IMF Definition of Emerging and Developed Economies can be found at Source: IMF World Economic Outlook, Bloomberg.

Yet avoiding a hard landing doesn’t, in itself, address some of the structural issues that China’s central bankers face. For instance, inflation is running well ahead of nominal deposit rates, so real yields on deposits are negative (Exhibit 25). This means that the Chinese, who are predisposed to cash deposits, are continually losing purchasing power. Not surprisingly, this often encourages individuals to make more speculative investments, particularly in real estate. We believe the resultant increase in real estate prices has several negative implications: it raises inflationary pressures; it creates a greater social and economic divide between owners and non-owners (Exhibit 26); and it underscores the inefficiency of the capital markets.

Exhibit 25

China Deposit Rates Are Now Below Inflation…

Data as at October 31, 2011. Source: Bloomberg.

Exhibit 26

…and Home Prices Keep on Rising

Data as at September 30, 2011. Note: National residential building selling price through 2010, index of new residential building prices in Beijing and Shanghai post 2010. Source: China National Bureau of Statistics, Haver, KKR Macro and Asset Allocation Research.


My recent trip to China reinforces our view that Asia—led by China—will remain the world’s additive growth engine in the foreseeable future. The trend towards urbanization and improvements in technology and infrastructure are materially accelerating the speed in pan-Asian growth per capita.

My visit also validates our long-term view that the global commodities—oil and corn in particular—are likely to remain in moderate-to-strong demand as standards of living and automation continue to grow across the region.

In the near-term, the potential for a meaningful decline in China’s inflation rate is the first positive sign amid three critical macro headwinds—sluggish U.S. growth, widening European bond spreads and Chinese inflation—that we have been monitoring for some time. It is potentially conducive to global economic growth and could mean that there is potential upside to our various national GDP forecasts, including our 2012 U.S. GDP forecast of 1.5-2.0%. However, China’s structural challenges—negative real rates, a potentially undervalued currency and declining demographic trends—should prompt us to follow the so-called “Asian Miracle” very carefully.

In terms of asset-allocation strategies for Asia, we note rising consumption, infrastructure developments and a strong appetite for commodities as key themes to consider. Given the challenging dynamics of traditional indices and benchmarks in emerging markets, we recommend considering tailored and actively managed strategies and vehicles—rather than blanket regional exposure, which may underperform—in order to seek to capture returns from high-growth areas that we favor.

Important Information

The views expressed in this presentation are the personal views of Henry McVey of Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR”) and do not necessarily reflect the views of KKR itself. The views expressed reflect the current views of Mr. McVey as of November 15, 2011 and neither Mr. McVey nor KKR undertakes to advise you of any changes in the views expressed herein. In addition, the views expressed do not necessarily reflect the opinions of any investment professional at KKR, and may not be reflected in the strategies and products that KKR offers.

This presentation has been prepared solely for informational purposes. The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Charts and graphs provided herein are for illustrative purposes only. The information in this presentation has been developed internally and/or obtained from sources believed to be reliable; however, neither KKR nor Mr. McVey guarantees the accuracy, adequacy or completeness of such information. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision.

There can be no assurance that an investment strategy will be successful.  Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially, and should not be relied upon as such.  This presentation should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy.

The information in this presentation may contain projections or other forward-looking statements regarding future events, targets, forecasts or expectations regarding the strategies described herein, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and may be significantly different from that shown here. The information in this presentation, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.   Performance of all cited indices is calculated on a total return basis with dividends reinvested. The indices do not include any expenses, fees or charges and are unmanaged and should not be considered investments.

Neither KKR nor Mr. McVey assumes any duty to, nor undertakes to update forward looking statements. No representation or warranty, express or implied, is made or given by or on behalf of KKR, Mr. McVey or any other person as to the accuracy and completeness or fairness of the information contained in this presentation and no responsibility or liability is accepted for any such information.  By accepting this presentation, Recipient acknowledges its understanding and acceptance of the foregoing statement.

The MSCI sourced information in this document is the exclusive property of MSCI Inc. (MSCI).  MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein.  The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products.  This  report is not approved, reviewed or produced by MSCI.