Jul 09, 2018
Henry Kravis, Co-Chairman and Co-CEO, provides opening remarks at Investor Day and explains how we are different and what has been the key ingredient.
Co-Chairman and Co-CEO, KKR
Well thank you everyone for joining us today and particularly those that have come a long way to be here on a Monday morning. Thank you. We really appreciate that.
Jerry Kohlberg, George Roberts and I started KKR about 42 years ago now. We started with $120,000. Now the $20,000 is from George and me. The $100,000 was from Jerry. With a vision to create an investment firm and culture that rewarded collaboration and team work.
Now, since then, we have been more than fortunate than we could ever have imagined. We have turned the $120,000 into over $190 billion of assets under management and that is after giving back quite a bit of money during this 42-year period to our investors. We have grown the firm into a global diversified business across private markets, public markets and as you can see on the slide, that will break down what we have done, and we have also gone into a global capital markets business, which is very important, and you will understand that as we go through the morning. We have built our balance sheet, which supports all of our businesses and increased our permanent capital. The balance sheet, keep that in mind as you listen to every presentation because it plays a role throughout what we do at KKR. We have created significant value for the people that have invested with us. I firmly believe that today we are a stronger firm than we have ever been before, and I know George would say exactly the same thing to you.
What you are going to hear today is a lot about our strategy, our focus and how we are going to grow the firm. A consistent theme you are going to hear is focused on our growth opportunities and why we truly believe that we are positioned today to continue the trajectory that we have already started and put into place over the last five years. We have had meaningful growth across KKR and you can see this on a chart coming up. Since 2005, our assets under management have increased at an annual compounded annual growth rate of 19%. From $23 billion up to the $190 billion that I mentioned. Not only have our assets under management grown but it has become much more diversified than ever before. In fact, a lot of the growth has come through the innovation of new products and the diversification of our business, both product wise and geographically. In 2010, when we first listed our units on the New York Stock Exchange, we were primarily a private equity firm, which shows on this chart, with the leveraged credit business that was focused in the US. But if you look today, we have diversified into a number of businesses. In private markets today, we have private equity, we have real estate equity and debt, we have infrastructure, we have energy, we have growth strategies and we have core investing. In our public markets, we have hedge funds, leveraged credit, special situations and we are one of the largest players in private lending. Also over this timeframe, as Suzanne Donohoe is going to mention to you, we have expanded our investor base tremendously to a much more global and diversified group of investors. Looking specifically at the period since we listed in 2010, we have more than tripled our assets under management from $62 billion to the $190 billion and after-tax distributable earnings grew from $577 million to $1.5 billion. We have increased book value per share from approximately $8 to $14.50 currently while paying out almost $9 a share in distributions over this period of time in the form of dividends.
How Are We Different?
Now, we are often asked how we are different and what has been the key ingredient. Well, investment performance is clearly one of the critical pieces and we always say portfolio, portfolio, portfolio, which means focus on the portfolio and get the most out of it that you possibly can. You are going to hear from a number of presenters today across the different strategies and how they are focusing and how we are focusing as a business. Perhaps most critically, though, is this one slide that I just put up. To me, this slide says it all. We are one firm. We started that 42 years ago when we started this firm, and today it is as applicable as it has ever been before. Now what does it mean? Well, it means that every single person in KKR is paid on how well the firm does as a whole. We do not have silos. People do not have their own individual economics. We work in teams. We started it that way 42 years ago and it is still exactly the same, obviously much bigger, much broader and more diversified than ever before. We work around the world with everyone in the firm where they work together to help connect the dots, as we like to say, and make smart investment decisions and help make the firm a better place.
Now, this is very important and I hope you will keep it in mind. These values that we have up here very much is ingrained in our DNA at KKR. In fact, I am not going to go through each one of these points but I will just say to you that there is not a firm meeting that we have at KKR where George Roberts or I do not mention our culture or values to everyone in the firm. We repeat it and repeat it because this is what really drives our business. And it’s this one firm culture, along with our values that allow us to achieve the growth opportunity that you are going to hear about in the presentations today.
With that, I am pleased to now introduce two of my partners, Joe Bae and Scott Nuttall. Last July, George and I appointed Joe and Scott as co-presidents and co-chief operating officers of KKR. This was an extremely important step for all of us at the firm. Now, while George and I continue to lead the firm as co-chairmen and co-COOs, Joe and Scott are jointly responsible for the day to day operations of the firm and work very closely with George and I. So rather than having 11 people that reported to us, we now have two people that report to us and the streamlining of this makes a huge difference at the organization. Both Joe and Scott have worked at the firm for over 20 years. In fact, they joined the firm within a few months of each other and they joined in our private equity business in 1996. They have adopted, which you will see on this chart, what they call a major/minor approach in terms of how they actually manage the business.
So as you can see on this page, Joe is primarily responsible for the private equity and real assets business, while Scott is responsible for our public markets, principle activities, capital markets and our distribution business. Their transition to these roles has really been seamless and effective. They both had worked in these areas before,in fact, started a lot of the business that we have at KKR today. So George and I could not be happier nor pleased with how well this transition is going, which is now one year in the making, and it is working very well. We are working extremely closely together.
With that, I am pleased to bring Joe and Scott up here to start taking you through our businesses. Thanks again for being here.
DisclaimerInvestor Day podcasts and corresponding transcripts have been prepared for KKR & Co. Inc. (NYSE:KKR) for the benefit of its public stockholders and is not intended to be a solicitation or sale of any of the securities, funds or services that they may discuss. Please find a copy of the presentation here.