Times used to be simpler for chief financial officers and the finance departments of large alternative asset managers, recalls Bill Janetschek. He should know, KKR's main number cruncher is a prime example of how times have changed.
“Twenty years ago, if you were the CFO, you just needed to make sure you provided quarterly valuations, financial statements and tax returns to your PE LPs,” Janetschek tells PEI during an interview in the firm's offices overlooking Central Park, adding that CFOs typically came from the big four accounting firms and most had tax backgrounds.
Janetschek, for example, began his career at Deloitte Touche and quickly became a tax partner focusing solely on KKR for more than a decade.
When KKR decided to bring the tax function in-house in 1997, the firm hired Janetschek, and a year later when the CFO retired, it promoted him to the post, while he continued to oversee the tax department.
Since those early days, much has changed at KKR and in the private equity industry.
Janetschek stopped wearing two hats in 2009 when the firm hired a global tax director. His role as CFO had already grown significantly since 2004, when KKR, planning to diversify its revenue stream and asset base, expanded its platform from private equity shop to multi alternative asset manager, adding a credit business, followed by real estate, energy, infrastructure, and capital markets.
Due to this transformation, Janetschek's role became much more strategic, working regularly in concert with KKR's co-chief executives, Henry Kravis and George Roberts, and with the heads of each of KKR's different businesses, to plan and orchestrate continued growth at the firm.
This evolution of Janetschek's role is reflective of the types of CFOs whom alternative asset managers are increasingly seeking.
“Nowadays, you're looking for a CFO with a more well-rounded business background,” he says. “People who now sit in the CFO role are a lot more strategic than they were 20 years ago. They're helping a firm run its businesses.”
As a result, CFOs coming to alternative asset firms today are more likely to have worked at a bank than at an accounting firm and often have a strong operating background.
It's not only the role of the CFO that has evolved, but also the importance of the finance department due to limited partners seeking more transparency, to alternative managers being publicly traded and to increased regulation following the Dodd-Frank Act.
For example, out of 1,200 employees at KKR, its finance department has 175 people spread out around the world in more than 20 offices. Some 40 of them focus exclusively on management company reporting.
Meanwhile, increased transparency requests prompted by the Institutional Limited Partners Association have required greater resources. In the year since ILPA issued its fee reporting template, KKR has hired a handful of additional people solely dedicated to more in-depth requests related to the template.
Every year, we are providing more information and more granular detail and responding to customised requests. That requires staff to handle the information,” Janetschek says. “This is a whole new ball game.”