Europe is in for a long stretch of low growth and restructuring, which presents good opportunities for investors who have the “financial and human capital” to make investments during this time, according to George Roberts, co-founder of Kohlberg Kravis Roberts.
Roberts spoke in front of the Washington State Investment Board recently, giving an update on KKR’s activities to one of its longest-standing limited partners. The firm and Washington State have a relationship that goes back 30 years.
Roberts spent time describing how the marco-environment affects the firm and its investment strategy. “We’ve been able to look at some interesting things … we’ve taken part of the capital you all have given us in private equity and invested in special situations where we see a lot of value,” Roberts said.
The underlying strength of the US economy is better than what you would typically read or feel by listening to the news.
The US economy is in a stronger position than what is reported in the media, he said. KKR gets a good sense of business sentiment from its own portfolio companies, as well as firm co-founder Henry Kravis, who serves on The Business Council, a group of business leaders representing various industries that meets several times a year.
“The underlying strength of the US economy is better than what you would typically read or feel by listening to the news,” Roberts said. “People are seeing little improvement on their business, not a lot but a little. People are shopping a little more, spending more, not a lot but there is some gradual uptick.”
Manufacturing could see a resurgence in the US as long as government policies remain open to fostering a business-friendly climate, he said.
“You see a lot of jobs going to southern states; one out of six jobs have been created in Texas because of the business environment there and the state income tax, which is non-existent,” Roberts said.
“I’m optimistic about our country. The US will lead the rest of the world out of the doldrums … I don’t think any other
country can potentially do that,” Roberts said. “The markets will eventually work here.”
Specifically citing the growth of the energy sector in the US, especially the rise of natural gas production out of shale formations, Roberts said there is a wave of technological advances that have not yet been reflected in the wider market that will help drag the US economy out of sluggishness.
Absolutely essential, though, will be the ability of the US to solve some of the fundamental fiscal issues that pose a threat to the market – including the expiration of the Bush-era tax cuts and the expiration of unemployment benefits that are set to go away in 2013. “Unless Congress and the President act on some form of handling that, if that were allowed to happen that would not be a good thing,” Roberts said.