Shop talk

George Roberts, who – along with colleague Henry Kravis and the since departed Jerome Kohlberg – founded Kohlberg Kravis Roberts, recently warned one of his firm’s longest-standing investors not to attach too much significance to quarterly performance numbers when assessing private equity investments.

“The cycle it takes to prove out an investment is not every quarter,” he told The Washington State Investment Board in April, “it takes years.” He went on to add that when the economy starts going backwards instead of growing, it takes even longer.

“Right now you’re probably in the second inning of a baseball game, and many of the pundits are calling the game already. That’s far from what’s really here,” he said.

Roberts was giving Washington State an annual update on the firm. KKR has enjoyed one of the longest, most lucrative relationships in the private equity industry – spanning 29 years – with the pension. It has committed $6.1 billion to KKR’s funds over the years, and received distributions of $7.7 billion.

George Roberts

Roberts also told the pension that the proposed “Volcker rule”, which would ban banks from undertaking proprietary trading, would not affect KKR’s business, but could have a detrimental effect on the amount of capital and liquidity in the market and people’s ability to hedge against market risks.

“Any time someone takes on a risk – a bank makes a loan – they’re taking on risk; that’s a proprietary product. Any time you do a hedge on commodity prices, natural gas, someone has to be the counterparty to that risk. Someone has to trade it. Someone has to provide the capital.”

“People have the pitchforks out for the bankers,” he said. “No one in Washington [DC] is going to stand up and say, ‘Wait a minute, let’s look after these guys’. They should, I mean, that’s where the money is.” 

KKR is currently edging closer to its listing on the New York Stock Exchange. In May the global alternative asset management firm revealed that having registered $2.21 billion worth of shares on the exchange, it will subsequently sell additional shares valued at around $500 million. The proceeds will be used to grow the business and for general corporate purposes, the firm said.