KKR – Red Deer Investments

KKR puts out nice perspectives pieces every so often, and they just released their 2022 mid year update. Instead of summarizing what I think is interesting, I’m posting their front page conclusion in its entirety with the bolding my own:

As we have highlighted for some time, our macro viewpoint remains that this cycle is different. Specifically, we see uneven supply constraints, higher levels of interest rates, and heightened geopolitical risks against a backdrop of slower real economic growth and sticky inflation. Overall, we believe that we have entered a regime change, where structural forces now warrant a different approach to portfolio construction. What is so challenging today for macro investors and allocators of capital alike is that the traditional relationship between stocks and bonds — where bond prices rise when stock prices fall — has broken down. Looking ahead, we are now firmly of the view that the macroeconomic narrative will soon shift from a singular focus on the impact of inflation on the global capital markets to one where investors are surprised by how unwelcome inflation adversely affects corporate profits. Importantly, we see inflation from food, oil, and services remaining robust, despite our forecast for deflation in the goods sector by 2023. Against this backdrop, our models suggest that Credit feels cheaper than Equities, and Public Equities appear more attractive than peer-to-peer Private Equity. Meanwhile, in Infrastructure and Real Estate, we do not expect prices to correct too much. Across all our portfolios, we think that a thematic bent continues to be required. Security, pricing power, de-carbonization, collateral-based cash flows, and innovation are all areas where we see significant opportunity to invest behind the ‘signal’ while many today are being swayed by the ‘noise’ of unsettled markets. Finally, from a deployment standpoint, we think that we remain in a walk, not run stance, until the Fed has inflation more under control and/or corporate profit estimates look more achievable.
KKR 2022 Mid Year Update

The NYT had an article about alternative investment firms. It wasn’t materially insightful. Here’s the best passage that I found:

To that end, the journalists that cover the alts tend to lump them all together. They started from the same place, but are on very different paths. Within 5 years I expect them to be notable different to journalists, and within 10 years to be in different “categories” altogether. Here’s the quick hit-list on my expectations:

Blackstone: Will continue down the path of becoming equity beta of large private market subsections. A continuation of their thrust into industrial real estate, multifamily real estate, entertainment / experience focused real estate, growth equity, etc. The razor sharp focus on returns inevitably has to degrade as they trade growth and scale that dive the stock price.

Apollo: Will continue down the path of becoming the next iteration of GE Capital, a shadow bank that ceases to exist in its prior skin. The focus is on debt, not equity. I think it’s possible that they spin off their equity units as the debt side of the house blots them out from the sun.

KKR: They seem like they are playing both strategies that Apollo and Blackstone are pushing. At some point they either commit to go all in on one or be a second rate mixed bag player. Their giant balance sheet virtually guarantees complexity that the market does not like and I expect commentators to harp on the ‘discount to intrinsic value’ for years going forward.

That’s just three of a broader set of public alt firms. But you see my point.