The US capital markets, which were virtually shut for the last six months with even top-notch companies unable to access money, has started opening up, according to Henry R. Kravis, co-founder of private equity firm Kohlberg, Kravis, Roberts and Company (KKR), which manages assets of $48 billion worldwide.
“We’re seeing rays of sunshine in the US, China and some other markets. I don’t know whether they’ll stay open but we’re reasonably optimistic,” Kravis said at a media conference in the city today. He added that the measures taken by the US government to stimulate the economy, including TARP, appeared to be working though some of the plans may need to be tweaked. For instance, he wasn’t sure how exactly the public-private partnership plans were going to work because there were apprehensions of whether the government would be too strict.
The KKR Co-Chairman said despite the global economic meltdown, most of the companies in the fund’s portfolio had been able to sustain or improve their earnings in 2008 although the fund had marked down its assets by 41 per cent. Observing that the best time to invest was when economies were coming out of a downturn, he said KKR saw a big opportunity in India though he wasn’t sure how many buyouts it would be possible to do right now.
“Nevertheless, we would like to put in growth capital and to partner with many of the family-owned companies and entrepreneurs. We believe we could help them grow, perhaps by helping them acquire companies overseas,” Kravis said. KKR, which has already invested just under $1.2 billion in India in two companies, was, however, in no hurry to invest, the Co-Chairman clarified. “We may not do anything for six months because it’s critical to pick up the right companies. We will be looking to work very closely with managements with specific performance metrics in mind and we’ll also be looking for board seats. It’s not what you buy that’s important, it’s what you do with the company that matters,” he said adding that typically his firm held on to an investment for seven years.
Kravis said that PE firms would bounce back but expected governments around the world to insist on more regulation. In the last three years, KKR has raised around $30 billion, through three different funds. In the 33 years since it came into being in 1976, the fund’s returns have been 27 per cent annually.