KKR - Latest buyout fund?

I stopped watching less than 10 minutes in

Seems like their point is that Kravis is wealthy.

Okay...and you're angry because you're jealous?

P.S.- Intersting find by the way

The video is very confusing. I understand what they would have liked to convey but it is incoherent and lacks substance.

Wow,I find this to be the epitome of Communistic thought in the U.S. Why does Henry Kravis have a net woth of $5.5 nillion dollars and make $50,000 an hour.....because he earned it! He wouldn't have mad that money without savvy skills and high risks, so I truly don't care if he make 1 million dollars an hour...as long as he earns it .the only people I truly deem being paid too low are those who sacrifice heir fiscal well being for the greater good suchas soldiers, teachers, etc. an even those ho go into those great services are sometimes allured by things other than morals, mainly job security- it isvery hard to fre a bad teacher, cop, etc. Let's think, Kravis risks his financial well-being reguraly and they don't think he deserves as much money as he makes? That is sick.

wealth is a function of your contribution and someone else's willingness to pay for whatever you have to offer. People should get what the market dictates, not what people feel is "right." i hope the dirty hippies who made this video die painful deaths. god i hate socialism.

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Another classic, on how an LBO really works.

Sorry if y'all have already seen it. It was featured in the Epicurean Dealmaker a few months back.

This should be a recruiting video for KKR lol. Do you want to a badass like Kravis? Come work for us, this could be your home one day.

My god the other video is worse....blahh

lol look at the clip on CNBC, Maria tells him off a couple times.

There are people, on the other hand, who don't deserve the $50 million a year they're getting paid...like the CEO of ford. He gets paid $28 million in 4 months to BLEED red ink? Unacceptable. Ford lost $12 BILLION and closed down a factory or two. Yet the CEO makes $28 million in 4 months. Or the "We're pulling decent airplane food from our flights because our CEO needs a bonus/new yacht/new gulfstream/new mansion in Florida" airline CEOs.

If your company's bleeding red ink, as a CEO, you should be fired and replaced, not paid tens of millions. Fired, as in no golden parachute.

"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-

why is there such """""hatred""""" for socialism, communism.

you can't disagree, but don't hate. man up people, man up!

NET WORTH OR NOTHING, YA FEEL'

I wanna be a badass like Wachtell and Lipton.

"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-

while you're at it, why not ask why there is such a "hatred" for slavery.

we're talking about grossly violating individual rights. i thought america was above this socialist nonsense, but i guess i thought wrong.

Slavery is just wrong in every way, both in theory and practice. Socialism is great in theory (we'll pool our resource, we'll "share" and nobody goes hungry and everyone's happy), but sucks in practice (think USSR). Therein lies the difference.

"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-

It is a fairly simplistic attempt at putting a face to all the greed on wall street, but I think it has a point on the tax breaks. I think Kravis could afford to earn a couple of hundred million less without being any less of a capitalist.

And while it is easy to diss socialism , remember that capitalism will eventually come back to bite your ass if the gap between haves and have nots widen. I would rather see Kravis earn a couple of hundred million less than see some nutjob with a grievance blow up Wall street, bcos that's where he thinks his money is going!

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This is a good direction for KKR, but like one article said about this, KKR is no Berkshire Hathaway. Never will be. As an investor Buffett is leagues above them all. Oh well, they can try...

What are Buffets annualized returns?

It poses an interesting scenario...

Buffet's investing principals are grounded in long-term investments. As he puts it, if you're not comfortable holding a company for 10+ years, you have no business looking to invest in it. This is in stark contrast to the life cycle of a Private Equity fund. In addition, one of the reasons alternative investments offer higher returns is because of a liquidity premium (illiquidity rather). Consider PE funds currently shoot for a 20-25% annual return on a 3-5 year investment horizon, if investors like KKR were now going to require LPs to commit to much longer horizons, that 20-25% should be upped to reflect an even lesser degree of liquidity.

A PE firm, using Buffet's investing principals would likely buy private companies for a longer holding period, say 10 years. And as a solution to the investment maturity differential I mentioned above, they could use KKR Fund II to cash out investors in KKR Fund I. So they buy Company X, hold for 3-5 years, and exit by selling that equity to KKR Fund II, thus allowing the Fund I LPs to realize their gains and still be on the same investment horizon KKR has always functioned on. But there are a host of issues that are born out of this as well. For one, earlier investors would likely enjoy a much higher return as KKR's management begins to add value. But as the investment ticks on, the marginal benefit of that management will not be as stark. In addition, how they value the assets being transferred to the new investors will be very tricky as someone will always feel shortchanged.

In sum, I just don't find it likely.

Marcus_Halberstram:

they could use KKR Fund II to cash out investors in KKR Fund I. .

how is this not a ponzi scheme?

Yeah, I don't think that would work. People in Fund II would be paying for a company that's probably already realized most of its value. It would be a good company, with high cash flows and low debt by then, but probably not a cheap one, which somewhat beats the purpose.

An entirely separate fund would probably be necessary, perhaps one that focused on opportunities where cash flows weren't as likely to cover debt in the short-term but where underlying assets could eventually produce significant cash flow (e.g. Burlington Northern).

Buffett's returns since 1967, when he bought Berkshire Hathaway, have averaged an annual 24.73%. They would probably be higher if you counted the years before that. Evidently they've been slowing down a lot.

Yeah cphbravo96, you are right. It also completely shows how much the people that say Buffett's record doesn't reflect his abilities because he gets special deals know. Buffett got the best returns in his life in the 50s (beat the market by an average of 50 percentage points in the decade), when knew a lot less about investing and business. Yet people make excuses.

Also, I would like to point out KKR uses leverage, making their real return very very unimpressive. Buffett uses no leverage, making his returns that much more impressive.

Finally, firms like KKR and Blackstone have hundreds of "professionals" (MBAs, lawyers, etc.) that apparently all find work to do. Buffett does everything himself.