KOHLBERG?

Any views on Kohlberg & Co. - the middle-market PE firm started off by KKR's Jerome Kohlberg?

From what I know: low headcount (about 20 or so professionals), portfolio companies usually in the $100MM - $500MM range, and relatively lower leverage deployment.

Anyone have any comments regarding prestige / deal sourcing capabilities / lifestyle? Would you work there after your 2 year stint?

 
[Comment removed by mod team]
 

Not really convinced that this is really anywhere as legit as KKR private equity. Yes it is in S.F., and unfortunately only in the first round interview process. What do you guys thinl, here's a description of company/job:

KKR Financial LLC (“KFL”) is an investment manager formed in August 2004 by Kohlberg Kravis Roberts & Co. L.P., Saturnino S. Fanlo, and David A. Netjes for the purpose of investing on behalf of clients in multiple asset classes utilizing leverage to generate competitive risk−adjusted returns. KFL’s clients include (i) KKR Financial Corp., a publicly-traded (NYSE: KFN) specialty finance company with total assets exceeding $16 billion; (ii) eight CLO and CDO transactions managed on behalf of KKR Financial Corp. and other third-parties; and (iii) an onshore and an offshore open-end private fund (KKR Strategic Capital Fund L.P. and KKR Strategic Capital Overseas Fund Ltd.). On behalf of its clients, KFL makes investments in the following asset classes: (i) residential mortgage loans and mortgage−backed securities; (ii) corporate loans and debt securities; (iii) commercial real estate loans and debt securities; (iv) asset−backed securities; (v) equity securities; and (vi) derivatives. KFL is based in San Francisco. KFL employs approximately 50 professionals in investment, accounting, finance, treasury and legal functions. KFL is an affiliate of Kohlberg Kravis Roberts & Co. L.P.

Key Responsibilities: • Support Intermediate and Senior Corporate Analyst team in evaluating non-investment grade corporate credit as well as commercial and residential real estate debt and equity opportunities • Prepare relative value analysis • Construct financing, valuation and analytical models • Conduct industry and company research

 

It definitely does not carry the same weight as KKR PE. I have talked to several people about this position as well as Bain Capital's equivalent (Sankaty Advisors) and the general consensus seems to be that though the job will be decent, it is not that great. Seems to be held as a joke by bankers. I would suggest taking a BB banking job over KKR Financial, especially given that if you do get this job, you are most likely qualified and able to get a pretty good bb. On the other hand, kkr financial does say kkr, and for most unsuspecting people, it may just fly.

 

KKR is similar to Sankaty Advisors. At my alma mater, I knew of a couple people who chose to full time at Sankaty after a summer in banking. All were very qualified (i.e. GS, MS, Laz), so I def. would not call these positions a "joke". This is more of a buyside position, investing in debt. See which line of work sounds more appealing for yourself personally.

 

I don't believe KKR Financial is their REIT...as ib1234 said, they are debt investors and that includes mostly high yield/mezzanine debt in a ton of different companies. And to address ib1234's comment, I also know of a few people that chose Sankaty over bb and they are very qualified. I do not myself consider it a joke and thought it would be a great position to have, but when talking to random bankers already in the street, seems to be that they think kkr financial and sankaty are not up to par. One thing to note is that kkr financial and sankaty are very different and have very little interaction with their pe counterparts due to legal issues, clearly. They also have a low track record of placcing into any type of pe or hf even though they are already on the buyside. Guess it's just a word of caution. Rep does matter.

 

BUSINESS SUMMARY
KKR Financial Corp., a real estate investment trust and specialty finance company, invests in various asset classes in the United States. The company invests in residential mortgage loans and mortgage-backed securities; corporate loans and debt securities; commercial real estate loans and debt securities; asset-backed securities, and equity securities. KKR Financial Advisors LLC serves as the manager of the company. KKR Financial Corp. was founded in 2004 and is based in San Francisco, California.

First line says "a real estate investment trust " = REIT

Mr. White:
I don't believe KKR Financial is their REIT...as ib1234 said, they are debt investors and that includes mostly high yield/mezzanine debt in a ton of different companies. And to address ib1234's comment, I also know of a few people that chose Sankaty over bb and they are very qualified. I do not myself consider it a joke and thought it would be a great position to have, but when talking to random bankers already in the street, seems to be that they think kkr financial and sankaty are not up to par. One thing to note is that kkr financial and sankaty are very different and have very little interaction with their pe counterparts due to legal issues, clearly. They also have a low track record of placcing into any type of pe or hf even though they are already on the buyside. Guess it's just a word of caution. Rep does matter.
 

KKR Financial Corp. is a leading diversified specialty finance company with more than $18 billion of assets under management. Our asset profile is bank-like but without the same infrastructure. Our balance sheet reflects our REIT status — we hold real estate assets (primarily whole loans and residential mortgage backed-securities) to maintain our eligibility as a REIT, HOWEVER WE ARE NOT INVESTING IN REIT ASSETS TO DRIVE OUR RETURN ON EQUITY (ROE). How we allocate capital and leverage our investments are what drive our ROE.

 
Mr. White:
KKR Financial Corp. is a leading diversified specialty finance company with more than $18 billion of assets under management. Our asset profile is bank-like but without the same infrastructure. Our balance sheet reflects our REIT status — we hold real estate assets (primarily whole loans and residential mortgage backed-securities) to maintain our eligibility as a REIT, HOWEVER WE ARE NOT INVESTING IN REIT ASSETS TO DRIVE OUR RETURN ON EQUITY (ROE). How we allocate capital and leverage our investments are what drive our ROE.

Yes....and?

 
Best Response

Well, we don't bank them but....

1) The external advisory agreement w/ KKR Financial Advisors is inherently conflicted (which is why most REITs internalize the management company)--in that management doesn't concentrate its focus solely on running KFN (Henry Kravis is on the investment committee, for instance), and you can guess who gets preferential treatment between KKR's LPs and KFN's public shareholders

2) KFN, like all finance REITs, is vulnerable to widening credit spreads (note: not necessarily rising interest rates, as they attempt to match-fund their investments)--since we're basically as low as we can go right now (CMBS financing at 75% LTV is now in the US10Yr + 125 bps area, depending on the assets), any negative jolt to the economy--something to cause investors to demand higher returns over the risk-free rate--would likely wreak havoc on KFN's floating rate investments.

I'm not pooh-poohing the company totally, as I think they're smart guys (one of the founding members of their investment team used to be an MD in my group), but their investment focus is quite risky (in my opinion) in the current economic environment.

 

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