New York, KKR (Kohlberg Kravis Roberts & Co.) is one of the world's leading private equity (PE) firms, alongside Blackstone, Carlyle Group, and TPG.

Initially, KKR focused on private equity investments. However, in 2004, the firm took a strategic step toward diversification by expanding into credit markets and gradually extending its reach into emerging areas such as infrastructure, energy, real estate, and impact investing. Although KKR’s pace of diversification has been more measured compared to other top-tier PE firms, this methodical approach has resulted in consistent investment success and strong investor confidence.

Today, KKR is increasingly focused on the private infrastructure sector. In a report published late last year, KKR analyzed the resilience and value of private infrastructure investments across various economic environments. The report highlights how private infrastructure assets have demonstrated strong performance during market volatility and offer unique advantages, making them a highly adaptable asset class. KKR’s expertise in this area is evident—over the past five years, the firm has raised over $60 billion for infrastructure investments, ranking among the top tier globally. KKR has also been named Global Best Infrastructure Fund Manager for four consecutive years.

While market conditions remain uncertain, key investment principles remain unchanged: diversification, a focus on asset quality, and the continued dominance of strong players. Looking ahead to 2025, we see two primary investment themes emerging:

Capital Preservation – Prioritizing stability and downside protection

Strategic Positioning – Aligning with macroeconomic and policy trends

From an allocation perspective, three key investment areas stand out on the global stage:

Infrastructure investments – A foundational asset class offering both resilience and long-term growth potential

Corporate debt – Attractive opportunities in a high-interest-rate environment

Tech-driven equity investments – Capitalizing on innovation-led growth

With limited capital at stake, investors must be more selective than ever in 2025. Amidst the Trump 2.0 presidency, infrastructure spending could become a renewed policy priority. At the intersection of digitalization, green energy, and de-globalization, infrastructure investments could be on the cusp of a 20-30 year growth cycle.

Noah Holdings (HKEX: 6686, NYSE: NOAH) presents ARK "GP Talk", offering deep insights into one of our key partners, KKR. This discussion will explore how KKR stays ahead of the curve, adapts to shifting economic landscapes, and strenthens its status as the "King of Leveraged Buyouts."
For global wealth managers, the question isn’t just whether to invest in private infrastructure, but how to do so effectively. Noah’s Olive Asset Management remains committed to high-conviction investment decisions, leveraging macroeconomic expertise, rigorous asset selection, and precision timing to deliver the right solutions for the right clients.

The birth of KKR: a legendary company started with US$120,000

The story of KKR's founder began in 1945 when Henry Kravis was born into a Jewish family in Oklahoma. His father was a well-known local petroleum engineer. Driven by a passion for finance, Kravis received an MBA degree from Columbia University Business School and worked in a number of financial positions in New York. Then, a twist of fate occurred when Kravis and his cousin George Roberts joined the corporate finance department of Bear Stearns, a top Wall Street investment bank, where they met their future partner and mentor Jerome Kohlberg.

In the 1970s, the U.S. economy underwent a period of transformation. Many traditional industrial companies had become large, bloated, and inefficient due to years of expansion. To make matters worse, these companies were tightly controlled by insiders, struggling with depressed market valuations. However, Kravis, Roberts, and Kohlberg were keenly aware of the unrealized profit potential of these companies and eventually brought these once-undervalued companies back into the public eye through a series of successful corporate mergers and acquisitions deals.

In May 1976, three ambitious young people sat together in a restaurant in New York and decided to co-found KKR, a name that abbreviated the names of the three founders: Kohlberg, Kravis and Roberts. Their start-up capital was a mere US$120,000.

Emerging in the industry: popularizing the leveraged buyout

KKR was not well known at first, but they soon stood out on Wall Street. What makes KKR unique is that they analyze companies from a financial perspective (financial investor’s point of view) and understand the ability of cash flow to determine the company's ability and size to withstand debt. KKR selects managers who are able to control the company's cash flow to repay debt, and usually doesn’t participate in the actual operating management of the company when the LBO/MBO (leveraged buyout/management buyout) transaction is completed. Instead, it meets with the portfolio company’s management at monthly board meetings.

The acquisition of Duracell is one of KKR’s most successful early buyout cases.

Duracell was a small but thriving division of American food processing giant Kraft Inc. CEO Robert Kidder had a dream of controlling the company’s destiny. When he learned that Duracell would be sold to giants such as Kodak and Gillette, he approached financial buyers like KKR for an MBO. After five months of fierce competition, KKR won with a high bid of US$1.8 billion, exceeding market predictions of US$1.2 billion predicted and outbidding competitors by at least US$500 million.

KKR's buyout package was so attractive to Duracell’s management that 35 top managers invested US$6.3 million in stock purchases for a 9.85% stake. In the first year after the acquisition, the company's cash flow increased by 50%, grew at an annual rate of 17%, and quickly paid off debt. Meanwhile, KKR strongly supported Duracell’s management expansion and gave CEO Kidder greater investment authority.

In May 1991, Duracell went public. KKR recouped its US$350 million investment and, through subsequent secondary offerings and dividends, earned US$1.3 billion by 1996, paying off US$600 million in debt. In September 1996, KKR sold Duracell to Gillette. By 2000, KKR earned a total of US$2.3 billion in cash and US$1.5 billion in stock from the deal. Duracell’s management also emerged victorious, with the original 35 executives seeing their stakes increase 11-fold. This acquisition was a win-win for both KKR and Duracell.

From 1977 to the end of 2006, KKR completed over 140 acquisitions with a total transaction volume of more than US$192.9 billion by adopting an acquisition approach of "management buyout (MBO) + leveraged buyout (LBO)". As a pioneer in leveraged transaction, KKR earned the moniker "king of leveraged buyout firms”.

Diversified Development: Global Expansion and Product Line Expansion

Although KKR started with leveraged buyouts and supported its business development with strict investment discipline, it also recognized that the investment risks associated with leveraged buyouts were relatively high and that excessive growth could exacerbate debt pressures. As a result, KKR began to pursue a public listing and expand its product lines, steadily moving toward globalization and a platform-based model.

In 2004, KKR established a bond fund. In 2010, the company went public on the New York Stock Exchange, moving from private to public markets to expand its financing channels. Today, KKR has grown into a platform-based, diversified alternative investment firm. Since its IPO, KKR has launched specialized funds in energy, infrastructure, real estate, secondary market FOFs and alternative credit investments, and has gradually evolved from a private equity firm focused primarily on leveraged buyouts to a leading platform-based diversified alternative investment firm. KKR has a global presence with operations in the Americas, Europe, Asia Pacific and the Middle East.

In recent years, KKR has placed a particular emphasis on investing in alternative assets such as infrastructure, real estate and energy. The scale of its physical asset management has grown rapidly and its share of KKR's total AUM has steadily increased, averaging over 30% in recent years. Physical assets have become a key component of KKR's product portfolio. Among them, infrastructure has been the main growth driver for its physical assets, while the energy sector has seen steady development, with AUM remaining stable at around US$3 billion from 2016 to 2020.

According to a December 2024 KKR report, the company views private infrastructure investment as an asset class well-suited to all economic conditions.

Strong Performance Across Economic Cycles

Over the past decade, private infrastructure has outperformed all other asset classes except private equity. Investing in infrastructure means investing in the foundation of the real economy, which offers stable cash flows and strong risk resilience.

Effective Inflation Hedging and Adaptability to a Low-Interest Rate Environment
Asset values are correlated with price increases, and some assets are indexed to inflation by contract or regulation and perform well in periods of high inflation. In a low-interest rate environment, valuations rise, new projects become more attractive, and stable cash flows are generated.

Low Volatility
Infrastructure assets are crucial to the economy, with strong market share and historically lower volatility compared to other asset classes, providing resilient returns even during market downturns.

Diversification of Investment Risks
With low correlation to other market segments, infrastructure assets combine upside potential, inflation linkage, and anti-volatility characteristics, making them an effective diversification choice.

High Risk-Adjusted Return Potential
Including infrastructure in traditional portfolios can enhance returns and reduce volatility. Compared to listed infrastructure, private infrastructure performs better in multiple aspects.

In April 2022, KKR's subsidiary, Kaide Private Equity Fund Management (Hainan) Ltd., completed its registration with the Asset Management Association of China, with business types including QDLP and other pilot programs. The news immediately attracted market attention. Since entering China in 2006, KKR had only been able to invest in the Chinese market. From that moment, after 15 years of waiting, KKR finally had the opportunity to raise funds in China. This means that KKR can raise funds domestically and invest them overseas.

From investment to fundraising, KKR has taken a firm and strong step into the Chinese market. For investors, KKR's deepening presence in China not only provides more opportunities to participate in the strategies of global private equity giants but also helps them achieve global asset allocation. It also provides valuable insights and inspiration for other international investment institutions.