Interview with Citywire: Expanding the notion of private wealth portfolios
I recently had the pleasure of speaking with @Citywire Asia on the future of private wealth and how we at @KKR & Co. Inc. have been building our team to innovate and capture these opportunities.
Below is the full article, which you can also read on Citywire here. I hope you find this perspective useful, and am happy to discuss further if you have any thoughts.
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Expanding the notion of private wealth portfolios
KKR’s Markus Egloff believes private wealth investors are ready for a more innovative use of their funds and he’s building out his Asia team accordingly
There is no reason why private equity and infrastructure investments should be excluded from private wealth portfolios, according to Markus Egloff, alternative asset manager and KKR’s head of wealth in Asia.
Most of the strategies currently in the market are focused on real estate and private debt, but Egloff believes this can be expanded to include other asset classes that have traditionally been the preserve of institutions.
To drive this opportunity, the private markets giant has been building out its team. In Asia, Egloff expects the headcount to grow to more than 10 in key markets such as Singapore, Hong Kong and Japan, to support rising interest from individual investors.
KKR, which has $471bn in total assets, was an early entrant in both Asia and the private wealth space and opened its first offices in the region in 2005. Its assets under management in Asia-dedicated strategies have increased from $20bn to $42bn in the last two years, according to the group’s fourth quarter earnings call held in February.
This year the firm will be raising capital for five strategies in infrastructure, real estate, credit and growth. Last year, it closed the KKR Asian Fund IV, a $15bn private equity vehicle focused on the region. It also raised $1.7bn for its first Asia real estate fund.
In private wealth, the firm oversees more than $50bn in assets.
Traditionally, this channel has contributed about 10-20% of funds annually, but this is expected to grow to 30-50%.
For Egloff, digitisation will be a game changer in the private wealth space.
‘Our consumers and investors are tech-savvy and we see a huge opportunity to reach more of them through digital channels and innovative platforms that seek to democratise the alternative investment space,’ he said.
‘We’re also starting to see credible digital native distribution platforms emerge due to global developments in the blockchain and tokenisation space and see wider adoption in the coming years.’
The firm has had dedicated working groups studying different models, including in Asia, Egloff said, as he pointed out that they want to be at the forefront of the evolution and are willing to partner with strong players in different segments.
Indeed, last year, KKR took an undisclosed minority stake in fintech iCapital Network – a global platform that helps firms distribute private markets funds to individual investors.
KKR has also been investing in data architecture and management, as well as systems that will help make its sales process more seamless and efficient. In addition, it’s been working on improving its distribution technology and striking partnerships with players it predicts will become disruptors in the space.
Demand for infrastructure
There is a particular demand for infrastructure strategies, Egloff said, as investors seek both income-generating assets and those that can provide protection in a higher inflationary environment.
KKR currently oversees some $40bn in infrastructure assets globally and has made about 65 related investments in a range of sub-sectors and geographies. In mid-March, the firm raised $17bn for its Global Infrastructure Investors IV fund, more than twice the $7.4bn attracted by its predecessor in 2018.
‘One big way to mitigate the uncertainty we see in the market today is to get the long-term investment themes right,’ Egloff said. ‘For us, this means focusing on the opportunities around energy transition and security, cyber and digitalisation, automation and logistics, and the rise of the global millennial, among others,’ he added.
The rise of India
India is an important part of KKR’s investment strategy in the region, Egloff said. The firm opened its Mumbai office in 2009. Since then, the country has become a popular destination for private equity firms.
In 2021, there were 1,201 private equity and venture capital deals in India, worth $62.8bn, according to the Chartered Alternative Investment Analyst Association, up from 853 deals worth $23.9bn in 2017.
In November, the firm appointed veteran banker KV Kamath as a senior adviser for India. KKR was also the lead investor in LivSpace, a home interior and renovation platform that raised $180m in its Series F fundraising in February.
Other investments in the country include Virescent Infrastructure, a renewable energy platform, Vini Cosmetics, JB Chemicals, and Reliance Retail and Jio Platforms, both units of Reliance Industries. Jio Platforms houses the group’s telecommunication and digital business.
The growth of innovative and disruptive Indian companies and generational transitions have created opportunities across the asset classes, Egloff said, singling out global and export-driven businesses and sectors such as technology, consumer, healthcare, and financial services.
‘We see terrific opportunity in India due to the dynamic population and strong economic fundamentals that are fueling the growth of innovative and disruptive homegrown companies,’ he added.
‘These tailwinds have also been boosted by progressive reforms that encourage investment across sectors, as well as trends around consumption upgrades and the digitalisation of traditional industries.’
The views expressed reflect the current views of the writer as of the date of publication and neither the writer nor KKR undertakes to advise you of any changes in the views expressed herein. Opinions or statements regarding current events or trends are based on current conditions and are subject to change without notice. Nothing contained herein constitutes investment, legal or other advice nor is it to be relied on in making an investment or other decision. The views expressed herein may not be reflected in the strategies and products that KKR offers or invests, including strategies and products to which the writer provides assistance with or on behalf of KKR. Further, KKR and its affiliates may have positions (long or short) or engage in securities transactions that are not consistent with the information and views expressed in this writing.