Investing with KKR’s Joe Bae

Leadership and Culture at KKR

• Joe Bay and Scott Nuttall serve as co-CEOs of KKR, a partnership model rooted in 45 years of precedent set by founders Henry Kravis and George Roberts.
• Bay describes the co-CEO dynamic as a core part of KKR's DNA, driven by deep personal trust and long-term friendship rather than mere corporate structure.
• The partnership began in 1996 when both were hired as analysts at age 24; they have worked together for 26 years and share close family ties.
• Kravis and Roberts retain roles as co-executive chairmen, allowing for a multi-generational transfer of the firm's founding culture.

Growth and Market Evolution

• KKR's first fund in 1993 was $3 billion; the private markets industry has since grown to over $1 trillion in the alternative space.
• The firm has evolved from a pure capital provider to a solutions provider, establishing an in-house consulting group (Capstone) with nearly 100 professionals.
• KKR launched its Asia expansion in 2005 with zero prior presence, eventually building a platform with eight offices and over 350 executives, 99% of whom are local talent.
• The firm now manages investments across a multi-asset class spectrum including private equity, real estate, infrastructure, and credit.

Macroeconomic Strategy and Investment Themes

• Globalization is shifting toward supply chain resiliency and "dual sourcing" rather than complete decoupling from China, as the historical 22:1 wage arbitrage has narrowed to approximately 4:1.
• Current investment criteria prioritize companies with pricing power, resilience to inflation, and protection against rising costs over top-line growth alone.
• Infrastructure remains a key asset class, particularly digital infrastructure (data centers, fiber, towers) and the energy transition, which requires trillions in annual capex.
• KKR has invested over $27 billion in sustainability themes, with the largest portion allocated to renewables like solar and wind.

Diversity, Equity, and Inclusion (DEI)

• Asian Americans comprise nearly 30% of KKR's U.S. employee base.
• Junior hiring is now over 50% female, a shift enabled by expanding recruiting pipelines to over 100 U.S. colleges and eliminating reliance on Ivy League schools.
• The firm aims for 30% diversity on the boards of its controlled portfolio companies, adding over 100 diverse directors to U.S. portfolio firms since the onset of the pandemic.
• KKR has hired approximately 100,000 veterans and their spouses across its portfolio companies over the last decade.

Philanthropy and Social Initiatives

• Joe Bay co-founded the Asian American Foundation (AAF) in summer 2020 following a spike in anti-Asian hate incidents tracked by the ADL during the early pandemic.
• The foundation's mission includes establishing anti-hate infrastructure, public education on Asian American history (e.g., Chinese Exclusion Act, Japanese internment), and political empowerment for the immigrant community.
• AAF was launched by a coalition of major Asian American business leaders, including Jerry Yang, Joe Tsai, Li Lu, and Peng Zhao.

Specific Investment Misses and Learnings

• Bay identified a missed pre-IPO investment opportunity in Alibaba around 2010 as a significant regret, citing a lack of internal tech depth in the region at the time.
• This missed opportunity prompted the creation of KKR's Next Generation Technology fund to invest in earlier-stage innovation.
• The firm's first major investment as an analyst was in Executive Jet (later NetJets), which was subsequently sold to Berkshire Hathaway.

Forward-Looking Statements and Sector Opportunities

• KKR plans to significantly expand its life sciences practice, which it currently views as a sector where it is "scratching the surface."
• The Russia-Ukraine conflict has elevated energy security as a critical investment theme, particularly regarding natural gas supply to Europe.
• Bay identifies "human relationships" and trust-building as the most critical skills for long-term investing, surpassing pure numerical analysis.