Jul 8, 2022, 10:17 AM ETConference Presentation, Fireside Chat, Interview

Investing with KKR’s Tara Davies

Inflation Hedge via Real Assets: KKR is observing a strategic pivot among investors toward real assets, specifically infrastructure, due to their inherent ability to pass through inflationary costs in the revenue line.
Revenue Mechanism: Infrastructure assets generally possess mechanics that allow them to "catch up" with inflationary conditions over time, providing a buffer against rising costs.
Market Competitiveness: The infrastructure market has expanded significantly over the last 25 years, transitioning from negligible private capital participation to a broader, deeper, and more competitive landscape.
Deal Source Focus: KKR prioritizes two primary avenues for sourcing M&A: corporate partnerships (targeting the ~50% of infrastructure still held by corporations) and public-to-private transactions.
M&A Activity Volume: KKR executed four public-to-private deals within the infrastructure sector in the 12 months leading up to March 2022, a significant volume for the period.

Risk-Based Classification: KKR categorizes infrastructure investments based on complexity rather than sector, distinguishing between "core" assets (stable, yielding, low operational work) and "core plus" assets (higher complexity, growth, or operating leverage).
Return Differential: The equity IRR difference between "core plus" and "core" infrastructure profiles is approximately 500 basis points.
Due Diligence Criteria: In the current volatile environment characterized by supply chain disruptions and tight labor markets, KKR prioritizes identifying businesses with genuine pricing power to protect margins against rising OPEX.
Digital Infrastructure Growth: Digital infrastructure (data centers, towers, fiber) has evolved from a non-existent asset class 25 years ago to becoming KKR's flagship fund's largest asset class today.
Sector Agnosticism: KKR maintains a sector-agnostic approach, investing in utilities, transportation, energy transition, and telecom infrastructure based on risk profiles.

Carbon Neutrality Goal: KKR's fiduciary objective is to achieve carbon neutrality across its infrastructure portfolio.
Operational vs. Allocation Strategy: KKR views simple asset allocation (selling brown assets to buy green) as insufficient; instead, they are focusing on granular operational know-how to convert existing "brown" assets into "green" ones.
Circular Economy Initiative: The firm is piloting the extraction of plastics from waste streams in its energy-from-waste business, a strategy designed to eventually halve the portfolio's carbon emissions through operational improvements rather than divestment.
ESG Focus Areas: While the "E" (Environment) dominates the infrastructure conversation due to the climate nature of the sector, KKR notes that the "S" (Social) and "G" (Governance) aspects are often overlooked relative to environmental metrics.

Transparent Debate: Tara Davies encourages her team to call out her blind spots and biases, fostering a culture of "constructive contentiousness" and open debate.
Soft Skills Emphasis: Davies advises that successful investing relies more on people skills—negotiation, relationship building, and team empowerment—than on pure financial modeling or analytical precision.
Recruitment Traits: The ideal investor candidate is characterized by curiosity, self-starting behavior, and a balance between aggressive deal-making hunger and the willingness to perform the operational "blood, sweat, and tears" of asset management.
Mentorship Philosophy: Effective mentorship involves identifying a mentee's blind spots while simultaneously providing the courage to pursue ambitious goals.
Cultural Influence: Davies cites KKR founder George Roberts as her primary inspiration, specifically admiring his humility and the principle that "people do business with those they like and trust."

First Investment: Davies' first successful deal was Sydney Airport, which she notes has since come full circle via a major takeover.
Key Lesson: The most critical investment lesson is to form a view on the management team quickly and ensure the best possible team is in place early in the process.
Regretful Decision: Davies expresses a specific wish that she had increased exposure to infrastructure assets during the 2008 credit crunch.
Geographic Origins: Davies began her career in Australia in the late 1990s after transitioning from chartered accountancy, moving to London in 2004 and joining KKR in 2016.
Market Dislocation View: While uncertainty can lead to a "do nothing" approach, Davies argues that dislocation often creates unique investment opportunities for those willing to act.

Recording Date: The interview was recorded on March 17, 2022.
Participants: Hosted by Alison Mass (Goldman Sachs Chairman, Investment Banking Division) featuring Tara Davies (Partner, Global Head of Core Infrastructure, KKR).
Market Backdrop: The discussion was framed by high inflation, geopolitical conflicts, slowing economic growth, and supply chain disruptions prevalent in early 2022.