Jun 30, 2025, 9:55 AM ETInterview, Fireside Chat

KKR's Head of European PE, Philipp Freise: Do Andreessen & General Catalyst Scare KKR?

Fund Scale and Composition: KKR Europe operates an $8 billion standalone fund, the largest of its kind in Europe, with an average investment check size of $400–$700 million.
Portfolio Construction: The fund typically holds 15 investments, balancing 3–4 major winners (compounding >20% consistently) against the necessity of exiting "good" but non-compounding assets to maintain discipline.
Ownership Structure: Three-quarters of recent investments are partnerships rather than outright acquisitions, with typical stakes ranging from 10% to 35% to align with founder incentives.
Capital Reserves: Approximately 10–15% of the fund is retained as a reserve, primarily for follow-on investments in acquisitions rather than new financing rounds, as portfolio companies are typically mature.
Deployment Discipline: Despite market volatility, KKR adheres to a "linear deployment" strategy over 4–5 year cycles, deploying capital steadily rather than waiting for perfect market conditions.
Risk Mitigation: The firm avoids emerging markets like Turkey and Ethiopia due to "flexible" rule of law and political risks, preferring controlled environments in Western Europe.

Crisis Investing: KKR deployed ~40% of its current fund during the 2020 pandemic, viewing disruption as a buy opportunity when others hesitated, contrasting with their hesitation during the 2009 Great Financial Crisis.
Boldest Recent Bets: A significant decision involved acquiring a 10% stake in Coty (the holding company for Vela) and buying out Vela majority while they were over-leveraged during the pandemic.
AI and Capital Intensity: The firm acknowledges AI models as "cash incineration machines" requiring heavy capital but maintains that their core thesis remains valid for businesses needing physical expansion, such as fertility clinics.
Concentration Limits: KKR caps individual position sizes at 10–15% of a fund, rejecting the "big winner" concentration model (like Benchmark's 33% in Airbnb) in favor of diversified consistency.
Decision Framework: Investment decisions are made by a partnership of multiple brains challenging each other, prioritizing deep vertical expertise over generalist pattern recognition for late-stage deals.

US Dollar Reserve Status: Philip predicts the US dollar will remain the primary reserve currency for at least the next 10 years, with Bitcoin and the Euro taking only marginal shares in the near term.
European Economic Challenges: The firm highlights a critical need for a European "Capital Market Union" to unify fragmented public markets and a call for EU nations to reduce deficits to avoid excessive debt servicing (20–25% of budgets).
Defense and Infrastructure: Investment themes are shifting toward "hard" sectors like defense, space, and infrastructure to address post-war geopolitical shifts and the need for European innovation in strategic industries.
AI Impact on Labor: While AI will likely cause short-term white-collar displacement, the firm argues the solution is not unemployment but societal mechanisms to share AI-driven capital gains (e.g., broad-based ownership).
Tariff Stance: Both speakers reject tariffs as a solution to trade imbalances, advocating instead for fixing underlying Western democratic issues like high deficits and lack of capital accumulation.

Exit Strategy: 85% of KKR exits are strategic sales or private acquisitions, with only 15% resulting in IPOs, driven by the trend of founders preferring private markets for stability.
Liquidity Sources: The firm identifies structural liquidity not in the secondary market but in the integration of insurance capital and retail investors (401k plans) into private equity structures.
Retail Inclusion Goal: KKR aims to increase the percentage of retail investors in its capital base from the current ~1% to 50% over the next decade to democratize access to long-term wealth creation.
Asset Growth Projection: While the specific fund size may not double immediately, KKR expects its total Assets Under Management (AUM) to double or triple in 10 years driven by the expansion of the eligible investor base.
Geographic Capital Flow: Currently, 90% of KKR Europe's capital is American, though the firm acknowledges the necessity for European pension systems to professionalize and retain capital within the region.

Venture Park Failure: Torsten set up "Venture Park" in 1999 to bring US-style venture capital to Europe, but it failed due to a mismatch in investor time horizons (quick turnover vs. long-term building) and being "too early."
Turkey Investment Loss: KKR lost approximately $500 million on the logistics company "UN RORO" in Turkey due to unforeseen political interference and the lack of a reliable rule of law.
Core Value Shift: Founders and investors alike often realize that while money is a foundational layer, the true value lies in the process of building, learning, and serving broader societal goals (e.g., affordable pensions).
Warren Buffett Influence: Both speakers cite Buffett's ability to separate market "noise" from fundamental business drivers as a critical mental model for enduring economic cycles.
Helsing Investment: Torsten acknowledges investing in Helsing is a "must" but cautions against putting the entire fund into a single winner, emphasizing the need for a portfolio approach.
Missed Opportunities: KKR passed on investing in Alibaba and Spotify (as an early institutional investor) due to timing and conviction issues, viewing these failures as lessons in due diligence and risk appetite.
Operational vs. Passive Investing: The firm rejects the notion of passive investing in "fads" (like OpenAI), preferring deep operational involvement to create value in companies that may not fit a pure VC "0 to 1" model.