Interview, Fireside Chat
KKR's Head of European PE, Philipp Freise: Do Andreessen & General Catalyst Scare KKR?
- Philip anticipates a policy shift away from tariffs toward resolving fundamental issues within Western democracies.
- Torsten plans to maintain a geographic focus on Western Europe, explicitly avoiding emerging markets and regions like Turkey or Africa due to uncontrollable political and legal risks.
- Harry predicts that investor selection remains the critical success factor during bull markets, necessitating humility when external shocks such as viruses or geopolitical conflicts disrupt outcomes.
- Torsten expects KKR to maintain investment discipline by capping annual capital deployment and limiting thematic exposure to mitigate unforeseen crises.
- Torsten forecasts KKR's European asset under management will double or triple over the next decade as the addressable investment universe expands.
- Torsten predicts that by 2025 to 2030, Europe will capture a larger share of value creation in alternative investments as pension systems undergo professionalization.
- Harry projects that KKR's total assets under management will increase massively over the next 10 years.
- Torsten expects the US dollar's share of global reserves to decline slightly but not disappear within a 10-year horizon, while Bitcoin and the Euro are likely to gain ground, though Bitcoin is not yet deemed a viable replacement reserve currency.
- Harry expects the US dollar to remain the dominant reserve currency over the next 10 years, though the global landscape could shift in 50 years.
- Torsten anticipates that innovation in European defense and space sectors will accelerate, potentially mirroring the private-public partnership model seen with SpaceX and the US Department of Defense.
- Torsten expects the transition to AI to create societal challenges regarding labor force participation, requiring earnings redistribution mechanisms.
- Harry expects the proportion of individual retail investors in alternative assets to rise from the current 1% toward 50%, provided regulatory structures allow capital allocation of 5% to 10% per individual.
- Torsten estimates that investing just 5% of the estimated $192 trillion in global savings into alternative vehicles could generate $10 trillion in capital.
- Torsten expects European AI regulations, specifically the EU AI Act, to be overly prohibitive and stifles innovation compared to US approaches.
- Harry expects the industry to evolve toward evergreen products and insurance-backed liquidity models rather than traditional 3 to 5-year fund cycles.
- Torsten expects demand for private equity in Europe to outpace growth as more market segments seek these investment vehicles.
- Harry predicts that the 15% IPO exit rate observed over the past 15 years will remain the norm, with 85% of exits occurring via strategic or large company acquisitions.
- Torsten identifies four structural disruptions—technology, geopolitics, monetary shifts, and demographics—that will create unprecedented risk and volatility.
- Harry notes that despite an IPO market crisis, KKR faces no structural crisis because the majority of exits are non-IPO based.
- Torsten expects demographic shifts involving aging populations and lower birth rates to make private equity a fundamental solution for capital accumulation required to fund retirements.
- Harry warns that structural deficits in countries like Japan and the US will likely necessitate financial repression, increased taxation, or inflation as debt interest loads become unsustainable.
- Torsten suggests that the "Norwegian model" of sovereign wealth funds could be replicated globally to broaden participation in value creation, though historical replication has been missed.
- Harry expects that if interest rates are forced below inflation, asset holders will lose value as part of the resolution to high debt loads.
- Torsten expects Europe to require a capital market union unifying liquidity across 27 nation states and the UK to catch up on innovation and defense spending.
- Harry and Torsten both warn that failure to address deficits, balance work and leisure, or manage the dollar's dominance will lead to political instability, populism, or monetary system transformations.