This is a sponsored article from KKR.

The opportunities that arise in times of volatility are not equally available to everyone, says Alisa Amarosa Wood, private equity partner at KKR.

Volatility in public markets can create anxiety for investors across the board, including in their private equity allocations.

That said, we think it’s important to remember that private equity has not only outperformed public stock markets over time (Exhibit 1), but private equity investments made during periods of high volatility have often generated the highest returns relative to calmer periods (Exhibit 2).

Exhibit 1: Private equity outperforms public stocks…

Source: Cambridge Associates LLC Benchmark Statistics as of December 31, 2024. Data reflects actual pooled horizon return, net of fees, expenses and carried interest. For funds formed between 1986‐2024. KKR Global Macro & Asset Allocation analysis.

Exhibit 2: … Especially when public markets falter

Reference period = 1Q89 – 4Q24. Data reflects actual pooled horizon return, net of fees, expenses and carried interest. Source: Cambridge Associates, S&P, KKR Global Macro & Asset Allocation analysis.

As we explain in our article, “Staying on Course in Private Equity,” across nearly 50 years of investing in private companies we have learned that complexity often creates interesting buying opportunities. Capturing them requires conviction, experience and capital. To make the investment work from start to finish, private equity teams also need to be able to create real and lasting value.

Access to capital is key for when navigating volatility

Our ability to lean into complex market environments requires both confidence and enough capital to make new acquisitions. Coming up short on capital was a lesson we learned the hard way nearly 20 years ago.

In 2006, with the economy booming, we deployed a lot of capital into new deals. When the Global Financial Crisis (GFC) hit two years later, we couldn’t take full advantage of fresh opportunities because we’d over-deployed earlier. Why does this matter? As Exhibit 2 shows, the best-performing vintages in private equity tend to be those that invest in periods of elevated complexity.

Since the GFC, we have been more disciplined about a linear approach to capital deployment. This means resisting the urge to overreact to the latest trends and instead, steadily deploying capital with confidence and discipline. The reality is that it is very hard, if not impossible, to predict attractive vintage years. We think the better strategy is to deploy consistently, finding the best opportunities in each vintage year and relying on repeatable playbooks to make our own luck, rather than the whims of the market to increase a company’s value.

What does adding value really mean in this context? Consider an acquisition we made from a large biopharmaceutical company a year into the recovery from the GFC. Pfizer was re-evaluating all its business lines and decided to sell a sleepy division that made capsules. We carved out the business and, through strategic acquisitions, were able to diversify the company into other forms of medication delivery with more growth potential.

The company we sold at the end of our investment period was more valuable due to the operational work we did with the business, including implementing a broad-based employee ownership programme, launching transformational new business lines, and improving margins.

Today’s volatility brings opportunities

The recent tariff-driven market dislocation of 2025 reinforces our view that opportunities come to those with experience and capital.

On April 8 2025, we signed an agreement to acquire a majority stake in Karo Healthcare, a leading pan-European consumer healthcare company, from another sponsor. Entering into a large transaction during a week of enormous market disruption – that saw the third quickest selloff in equities since World War II – would not have been possible without the underwriting capabilities of our KKR Capital Markets (KCM) team. The partnership of our in-house capital markets experts enabled us to proceed with the transaction without relying on ‘staple’ financing (financing linked to a specific transaction) and emerge as the successful bidder.

Karo operates in a resilient, growing sector supported by long-term demographic trends and increasing consumer focus on wellness and self-care. It has a diversified platform of strong consumer health brands under its umbrella, spanning core categories such as Skin Health, Foot Health, Intimate & Digestive Health, as well as Vitamins & Supplements. We see opportunities for Karo to expand into new markets, invest in product innovation, and focus on organic and inorganic growth when the transaction closes, which is subject to customary conditions and regulatory approvals.

The opportunities that arise in times of volatility are not equally available to everyone. We note the historical gap between the returns of top-performing and bottom-performing private equity managers is approximately 14%.¹ Skill, experience, and access to capital all matter, especially to identify good companies that we can make great in complex markets.

Click here to learn more about KKR’s private equity capabilities and our Staying on Course thought paper.
 

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¹ Data as of September 30, 2024. Sources: Cambridge Associates, Pitchbook, KKR Global Macro & Asset Allocation analysis. Data reflects actual pooled horizon return, net of fees, expenses and carried interest. For funds formed between 1986‐2023. Data for equities from eVestment Alliance database for 15‐year period through December 31, 2023. US Equities include large and small cap indexes.

This is a sponsored article from KKR.