Beyond carveouts, less than one-third of our deal flow over the last three years has come from other sponsors, meaning we don’t rely on our peers for sourcing. Instead, we create our own luck by executing take-privates and partnership transactions, in addition to traditional control buyouts and growth equity positions. In short, we have many ways to win.
Conviction matters as much as sourcing. Across the industry, we saw managers over-deploy in the highly liquid markets of 2021 and 2022 when interest rates were low and valuations were high. But today’s market is very different. Few managers have enough conviction amid the uncertainty to continue making new investments. The result: more managers are sitting on the sidelines, waiting for a clearer signal.
At KKR, we take the opposite approach. We learned during the Global Financial Crisis that timing the market is a losing game. Rather than trying to predict attractive vintage years, we aim to invest consistently across cycles, deploying capital into roughly the same number of deals every year. This disciplined deployment approach avoids over-deploying in frothy markets and preserves capital to pursue the more complex opportunities that often emerge during periods of uncertainty. For context, we deployed capital steadily through 2020 and again in 2023-24, periods when many of our peers pulled back. This consistency has historically generated some of our strongest returns.
Exhibit 2 helps reframe the current debate: the best private equity opportunities do not depend on public market movement or high visibility. Historically, private equity has generated excess returns most consistently during periods of modest or volatile public market returns.5 This trend suggests that disciplined managers who continue to deploy through complexity may be better positioned to capture attractive vintages than those waiting for perfect clarity.
EXHIBIT 2: Average 3-Year Annualized Excess Total Return of U.S. Private Equity Relative to S&P 500® across Public Market Return Regimes
