2015 Investment Management Awards: Henry Kravis

Henry Kravis got his first break in finance during college in the mid-’60s as a summer trainee at Goldman, Sachs & Co., working with the firm’s research analyst who covered the insurance industry. “I was reading these long, excruciatingly boring insurance filings, but it taught me how to dig,” says Kravis, 71, who went on to earn an MBA from Columbia University after graduating with a BA in economics from California’s Claremont Mc­Kenna College. “I would recommend to any young person today to get into the research department, because you really learn to understand how companies operate and the levers where they make money.”

A half century later Kravis has pressed his fair share of levers, completing more than 250 private equity investments with a transaction value of $500 billion at KKR & Co., the New York–based firm he co-founded in 1976 with Jerome Kohlberg and George Roberts. That year the trio left Bear, Stearns & Co., where they had been partners doing bootstrap acquisitions of small, private companies, in part because they had grown tired of the firm’s “eat what you kill” culture, Kravis says: “What was important to us then, and is important to George and me today, is to have a culture of inclusion, not exclusion, where everybody gets paid on how well the team does and how well the firm does, whether or not you work on a deal.”

Kravis credits much of KKR’s success to its “one firm” culture, embodied in his relationship with Roberts, his first cousin and best friend for more than 60 years. (Kohlberg resigned from the firm in 1987.) As co-­chairmen and co-CEOs, Kravis and Roberts (who works out of the firm’s San Francisco office) have grown KKR from a small private partnership doing only U.S. deals to a publicly traded global asset manager by fostering a culture of teamwork, integrity and accountability. Mirroring the transformation of the industry it helped pioneer, KKR manages $100 billion across a broad swath of asset classes, including credit, energy, hedge funds, infrastructure, private equity and real estate, and operates a vibrant capital markets business for both its portfolio companies and outside clients.

“The definition of private equity has changed,” says Kravis, who grew up in Tulsa, Oklahoma. “There’s no such thing as one-size-fits-all. Today you have to be a solutions provider. It’s investing up and down the capital structure — minority, majority, whatever it is to fit the bill.”

KKR’s private equity funds have delivered net annualized returns of 19.2 percent, powered by such highly successful deals as the firm’s purchase of consumer products maker Beatrice Cos., retailer Dollar General Corp. and supermarket chain Safeway. But for Kravis the deal that stands out the most is conglomerate Walter Industries, which filed for bankruptcy protection from asbestos lawsuits two years after KKR purchased it in 1987 in a $3.1 billion leveraged buyout. “In the end we were in this investment for 17 years,” Kravis explains. “We got the banks back every penny that they had lent us, and we got our limited partners back every penny of equity that they had put up. Now that’s what we’re all about.”

Large Public PensionJagdeep Singh BachherSmall EndowmentJason MatzLarge FoundationShawn WischmeierManager Lifetime AchievementHenry Kravis

Small Public PensionFadi BouSamraLarge Corporate PensionGreg WilliamsonLarge EndowmentMark SchmidInvestor Lifetime AchievementSandra Urie

Small FoundationClara MillerSmall Corporate PensionMarie Pillai