Kravis Warns ‘Amateurs’ Off Investing Amid Brexit Volatilityby
Predicts 20% of London’s financial sector to leave city
KKR co-founder says more ‘black swans’ in markets these days
Henry Kravis, co-founder of KKR & Co., warned of a tougher investing environment and more volatile markets as negative interest rates around the world and the U.K.’s vote to exit the European Union weigh on sentiment.
Brexit will cause more market “dislocation” in the next 12 to 24 months, and about 20 percent of the financial sector in London is expected to leave the city, Kravis said at an event organized by The Women’s Foundation in Hong Kong on Wednesday. With about 40 countries now running interest rates below zero, investors have “to be agile,” he said.
“This is not a time for a lot of amateurs to be investing,” Kravis, 72, said. “There are more black swans out there that seem to come up and bite when they’re least expected.”
The U.K. vote on June 23 to exit the EU roiled markets and caused the pound to nosedive. The International Monetary Fund slashed its outlook for U.K. growth this week and forecast the economy to grow next year at its weakest pace since 2012. The IMF warned the damage could worsen if confidence falters among investors and companies, according to its World Economic Outlook released Tuesday.
Kravis said he’s finding “huge opportunities” in credit to companies with non-investment grade ratings. KKR is expanding its private credit business by extending financing to small to medium-sized companies, taking advantage of a pullback in lending by banks as stricter capital and liquidity rules curb their ability to lend.
Stricter capital rules globally make it hard for large financial firms to cover small to mid-sized companies with the same depth, creating an opportunity for KKR, Kravis said.
“I’ll put money in credit,” he said. “There is an absence of credit availability for certain kinds of companies. I like the ability to provide growth capital.”
KKR raised $3.35 billion for a special-situations fund earlier this year that focuses in part on distressed credit. Last year, the firm started Pillarstone, a business that restructures companies underlying European banks’ nonperforming loan portfolios.