Philipp Freise on KKR’s European Investing and Private-Market Liquidity

Harry Stebbings interviews Philipp Freise, KKR's co-head of European private equity, about investing discipline, liquidity, AI and Europe's economy. Freise discusses KKR's portfolio and advocates broader access to alternative investments; his views reflect his role at an investment firm that would benefit from that expansion. Figures and forecasts are his or the host's, not independently verified in the interview.

Freise recalls co-founding Venturepark in the European dot-com boom around 1999. After raising roughly $100 million, he says the crash exposed a conflict between investors seeking a quick IPO and corporate backers with a long-term innovation objective. As a young founder he spent much of his time mediating; his lesson is that founders should choose investors whose time horizons align.

Stebbings asks how to participate in an exuberant AI market without abandoning discipline. Freise says crises taught him humility and the need for limits on annual deployment and exposure to a theme: even a promising team can face events outside its control. He advises analyzing a failure carefully rather than rejecting an entire market because one investment went wrong.

After Stebbings describes a loss in Pakistan, Freise recalls KKR losing around $500 million on Turkish shipping company UN Ro-Ro. He attributes the loss partly to risks in the legal and competitive environment that the investors did not anticipate. That is his retrospective account, not an independently adjudicated finding about Turkish institutions.

Freise says an Ethiopian investment also did not work out and that the European team chose to focus on opportunities closer to home rather than take additional emerging-market risks. He frames this as a decision about political and currency exposure and what the team can control, not a claim that all emerging markets are unsuitable.

On timing, Freise estimates that KKR's European fund deployed roughly one-third to 40% during the pandemic. He recalls backing Wella despite doubts about salon demand, and contrasts that decision with the firm's reluctance to invest after the financial crisis, when its 2009 BMG investment was an exception. These are his recollections, not a calculation of fund performance.

He describes a combined investment in Coty and a majority purchase of Wella, after Coty's leverage had become a concern. He says the opportunity required conviction amid uncertainty. Stebbings asks how such concentrated activity fits with a disciplined deployment schedule.

Freise says KKR typically believes in roughly linear pacing over four to five years, though cycles can be longer. During 2020 the team went around 10 to 15 percentage points above the illustrative 25% annual pace for a four-year cycle, then invested very little in 2021. He calls the result partly fortunate and defends diversification across time.

Freise describes an $8 billion European fund and says a typical portfolio contains about 15 investments. Construction involves themes, geography, growth and cash flow, as well as deciding when to sell, improve or hold. He warns that individual deal teams' attachment to companies can make those decisions harder; the fund size and construction are his account at recording.

Stebbings asks whether private equity follows venture's power law. Freise says his business needs more consistency than a portfolio relying on two giant winners and many failures, though meaningful winners still matter because some investments disappoint. He rejects the idea that a simple doubling over five years is always sufficient, without providing fund-level realized returns.

For the $8 billion fund, Freise estimates average investments of $400 million to $600 million. He says roughly three-quarters of investments over the prior 10 to 15 years were partnerships rather than outright purchases, citing minority stakes in OHB and WILD. He describes reserves of roughly 10% to 15% of the fund, often for acquisitions rather than venture-style follow-on rounds.

On capital intensity, Freise emphasizes making managers think like owners. He recounts an example in which an executive's appetite for capital expenditure changed when their own 10% stake meant bearing part of the cost. The practical question is which expansion or product deserves scarce capital, not whether growth ever requires more money.

Stebbings asks whether that discipline still applies to AI companies burning large amounts of cash. Freise contrasts them with KKR's fertility clinics, which he says need capital to expand physical operations. He predicts such businesses will not simply be replaced by models and argues that capital-allocation principles remain useful across different cycles; both claims are investment judgments.

Stebbings says three of his companies grew from zero to $100 million in annual recurring revenue in a year. Freise calls them exceptional winners and predicts they will not become the norm. The host's portfolio claim and Freise's prediction are not independently verified, and ARR is a run-rate metric, not necessarily revenue already collected.

Asked whether KKR should simply buy leading AI companies and sell quickly, Freise praises specialist venture investors but says his own experience and strengths lie in later-stage investing. He says KKR's growth team is separate and regards venture as a different skill set. The speakers' views reflect their respective investment businesses.

Freise describes investment decisions as a partnership effort: several people bring different perspectives and should challenge each other's concerns. Stebbings asks whether this risks consensus thinking; Freise says an open culture of disagreement is essential. This is his account of KKR's process, not proof that group decisions always outperform.

On liquidity, Freise recalls repeated cycles from exuberance to drought. Stebbings cites $3 trillion of limited-partner money locked in private markets and worries the problem is structural. Freise agrees that 2021–22 activity was inflated but expects the current shortage to clear over time; he distinguishes that forecast from the longer-term decline in the number of public companies.

Freise says some companies chose private ownership because public-market volatility made change difficult, citing OHB and GfK. He estimates that only 15% of KKR's exits over the preceding 15 years were IPOs, with most others through strategic buyers or other investors. The figure concerns the firm's exit mix as he describes it, not returns, proceeds or the wider industry's mix.

The speakers suggest AI demand has helped sustain venture fundraising despite the liquidity hangover. Freise then argues that pensions need long-term capital accumulation as populations age. He sees a growing source of investment in individual savers and retirement accounts, a view aligned with KKR's interest in raising capital.

Freise cites an estimated $192 trillion in individual and high-net-worth savings and says roughly 1% is in alternatives; he illustrates how a 5% allocation could represent roughly $10 trillion. The definitions and sources are not provided, and the arithmetic describes a hypothetical pool, not money committed to KKR or guaranteed returns.

He points to secondary funds buying existing fund stakes and to evergreen products as possible sources of liquidity. He also describes KKR's public listing and access to insurance capital, comparing the latter with Berkshire Hathaway's use of insurance float. These mechanisms change sources of capital but do not eliminate asset, liquidity or investment risks.

Asked whether KKR's Europe fund will reach $20 billion in ten years, Freise distinguishes a single fund from assets under management. He predicts European AUM could double or triple over a decade as retail and insurance capital grow. That is a forward-looking expectation, not a commitment to a $20 billion fund or a forecast of investment returns.

Freise says a large majority of the fund's investors are American, with participation from places including the Netherlands, Norway and the Middle East. Stebbings asks whether it is ironic that gains on European businesses flow abroad. Freise welcomes outside capital but argues Europe should strengthen pension investment so more value can accrue locally.

Stebbings asks whether Europe's energy, infrastructure and defense needs are changing the kinds of companies KKR backs. Freise says scarcity can encourage innovation and mentions private-sector space and defense businesses, including Helsing's support for Ukraine. His comments are investment and geopolitical views, not an assessment of any military technology's effectiveness.

Freise sees simultaneous disruption from AI, geopolitical change, the monetary system and demographics. He argues that amid uncertainty investors should focus on capable leaders, large markets and opportunities to improve companies, while being prepared to hold longer if conditions deteriorate. These are portfolio judgments rather than assurances against loss.

Asked about reserve currencies, Freise predicts the US dollar will remain dominant in ten years, though its share may fall, and says he cannot tell what will happen over fifty years. He sees the euro and Bitcoin potentially gaining share but says it is too early to call Bitcoin the world's reserve currency. These are speculative forecasts.

Stebbings doubts thematic investing because unexpected events can invalidate assumptions. Freise says a theme can help build expertise, but investors must also assess the people, market position, innovation and returns on capital of each business. He gives space and defense as examples of areas where he sees a European investment need.

Discussing defense startups, the speakers praise Helsing and its founder. Freise expects additional strong companies to emerge and says a fund should back winners without putting all its capital in one company. He says his normal single-fund concentration limit is around 10%, with an underwriting maximum of 15%; Stebbings contrasts that with a venture investor's more concentrated approach.

Both speakers favor a more unified European capital market. Freise calls for fewer national barriers to public listings and securitization and a European regulator, and argues that Europe has overregulated AI. These are policy preferences from an investor, not an assessment of the legal requirements or the full benefits and costs of existing rules.

Asked about Chinese competition in cars, Freise says engineers can move into growing industries and calls for fair competition. When Stebbings suggests tariffs on subsidized Chinese cars, Freise says he favors free markets and does not think tariffs are the answer. Their policy views do not establish the level of subsidy or the effects of any particular tariff.

Freise argues that government deficits and debt service constrain spending and proposes attention to expenditure and pension systems. He holds up Norway's sovereign wealth fund as an example of long-term capital accumulation. His budget percentages and economic conclusions are illustrative claims in the interview, not a verified country-by-country analysis.

Stebbings asks why countries cannot continue carrying deficits, citing Japan. Freise warns that confidence can weaken if interest consumes too much of a budget and discusses taxes, spending cuts and inflation as possible responses. These are contested macroeconomic arguments, not a prediction that any particular country must follow one path.

On AI productivity, Freise says it is too early to know the scale, but expects gains and a disruptive transition for white-collar workers. He argues broad ownership of productive assets could spread the benefits, using a hypothetical sovereign fund stake in OpenAI. The example is hypothetical and does not establish that unemployment would be harmless.

Stebbings worries that extended private markets concentrate gains among a few investors. Freise agrees broader participation matters and advocates retail access to alternatives and retirement funds. KKR has a direct interest in that expansion, and the interview does not establish that such investments are appropriate for every saver or will generate returns.

Freise describes his own retirement allocation as roughly 30% to his industry and the rest to the S&P 500 and some bonds, reviewed over long periods. He proposes that European pensions add a funded capital component. His personal allocation and proposed reforms are not individualized financial advice.

Asked about money, Freise says he values learning and the work itself, recalling leaving a secure McKinsey role to become a founder. He notes that a KKR-owned production company produced the film F1 and mentions his love of opera and support for arts institutions. His claim that money follows work one loves is a personal belief, not a guaranteed outcome.

In quick fire, he names Warren Buffett as an admired investor and returns to Venturepark as a painful lesson in humility, persistence and choosing investors. He describes long-term investing as a marathon and recalls KKR founders Henry Kravis and George Roberts welcoming him when he joined.

Freise says he admired Spotify but lacked a fund through which to invest, and later declined an early opportunity in Alibaba, which he regards as a mistake. Asked about venture firms moving into later stages, he says the market is large and the skill sets differ. These examples are personal recollections, not a complete performance record.

For the next decade, Freise says KKR had about $670 billion under management at the time and predicts substantial growth. He hopes individual and retail investors will represent 50% of its investor base, compared with his estimate of roughly 20% to 30% historically. The future mix and AUM are aspirations and predictions, not realized results.