• Periods of widespread selling and cash-hoarding shifted the sands of the investing landscape to reveal new opportunities.
• Several of Wall Street's biggest firms are raising billions of dollars to pile into distressed debt, viewing the Federal Reserve's relief measures as a backstop for ailing corporations.
• Significant spending on coronavirus relief measures will drag on global currencies, Bank of America projected, setting gold up to skyrocket through the economic downturn.
• Even bitcoin is breaching key thresholds, and some investors are turning to the volatile asset for the first time "as a hedge against currency wars," Ed Moya, senior market analyst at OANDA, wrote Thursday.
• Visit the Business Insider homepage for more stories.

Weeks of indiscriminate selling and rotation to cash has left some corners of the market attractive to major institutions and retail investors alike.

Distressed debt, gold, and even bitcoin are currying new favor as popular sectors grow tepid. Trillions of dollars worth of relief measures from the Federal Reserve and the government have stabilized once-turbulent markets and signaled to buyers they can rely on a policy backstop. Firms tracking investor positioning are trying to get ahead of the curve, advising clients to enter underweight areas before a wave of capital follows.

Uncertainty clouding the US's economic future has spoiled some more traditional investment strategies. The stock market's rebound from late-March lows has slowed its pace, leaving economists forecasting everything from a sharp uptick to a bear-market resurgence. Monday's plunge into negative oil prices pushed the commodity market into uncharted territory and added another phenomenon to an already unprecedented year for the financial sector.

With corporate earnings fueling even more volatility to the virus-slammed landscape, investors are targeting gains elsewhere.

Read more:GOLDMAN SACHS: These are the top 11 companies to watch as we enter the best stock-picking environment in over a decade

Sweet and soured debt

The Fed's policy salvo indirectly gave stocks much-sought-after support following precipitous drops, yet credit markets are where the brunt of the aid will be felt. Distressed debt in the US quadrupled to nearly $1 trillion in less than a week as loan health tanked through March.

The central bank addressed the credit squeeze with an alphabet soup of relief programs aimed at keeping firms afloat through the economic freeze. Where corporations brought fresh supply to the debt market, the Fed's lending facilities are poised to drive outsized demand.

"We say 'distressed' has to trade higher before rally ends," Bank of America analysts led by Michael Hartnett said in a Thursday note, adding clients should "buy what the Fed buys."

The policy backstop hasn't gone unnoticed by Wall Street's biggest offices. Howard Marks' Oaktree Capital plans to raise $15 billion for the biggest ever distressed-debt fund, eyeing risky loans as a golden opportunity. The massive debt piles accumulating around the world stand to drive more defaults than during the 2008 recession, Oaktree said in a presentation seen by Bloomberg.

Read more:The stock market is rebounding without the most important ingredient it needs for long-term gains — and one quant chief warns it's a setup for another crash

Blackstone soon followed suit, with Bloomberg recently reporting the firm is looking to raise $7 billion for its own soured-debt fund. PIMCO is raising a $3 billion fund for a similar strategy. KKR is taking a less conventional path, converting one of its failed funds into a new, $600 million vehicle for buying up corporate loans. All told, billions of investor dollars are following the Fed into distressed debt.

Chase the shiny objects

Gold initially soared as volatility connected to the coronavirus pandemic picked up, but its gains quickly gave way to a mass sprint for cash. With government aid in place and relatively little cash sitting in gold investments, Bank of America said Monday the precious metal is positioned to nearly double to an all-time high by October 2021.

The bank lifted its 18-month price target to $3,000 from $2,000, saying significant easing policies around the world will serve as rocket fuel for the precious metal's value. Such measures place downward pressure on currencies and historically spike interest in gold.

Positioning in "the ultimate store of value" is also "surprisingly weak," leaving plenty of room for investors to get in early, the team led by Michael Hartnett wrote in a note titled "The Fed can't print gold."

Read more:'I've gone to cash': Mark Cuban outlines his coronavirus investing strategy ahead of another 'leg down' in markets — and says now is the time to buy real estate

The note helped push gold above $1,700 for the first time since 2012 and bringing its year-to-date gains to 14%. As recession relief measures ramp up in the second quarter, the precious metal's streak may even accelerate, Ed Moya, senior market analyst at OANDA, said.

"The stimulus trade is not going away anytime soon and that should mean record highs for gold (in dollar terms) by the summer," Moya wrote in a Thursday note.

Retracing the crypto crash

One play gaining new attention looks to detach from stimulus measures entirely. The recent resurgence in risk appetite is pushing bitcoin to its highest levels since early March, with investors cheering the asset's disconnectedness from the financial sector. The digital currency surged as much as 9% in Thursday trading to break through the key $7,500 threshold, and its value has stayed above the level as of Friday afternoon. 

Read more:Meet the 20-year-old day-trading phenom who's turned $20,000 into more than $1 million. He details his precise strategy — and shares how he made $11,400 in 2 minutes.

Where the stock market closed slightly lower through the week, bitcoin shrugged off the oil market crisis and bleak economic data to notch a 5% gain over the same period. Crypto investors now find themselves at a technical junction. The coin is showing enough momentum to clear the $8,000 mark and break through its recent trading range, Moya said in a note. If enough investors outside the usual group of crypto enthusiasts see promise in the asset, it could emerge as a new favorite for those on the lookout for gains.

"Bitcoin is starting to attract retail interest again. With worldwide stimulus efforts showing no signs of easing, some traders are jumping into cryptos as a hedge against currency wars," he added.

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• The Federal Reserve's "liquidity spigot" will close by 2021 as the government faces a new challenge in its ballooning debt balance, Henry McVey, head of global macro, asset allocation, and balance sheet investments at KKR, said Friday.
• Bond vigilantes — investors who short government bonds to combat inflation risks — could return in droves if the US continues its massive borrowing.
• To ensure the US can continue easily selling bonds to raise cash, it will likely end its relief programs sooner than most expect, McVey said in an interview with Bloomberg TV.
• Tax hikes are also likely in the cards as demand sits lower for a prolonged period, he added.
• Visit the Business Insider homepage for more stories.

Investors hoping for years of asset purchases from the Federal Reserve are in for a rude awakening as soon as next year, Henry McVey, head of global macro, asset allocation, and balance sheet investments at KKR, said Friday.

The central bank has spent billions of dollars to support market functioning and pad the economy against the coronavirus pandemic. Markets responded in kind, soaring through recent months on fresh hopes for a sharp recovery. Yet experts are now bracing for when the Fed could unwind its facilities and how the US will pay for its colossal aid efforts.

Governments are set to reach a "tipping point" next year, McVey warned in a Bloomberg TV interview, as their ability to easily raise cash fades to a ballooning debt pile. Bond vigilantes — investors who sell bonds to combat rising inflation — could return in droves and further complicate the government's bond-sale efforts. Such risks will push the Fed to end its relief programs in a matter of months, McVey said.

"I don't think we're going to see the bond vigilantes today, because the bond vigilantes are being overrun by the central banks," he said. "But ultimately that liquidity spigot will turn off by 2021."

Read more:A Wall Street firm studied every crash over the past 100 years — and concluded that the unusual performance of 7 tech stocks is masking the risk of a prolonged meltdown

A market reckoning could arrive the moment the Fed backs away from its aid programs. Oaktree Capital co-chairman Howard Marks warned earlier in May that current risk-asset prices are "artificially supported by Fed buying," and that he didn't think such levels would hold "if the Fed were to recede."

Central bank retraction is only the first stage of a new economic struggle, McVey said. The macro expert forecasts the coronavirus crisis to push demand 10% lower, double what current prices imply, according to Bloomberg. The combination of weakened income and skyrocketing deficits will necessitate tax hikes and a lasting drag on consumer spending, McVey said.

"The money's not free," he added.

Investors looking to brace for the Fed's eventual unwinding should pivot to companies best positioned to profit from the coronavirus's side-effects, McVey said. Such stocks slid through the week as investors cheered economic reopenings and turned back toward beaten-down sectors. Infrastructure investments and leveraged buyout opportunities are of particular interest at KKR, he added.

Disclaimer: KKR holds a majority stake in Business Insider's parent company, Axel Springer.

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• Private-equity firms are starting to look a bit more like insurance investor Berkshire Hathaway.
• KKR this week announced plans to acquire Global Atlantic Financial Group, paying $4.4 billion in a deal that, subject to regulatory approval, would place the insurance giant on KKR's own balance sheet. 
• It marks the next phase of PE's move into the $30 trillion global insurance industry, as PE shops expand their relationships with insurers, taking them from limited partners to managing their entire businesses. 
• Private-equity firms have been drawn to the permanent capital insurance giants bring to the table.
• Visit Business Insider's homepage for more stories.

Private-equity firms are starting to look a bit more like Berkshire Hathaway as they tack on insurance arms to their expanding lists of assets.

That was the observation of Columbia Business School professor Donna Hitscherich, who attributed the push into insurance to the PE industry's explosive growth since the 1980s, when their bread and butter was buying companies outshined by corporate conglomerates that weren't getting much attention, and fixing them up before selling them off.

Now, they're getting into far less sexy financial products that deliver a consistent stream of fees, albeit at a lower rate of return — like insurance.

"We are quickly getting into private equity for the masses," said Hitscherich, who pointed to recent guidance by the Department of Labor that allowed certain defined-contribution retirement plans such as 401(k)s to access private equity. 

"The more assets you have under management, it's harder to create returns," she explained. "I wouldn't say they are victims of their own success, but they just keep getting bigger and bigger."

The latest push could be seen this week when KKR announced that it would buy Global Atlantic Financial Group, which sells and manages life insurance and retirement products. The $4.4 billion deal will give KKR around 60% economic ownership, and boost its assets under management in insurance to $97 billion from $26 billion. 

The deal, which is subject to regulatory approval, would position KKR next to investment behemoths Apollo Global Management, Blackstone, and The Carlyle Group, all of whom continue to turn around companies like the old days, but are now diversifying their portfolio with fixed annuities and long-term life insurance products.

"It helps sustain their management fee growth at a double-digit rate," said KBW analyst Robert Lee of the Global Atlantic deal.

"To the extent that they are managing all of the assets of the insurance company, they have pretty good growth."

Read more: Uber-rich investors hungry for growth have turned their sights on the private market. Here's how wealth firms like Citi and UBS are transforming their businesses to meet those client demands.

The lure of permanent capital for private equity

KKR's expanding assets — and stable management fees that come with it — are perhaps the most attractive features of buying an insurance company with no short-term intent to sell it.

Another draw, analysts said, was the permanent capital that would now be locked up with KKR, allowing it to invest on behalf of Global Atlantic without having to continuously raise money from outside investors.

Its growing pie of permanent capital — which the deal will bring from 9% to 33% of KKR's overall assets under management— means the firm can focus more on expanding Global Atlantic's business through acquisitions and increased sales of existing products, rather than fundraising, people familiar with the deal said. 

Already, Global Atlantic more than doubled its assets between 2014 and 2019, as the aging population in the United States kept buying annuities and life insurance plans.

Now, KKR co-president Scott Nuttall said in a Wednesday call announcing the deal that he would supercharge its growth.

"We believe we can help GA grow even faster going forward," Nuttall said Wednesday, "through helping generate even better investment returns, and using our network to access capital to fund more organic and inorganic growth." 

Why private equity has been pushing into life insurance 

The deal marks the next phase of PE's toehold in the $30 trillion global insurance industry, a stake that has grown larger since 2009 when Apollo partnered with former American Insurance Group executive James Belardi to start creating Athene Holdings.

Since then, Apollo has bought other insurance assets — notably, Aviva USA in 2013 — and increased its stake in Athene,  to 35% from 17%.

Others have taken note. 

Blackstone got in on the game in 2017 when it bought fixed annuities and life insurance business Fidelity & Guaranty Life, now known as FGL Holdings Inc, for $1.87 billion. After announcing a broader push into insurance last year, Blackstone sold the business to Fidelity National Financial for $2.7 billion.

The Carlyle Group  bought a 19.9% stake in DSA Reinsurance — a reinsurance company with life and annuity insurance, but also property and casualty — from AIG in 2018. It increased its stake in 2019, taking a majority stake in the company, rebranded as Fortitude Re. 

"We have relationships with many insurance companies, and several of them have capital tied up in products they sold years ago that are dragging down returns. We also have this great connectivity to world-class investors that might appreciate a new class of asset or risk to add to their portfolios," said Brian Schreiber, managing director and co-head of Carlyle Global Financial Services Partners.

"At Carlyle, what we do best is originate superior value assets, many illiquid and long dated, that match well with those long-dated insurance cash flows," he added.  

Some of the largest life insurers have increasingly put investment dollars into the hands of private-equity firms, PE experts say. 

Their businesses rely on collecting premiums from individuals, and then investing it wisely — enough to cover claims at the date of mortality events. So, as interest rates have remained low, insurers have looked to alternative assets to invest, which yield higher returns than plain vanilla corporate bonds. 

While insurers are often limited partners in PE funds, entering into an outright acquisition takes the relationship to another level, allowing the PE investor to manage all of the assets and scope out new opportunities for growth. And, of course, take a cut of its earnings. 

Read more: Goldman Sachs-backed fintech Even Financial just bought a life insurance startup. Here's why that bet could pay off as policy applications soar.

KKR's acquisition puts Global Atlantic on the books

But there are downside possibilities as well. 

In KKR's purchase of Global Atlantic, observers noted that the PE shop was buying the majority of the insurance business and placing it on its books — a change in approach from how Apollo, for instance, has managed Athene as a minority stakeholder. 

Such a maneuver will mean taking on a bit more risk versus taking a minority stake and keeping it off its balance sheet, one analyst, Autonomous Research's Patrick Davitt, noted. Global Atlantic's earnings will now appear as a line item in KKR's income statement, he said. 

A line item, though, is a far cry from KKR becoming an insurance giant itself, others pointed out. 

That's a point that came through in the Q&A portion of KKR's deal announcement on Wednesday, when co-president Scott Nuttall characterized the transaction as more of a partnership than an acquisition.  

"We do not think about this as acquiring an insurance company, per se," he said.

"We think about this as acquiring the majority of an insurance company, where we can partner together, and we can help them increase their investment returns — which should, in turn, allow them to increase their growth."

So, as far as the Berkshire Hathaway references go?

"This is not KKR becoming an insurance company," Nuttall said. 

Read more: 

• It's only going to get harder for private-equity giants to find cheap things to invest in, and that will be a huge drag on returns over the next decade
• Big investors like Apollo and Carlyle are clamoring for a piece of the $30 trillion ESG space. We spoke to 15 insiders about how they're ramping up hires, raising money, and striking data-driven deals.

Disclosure: KKR is a large shareholder in Axel Springer, which owns Business Insider.

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US private equity firm KKR will invest $755 million in the retail unit of India's biggest company, Reliance Industries, it said on Wednesday. 

KKR's investment for a 1.28% stake in Reliance Retail values the company at 4.21 trillion rupees ($57 billion), Reliance said.

This is KKR's second investment in Reliance Industries — in May, it invested $1.5 billion Jio Platforms, Reliance's digital arm, which includes India's largest mobile network.

It means that investors have poured $1.78 billion into Reliance Retail within a month. Tech investor Silver Lake will invest $1.02 billion in Reliance Retail, it said on September 9, after making a $1.35 billion investment in Jio Platforms in May.

As India's biggest retailer, Reliance Retail owns around 12,000 stores, including convenience shops, supermarkets, apparel stores, and electronics stores. Most are in India, but it also owns Hamleys in London — the oldest and largest toy shop in the world.

It turned over around $20 billion in the year to March 2020, an increase of 27% on the year before. Reliance struck a $3.38 billion deal last month to acquire rival Future Group's retail business.

Reliance lined up other investors

Reliance Industries, controlled by Asia's richest man Mukesh Ambani, has been lining up investors for Reliance Retail in recent months.

Reliance Industries offered to sell Amazon a 40% stake in Reliance Retail in a deal that could be worth $20 billion, a source told Bloomberg News. Reliance later called this "speculative" and said it "cannot confirm or deny any transaction which may or may not be in the works."

It follows an investment drive for Jio Platforms, which includes India's largest mobile network operator as well as streaming services and a video-conferencing app. Reliance has received $20 billion this year from global investors, including Facebook, for Jio Platforms, and has approached many of those same firms about Reliance Retail, Reuters reported.

Reliance Retail and Jio Platforms launched e-commerce platform JioMart in May. It plans to expand beyond groceries and is becoming a major, fast-growing rival to Amazon and Walmart's Flipkart in India.

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RV rental platform RVshare has raised over $100 million from KKR and previous investor Tritium Partners, according to a news release from RVshare.

This investment comes at a time in which RV rental companies and makers have stayed resilient amid the coronavirus pandemic that has otherwise tanked the travel industry. 

RVshare is just one example of this general massive industry growth: from early April to May 19, the rental platform saw a 1,000% increase in bookings.

"I think we're going to see a lot more demand,"RVshare CEO Jon Gray told Business Insider in June. "I think you're now getting a new group of people buying them, which has people who are substituting it for more luxurious vacations that they typically took."

Gray's previous prediction has so far been correct. According to RVshare's news release in September, the company saw fall bookings increase 123% year-over-year.

According to RVshare, this over $100 million investment will allow the peer-to-peer rental platform to tap into KRR's "network" and "resources," and grow the company as the industry continues to boom.

See more: KKR is making a big push into the $30 trillion insurance industry — here's why private equity is starting to look more and more like Berkshire Hathaway

"I am very proud of our employees and thankful to our customers for helping build RVshare into the market leader it is today – and we are only at the beginning of where our business can go,"Gray said in a statement about the investment. "This financing and the support of KKR's global platform positions us well to invest in future growth and provide the best experience for our owners and renters."

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Scrolling through videos on social media may seem like carefree fun, but the logistics behind it are an increasingly serious business.

ByteDance, the China-based parent company of the social media streaming service TikTok, has leased 53 megawatts of data-center space across three locations in northern Virginia, a source with knowledge of the transactions said, facilities that could consume more annual power than 25,000 homes. That's on top of 9 megawatts ByteDance leased in 2019, according to data from DataCenter Knowledge. 

The company, which has come under scrutiny in recent months from the Trump administration, is just one among an expanding universe of businesses for whom data centers are key.  

In Totowa, New Jersey, meanwhile, Digital Realty Trust, a $41 billion public real-estate company that is one the country's largest data-center developers, has broken ground on a sprawling 600,000-square-foot complex after locking down a major commitment from Bloomberg LP, the financial data and media firm, several sources with knowledge of the transaction said.

A spokesman for Bloomberg did not immediately respond to a request for comment. ByteDance did not respond to an inquiry about its data-center deals.

The transactions are just the latest activity in a booming sector that straddles both the technology and property markets.

Data-center demand has dramatically risen in recent years thanks to a host of drivers. Those include the growing consumption of storage-heavy streaming content, the proliferating internet-of-things that has connected everything from cars and appliances to remote software and systems, and also the increasing migration of businesses to cloud based storage and applications.

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The coronavirus pandemic, while causing other areas of the real estate industry such as retail and hotels to wilt, has only given lift to the already surging sector, experts say.

The audience data firm Nielsen, for instance, reported that US consumption of streaming content rose more than 30% through the first three quarters of the year to 7.1 trillion minutes as lockdowns and lingering virus concerns have encouraged more viewers to watch from home.

And as companies continue to put off a return to the office, more have scrambled to move more of their data and operations from onsite servers into the digital ether so that they can be more readily accessible to employees working remotely.

The lynchpin behind all of it are tens of thousands of megawatts of data centers.

Big investors like Goldman Sachs and Apollo are jumping in 

The demand has given a boost to established players in the industry, including public companies such as Digital Realty Trust and Equinix, the largest data center company by market value at over $71 billion. Shares of data center REITs have risen on average by about 25% this year, according to the REIT investment and research firm Cohen & Steers, compared to an overall 12% decline in the broader REIT market, which has been battered by the virus crisis.

The industry's performance has also caught the attention of major investment firms that want to make inroads into the lucrative business. On Tuesday, Goldman Sachs announced it had hired Scott Peterson, the former chief investment officer of Digital Realty Trust, and Goldman's merchant banking division plans to invest $500 million from an infrastructure fund to make up to $1.5 billion of data center acquisitions in the US and around the globe.

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Other bluechip investors have crowded into the market as well. Apollo Global Management announced last week that it purchased a portfolio of nearly 500 existing cellular towers and hundreds of additional tower sites that are under development. That infrastructure is seen as closely linked to the data center business, especially with the arrival of 5G, whose faster speeds will require both more transmission infrastructure and storage space and increasingly seamless connections between the two.

In May, KKR said it would invest $1 billion from an infrastructure fund it operates to build and buy data centers in Europe in a venture called Global Technical Realty. And last year, Blackstone announced it had acquired a 90% interest in seven data centers in Virginia owned by the property REIT Corporate Office Properties Trust in a deal that valued the buildings at $265 million.

"Global internet traffic has grown 20% to 30% per year and the amount of data in data centers is growing at about the same pace," said Nadeem Meghji, the head of US real estate investments for Blackstone. "And with the arrival of 5G, you'll see the consumption of even more content from people's phones and devices."

Meghji also expected broad demand from businesses across the economy to continue to fuel growth.

"Only 30% of companies have moved their data storage off premises into a data center so far," Meghji said. "That adoption will grow."

Data centers require enormous amounts of power

Unlike other property types that have attracted robust investor interest in recent years, such as warehouse space, data centers can be particularly complex and expensive to operate and build. Most require enormous supplies of power, backup generators to prevent outtages, robust ventilation systems to cool football field sized rooms crammed with servers that can reach ovenlike temperatures, and connectivity to established networks of fiber optic cabling that serve as the nation's superhighways for data.

Development has nonetheless boomed as capital has flooded in.

"You're getting pension funds investing in data centers now, which is a huge change from a few years ago," said Steve Berkman, a real-estate attorney at Paul Hastings in San Francisco who has worked on data center deals on the West Coast.

The amount of new colocation capacity in leading data center markets such as Northern Virginia, Dallas, Silicon Valley, and the New York area grew by 5% in the first half of the year to 2.7 gigawatts of total inventory, according to data from CBRE, about 20% of the power consumed by all of New York City. Colocation spaces are akin to the coworking business in the office sector, offering takers flexible space in which to grow their data footprint. They are only a segment of the larger market.

Huge data consumers have also been active building and leasing their own facilities. Facebook recently began operating in a $1 billion data center it built in Henrico County in Northern Virginia, the country's largest and most active data center market. The social media giant has outlined plans to more than double the size of the complex.

Even more space is on the way, with about 373 megawatts of colocation facilities under construction, CBRE said.

All of that supply has put a modest strain on pricing in the industry, with average charges falling from $129 per kilowatt of monthly power consumption to $121 in the first half of the 2020 in those prime data-center markets, according to CBRE.

Developers have compensated for tightening profits by building and operating space more economically. Some data-center companies have even begun to experiment with the idea of submerging servers in tubs of mineral oil, which is more efficient at dispersing heat than air and can reduce hefty cooling costs. Microsoft has tested underwater data centers.

"A decade ago, the rule of thumb was it cost $40 million a megawatt to build," said Pat Lynch, a senior managing director at CBRE who oversees the company's data center solutions group. "Today it's a quarter of that, so there's still a healthy margin in the business even if prices fall slightly."

How a big supply pipeline is changing the competitive landscape 

The tightening economics and the large pipeline of supply are expected to prompt consolidation in the industry, allowing major players to enhance profitability by gaining economies of scale through acquisitions that avoid the risks of building from the ground up. Digital Realty Trust, according to several sources, was in talks, for instance, to purchase the $8.9 billion rival data center REIT Cyrus One last year, although the deal appeared to fizzle earlier this year.

The data-center industry's tenancy is dominated by huge customers such as Amazon Web Services, Microsoft Azure, Google, Oracle, and IBM, which use the facilities both for their own operations and multi-billion dollar cloud computing and storage businesses that cater to corporate and government clients.

Smaller companies too have found a niche, highlighting the diverse ecosystem of users behind the demand for data center space.

Data Canopy, a Maryland-based cloud-storage provider, has leased space in 16 data center locations across the country totaling about 10 megawatts that cater to small customers. Ryan Barbera, the company's founder and CEO, said he expects its footprint to as much as double in the next year and revenue to pick up by 30% or more. He is already contemplating a first fundraising round for the company.

"2020 has been pure growth for us from a business standpoint and the best year that we have ever had," Barbera said. "When Covid happened we frankly began implementing a lot of austerity. Instead, companies that in the past talked about a cloud transformation made the move after realizing it's just as important or more important than other areas of their business at a moment like this."

Disclosure: KKR is a large shareholder in Axel Springer, which owns Business Insider.

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Here's a rundown of news on hires, exits, and promotions from the past week.  Are we missing anyone? Let us know.

• JPMorgan Chase hired Jeremy Balkin as its new head of fintech and innovation for wholesale payments, Reuters first reported. Balkin previously had been the head of innovation at HSBC. Reuters noted that his new role will entail supervision of financial technology and innovation efforts for wholesale payments, and added that Balkin will "be involved in JPMorgan's decisions to invest or partner with companies that can help further its strategy in the space." From 2012 to 2014, Balkin was the president of Karma Capital, an independent wealth advisory firm, according to his LinkedIn page.
• Partner exits have continued at Goldman Sachs. Tom Leake, global head of systematic trading strategies sales strats and EMEA equity structuring, has retired, according to an internal memo sent on March 8 viewed by Insider. Ashok Varadhan and Marc Nachmann, co-heads of the global markets division, sent the memo. Leake first joined Goldman Sachs in 2017 as a managing director, and was named to the ranks of its partnership in 2018. He served on the firm's client index and strategy committee and global markets sustainable solutions council.
• Also at Goldman Sachs, Jason Mathews has retired. Mathews was head of Americas Equity Flow Sales and a partner since 2016. The news of his departure, which concluded two decades at the firm, was announced in an internal memo sent on March 3 viewed by Insider. Ashok Varadhan and Marc Nachmann, global co-heads of the global markets division, sent the memo. Varadhan and Nachmann praised Mathews as having been "particularly dedicated to supporting the recruitment and integration of our diverse hires," and said he was committed to efforts to support and promote Black talent.
• Goldman Sachs partner Sarah-Marie Martin has also left the firm, Bloomberg reported this week, and is heading to Yumi, a baby-food manufacturer, as its next chief financial officer. Martin, who first joined Goldman Sachs in 2016, was a senior investment banker within the firm's financial and strategic investors group. Previously, she had been a managing director and then co-head of the Americas financial sponsors group at Credit Suisse, according to her LinkedIn page.
• Perella Weinberg Partners, a boutique investment-bank, announced on March 9 that it has hired Marie-Soazic Geffroy as a new partner in its advisory business, where she will lead the firm's financial institutions group in Europe. Previously, Geffroy was a managing director and vice chairman at Morgan Stanley Europe.
• Tradeweb has hired Greg Jachno to serve as the global head of data science and analytics for the electronic trading venue, Insider has learned. Previously, Jachno spent time at Bloomberg and Ascential, where he worked on alternative data. Jachno reports to Lisa Schirf, Tradeweb's global head of data strategy.
• BTIG Limited announced on March 9 that Kevin Edwards, Sean O'Brien, and Roxanne George joined the firm's fixed-income credit division. Edwards was appointed as managing director with a focus on European financials and investment-grade credit sales. O'Brien has been named a director, focused on convertible sales lending. And George will be a vice president within operations, leading BTIG's European middle-office loan operations, the company said in a press release. All three will be based in London.
• Private-equity firm KKR appointed Dinesh Paliwal as a new partner within the firm's private-equity business. Paliwal will focus on helping the firm to identify investment opportunities within verticals including industrials, consumer, and automative, the firm said in a press release. He will also be involved in helping the teams driving KKR's portfolio companies to achieve their goals in operations and strategic growth. Paliwal had previously served as the CEO of HARMAN International.
• HSBC announced Heidi Miller, the current chair of the board of the global firm's US subsidiary, HSBC North America Holdings, will retire from the board at the end of May. She will be replaced by Jamie Forese, former president of Citigroup, who left Citi in 2019 after spending more than three decades there. Forese first joined HSBC's board in 2020. He will assume the chairmanship as of May 28.
• HSBC also announced that Rachel Duan, most recently a senior vice president at General Electric and president and CEO of General Electric's Global Markets, will also join the board as an independent non-executive director, effective September 1.
• Liberum, an independent investment bank with offices in London and New York, announced this week that it has hired Duncan Higgins and Charles Taylor to serve as senior advisors to the firm's execution services business. Higgins is an independent financial markets consultant who had previously worked at ITG and UBS. Taylor was a founding partner at Redburn European Ltd. and is a partner at Aldbury International, a consulting firm.
• Citigroup's head of EMEA emerging markets is retiring, the bank said in a press release. Atiq Rehman first joined the Citi graduate trainee program in Pakistan in 1984, before joining the firm's investment-banking division in London in 1993. After holding a series of other roles, he transferred to Dubai in 2009 to lead Citi's Middle East business, eventually taking over operations in North and Sub-Saharan Africa. In 2019, he took over management of the EMEA Emerging Markets Cluster, where he oversaw activities in 29 countries. A successor has not yet been appointed.
• Marc Serafin, a former portfolio manager at billionaire Israel Englander's Millennium Management, has joined Douglas Bratton'sCrestline Investors as a portfolio manager in the Texas-based firm's New York office, as first reported by trade publication Hedge Fund Alert. Serafin previously was an analyst at Citadel and worked at Morgan Stanley and Bank of America.
• Chris Roberts, who was most recently a managing director and co-head of EMEA equity advisory at the boutique investment bank Moelis & Co., has left the firm to start his own equity capital markets advisory firm. Roberts will lead Start Point Advisory from London. Previously, he had been a managing director and head of EMEA equity capital markets execution at JPMorgan Chase; and, prior to that, a vice president in capital markets structuring at Morgan Stanley, according to his LinkedIn page. Roberts' departure to his new venture was first reported by Financial News.
• Grayscale Investments, the world's largest digital-currency asset manager, is advertising for a bevy of new jobs related to exchange traded funds. Among the nine roles it's searching for in online job listings are a compliance officer, a finance reporting manager, and two sales directors. All of the roles presently show that they are based in Stamford, Connecticut. The series of ETF-related job postings was first reported this week by Coindesk, which recognized that Grayscale may be seeking to develop a cryptocurrency ETF, which would be a new product for the asset manager.

Dan DeFrancesco, Meredith Mazzilli, and Bradley Saacks contributed to this reporting.

Disclosure: KKR is a large shareholder in Axel Springer, which owns Insider.

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KKR Acquisition Holdings I Corp on Wednesday said it raised $1.2 billion in an upsized initial public offering, selling 120 million units at $10 each, Reuters first reported.

The special purpose acquisition company backed by private equity firm KKR increased the offering from 100 million units it had marketed previously.

KKR Acquisition Holdings, helmed by Glenn Murphy, chairman of yoga apparel maker Lululemon Athletica, said he plans to merge the SPAC with a consumer or retail company.

Shares, traded under the ticker KAHC.U will begin trading on the New York Stock Exchange on Wednesday. Citigroup was the sole underwriter for the offering.

KKR joins the long list of firms riding the SPAC frenzy. SPACs, shell companies seeking to merge with private companies with the intention of taking them public, have boomed over the last year. 

In 2020, a total of 248 SPACs raised $83.3 billion according to SPAC Analytics. But in the third month of 2021 alone, data already show 246 SPACs that raised $76.7 billion, comprising 75% of initial public offerings.

Regulators have begun turning their eye to the soaring market. On March 11, acting SEC Chair Allison Herren Lee said that SPAC returns don't warrant the "hype" they're getting.

KKR is an investor in Insider Inc. parent company Axel Springer.

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Mobile-gaming company AppLovin is targeting a $30 billion valuation for its US initial public offering, with plans to raise as much as $2.13 billion, Reuters first reported Wednesday.

AppLovin, backed by private equity firm KKR, is looking to sell 25 million shares between $75 to $85 each. 

The Palo Alto, California-based company applied to list under the Nasdaq ticker symbol "APP."

Banks underwriting the deal are led by Morgan Stanley, JP Morgan, KKR, BofA Securities, and Citigroup. 

AppLovin, founded in 2012, is the latest in the long list of mobile gaming firms looking to profit from pandemic-stricken gamers who are stuck at home due to the pandemic. DraftKings, Playtika Holding, and Roblox all recently went public.

The company has been scaling up. In February, AppLovin acquired Berlin-based Adjust, a mobile app measurement and marketing company. In May 2020, the company acquired Machine Zone, best known as the developer of top-grossing mobile games including "Game of War: Fire Age, Mobile Strike," and "Final Fantasy XV: A New Empire." Sources valued the deal at about $500 million, according to Bloomberg. 

Last year, AppLovin reported a $126 million net loss, according to Reuters, compared to a net profit of $119 million in 2019.

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Box on Thursday announced a $500 million investment from private equity firm KKR, in a deal that seems to put an end to speculation that the $3.5 billion enterprise cloud storage company will sell itself — at least, for now. 

Under the terms of the investment, which the company says will largely be used to finance share buybacks, KKR's John Park will join Box's board of directors. (Disclosure: KKR is a major shareholder in Axel Springer, Insider's parent company.) 

Meanwhile, cofounder CEO Aaron Levie will step down as the board's chairman, to be replaced by independent director Bethany Mayer. Mayer joined the board last year as part of a settlement with activist investor Starboard Value. 

Box's board went through a "comprehensive review of a wide range of strategic options," independent board director Dana Evan said in a press release about the deal, and determined that "continuing to execute Box's long-term strategy in combination with a significant share repurchase and the support of KKR, is the optimal path to drive the company's next phase of growth." 

"The investment from KKR is a strong vote of confidence in our vision, strategy, and continued efforts to increase growth and profitability," Levie said in the same release.

In the wake of the announcement, Box's stock was down 9.35% at market close on Thursday, with shares priced at $22.

Starboard first invested in Box in September 2019, eventually growing its stake to 7.9% of the company, and has pushed the company to deliver more growth and shareholder value. The two signed an agreement in March 2020, to add three new independent directors to its board as a way to bring in new ideas. 

However, Starboard was not satisfied with Box's 11% year-over-year growth in 2020, given the explosive spikes that other cloud software companies including Zoom have seen in the pandemic-driven remote work surge. Reuters reported in February that Starboard was preparing to launch a board challenge unless Box made major changes, and further wrote in March that Box was exploring the possibility of putting itself up for sale.

Experts now agree that the KKR investment is a clear signal that getting acquired isn't in the cards for Box right now. Instead, the capital raised, and the share buyback plan that goes with it, buys Box the time to come up with a strategy to reinvigorate its business and post the kind of numbers that would satisfy Starboard and any other activist investor while also allowing it to remain independent. 

"By having KKR strategically involved in [the deal], it kind of gives them a little bit more breathing room," said D.A. Davidson analyst Rishi Jaluria said. "And what I expect to happen with this, will be a kind of more robust turnaround plan."

KKR's involvement brings more oversight to Box, but also a boost of confidence

The hit to Box's stock price on Thursday probably stems from Wall Street disappointment that the company won't sell itself after all. However, having a KKR member on the board and the overall support will bring some "operational discipline" to Box that could benefit the company in the long run, Jaluria said. 

Placing an independent director as chair of the board to replace Levie also adds some accountability and "independent oversight" of the company, Jaluria added. The board can now theoretically make changes at the management level more easily, which is one thing Box that is likely to do as it pursues new growth, he said. 

KKR's investment also shows that the firm believes Box has the technology chops to improve its business on its own, said Nucleus Research analyst Barbara Peck. Indeed, the investment gave Box a much needed "public boost of confidence," said Futurum Research analyst Dan Newman. 

"Staying public, not necessarily accepting a deal that isn't the best for its shareholders and stakeholders, was a good piece of progress, good negotiation and a good alignment for the company to kind of settle both worlds," Newman said.

Ultimately, Box has about six to 12 months to show investors, especially activists like Starboard, their plan and some results, Newman said. And if things don't pick up, he said, there is a risk Box might be right back where it started.

Box has to show progress if it wants to stay independent

To avoid that fate, Box will have to show it can grow the company and improve performance, Newman said. That includes making sure the company is investing in its e-signature business and making the most of its recent acquisition of SignRequest for $55 million, said Valoir analyst Rebecca Wettemann. 

The company will have to invest in growing its capabilities and adding new adjacent technologies, she said. From Wettemann's perspective, Box should focus on adding robotic process automation and AI capabilities to its platform, either from acquisitions or building it in house.

In addition, Box will have to continue landing new enterprise customers and expanding usage within those organizations, Newman said. The company will also have to continue to emphasize and deepen integrations with other software vendors like Slack, Zoom, and Salesforce, he added.

Over the last year, Box has deepened its integrations with productivity suites from Google and Microsoft over the last year. CEO Levie has also spoken about Box's goal to build a "content cloud" where customers can both store their documents and manage the business processes around them. 

Even with that vision, Box faces many challenges ahead, especially with Big Tech companies continuing to invest in their own cloud storage products.

"I think it's a challenging space," Wettemann said. "And when you have Microsoft and Google who can effectively give away capabilities for free or almost free, and as storage becomes more and more of a commodity, it's a challenge as a content player to deliver value that warrants the price." 

Got a tip about Box? Contact this reporter via email at pzaveri@insider.com or Signal at 925-364-4258. (PR pitches by email only, please.) 

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Here's a rundown of news on hires, exits, and promotions from the past week.  Are we missing anyone? Let us know.

• Michael Daffey, who until March 31 was the head ofGoldman Sachs' global markets division, has joined digital-currency investment firm Galaxy Digital Holdings as chairman, replacing Mike Novogratz, the company announced. Novogratz will remain Galaxy's CEO. In March, Insider broke the news that Daffey was the mystery buyer of Jeffrey Epstein's $51 million Upper East Side mansion, in large part bought with Daffey's proceeds from crypto holdings. Galaxy is reportedly preparing for a US IPO planned for later this year.
• Goldman Sachs' global head of corporate communications, Jake Siewert,is leaving the firm after nine years, according to an internal memo sent by CEO David Solomon and top executives that was viewed by Insider. Siewert will be joining Warburg Pincus where he'll work in a policy role and be reunited with Warburg President Timothy Geithner, with whom Siewert worked at the US Treasury. Siewert also served as the last White House Press Secretary under President Bill Clinton and was a top executive at Alcoa. 
• Goldman Sachs also announced the appointment of Andrea Williams as the firm's head of media relations in a memo sent by Corporate Secretary John F.W. Rogers and viewed by Insider. Williams will join Goldman in May as a managing director from Howard Marks' Oaktree Capital Management, where she led the hedge fund's corporate communications.
• JPMorgan Chase has poached top executives from Goldman Sachs, Google and Wells Fargo to help lead its consumer and community banking (CCB) team, Insider reported.
  • Sonali Divilek, formerly head of product at Goldman Sachs' Marcus, will join the CCB team as head of digital channels and products.
  • Google's Sumit Gupta will join as CCB's new chief design officer, having formerly served as a global director in digital marketing and ecommerce.
  • The CCB team also hired Kaaren Hanson, a Wells Fargo executive vice president in experience design, as its new head of consumer experience and personalization.
• Carlyle named Brian Bernasek as its next co-head of US buyout and growth, Insider reported. Bernasek, who currently head's the private-equity giant's global industrial and transportation team, has been at Carlyle since 2000. He is taking over for Peter Clare, the firm's chief investment officer for corporate private equity and a member of the firm's board of directors, and he will lead the US buyout and growth team with current co-head Sandra Horbach. Clare will remain in his CIO role, and take on a new title as chair of the integrated US buyout and growth team as well.
• In Citigroup CEO Jane Fraser's first major strategy overhaul, the bank is exiting 13 consumer markets across Asia and EMEA (Europe, the Middle East, and Africa) to focus on wealth management. As part of the move, Citi announced new leadership across its wealth management division, Insider reported.
  • Ida Liu, most recently head of Citi's private banking franchise in North America, has been named the global head of private banking.
  • Fabio Fontainha, head of retail banking for Asia Pacific, and Steven Lo, head of the private bank in Asia, have been named co-heads of wealth in Asia.
  • Luigi Pigorini, most recently Citi's head of private banking in EMEA, will now head Citi's wealth management business in the region.
• Citi has promoted Jill Evans and Jolene Han Berg to be global co-heads of client engagement and marketing for securities services, according to an internal memo reviewed by Insider. In their new roles, Evans will focus on the investor client segment — asset managers, insurers, and asset owners — while Han Berg will focus on the financial institution clients — banks, broker-dealers, wealth managers — the memo said.
• Matt Harris, a partner at Bain Capital Ventures, was appointed as a new member of the Federal Reserve Bank of New York's Fintech Advisory Group. The Fintech Advisory Group connects Fed leaders with senior representatives and thought leaders from the finance and technology industries.
• Phil Sieg, currently the head of practice management at JPMorgan Wealth Management, has been named the CEO of JPMorgan Advisors, the firm's group of brokers for high-net-worth clients. The news was announced in an internal memo from wealth management CEO Kristin Lemkau that was viewed by Insider. Sieg, who joined JPMorgan a year ago, has a long track record in wealth management encompassing 30 years spent at Merrill Lynch. Sieg is replacing Chris Harvey, who is moving to a new role at JPMorgan overseeing lead generation across wealth management, reporting to Lemkau. The search for Sieg's successor at JPMorgan is underway, Lemkau added.
• Julia Unger, former Citi head of global cards and unsecured lending, joined Walmart on Monday as its new vice president of financial services. Unger, who spent over two decades at Citi, will report to Walmart's executive vice president and Chief Customer Officer Janey Whiteside. Earlier this year, Walmart poached two executives from Goldman Sachs' Marcus, David Stark and Omer Ismail, to deepen its foothold in the fintech space.
• Bridgewater Associates' people and talent leader Jen Vanderwallis joining Capitolis, a SaaS fintech platform that just raised $90 million in Series C funding led by Andreessen Horowitz. Vanderwall, who was a member of Bridgewater's core management team, will serve as the company's new chief people and culture officer, Capitolis announced on Tuesday.
• KKRappointed two new managing directors to its global infrastructure team on Monday. Energy transition industry veterans Tim Short and Benoit Allehaut join the KKR team from Capital Dynamics, where they both served as managing directors on the clean energy and infrastructure team.
• San Francisco-based venture firm General Catalyst has nabbed Paul Kwan, a top Morgan Stanley tech banker, to support GC's coverage of internet, software, and health assurance companies, the firm said in a press release. At Morgan Stanley, Kwan was most recently the head of west coast technology banking, where he led M&A and IPOs across tech companies, including Livongo's $18.5 billion tie-up with Teladoc Healthlast year. Kwan was at Morgan Stanley for more than 21 years, during which time he's been based in the bank's Menlo Park office.
• Circle, a blockchain-powered fintech unicorn, announced it has hired Dante Disparte as chief strategy officer and head of global policy. Disparte comes to Circle from Facebook's Diem Association, formerly known as Libra, where he served as executive vice president. Disparte, who led engagement with government and financial industry leaders at stablecoin Diem, will oversee Circle's global expansion efforts.
• Smith College announced it is getting its very first chief investment officer. Lisa Howie, a 12-year veteran of the Yale University Investments Office, is leaving her position as director there to lead the Smith College endowment.
• David Ryan, the former head of US CLO Syndication at Deutsche Bank, has left his position after 17 years with the bank, GlobalCapital reported Monday. His new role is unknown.
• Hedge fund Brevan Howard has hired Gurpreet Singh to be its new chief technology officer for Alpha Strategies, Insider reported. Singh joins from  Point72 Asset Management, where he was CTO of its quant-trading group Cubist. 
• Joe Brucchieri has departed Carlson Capital, where he was chief legal officer. Insider reported. His exodus comes as multiple top executives have left the hedge fund recently. Nicole Mascera, head of HR; Whitney Fogle Lewis, deputy chief legal officer; and Jehan Akhtar, chief risk officer, also departed. Their new roles are unknown.
• The head of Goldman Sachs' LIBOR transition efforts and a managing director for corporate treasury, Jason Granet, is retiring, Bloomberg reported Wednesday. Granet, who had been at Goldman for more than 20 years, has been in the top LIBOR transition spot since September 2018 and before that was deputy head of the firm's liquidity solutions team in the asset management sector.
• Wells Fargo is searching for a new head of human resources. In a press release, the bank said that David Galloreese, Wells' head of HR who joined in 2018, is departing on April 23. He'll be replaced in an interim capacity by Kleber Santos, Wells Fargo's head of diverse segments, representation and inclusion, while the bank searches for Galloreese's replacement.
• Melissa Baal Guidorizzi, formerly the senior counsel for policy and strategy in the Consumer Financial Protection Bureau's enforcement division, has joined international law firm O'Melveny, the firm said in a press release. Before spending eight years at the CFPB, Guidorizzi was the COO of the National Summer Learning Association and also associate general counsel at Citi. At O'Melveny, she has joined the firm's financial services and fintech practice. 
• Moran Forman, a managing director on Goldman Sachs' index derivatives trading desk, is leaving the firm, according to efinancialcareers. Forman had been at Goldman for nine years, prior to which she'd worked in index derivatives at JPMorgan Chase. 
• Alex Catterick, formerly the head of alternative investments in the Americas at HSBC, has joined Manulife Investment Management, according to Wealth Advisor. At Manulife, Catterick will now oversee the company's high-net-worth strategy in private markets. Prior to working at HSBC, Catterick was a director in alternative investments at Barclays.
• Jae Yang, previously a vice president at Goldman Sachs, has joined Steve Cohen's Point72 Asset Management as of April to head business development in Japan, according to Hedge Fund Alert. Yang had been at Goldman for more than 19 years.

Reed Alexander, Dakin Campbell, Dan DeFrancesco, Meredith Mazzilli, Alex Morrell, Bradley Saacks, and Rebecca Ungarino contributed to this report.

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Private equity firm KKR is private aviation's newest benefactor having just invested in Jet Edge, a California-based private aviation management firm that specializes in heavy jet aircraft from Gulfstream and Bombardier, in a deal announced on Tuesday. 

Jet Edge now has access to a $150 million credit facility from KKR's funds. The private jet firm intends to use the investment to expand its technological infrastructure and develop a new aircraft ownership scheme, known as AdvantEdge, as private aviation continues to enjoy a rapid pandemic recovery.

It's at least the second high-profile investment that KKR has made into private aviation this year. A $4.475 billion deal to buy Atlantic Aviation, an operator of more than 60 private terminals across the US, was also announced on Monday.

Private aviation's recovery from the pandemic came about quicker than the airline industry's, driven by wealthy leisure travelers that are now more willing to pay up to fly private. They've been a driving force in the industry and are one reason why Jet Edge is on track to achieve 40,000 charter hours this year compared to 25,000 prior to the pandemic, Bill Papariella, Jet Edge's chief executive officer, told Insider. 

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Jet Edge will likely also see more favorable pricing for Atlantic's services including aircraft fueling, handling, and parking thanks to its new partner in KKR. 

KKR's investment, however, is also guaranteeing Jet Edge's AdvantEdge program that's aimed at enhancing and providing transparency to the aircraft ownership process for ultra-high-net-worth individuals looking to charter their aircraft.

Aircraft owners in the program agree to commit their aircraft to the program for a specified period of time and are given minimum charter hour guarantees in return. Membership tiers in the program range from a minimum of 250 charter hours per cycle to 900 per cycle. 

Jet Edge says the program will give current and prospective aircraft owners a better understanding of how much they'll earn in a given year. 

The program complements Jet Edge's vertically integrated sales and acquisition business by giving aircraft owners a home for their aircraft to be chartered after an acquisition is made.

"This is our way of kind of turning the fractional model on its head [while] at the same time giving people access to a plane that they bought," Papariella said. Berkshire Hathaway-backed NetJets and Directional Aviation-backed Flexjet are the current leaders in the fractional aircraft model where multiple aircraft owners invest in an airplane and share costs. 

KKR's investment is also allowing Jet Edge to offer prospective owners a money-back guarantee with the AdvantEdge program. "If you are unhappy for any reason, we will buy your plane back at any moment at this point, underwritten by KKR," Jonah Adler, Jet Edge's chief commercial officer, told Insider. 

"The reality is: what we're doing is very simple, but it's truly revolutionary in terms of what it's doing for whole aircraft ownership," Adler said. 

Jet Edge's charter customers will also see the difference when arranging charter flights. They'll have access to some of the newest aircraft in the industry and easier opportunities to arrange flights as owners won't need to be consulted for approval each time a trip is booked. 

Customers can access the AdvantEdge fleet of aircraft primarily through Jet Edge's Reserve membership program where a refundable deposit is paid and in exchange, set pricing and more flexible booking terms are given. 

The push to become a high-tech aircraft operator

Investing in technology will also be a key use of the funds, allowing Jet Edge to align itself with high-tech competitors that use advanced scheduling systems and artificial intelligence-based programs to maximize fleet efficiency. 

"We will go big in tech right now, that's for sure," Papariella said. "You'll see us spend millions of dollars in tech."

Jet Edge operates a nationwide point-to-point network using its Gulfstream and Bombardier aircraft where customers only pay for the legs that they fly. Efficiently, and profitably, maintaining that type of network requires costly scheduling systems that minimize empty legs and match up Jet Edge's aircraft with customers across the country. 

A new mobile application will also be online by December and it will allow charter customers to get pricing and reserve flights. Aircraft owners, conversely, will be able to use the app to schedule their personal flights. 

Disclosure: KKR is a large shareholder in Axel Springer, which owns Business Insider.

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KKR's co-head of Americas private equity, Pete Stavros, is familiar with the challenges low-income hourly workers face. Now, he thinks he's found an effective solution by granting these workers shares in the companies that employ them.

Stavros' father was an hourly construction worker in Chicago for 45 years. Stavros said his father's job helped him understand the challenges of working "at direct odds with your employer." Employees want to maximize their compensation, against the will of employers seeking to keep workers' paid time low, Stavros said. 

Since 2011, KKR has implemented its "employee engagement model" in all its Americas industrials portfolio companies, a division Stavros led at KKR from 2005 to 2019, when he was promoted to co-head Americas private equity. The model grants hourly wage workers shares of ownership in their employer.

If the company performs well, the workers may be paid a portion of its profits in the form of dividends, and can earn cash when KKR eventually sells the company.

Stavros said the model, which also features employee training programs, has significantly improved employee productivity and retention, the latter of which is especially important as manufacturing companies across the US struggle to hire enough workers.

Speaking at a virtual event hosted by Goldman Sachs' Ayco division on Wednesday, Stavros said KKR started "experimenting" with employee stock ownership 11 years ago to mitigate high turnover at some of its portfolio companies.

Stavros, who has spent decades advocating for broad-based stock ownership, said he had wanted to try implementing it in KKR's portfolio for years. KKR first granted employees stock at drug manufacturer Capsugel in 2011, after which recordable safety-related incidents dropped by 56%, and the days away case rate went down by 55% over the six years KKR owned it, according to a fact sheet on the program a KKR spokesperson shared with Insider.

Four years later, Stavros was back in Illinois, leading the acquisition of garage-door manufacturer C.H.I. Overhead Doors. When KKR first bought the business, he said absenteeism and turnover were rampant, so the firm implemented its employee engagement program once again.

Employees received their first dividend as stockholders, amounting to $1,300 to $4,000 per person. Afterward, Stavros said, employee participation in a survey administered to gauge engagement jumped to 90% from 30%.

Since then, the average compensation per employee at C.H.I. from dividends has been about $10,000 per hourly colleague, according to Stavros.

Stavros said the program successfully reduced employee turnover, though he did not provide specific numbers. While it's not a "magic solution" to any problem, Stavros said, employee stock ownership "can be the foundation for culture-building."

In a video shown during the event, an employee detailed how the grants changed some workers' lives. She said the dividend enabled one employee, a single mother of two, to buy a new car for the first time. Another employee, she said, finally took her husband on a honeymoon.

For KKR, the focus on employee stock ownership has proven to be a differentiator from other private equity firms.

Stavros said some leaders at KKR feel that the program is the "most meaningful thing" they've done in their careers, leading hourly employees to "dignified retirement and real wealth creation."

"It's become a recruiting advantage, and a real source of mission and purpose inside of the company for the leadership team," he said.

Stavros, meanwhile, is launching The Center for Shared Ownership this summer, a nonprofit which he and his wife plan to contribute $10 million of their savings. The nonprofit will conduct research on outcomes driven by employee stock ownership.

Disclaimer: KKR holds a majority stake in Insider's parent company, Axel Springer.

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The race among private-equity firms to show investors they are serious about sustainability has been heating up.

Blackstone, the world's largest alternative asset manager, is considering adding three executives to its corporate ESG team, Christine Anderson, Blackstone's head of external relations, told Insider. The firm has been snapping up talent for its fast-growing ESG team this year, announcing the hire of five new ESG execs in early May.

The search for talent comes as investors ramp up the pressure for private equity firms to double down on ESG and impact investing efforts.

Blackstone made a major move toward bolstering its ESG initiatives when it asked all the CEOs of its portfolio companies to regularly report on sustainability measures in a letter, Reuters reported in May.

The initiative was also one of Anderson's first, as she took on oversight of ESG at the firm after KKR poached Blackstone's former global ESG head, Alison Fenton-Willock, in early May.

Anderson, said that when she joined the firm 12 years ago, she would informally meet with other employees who were interested in the budding field of "corporate social responsibility," which culminated in the firm's first sustainability initiative.

When president and chief operating officer Jon Gray took over in 2018, the firm honed in on a "renewed focus" on ESG issues, aiming to add further structure to its previous efforts. 

The firm did not issue standardized reporting rules to all its portfolio companies when it widened the ESG reporting requirement to include them in May. 

"We certainly gave them a little bit of guidance on the things that we care about, like diversity and sustainability, but we gave them a lot of leeway to do it the way they wanted to do it."

However, companies in Blackstone's real-estate division have been reporting sustainability metrics against The Global ESG Benchmark for Real Assets framework to their boards since 2019, she said. 

Blackstone's portfolio companies can report on ESG in a variety of forms, from verbal discussions with board members to Powerpoint presentations.

Portfolio companies log these metrics quarterly as part of their broader reporting process, Anderson said. Blackstone also administers an annual ESG survey for them to identify "some of the less quantitative items" like anti-discrimination policies.

Further standardization of the metrics companies use to assess their ESG efforts, however, would be helpful in ensuring accountability, Anderson said. Some of Blackstone's portfolio companies are in the early stages of the reporting process and are still assessing what ESG factors are material to their business.

"Not all of these companies have had the luxury -- they've been in a growth phase, and haven't had the time to really address [ESG]."

Anderson said that Blackstone is encouraging these companies to make ESG a priority. The private-equity firm's view of some topics within ESG, like its emissions program, require a more "granular" approach -- the firm offers mechanical guides, seminars, and help from outside consultants and vendors, Anderson said.

It's also considering further ramping up the support of portfolio companies by hiring ESG coverage leaders within its different business units, she added.

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Here's a rundown of hires, exits, and promotions from the past week.  Are we missing anyone? Let us know.

• Healthcare investment bank SVB Leerink hired Whit Mayo to the firm's equity research team as a managing director and senior research analyst covering healthcare providers and managed care, according to a press release. Mayo joins SVB Leerink from UBS, where he was also a managing director. Mayo will stay in Nashville, TN.
• The Securities and Exchange CommissionappointedGurbir S. Grewal as director of the division of enforcement, effective July 26. Grewal currently serves as Attorney General for the State of New Jersey, a role he has held since January 2018. Grewal's SEC appointment comes after Alex Oh, the first woman of color to hold the same role, resigned in April after less than a week on the job amid scrutiny over her work for ExxonMobil. 
• Mitsubishi UFJ Financial Group announced this week that Rukhein Davis has joined the firm as a New York-based managing director and head of corporate derivative solutions. Previously, Davis was head of consumer and retail rates & FX at Bank of America Merrill Lynch.
• Menlo Park, CA-based David Chen was promoted to head of global technology investment banking at Morgan Stanley, according to Linkedin.
• BlackRock announced a leadership shuffle in its Aladdin portfolio risk analysis business:
  • Samantha Tortora, the firm's former head of investor relations and corporate sustainability, was named global head of sustainability for Aladdin, Insider reported Thursday.
  • Antonio Baldaque da Silva, former head of analytics and modeling for BlackRock's solutions unit, will run a new team providing Aladdin clients with climate and sustainability analytics.
• KKR promoted New York-based Giacomo Picco and Stephanie Yeh to managing director roles in global private credit, per a press release on Thursday. Picco will lead a new effort focused on receivables and inventory financing, while Yeh will lead asset-based financing in the US. Picco was a portfolio manager and head of alternative lending at asset manager Sound Point Capital and Yeh was the head of early-stage financing at Credit Suisse. 
• Goldman Sachs promoted managing director and former Trump advisorJim Donovan to vice-chair of global client coverage, Axios reported on Thursday.
• Anastasia Amoroso, a top private bank strategist at JPMorgan, is leaving the firm to be fintech startup iCapital's chief investment strategist, Insider reported Monday. Amoroso, who had been at JPMorgan for the last 8 years, starts in her new role Monday and will be based in New York.

Meredith Mazzilli, Reed Alexander, Aaron Weinman, and Rebecca Ungarino contributed to this report.

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Joe Bae and Scott Nuttall, the copresidents and co-chief operating officers at the private-equity firm KKR, started at the firm in the same analyst class.

Grace Koo, KKR's head of talent acquisition, told Insider that when she's speaking with prospective hires, she always keeps in mind that she could be talking to "the future Scott or Joe" of KKR, an ethos that informs the firm's approach to hiring.

KKR, the second-largest private-equity firm by assets, values camaraderie. It's also made moves to lock down the best young talent.

In 2020, it launched an analyst program to recruit talent directly from college campuses, a departure from its historical approach of hiring analysts laterally from investment banks and other financial institutions.  It accepted less than 2% of 1,678 collegiate applicants to its analyst program last year, according to Koo. 

When it looks at candidates for its investment teams, Koo said KKR looked for two main attributes: exceptional intellect and strong cultural alignment.

The firm values curiosity and inquisitiveness, as well as strong technical skills, she said.

"What we're trying to do is take into account their ability to grasp technical concepts quickly," Koo said, "and really assimilate facts and data to evaluate opportunities and eventually construct thematic investment ideas."

Koo told Insider what KKR's hiring process looked like for a typical junior investing role. 

Make sure to 'do your homework' before a KKR job interview

KKR receives thousands of résumés a year from college students, and the firm's first priority is to screen for technical skills with assessment tools to reduce the applicant pool, Koo said. The firm does not use software like HireVue to conduct video interviews or résumé reviews, but it is assessing a number of tools to streamline next year's process. 

The firm runs a "fairly structured process with a well-defined rubric," Koo said. Typically, a candidate will have a first-round interview with an investment-team member via phone call or Zoom.

After the first-round interview, a candidate can expect up to eight more individual interviews, including one dedicated to gauging cultural fit, she said. KKR also administers one or two timed case studies for candidates to complete at home to assess their technical prowess. 

A candidate will likely meet the entire team with which they hope to work, Koo said. While the technical assessments and case studies are usually conducted by senior-level employees, junior employees will often meet prospective hires in later stages of the process to answer questions about the daily demands of the role.

KKR expects candidates to have "done a fair bit of homework" on the firm, Koo said. Standout candidates are those who ask relevant questions that show they understand the firm's deal flow and trends in the industry, she added.

Importance of diversity and cultural fit

KKR looks to hire candidates who "come from all walks of life, can bring varied perspectives to the conversation, and are lifelong learners," Koo said.

Hiring a diverse group of employees is integral to KKR's stance that "monolithic views are the death knell of any sustainable investing model," she added.

According to KKR's website, 12% of its workforce is made up of employees from historically underrepresented ethnic groups and 44% consists of women.

While lateral hires still represent the majority of KKR's junior talent, the firm is expanding its formal campus-recruiting program, Koo said. Recruiting from colleges has also opened its talent pool to more candidates from nontarget schools.

As for cultural alignment, Koo said that those who are used to working alone were unlikely to succeed at the collaborative firm.

KKR also values candidates who have demonstrated their ability to learn from mistakes, she said.

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After years of relying on lateral hiring, private-equity firms are now battling with investment banks to recruit talent directly from college campuses to fill entry-level, often six-figure roles. 

But thanks to virtual recruitment, the group of schools that the private-equity giant KKR targets for entry-level talent has broadened. 

KKR launched its first formal analyst program in 2020, which it filled with college graduates, many of whom had interned at the firm. It hired 12 full-time analysts this way out of 762 collegiate applicants in 2020, and in 2021 it hired 19 out of 1,678, amounting to an acceptance rate of less than 2% in both years, Grace Koo, KKR's head of talent acquisition, told Insider.

Before, the firm had hired junior investment professionals only after they landed jobs at other financial institutions, most often investment banks. While a majority of KKR's junior hires still come to the firm laterally, Koo said campuses are now becoming an equally important pipeline.

The pandemic and switch to remote work helped KKR rethink how it approached on-campus recruiting, Koo said. 

KKR has been able to access more students through webinars and virtual tools this year. Koo said that the age-old practice of recruiting within a group of core "target" schools is now "almost an obsolete concept," as the firm no longer feels it must be physically present on a campus in order to connect with prospective hires. 

"It's no longer: Here are my four schools or here are the 12 schools I care about. Technology has completely leveled the playing field," Koo said. 

KKR received applications from students from close to 150 schools this year.

"There's no way we ever would have been able to physically appear at these campuses," she said. "But with virtual tools, I think we can tell our story to so many more students and reach that diverse and rich pool of talent."

A spokesperson for KKR said they were unable to provide specific data on the diversity of the company's candidate pool this year.

Before 2020, first-year investment-banking analysts would apply to KKR for "on-cycle" private-equity associate positions, committing two years in advance to starting those jobs. On-cycle recruiting for the class of 2020 associates was delayed throughout the industry as firms including KKR sought to give these investment-banking analysts more time to gain work experience before interviewing.

Koo said that firms expect to start recruiting on-cycle associates again this fall. She said KKR sees the late start to recruiting as a positive for first-year investment-banking analysts, who will have the chance to gain hands-on experience before making an informed choice about their post-banking career path. 

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The pandemic has had a dramatic impact on lumber prices, dragging futures below $300 per thousand board feet in April 2020, then lifting them as high as $1,700 this May. Warren Buffett could well be having flashbacks to the time he doubled his money on a deal involving a redwood forest.

The billionaire investor and Berkshire Hathaway CEO described his Arcata bet as one of his "more serendipitous arbitrage experiences" in his 1988 letter to Berkshire shareholders.

Arcata, a printing and forest-products company, was sparring in court with the US government over its purchase of 10,700 acres of Arcata timber in 1979 to expand Redwood National Park in California. Arcata argued the government's payment of $98 million for the trees was nowhere near enough, and took issue with the interest rate it had proposed.

Meanwhile, KKR had submitted a takeover bid of $37 per Arcata share and two-thirds of any further payments by the government, and Arcata had accepted. Buffett and his team determined that the private-equity group was likely to close the deal based on its track record, Arcata would probably find another buyer even if the deal fell through, and there was potential for a major windfall once the redwood dispute was resolved.

"Your chairman, who can't tell an elm from an oak, had no trouble with that one: He coolly evaluated the claim at somewhere between zero and a whole lot," Buffett quipped in his letter.

Berkshire promptly bought 400,000 Arcata shares, or 5% of the company, in the fall of 1981. When the deal's closing date was pushed back, but a definitive agreement was signed in early 1982, Buffett's company raised its stake to 655,000 shares, or 7%, at an average cost of $38 a share — a premium to KKR's offer.

"Our willingness to pay up — even though the closing had been postponed — reflected our leaning toward 'a whole lot' rather than 'zero' for the redwoods," Buffett wrote.

The transaction ran into further delays, and KKR ultimately trimmed its offer to $35. Arcata's bosses rejected that bid in March 1982, accepting another offer of $37.50 per share plus 50% of any redwood money instead. The group's shareholders approved the deal, and Berkshire received $24.6 million, representing a solid 15% annualized return on its $22.9 million investment.

The redwood question was finally answered after a judge directed two commissions to assess the timber's value and an appropriate interest rate, upheld their conclusions in 1987, and ruled that the government owed $600 million to Arcata. The parties settled on a $519 million payment in 1988. Berkshire received an extra $19.3 million as a result, and Buffett wrote that another $800,000 payment was slated for 1989.

Assuming the money came through, Berkshire's total payout was $45 million, netting him a $22 million profit on its investment. It may have taken the better part of a decade, but Buffett must have been pleased to see his bet pay off in the shape of a 95% return.

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Since the pandemic began, both Washington and the Federal Reserve have demonstrated their willingness to step in and save the financial markets in worst-case scenarios.

On February 28, 2020 the Dow Jones sank 1,000 points as rumors of COVID-19's devastating potential began to cause panic among investors. The Fed was quick to respond, cutting interest rates by half a percent in the first emergency cut since 2008.

In the following weeks, news of the severity of COVID-19 hit the global economy hard, and markets continued to tumble.  The Fed slashed rates to zero in response and began a historic bond-buying program to prop up the US economy.

Meanwhile, the Trump administration put through a $900 billion relief bill, followed by another $2 trillion spending package. And after President Biden's election, his administration added its own $1.9 trillion in COVID-19 relief spending. 

Now, despite a recovery in the financial markets that has the S&P 500 continually grinding out new highs, the Fed has kept its foot on the gas pedal, buying $120 billion of bonds each month with interest rates at historic lows.

The goal is to provide "maximum employment," which will enable a more equitable economic rebound, particularly for minorities and low-income households who were the worst hit by the pandemic.

Henry H. McVey, the head of KKR's Global Macro, Balance Sheet and Risk Team, says the move is an example of the US economies' newfound reliance on fiscal and monetary support.

"We have entered a new era for policy," McVey wrote in a recent mid-year report. "One that relies on more government support/intervention/regulation on the fiscal side as well as more reflationary strategies on the monetary side." 

McVey believes austerity is out, and we are in a new era dominated by dovish Fed policies and big government spending.

"Acceptance of big government with a more 'visible hand' in tackling thorny challenges such as inequality, data security, cross border investing, monopolistic pricing, and climate change, is becoming mainstream," McVey said.

The Head of Global Macro went on to elaborate six structural inputs that will make the next decade look very different from the previous four:

1. Accommodative monetary policy in the form of average inflation targeting
2. Sustained global fiscal stimulus, with more going direct to consumers
3. Input cost pressure and labor shortages
4. Lower real rates, easier financial conditions for longer
5. An inflationary global energy transition.
6. Record savings

Although some market commentators have expressed fears of lasting inflation, McVey believes the current elevated figures will eventually settle.

Still, with an odd mix of disinflationary technological change and inflationary spending from old economic sectors' transition to clean energy, the exec predicts inflation will hover at a higher resting rate (around 2–2.5%) over the next decade in comparison to previous cycles.

In the near term, he says markets will see what appears to be a growth slowdown, but investors shouldn't be fooled.

"It's a rate of change transition, not a growth bust," McVey wrote.

The global economy will see higher nominal gross domestic product (GDP) in this business cycle amid aggressive support from governments around the world, McVey believes.

The private equity exec said investors should focus on a thematic approach over the next decade, as this new economic reality will favor companies with pricing power and collateral-based cash flows.

Below, Insider detailed five ways KKR is adjusting its asset-allocation strategy for the next decade, plus four areas investors should avoid if they want to profit in 2021 and beyond.

Bullish Picks

1) Investments linked to collateral-based cash flows

KKR's McVey believes a "structural yearn for yield" will lead to a re-rating of collateral-based assets as a whole. This means firms with these assets will receive a strong upfront yield without the need for significant leverage.

Investors should look for companies with strong cash flows and pricing power, which is key during times of rising inflation, McVey added. As input costs, including wages and select commodity prices, continue to increase at a faster pace than consumer prices, McVey sees firms with pricing power being re-rated up. 

Overweight: Firms with exposure to infrastructure, real estate, asset-based finance, premium consumer products, industrial distributors, home improvement, and specialized staffing companies.

2) Global equities

KKR is overweight global equities, due to the belief that GDP growth will continue to be strong, backed by fiscal and monetary support and the rise of the global millennial. McVey pointed out that 822 million Asian millennials, 12 times more than are in the US, are set to buy homes and invest in stocks in the coming years. The exec recommended a balanced approach between value and growth stocks for global equity allocation.

Overweight: European, Japanese, small and mid-cap US equities, select Emerging Markets stocks.

3) Opportunistic credit

Opportunistic credit funds have an emphasis on financial or hard-asset collateral to provide higher yields than traditional credit in bull markets, with the opportunity for better returns in a downturn.

KKR favors opportunistic credit because it gives them the ability to operate in multiple asset classes as opportunities arise. For retail investors looking to gain exposure to this space, the Russell Investments Opportunistic Credit Fund Class S is a solid proxy for KKR's recommendation. 

Overweight: Bank loans, opportunistic credit funds.

4) Select commodities

McVey said KKR believes oil will rise during the ongoing energy transition.  Other commodities that act as the "picks and shovels" of the new energy economy, as well as services linked into this business movement, also offer potential upside.

Overweight: Oil, copper, lithium, aluminum.

5) Capital solutions

McVey said firms that are providing unique capital solutions, such as convertible preferred shares or payment-in-kind/equity structures, to private companies in innovation sectors could also outperform.

KKR likes that traditional banks aren't as interested in helping provide unique capital solutions for private firms, leaving the door open for competitors.

Overweight: Media, biotech, gaming, blockchain

Areas to avoid

1) Price takers

KKR sees valuation and earnings de-ratings for companies that have high leverage and an inability to pass costs onto consumers. Retailers and certain healthcare services with large low-wage workforces and limited pricing power could suffer, McVey said. Auto parts firms and government services providers might also struggle to pass on rising costs, which could lead to lagging returns.

2) Short duration bonds

Higher inflation trends make short-term bonds unattractive for KKR.  McVey pointed to the fact that two-year real rates are as negative as they have been in over 40 years. Around the world, short-term bonds are seeing negative rates and represent little value, he argued.

3) Popular stocks with rich valuations

McVey sees increased regulatory scrutiny acting as a headwind for high-flying tech and growth stocks. He said overvalued shares should be dumped, and that his call applies to all regions and market capitalizations. 

4) Select EM currencies

McVey believes the Columbian economy will struggle in the coming years if global tightening begins ahead of schedule. Headwinds, including low vaccination rates, poor investor sentiment, and rising inflation, could make EM currencies particularly vulnerable. The firm is short the Colombian Peso. 

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Private equity firm Blackstone has combined its mobile ad tech firms Liftoff and Vungle, following the lead of other private equity firms that made billions by acquiring and uniting different mobile adtech startups.

Blackstone invested $750 million into Vungle in 2019, and $400 million into Liftoff in 2020. Liftoff caters to marketers and uses machine learning to improve ad buying and tracking across 500,000 mobile apps over 140 countries, according to the company. Vungle, on the other hand, sells video ad inventory on behalf of 100,000 mobile app publishers and 15,000 individual content creators.

In rolling those two investments into the same company, called Liftoff+Vungle, Blackstone seems to be taking a page out of PE firm KKR's playbook with mobile games marketing platform AppLovin, said Matt Barash, SVP of global publishing and platform partnerships at customer intelligence platform Zeotap. 

KKR bought a $400 million stake in AppLovin in 2018, bolstered it with a string of other acquisitions including marketing platform Adjust and mobile gaming studio Machine Zone, and netted $6.8 billion when AppLovin went public this April.

To be fair, Liftoff+Vungle combines different features than the AppLovin rollup. 

Liftoff CEO and co-founder Mark Ellis said the combined company, which he will lead, is in a better position to compete with tech giants like Facebook and Google as well as AppLovin. Vungle CEO Jeremy Bondy will serve as president, and Ellis said he doesn't anticipate layoffs.

Sachin Bavishi, managing director of Blackstone's Private Equity Group declined to comment on its future strategy with Liftoff+Vungle, but said that he had faith in the combined company's ability to drive value in the future.

But the PE firm does own other mobile companies it could bolt on in the future, like game developer Murka, which it acquired in 2019. Consider how AppLovin inherited a huge trove of user data when it acquired MachineZone, raising the value of its offering. So bundling Murka with the new company could create a mobile ad network comparable to AppLovin, said Barash.

"Scale and user data are the two key metrics that determine success in a world where Apple has scrambled the mobile app market," he said. "So a roll up strategy with more acquisitions to come down the line makes sense for Blackstone."

Blackstone could also add a measurement company to Liftoff+Vungle, Barash added, similar to AppLovin's acquisition of Adjust.

Blackstone isn't the only investor hoping to mint money by combining mobile companies. Mobile game developer Zynga, for instance, is following a similar playbook, with its acquisitions of Rollic and Chartboost, said Barash.

Mobile M&A has been heating up overall amid uncertainty around Apple's restrictions around ad targeting. The enormous amounts of time consumers' spend on mobile and gaming apps is driving growth, such that worldwide mobile ad spending is projected to reach nearly $500 billion by 2024, up from $341.18 billion in 2021, according to Insider Intelligence's eMarketer. 

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