KKR Releases Report on Europe by Henry H. McVey and Aidan T. Corcoran
"Overall, we continue to advocate our thesis of focusing on sectors and countries where the macro momentum has turned positive. However, the bigger picture conclusion we left with is that we believe European GDP is ‘Returning to Normality' after several years of austerity, bank deleveraging, and current account narrowing,"
Some high-level insights from the report include:
Europeremains on an economic upswing, and as such, we are now revising our 2015 European GDP forecast to 1.7% from 1.3%, against current consensus of 1.3%. We see multiple ways for growth to "win" in Europein 2015, including low rates, cheaper oil, less fiscal drag, and a weaker euro. Our quantitative GDP model is even more bullish, suggesting 2.4% growth over the next 12 months. Mario Draghihas orchestrated a perfect time to launch Quantitative Easing (QE), in our view.
- In terms of credit conditions, the gap between some of the Haves and the Have-Nots has narrowed.
- We spent some time listening to a few experts talk about European capital market structure. We left unimpressed. While banking union has become a reality, capital markets union remains so far an aspiration, ongoing opaqueness favors patient capital that can take advantage of arbitrary pricing and/or harness volatility.
- Some of the well-informed macro and economic folks with whom we spoke view China's slowing as more of a global risk than
Greece. We tend to agree.
- Social unrest and political tension remain risks to the story. Across
Europe, we think that wage growth is likely to remain sluggish, while liberal benefit packages, including pensions, may continue to be slimmed down.
Links to access this note as well as an archive of previous publications:
- Read the latest Thoughts from the Road on KKR's website
- Download a PDF of
Europe, Returning To Normality
- Archive of previous publications
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The views expressed herein are the personal views of Henry McVey and Aidan T. Corcoran of KKR and do not necessarily reflect the views of KKR. This information is not research and should not be treated as research. It does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of KKR. It is being provided merely to provide a framework to assist in the implementation of an investor's own analysis and an investor's own views on the topic discussed herein. There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially, and should not be relied upon as such. This information should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy. This release may contain projections or other forward‐looking statements. None of
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