Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

KKR: US economy is good, but investing is hard

Alexander Navab
Amanda Gordon | Bloomberg | Getty Images

A top KKR executive thinks the American economy is in good shape, even if the looming interest rate increase by the Federal Reserve is likely to create some disruption.

"Overall in the U.S. we're looking at a very positive, healthy picture," Alexander Navab, KKR's head of Americas private equity, said Friday at the Columbia Business School Private Equity & Venture Capital Conference in New York.

Navab said the interest rate hike question was the biggest uncertainty in the capital markets.

"That has caused all sorts of volatility and uncertainty," he said. "Depending on when that happens, and how much, that may cause rebalancing or some more volatility."

Stocks fell sharply Friday as Navab spoke, partially in anticipation of a rate hike in June, earlier than some had expected.

Read MorePros bullish on private equity for 2015

Navab added that the CEOs of KKR's portfolio companies were "not overly optimistic but positive" on the U.S. economy. He said the concern was how slower growth in various emerging markets as well as Europe and Asia might affect demand given the international nature of many of their businesses.

KKR's private equity portfolio companies in the U.S. include Toys R Us, Go Daddy, Colonial Pipeline, Samson Resources and Alliant Insurance Services.

While Navab was positive on the economy, he underscored a common sentiment in private equity: It's increasingly difficult to find attractive deals given higher valuations.

"Today it's a lot harder to find the kind of return that we're looking for," Navab said in explaining the need to be "very selective" in making investments.

"Today, we're somewhere in the mid-to-late end of the cycle," he said regarding the pattern of valuations risings following a crash, most recently with the financial crisis of 2008.

Navab, speaking in front of a room of mostly MBA students at the Waldorf Astoria hotel, noted that there was some distress in the market, especially energy, creating pockets of opportunity. KKR completed $2 billion in fundraising in March 2014 for a North American oil and gas fund.

Read More

US place to be but volatility will rise: Pro

KKR managed $96 billion in total assets as of September. The firm was founded in 1976 by Henry Kravis and George Roberts. It went public in 2010. Best known for leveraged buyouts, KKR also has real estate, hedge fund and other strategies today.

Navab graduated from Columbia College in 1987 and joined KKR in 1993.