Alternatives Access: Understanding Evergreen Private Equity

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A shimmering strip of gold-plated handwriting swirls elegantly across a dark surface. It spells JP Morgan. A woman with long dark hair wears a taupe buttoned jacket, small stud earrings, a wristwatch, and a lapel microphone. Large windows frame a city skyline with tall buildings and a blue sky with clouds in the background. Text: Jasmine Green-Hogan, ALTERNATIVE INVESTMENTS SPECIALIST, J.P. MORGAN PRIVATE BANK.

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JASMINE GREEN-HOGAN: Hello, everyone, and thanks for joining. We're back for another episode of alternatives access. I hope that this series continues to be helpful to you. We love the feedback, so please feel free to send it our way. This is going to be a really special 25 minutes. We're going to talk through five ideas about evergreen private equity today with no one better, I think, to have this conversation than Alisa Wood, co-ceo of KKR Private Equity Conglomerate. Alisa, thanks for joining us today.

ALISA WOOD: Thanks for having me. It's great to be with you.

JASMINE GREEN-HOGAN:

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A woman with short blonde hair wears a bright orange dress with a floral pattern, pearl stud earrings, layered necklaces, multiple bracelets, a wristwatch, and a lapel microphone. She sits across from Jasmine at a black desk labeled J.P. Morgan in a studio. Two glasses of water and a sheet of paper are on the desk.

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It's going to be a lot of fun. So I think the most natural place to start today is accessing private equity strategies-- how clients can think about accessing this part of the market, but also historically what's always existed.

ALISA WOOD:

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Text: Alisa Wood, PARTNER, KKR, CO-CEO, KKR PRIVATE EQUITY CONGLOMERATE.

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For sure. So when you think about the highest and broadest use case, it's public equities. You can go and buy shares of companies. There are thousands of them in the world. Now the world has also changed, though. There are about 40% fewer public companies today than there were 25 years ago. So being public is maybe not what it always was seen as. But that is the easiest form to buy equities. You go buy your shares. You own them. They're fully liquid. You can decide when to trade them on any given day.

The

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Slide: How a Typical Drawdown Fund Works. Capital Commitment and Call. Limited Partners pledge to invest a given amount of capital to a fund. The General Partner asks for the money when portfolio companies need a cash infusion or as new opportunities arise. Capital Commitment. Limited Partners commit to: • Provide funds for investment, • Stay invested for the life of the fund Capital Call. General Partner calls for a portion of the Limited Partners' committed capital to invest in new portfolio companies. Lockup Period. In a drawdown vehicle, investors typically commit capital for the full lifecycle of the strategy. The GP calls that capital over time, deploys it into underlying investments, and returns proceeds as those investments are exited. Because the strategy is built around long-term ownership and value creation, committed capital is not freely redeemable during the investment period and is generally returned only as assets are harvested. Investors may also be able to sell their stake in the fund via a secondary transaction. A graph titled Typical Private Market Return Profile "J Curve" spans a horizontal timeline labeled Year 0 through Year 10. The J-curve shows how returns to investors are typically negative in the early years of a fund's life before turning positive as investments are sold and returns realized. Dark blue vertical bars extend below the horizontal baseline during the early years, then become much shorter and remain close to the baseline in the later years. Teal vertical bars extend above the baseline, increase in height through the middle years, reach their tallest point around Year 6, and then gradually decrease in height through Year 10. An orange curve begins near the baseline, slopes downward to its lowest point around Years 2–3, then rises steadily, crosses the baseline around Year 5, and continues upward to its highest point by Year 10. A horizontal bracket beneath the timeline is labeled Investment Period and spans the early years of the graph. A legend labels the dark blue bars as Cash Outlays, the teal bars as Cash Inflows, and the orange line as Net Cash Position. Text: For illustrative purposes only.

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second bucket that I would put in is traditional private equity, which are closed-end funds. Also those still exist and they're alive and well. You make a commitment. You spend years putting that commitment to work, usually about five to six years in general. You invest with the manager who really goes and either takes companies private, which is one option. You can go buy non-core assets out of conglomerates. You can buy even smaller private companies. All of that could be encompassed in that.

And then you hopefully buy good businesses. You make them great. That's where your return comes from. And then you sell them and that capital comes back. That structure is alive and well. But the whole concept of committing capital, having it called and waiting, maybe 10, 12 plus years to see that return come through, it's a very long time horizon and it's extremely illiquid. For the right investor, that works really, really well.

Now the third bucket is where I think the market's moving to. We think about this as an evolution. This is not a revolution. It's an evolution. There's nothing wrong with the first two buckets. You need all probably all versions of it in your portfolio. But when you think about evergreen private equity, what we've tried to do as an industry is blend the first two. So you can access those great private companies that there's no other way to access but you can do it in a semi liquid form.

So you obviously try to mitigate your j-curve. So there's no concept of capital calls. You're fully invested day 1. You can still buy good make great. Have a good manager really important. I'm sure we'll talk about that and how that impacts it. But you then can decide when you want to redeem. You're not beholden to holding something for 10 to 15 years. So I think what we've really tried to do as an industry is give lots of optionality. Each of those have different time horizons. Each of those can have different return targets.

Each of those can really be suited for different types of clients in different parts of a portfolio. It's not good or bad. It's an and, it's not an or, and I think that's the really important and exciting part of where we are today with this evolution.

JASMINE GREEN-HOGAN: Sure. And I love that it's not an or it's an and because I think a lot of times clients have the mindset of maybe one or the other what's better. Really what you're describing is there's no one of the three that's better. All different. And really a function of structure and mechanics.

ALISA WOOD: Absolutely.

JASMINE GREEN-HOGAN: So I think that takes us to-- we should head into our first idea. Five ideas in 25 minutes is our goals today. But

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Slide: Accessing Private Equity Strategies. Private markets have traditionally been accessed through drawdown structures, where capital is committed upfront and deployed over time. More recently, evergreen vehicles have emerged as an alternative. Comparing these two structures highlights key differences in how investors commit capital, access liquidity, and experience cash flow timing within private market portfolios. A comparison table has three columns labeled Public Equity, Traditional Private Equity, and Evergreen Private Equity, with a left column listing the categories Buying, Selling, Investor Requirements, Valuations, Minimum Amount, Shareholder Influence on Cos., Disclosures at Issuance, and Ongoing Disclosures. The Buying row states Public Equity: Buy anytime, Traditional Private Equity: Buy only during the offering period, Evergreen Private Equity: Buy at regular intervals. The Selling row states Public Equity: Paid when co. sold or goes public, Traditional Private Equity: Paid when co. sold or goes public, Evergreen Private Equity: Sell at regular intervals. The Investor Requirements row states Public Equity: None, Traditional Private Equity: Eligibility requirements, Evergreen Private Equity: More moderate than traditional PE. The Valuations row states Public Equity: Daily based on trading activity, Traditional Private Equity: Monthly or quarterly (non-traded), Evergreen Private Equity: Monthly based on net asset value. The Minimum Amount row states Public Equity: None, Traditional Private Equity: High, Evergreen Private Equity: Lower than traditional PE. The Shareholder Influence on Cos. row states Public Equity: Limited, Traditional Private Equity: Often ownership stake and/or direct influence on company management and operations, Evergreen Private Equity: Often ownership stake and/or direct influence on company management and operations. The Disclosures at Issuance row states Public Equity: Detailed disclosures, Traditional Private Equity: Limited disclosure requirements, Evergreen Private Equity: Limited disclosure requirements². The Ongoing Disclosures row states Public Equity: Quarterly / annually, Traditional Private Equity: No specific requirements, Evergreen Private Equity: Quarterly / annually.

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if we think about how a traditional drawdown fund works, this is what you started with in alluding to when you think about the initial capital outlay, looking to harvest it over the back half. Talk us through that traditional structure a little bit more for someone who may be joining us for the first time today.

ALISA WOOD: When you think about the traditional structure, and, by the way, this structure was created in the '60s and the '70s. It's old. And most things in life, if you're looking at your operating system, what version are you on? Version 20.0. So this is probably one of the parts of the evolution of private equity that has not evolved as quickly as other parts. It doesn't mean it's broken, doesn't mean it doesn't work.

JASMINE GREEN-HOGAN: It still works.

ALISA WOOD: It still works, and it still works really, really well. But the way it looks is pretty unique. So you make a commitment. That commitment takes years to be called, typically about five years, maybe a little more, maybe a little less. You invest with the manager who then is going to go out on the market and find good places in private investments to go put that capital to work. And then they need time to go take the good companies and make them great. Figure out what they're going to do with the business. It's not 1985 anymore. It's not about buy low and sell high and just hold on and hope for the best like that. Or allow for financial engineering to take the path forward. So it does take time.

Now I think in average we've seen about five to seven years is the average hold in the industry. So then once you've created that value what do you go do? You go sell it. You build a diversified portfolio and you work these companies obviously through operational alpha and things of that nature. Portfolio Alpha 2 and how you construct it, you want a diversified pool. But then you go sell the assets, and then what do you do with that capital? You give it back.

JASMINE GREEN-HOGAN: That's right.

ALISA WOOD: You send it back. So nothing wrong with that. It works really well. If you can manage exactly how much you want to be invested, can you manage the illiquidity? Can you manage that J-curve, and waiting for the capital to be called? And can you actually hold on for 10 to 12 years in most cases, or even sometimes longer, sometimes a little less too. But if you can work that in, that's what traditional private equity looked like. And the whole concept of illiquidity premiums came from that. You need to be generating a return in excess of the public markets in order to be compensated for your capital to be tied up for that period of time.

JASMINE GREEN-HOGAN: And I think too a lot of what you're describing, I think, is interesting because it's not just institutions who have done the traditional drawdown private equity strategies. Private clients and families have been investing for decades in this form, too. But if we think about who has a perpetual bucket into perpetuity, large public pensions and endowments and foundations, their needs and goals sometimes look a lot different than the traditional private client or family. And so it's nice to your earlier point to just have the optionality. I think that can be pretty interesting.

If we press forward one slide, just in the spirit of the traditional drawdown fund versus the evergreen strategies. Sorry. One more. What I think is interesting here is your comment around evolution. Is there a world in which maybe from your experience that you always saw this coming? Or when you think about the introduction of the evergreen vehicle today, is this a slow moving where small chunks along the way got us here?

ALISA WOOD:

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Slide: Comparing evergreen and drawdown vehicles. Drawdown and evergreen structures differ in a number of ways – including average liquidity. Three stacked panels each contain a circular icon and a short statement. The top panel contains a pie chart icon and reads Fully drawn and immediate exposure to a diversified portfolio. The middle panel contains a dollar sign icon and reads No cash-flow management or modeling of capital calls. The bottom panel contains a dollar sign inside a circular arrow icon and reads Realizations are automatically reinvested in the vehicle enabling investors to benefit from long-term compounding. A chart titled Private Equity Portfolio Allocation in Evergreen vs. Drawdown Vehicles compares two stacked bar charts labeled Evergreen Private Equity Structure and Drawdown Private Equity Structure. Both charts have a vertical axis labeled Portfolio Allocation (%NAV) ranging from 0% to 100%. The top chart displays bars for Day 1, Year 1, Year 2, Year 3, Year 4, Year 5, Year 6, Year 7, Year 8, Year 9, and Perpetual. Each bar remains nearly the same height throughout the timeline, with Private Equity comprising most of the allocation and Liquid Assets (Cash & Treasuries) forming a small portion at the top. A dashed horizontal line labeled Average Liquid Assets runs across the chart at approximately 15%, with the figure in an orange box at the right end of the line. The bottom chart displays bars for Day 1, Year 1, Year 2, Year 3, Year 4, Year 5, Year 6, Year 7, Year 8, Year 9, and Year 10. The Private Equity portion begins at zero on Day 1 and rises each year to its highest level around Year 5, then gradually declines through Year 10, while the Liquid Assets (60/40/EQ./F.I.) portion fills the remainder of each bar. The bars stack to varying total heights across the timeline rather than each reaching full height. A dashed horizontal line labeled Average Liquid Assets runs across the chart at approximately 58%, with the figure in an orange box at the right end of the line.

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I would say both, honestly, if that's an OK answer. I think this has been two decades in the making.

JASMINE GREEN-HOGAN: Sure.

ALISA WOOD: And if you look across the industry, several managers have really tried to crack the code on this. But in order to be able to create a good evergreen, you need as a manager to be really good at three things. So to be good at a traditional drawdown fund, you need to be a good investor.

JASMINE GREEN-HOGAN: Yeah.

ALISA WOOD: But by the way, that's not easy. I'm not trying to make that.

JASMINE GREEN-HOGAN: And we hope that's the baseline.

ALISA WOOD: We know that's the baseline. And by the way that's really hard.

JASMINE GREEN-HOGAN: Yeah.

ALISA WOOD: And you need to have resources to do that and a lot of capabilities to support that. But that's what you need to be good at. To be good at an evergreen vehicle, that's only one of the three things you need to be good at. You also need to have breadth and depth of deal flow, because when you think about an evergreen, you're taking capital on any given day.

You take capital in often monthly, but the capital is flowing in. You've got to find those companies every given month to put that capital to work. You still have to buy good and make great. All of that's the same. But you've got to have the velocity of idea flow to be able to feed these vehicles. If you do a couple deals a year, that's not going to work here. So that's the second bucket you've got to be good at.

And then the third bucket, which honestly I think is really hard and not fully appreciated in the industry, is the operational complexity.

JASMINE GREEN-HOGAN: Of course.

ALISA WOOD: You've got to be able to manage liquidity. You've got to manage your cash management practices, your hedging, because I'm sure you're going to have multiple share classes. You've got to be able to do more frequent valuations. Are they third party validated? All of that takes dozens of people. It takes a lot of work. So the way I think about it is in evergreens, the industry has had to figure those three legs of the stool out, and it's taken a little bit of time. Intellectually, it's easy to say, OK, I need to be good at that. It's hard then to be able to action it and to be good at that.

And then I think the other piece, which is really important in this, is making sure that people understand what it is they're buying. I hate the word semi-liquid. We've talked about this before. If there's one word I can strike from the English language, that would probably be it.

JASMINE GREEN-HOGAN: Sure.

ALISA WOOD: Because all you hear is semi.

JASMINE GREEN-HOGAN: Yeah.

ALISA WOOD: All you hear is liquid. You don't hear the word semi. And that's exactly the issue.

JASMINE GREEN-HOGAN: And it's a misconception.

ALISA WOOD: That's the misconception. So when you think about those three different options to invest in equities, one is very liquid, one is very illiquid. This is like the three little bears. And one is just right. So when you think about that, the whole concept of being able to control when you buy, when you sell and have that power in your hands, that's what's different. So when I think back to your analogy and your conversation earlier on in this discussion about what public pension plans, insurance companies, sovereign wealth funds have used alternatives for for a lot of years, they've owned that last bucket. All of that operational complexity. The institutional investors own that.

JASMINE GREEN-HOGAN: That's right. Yeah.

ALISA WOOD: In an evergreen structure, the manager owns it. That's the difference. It's just the shifting of the risk. Like who is going to be responsible for that? And I think that's what's very different in this. So yes, evergreens take out and strip away a lot of those inefficiencies and pain points. And for the right investor, maybe that matters. For certain investors, maybe it doesn't. And that's OK. And that's where it's the end, not the or.

JASMINE GREEN-HOGAN: You bet. Well, I'd love for you to expand just on two things that you mentioned. One, you talked about the management of liquidity. That is a component of every evergreen strategy. When you think about taking monthly inflows, potentially offering quarterly redemptions or repurchase of shares after a soft or hard lock. What does that look like, and why is that so important, again, that a manager is focused on the liquidity component and the management of that? And then maybe we'll talk about one or two of the other components.

ALISA WOOD: Absolutely. I think it's as important for the manager to be focused on how to manage the liquidity as much as it is for the investor to understand what that liquidity should actually be. I think it's both of those. I think it's the actual management, and then it's the education of it. So in terms of the liquidity, you need to make sure your liquidity is there for two reasons. One, in case someone decides they want to redeem, which by the way, they will, preferences will change. Maybe you need liquidity for other reasons in your portfolio. Whatever it may be, that's not a bad thing.

JASMINE GREEN-HOGAN: Sure. And just circumstances of our clients. They look different for private families than they do for institutions. People retire, people have grandkids, go to college, so on and so forth.

ALISA WOOD: And that's normal and natural. So you're going to need that liquidity functionality there. And you need to make sure liquidity is there when people need it. And they need to trust you that it will be there. And so I view the liquidity sleeve in any of these evergreens. It's got to be sleep well at night money. It can't be you're trying to make up returns on the liquidity sleeve and take extra risks there. No, no, that's got to be where it's safe. But the liquidity sleeve also has to fund new investments as well.

So as you're making investments throughout the year, you've got to make sure that it's there to fund it. So I think that's really important for both of those perspectives. What does the liquidity look like? What is the threshold? What does the process look like to actually redeem and get out? And by the way, we've seen a lot of news about this, around caps on liquidity and whatnot. They're there for good reason. Because when you think about an evergreen vehicle, two truths have to be coexisting together. And I don't think anyone really thinks about it this way.

One is you've got to protect the experience of the investor who wants to get out. So how do you redeem the liquidity there? But you've also got to protect the experience of the investor who wants to stay in.

JASMINE GREEN-HOGAN: Who wants to stay invested.

ALISA WOOD: And how do you make sure that you're still able to invest. You're still able to generate those returns. By the way, those two investors are equally important at any point in time. And as the manager you've got to navigate through that. So much of, I think, how we all think about this is you've just got to be really transparent with the end client in terms of here's how we think about liquidity, here's how it works, here's how we manage it. And then there are no surprises. I'm a big believer in if you do your job right, there should never be a surprise in this.

JASMINE GREEN-HOGAN: Sure. And I'm sure every client who's thinking about adding evergreen to their portfolio wants zero surprises. So I'd love to hear you say that. If we think about pressing forward one, I want to hit our idea 4. And in the spirit of being balanced, I think this is a conversation to your earlier point that this also doesn't get talked about enough.

And that's the dispersion across performance and returns in private equity specifically, and why selecting the right manager makes so much of a difference when it comes to your outcomes and returns. I'd love for you to spend a moment just on one. How the current environment may favor just private equity in general, but I think how we should be thinking about manager selection in the dispersion that exists in the space today.

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Slide: Why this environment favors private equity & "high grading." In complex cycles, manager selection matters more than ever. Why PE is a compelling opportunity. • Public equity increasingly narrow and expensive, • Private markets now too large to ignore in portfolio construction, • Operational value creation is greater than financial engineering, • Ability to drive long-term compounding outside quarterly scrutiny. The case for high grading. • Underwriting discipline matters, • We believe cycle-tested managers can outperform in periods of stress, • Crises change; process discipline does not, • Pattern recognition from prior dislocations (e.g., GFC, Euro crisis, COVID-19, 2022 rate shock), • Repeatable playbooks are greater than reactive investing. A chart titled Manager Selection Has a Greater Impact on Returns in the Private Equity Space Relative to Traditional Asset Classes has a vertical axis ranging from 0% to 25% and four categories along the horizontal axis: US Fixed Income, US Equities, All Global Equities, and Buyouts. Each category has a box spanning from its third quartile threshold to its first quartile threshold, with a dot marking the median. A Performance Key labels the top of each box as First Quartile Threshold, the dot as Median, and the bottom as Third Quartile Threshold. US Fixed Income ranges from 2% to 4% with a median of 3%. US Equities ranges from 11% to 14% with a median of 13%. All Global Equities ranges from 8% to 11% with a median of 10%. Buyouts ranges from 9% to 23% with a median of 16%. Text: Past performance does not predict future return. A banner reads This isn't just "why PE now?" It's: "why not lean further into control-oriented strategies in volatile periods?" Source: eVestment Alliance database for 15-year period through December 31, 2024. US Equities include large and small cap indexes. 1. KKR Global Macro and Asset Allocation. 2. Source: Preqin online database, performance as of December 2024 (includes vintages for the 15 years to 2022), top quartile, median, and bottom quartile boundary net IRRs. Performance for later vintage funds not available/meaningful. Preqin's database is continually updated and subject to change. You cannot invest directly in an index. Index results assume the re-investment of all dividends and capital gains. There is no assurance that the trends described or depicted above will continue.

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ALISA WOOD: I think you probably know this is my favorite topic to talk about because I do agree with you that this is just not understood in the industry. There's a lot of, well, all private equity should be created equal, and it's not. That's the hard part in this is the manager selection piece of it. Yes, you've got to get the structure right. You got to have deal flow. You've got to manage your risk. All of that's hard.

JASMINE GREEN-HOGAN: But your number 1 is the most important.

ALISA WOOD: But the number 1 exactly.

JASMINE GREEN-HOGAN: You have to be a good investor.

ALISA WOOD: That's the starting place. If you don't have that, you don't even have a seat. You shouldn't even have a seat at the table. So I think there are a couple of things to break apart what you just said. First and foremost, I do think the world looks very different today than it has. When we both started in the industry. It's been a while. And when you think about those institutional investors who, in the '70s and the '80s, first started investing in private equity.

They did it because they sat there and they looked at their asset allocation and said, there are a bunch of companies. Back then it was fewer than today, but there were a lot of companies who were staying private or just there-- being private is a moment in time. It doesn't mean you're always going to be private. It probably means that staying private at a moment where you're going through some operational change or maybe some strategic repositioning makes more sense than doing that in the public eye, as an example.

But to have that type of return stream, which is a less correlated. I'm not saying uncorrelated, but a less correlated return stream is actually really helpful at the end of the day from an asset allocation perspective. And as-- and this is what's fundamentally changed-- we've seen correlations between asset classes change. Things that were highly uncorrelated today are actually highly correlated. When you think about fixed income and public equities, it's changed. We could debate why and will it stay. But it is what it is today.

We're also seeing, I think, on a go forward basis, there are moments in time where public equities have performed very, very well. And we're coming off of a period and it's still happening. But will the future look like what the last several years have looked like? I don't think we're predicting that. But in a world where you probably will see some type of return compression across, by the way, all asset classes, you're going to need to make up that return somewhere.

So what's happened is that same strategy of less correlated returns and especially in a moment where correlations have changed, where compression of return is happening, it's more important than ever to have that additional optionality and honestly return driver in a portfolio to be able to achieve what you want to achieve return wise.

JASMINE GREEN-HOGAN: We were talking about it earlier as a team this week is just diversification is back. People are really starting to think about this. The concentration in public equity markets being one of the key drivers of clients really thinking about, what are my options around diversification more broadly? So it's a great point.

ALISA WOOD: I couldn't agree more. And also diversification as well. Geographically too. Certain markets, you're-- the depth of the public equity market is not the same as the private market when you think about that depth, and you want that optionality that way too from diversification standpoints. So I think all of that's really important. So that's the foundation. You understand why you need alternatives. It was called alternatives for a reason. It was alternatives to public equities. Now I think it's mainstream. I don't think it's an alternative anymore. But you need that in a portfolio. So that's part 1.

Part 2, though, is how do you do that? It sounds really easy. Well, then, OK, just go pick a private equity manager. The answer is it's not that simple. When you think about how many thousands of private equity firms there are, all over the world there are lots of options. And they're all not created equally. There's a reason why there's not really a thing like a private equity index that you can just go buy because you don't want to go buy the index. You wouldn't want to go buy the index.

JASMINE GREEN-HOGAN: That's right.

ALISA WOOD: The who matters more than what here. So when you look at some of the math on this, and I think this is just so startling. The dispersion of returns in private equity, first of all, it's wider than it's ever been before. And two, it's the why it's wider than any other asset class, by the way. Many, many multiples of any other asset class. So if you look at the dispersion in public equities, you look at the dispersion in fixed income, it's a couple hundred basis points. It matters. Don't get me wrong. Look, all those basis points matter. But not to the tune of north of 1,000 or 1,400 basis points as what the data shows.

JASMINE GREEN-HOGAN: And that's why in public equity and in traditional fixed income, you can go passive or active. And really you're not making too many choices because there aren't a ton of levers necessarily being pulled in private equity. And sorry to cut you off.

ALISA WOOD: No, no.

JASMINE GREEN-HOGAN: It looks a lot different.

ALISA WOOD: Very different. And by the way, back to what you're saying right here. It's the people. So you need the resourcing. You've got to buy well. So you need people who are industry experts and understand the businesses. You need to have a point of view in terms of what do you buy and when do you buy it. Not that any of us are trying to time the market. That's foolhardy to believe we can. But you got to buy good. You got to make great. But then how do you make the great? You need expertise in everything under the sun.

When you think about operational value creation, Six Sigma specialists, lean manufacturing, procurement, supply chain, sales force, marketing, you need capital markets specialists to be able to make sure you have capital structures to support the businesses so they can grow. You need to make sure you have macro specialists. If you buy the great company, but you buy it at the wrong moment, that could fundamentally impact your ability to drive value. You need geopolitical experts.

JASMINE GREEN-HOGAN: More than ever.

ALISA WOOD: More than ever. The world is really complex, and it's getting more complex, not less, on any given day. So what does that all look like? You need managers who want to have those levers in the companies they're picking to own that they can pull. And two, they have best in class talent that could go do that. So I think that's why you've seen the dispersion widen so much. The old playbook of buy a good company. Like we were saying before, buy low. Hold it. You get some multiple expansion. You could sell high.

You hold it for a number of years. You put a little bit of equity in the business. You use a lot of cheap debt to have that be part of the financial engineering solution and return driver. That was great 50 years ago.

JASMINE GREEN-HOGAN: The model doesn't work anymore.

ALISA WOOD: The model doesn't work anymore. And right now and I think that's what's so fundamental in this. So back to whether you're buying an evergreen or you're buying a closed-end fund, that foundational element is, by the way, more important today than it's ever been.

JASMINE GREEN-HOGAN: Well, you started to take me through a little bit of the arithmetic. And so I want to dive in there. Idea 5 I think is really compelling. And this is something that I actually hadn't had an appreciation for until we did a little bit of prep for this. This is really interesting to me. The slide that we've pulled up here is 12 is the new 5, which I'm hoping that catches on. But will you talk to us about how the buyout math has changed? You did a little bit of it as we talked about the environment prior, but this is interesting because I think all of the things that used to could be what you describe as a beta play, if you will, alongside the private equity space no longer exists.

People are truly looking for alpha and they're looking for managers who can deliver on that. Talk us through what is 12 is the new 5.

(DESCRIPTION)

Slide: 12 is the new 5 | Buyout math has changed. With lower leverage, higher debt costs, and limited multiple expansion, operational value creation drives returns. Strong EBITDA growth can separate leading GPs. A comparison table has two columns labeled 2015 and Today, with a left column listing categories, each with an icon: Entry Multiple, Exit Multiple, Leverage, Cost of Debt, EBITDA Growth, and Returns. The Entry Multiple row states 2015: 10x, Today: 14x. The Exit Multiple row states 2015: 12.5x, +25% expansion, Today: 14 to 15x, Flat multiples. The Leverage row states 2015: 50%, Today: 30 to 40%. The Cost of Debt row states 2015: 6 to 7%, Today: 8 to 9%. The EBITDA Growth row states 2015: 5%, Today: 12%. The Returns row states 2015: 2.5x MOIC, Today: 2.5x MOIC, with an equals sign between them. Text: Past performance does not predict future returns. For illustration purposes only. There can be no assurance that these outcomes will be replicated for companies held by KKR or for investments made in KKR Funds. Source: Bain & Company, Global Private Equity Report 2026 ("12 is the new 5"). Illustrative buyout math assumes approximately 5-year hold and approximately 2.5x MOIC target. 2015 case reflects approximately 50% leverage at approximately 6 to 7% cost of debt and approximately 25% multiple expansion (e.g., approximately 10.0x entry to approximately 12.5x exit), implying approximately 5% annual EBITDA growth. Current environment assumes lower leverage (approximately 30 to 40%), higher cost of debt (approximately 8 to 9%), and flat exit multiples (e.g., approximately 14 to 15x entry/exit), requiring approximately 10 to 12% annual EBITDA growth to achieve comparable returns. Figures are illustrative and will vary by deal and market conditions.

(SPEECH)

ALISA WOOD: I love this slide because I think it fundamentally distills everything in the environment today and where the market's moved to. And by the way, what does good look like?

JASMINE GREEN-HOGAN: Yeah.

ALISA WOOD: 12 is the new 5 is actually like what is the new good. So when you think about all the different components. Entry multiples are higher today in general than they've been over the course of call it the last decade. By the way nothing wrong with that. I still don't think they're high. This is average for the industry. Different managers playing in different sectors have a different experience. They may be higher than this. They may be lower than that depending on what you're buying and how good they are at buying. But this is the average for the industry.

So assume companies are a little more expensive. On average in the last-- call it 25 years-- the average company in the world, if you take out Mag Seven and 1, that's about five times larger today. So not surprising that as things get larger, things are also getting more expensive as you see time. Two, when you think about the concept of exit multiples, this goes back to hold it for a while and it will be worth more over time. We're not seeing that happen. Exit multiples are looking more flat. So if you look at the levels that you're buying, just because you're holding it back to the market beta, that's not going to be your get out of jail free card on these.

JASMINE GREEN-HOGAN: Sure. Everything is not a Chanel bag.

ALISA WOOD: Exactly, exactly. So, so much of this is about you got to assume that you're not going to get that multiple expansion unless you're doing something like strategic repositioning, which, by the way, if you are, then you'll get paid for that. But by the way, that takes a lot of work too. Now the third point is leverage today looks fundamentally different. And I actually think this is not a bad thing.

JASMINE GREEN-HOGAN: Sure.

ALISA WOOD: A lot of folks are like, well, you get less leverage today. Yeah, but you actually means you're putting more equity in a business. So when you think about however many years ago, maybe you were putting 50% equity in, if you think back to 25 years ago, maybe you're putting in 20% to 25% equity. I mean, so today, though, you're putting in a lot more equity in the system. So on average it's probably 60%, 65% plus equity in a deal, which means there's less leverage. So it comes down to more. And by the way, leverage is also more expensive.

So I think that's the other interesting piece of this if you think about the cost of debt. Whatever it is you're using of it, it's more expensive. You're not going to rely on the market beta anymore. Well, then, OK, the question is where the returns going to come from then. That math is pretty bleak. Where it comes from is bottom line operational growth. It's asset alpha. It's what you do with the business to grow the profitability and the earnings of it. It's a growth story.

Yes, you may make companies more efficient, but you're not going to cut your way to greatness. You got to do something to grow the business either organically or inorganically, usually a little bit of both. And that's where you can get this EBITDA growth. So that's where the 12 is the new 5 comes into play. If you think about the math we just ran through, in the old days, you only needed 5% earnings growth to get you to where you needed to be from a return standpoint.

JASMINE GREEN-HOGAN: Sure.

ALISA WOOD: Today you need 2 and 1/2 times that. Pretty different. And by the way, what are the skill sets you need as a manager in order to do all of that? What you need as a manager is to be able to have operational expertise in order to be able to drive those things. You got to buy well, but then you got to drive it well. It's not good to be the experts in financial engineering and sit around and hope for the best. So I think that's what's fundamentally changed. So what makes a good manager today is very, very different than what made a good manager before.

JASMINE GREEN-HOGAN: Sure.

ALISA WOOD: And I think that that new litmus test, that understanding of how to pick the good from and the great from everybody else, if you could do that, that's pretty special. Your returns will be seen for that.

JASMINE GREEN-HOGAN: You bet. And I think to exactly what you're describing speaks to what you alluded to on the prior page on page 4 is just manager dispersion is wide, but it's greater than it ever has been before. Again, the math is new. Awesome. I would love to have you end on our next and final idea. Spend a moment here on in your mind.

For clients who are maybe exploring this for the first time, they want to be really thoughtful about the risk that may exist in this part of the market. Maybe they've only invested in public equity before. This is their first foray into alternatives. What are some of those key things they can be asking to just make sure that they're on the right path towards exploring maybe a different part of the market?

(DESCRIPTION)

Slide: Considerations for evaluating an evergreen PE strategy? A three-by-three grid of blue squares deepening in color toward the upper right. The columns are labeled Multi-Manager, Mixed, and Single-Manager, with a horizontal arrow noting Potentially less control on the left and Potentially more control on the right. The rows are labeled Pure-Play PE, Mixed, and Multi-Asset, with a vertical axis noting Potentially more PE at the top and Potentially less PE at the bottom. To the right, five questions are listed: Does the evergreen strategy have priority access to deal flow and is that deal flow robust and consistent? Does the strategy have a strong track record or are other opportunities being pursued? How is liquidity being managed? How are underlying positions being valued? Does the strategy have control over the underlying portfolio companies?

(SPEECH)

ALISA WOOD: I'm a big believer in you got to just be able to ask the right questions, and you'll get the answers that you need to make the right decision, but you got to be able to know how to ask them. I think there are a few of them. Some of them we've touched on a little bit, some we haven't. I think first and foremost is by investing in an evergreen, what do you contractually have access to? Are you investing in the core part of what that manager is good at? Do you get the same deals at the same time, at the same price as the institutional investors, or are you buying something that's other? By the way, others may not be bad if you understand it and you're OK with that.

JASMINE GREEN-HOGAN: Or if that's what you want OK.

ALISA WOOD: Or if that's what you want. Maybe that's actually that's perfect. But if you think you're buying X and you're really buying Y, that's a problem.

JASMINE GREEN-HOGAN: Sure.

ALISA WOOD: So much of, I think, what-- if you're sitting there and you're looking at these different solutions, you need to be able to understand, am I in together and out together at the same time? Am I buying things that the manager turns down for their institutional pools of capital? Like, what does all of that look like just so you can assess your risks the right way. Risk isn't bad, by the way. Investing is all about risk. You just have to understand it, price it, ring fence it. If you do all of that work around it, that's OK. You're a knowing buyer.

I think the other thing is really making sure that you are investing with somebody who is good at what you believe you're investing in. OK, so if you're buying apples and they really are good at oranges, well, then do you want to be buying apples? Or maybe it's OK, but maybe it's not. And you should just be able to dig down on them. Where's the track record? How can they actually deliver?

JASMINE GREEN-HOGAN: You want the transparency.

ALISA WOOD: You want the transparency. Are they cycle tested? Have they operated in this type of environment before? Is this the first time they've ever tried to manage an evergreen? Have they invested in the operational complexity of this? All of that really matters at the end of the day. I also think it's really important to understand, I think, both liquidity-- we've talked about this, how it's managed, how it's thought of, what is the philosophy around it. Liquidity is almost like a religious experience for a lot of managers. What are their beliefs? And in moments that are dark because there will be them. By the way, we know that.

JASMINE GREEN-HOGAN: Yep.

ALISA WOOD: How are they going to handle those situations? And I think you got to dig in there. But what goes with all of these other points is how is it all valued? How are valuations done? Are they actually third party validated? Are they transparent? Is the manager transparent in this? Do they have the resources to do this? Are you taking valuations that are on a long lag, or are they actually done monthly? Because by the way, unlike a closed-end fund, you are buying and you are selling based on this that's created. So you got to make sure there's certainty or at least process around it.

And I think the final thing, and this is what's really important, is from a manager standpoint, aside from everything we've just talked about, does the manager actually have control over what they're investing in? Do you actually have the control that you think you have to buy and sell when you think you can? Control matters. We're big believers in this. So if as an industry and private equity in the space as a whole, if it's all about buying good and making great, which I think we would all agree is the whole point of private equity is the goal. It means that you've got to have your hands on it. It means that you've got to have some control of it.

And so as a manager, you've got to have control over the asset. But as an underlying investor, you also need some control as well to be able to manage your own portfolio. And so is the control that you believe is there actually there?

JASMINE GREEN-HOGAN: Yap.

ALISA WOOD: So I think those are the questions, at least if I'm sitting in an investor's shoes and you sit down and say, OK, well, what do I need to make sure I really understand before I take this leap? Those are the key points.

JASMINE GREEN-HOGAN: Sure. All really good questions to be thinking about. Hopefully we hit most of them for everyone in a good amount of detail. One, I want to thank you for your time. And two, I want to thank you for 12 is the new 5. I didn't know it before today, but I'm glad that I do. So, Alisa, thank you so much. For those of you who joined us, I hope that you learned something new. I sure did. Hope it was interesting, or at least something resonated. We will be back next month for another iteration of Alt Access.

I just want to thank you all for spending your morning, your afternoon, your evening with us. I really appreciate it. We'll see you next time.

ANNOUNCER: Thank you for joining us. Prior to making financial or investment decisions, you should speak with a qualified professional in your JP Morgan team. This concludes today's webcast. You may now disconnect.

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(DESCRIPTION)

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YOUR INVESTMENTS AND POTENTIAL CONFLICTS OF INTEREST. While our internally managed strategies generally align well with our forward-looking views, and we are familiar with the investment processes as well as the risk and compliance philosophy of the firm, it is important to note that J.P. Morgan receives more overall fees when internally managed strategies are included. We offer the option of choosing to exclude J.P. Morgan managed strategies (other than cash and liquidity products) in certain portfolios. The Six Circles Funds are U.S.-registered mutual funds managed by J.P. Morgan and sub-advised by third parties. Although considered internally managed strategies, JPMC does not retain a fee for fund management or other fund services. LEGAL ENTITY, BRAND & REGULATORY INFORMATION. In the United States, bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A., Member FDIC. JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank managed investment accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (“JPMS”), a member of FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPM. Products not available in all states.

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LEGAL ENTITY, BRAND & REGULATORY INFORMATION. In the Netherlands, this material is distributed by J.P. Morgan SE – Amsterdam Branch, with registered office at World Trade Centre, Tower B, Strawinskylaan 1135, 1077 XX, Amsterdam, The Netherlands, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Amsterdam Branch is also supervised by De Nederlandsche Bank (DNB) and the Autoriteit Financiële Markten (AFM) in the Netherlands. Registered with the Kamer van Koophandel as a branch of J.P. Morgan SE under registration number 72610220. In Denmark, this material is distributed by J.P. Morgan SE – Copenhagen Branch, filial af J.P. Morgan SE, Tyskland, with registered office at Kalvebod Brygge 39–41, 1560 København V, Denmark, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Copenhagen Branch, filial af J.P. Morgan SE, Tyskland is also supervised by Finanstilsynet (Danish FSA) and is registered with Finanstilsynet as a branch of J.P. Morgan SE under code 29010. In Sweden, this material is distributed by J.P. Morgan SE – Stockholm Bankfilial, with registered office at Hamngatan 15, Stockholm, 11147, Sweden, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Stockholm Bankfilial is also supervised by Finansinspektionen (Swedish FSA); registered with Finansinspektionen as a branch of J.P. Morgan SE. In Belgium, this material is distributed by J.P. Morgan SE – Brussels Branch, with registered office at 35 Boulevard du Régent, 1000, Brussels, Belgium, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Brussels Branch is also supervised by the National Bank of Belgium (NBB) and the Financial Services and Markets Authority (FSMA) in Belgium; registered with the NBB under registration number 0715.622.844.

In Greece, this material is distributed by J.P. Morgan SE – Athens Branch, with its registered office at 3 Haritos Street, Athens, 10675, Greece, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE – Athens Branch is also supervised by Bank of Greece; registered with Bank of Greece as a branch of J.P. Morgan SE under code 124; Athens Chamber of Commerce Registered Number 158683760001; VAT Number 99676577. In France, this material is distributed by JPMorgan Chase Bank, N.A. Paris Branch, registered office at 14, Place Vendôme, Paris 75001, France, registered at the Registry of the Commercial Court of Paris under number 712 041 334 and licensed by the Autorité de contrôle prudentiel et de résolution (ACPR) and supervised by the ACPR and the Autorité des Marchés Financiers. In Switzerland, this material is distributed by J.P. Morgan (Suisse) SA, with registered address at rue du Rhône, 35, 1204, Geneva, Switzerland, which is authorised and supervised by the Swiss Financial Market Supervisory Authority (FINMA) as a bank and a securities dealer in Switzerland.

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