Market Overview

KKR Releases "China: A Visit to the Epicenter" by Henry H. McVey


New Macro Report Delves into Country in Transition

KKR today announced the release of China: A Visit to the Epicenter,
a new macro Insights piece by Henry McVey, Head of Global Macro and
Asset Allocation (GMAA), wherein McVey and Frances Lim, who leads the
team's efforts in Asia, provide their outlook on China's evolving role
in the global economy.

"A recent trip to China reminded us why so many investors now consider
China the ‘epicenter' of global macro trends," Henry McVey says. "In
addition to accounting for nearly one-third of the global growth, the
country is also in a heated trade dispute with the United States.
Without question, it is not sitting idle, and we saw visible signs of
change in both monetary and fiscal policies during our visit. Overall,
we believe that the current trade wars will only accelerate China's
shift away from an export economy dependent on global trade towards a
more self-reliant consumer services economy that is gaining prominence,
particularly within Asia."

In this latest report, Henry McVey and Frances Lim delve into the
following four key areas of rapid change within the Chinese economy that
they believe are potentially most important for investors to better

  1. The escalation of trade barriers between the U.S. and China and their
    undeniable attack on the traditional global supply chain.
  2. Secular growth trends within the rising Asian millennial generation,
    the Chinese one in particular.
  3. The evolution of e-commerce in China, which is dramatically more
    abrupt than what is occurring in other parts of the global economy.
  4. Diverging macro data trends in China. While aggregate GDP statistics
    in China look fine, they are masking major disparities that can be
    uncovered in the underlying sector data.

From an investment standpoint, the report details how these macro themes
factor into the GMAA team's support of capital deployment in areas such
as leisure, wellness, services (environmental, healthcare, and
financial), healthy food and food safety. They also influence the team's
cautious view on branded consumer goods, global supply chains, and
logistic plays that do not interface with the customer or can be
disintermediated by the growing influence of Baidu, Alibaba, and
Tencent. Finally, the GMAA team asserts now is the time to be thoughtful
in terms of allocating to globally integrated industries such as autos
as well as high-end technology.

Links to access this report as well as an archive of Henry McVey's
previous publications follow:

About Henry McVey
Henry H. McVey joined KKR in 2011 and is
Head of the Global Macro and Asset Allocation team. Mr. McVey also
serves as Chief Investment Officer for the Firm's Balance Sheet,
oversees Firmwide Market Risk, and co-heads KKR's Strategic Partnership
Initiative (KSPI). As part of these roles, he sits on the Firm's
Investment Management & Distribution Committee and the Risk & Operations
Committee. Prior to joining KKR, Mr. McVey was a managing director, lead
portfolio manager and head of global macro and asset allocation at
Morgan Stanley Investment Management (MSIM). Earlier in his career he
was a portfolio manager at Fortress Investment Group and chief U.S.
investment strategist for Morgan Stanley. While at Morgan Stanley, Mr.
McVey was also a member of the asset allocation committee and was the
top-ranked asset management and brokerage analyst by Institutional
Investor for four consecutive years before becoming the firm's
strategist in January 2004. He earned his B.A. from the University of
Virginia and an M.B.A. from the Wharton School of the University of
Pennsylvania. Mr. McVey is a member of the TEAK Fellowship Board of
Trustees after previously serving as co-chair of the board for five
years. Mr. McVey is also a member of the Pritzker Foundation Investment
Committee, a board member of the University of Virginia Investment
Management Company (UVIMCO), a member of the national advisory board for
the Jefferson Scholarship at the University of Virginia, and a member of
the Council on Foreign Relations.

About KKR
KKR is a leading global investment firm that
manages multiple alternative asset classes, including private equity,
energy, infrastructure, real estate and credit, with strategic manager
partnerships that manage hedge funds. KKR aims to generate attractive
investment returns for its fund investors by following a patient and
disciplined investment approach, employing world-class people, and
driving growth and value creation with KKR portfolio companies. KKR
invests its own capital alongside the capital it manages for fund
investors and provides financing solutions and investment opportunities
through its capital markets business. References to KKR's investments
may include the activities of its sponsored funds. For additional
information about KKR & Co. Inc. (NYSE:KKR), please visit KKR's website
and on Twitter @KKR_Co.

The views expressed in the report and summarized herein are the
personal views of Henry McVey of KKR and do not necessarily reflect the
views of KKR or the strategies and products that KKR offers or invests.
Nothing contained herein constitutes investment, legal or other advice
nor is it to be relied on in making an investment or other decision.
This release contains projections or other forward-looking statements,
which are based on beliefs, assumptions and expectations that may change
as a result of many possible events or factors. If a change occurs,
actual results may vary materially from those expressed in the
forward-looking statements. All forward-looking statements speak only as
of the date such statements are made, and neither KKR nor Mr. McVey
assumes any duty to update such statements except as required by law.

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