We are in the middle of the fourth major macroeconomic downturn in Berkshire Partners’ nearly 40-year history. Last year we witnessed a tragic and ongoing war in Europe, significant capital market disruption, and another contentious U.S. election cycle. All of which has led to much uncertainty for business and policy leaders.

Our response has been to double down on what we know to be true. We are working to ensure our private equity portfolio of 34 companies weathers this storm of uncertain severity and duration. We are encouraging our management teams to plan for conditions worse than they expect while maintaining legitimate optimism about the long-term prospects of their companies, which continue to grow revenue. Although widespread corporate and consumer caution may deliver growth challenges, we think our portfolio is well-positioned for that possibility.

While our public equity team, Stockbridge, was not immune to the volatility of the broader market in 2022, we continue to find opportunities to invest in high-quality, sustainable businesses that we believe have long-term potential for success. Stockbridge and Berkshire Private Equity have maintained their close collaboration, particularly at the industry team level, further bolstering our firm-wide ability to deeply understand companies across a range of stages and capital structures.

In addition to enhancing our private equity portfolio value creation team, we have added investment professionals to each of our industry teams and strengthened other areas across the firm. We are delighted with our three recent Managing Director promotions: Candice Corvetti, Ted Rainaud, and Drew Walker.

Responsible Investment Goals

A specific focus of adding value within our portfolio is to address the environmental, human capital, and good-governance goals of each of our businesses, as their ecosystems (e.g., communities they operate in, customers and employees) so often expect. In 2022, we escalated our efforts with a particular focus on climate impact, notably becoming a signatory to the United Nations-supported Principles for Responsible Investment. In addition, we became a founding partner of Ownership Works, a nonprofit organization that partners with companies and investors to provide all employees with the opportunity to build wealth at work.

What’s Next?

While it would be easy to be either discouraged or paralyzed by the current world backdrop, we are excited by the opportunities that a world in flux creates. We head into 2023 with an optimistic outlook. We will be guided by our experience and our three core values that act as the foundation for all we do at Berkshire: Relationships Matter, the Power of Teams, and Winning the Right Way.

We are thankful for your partnership and look forward to continuing our collaboration in 2023.