This is a line issued in the mid-year report of one of the most well-performing and renowned private equity firms in the world, KKR.

This isn’t just another downturn, writes Henry H. McVey, head of the global macro, balance sheet, and risk team at KKR. For a really long time, we have gotten used to bonds and stocks having an inverse relationship. It’s why bonds are used as a cushion in portfolios—for markets just like this. But here’s the problem: that structure “has broken down,” according to McVey. Stimulus, geopolitical risk, and sticky supply side constraints have created an environment unlike anything we have seen.

“We believe that no less than a complete rethinking of asset allocation relative to the prior two decades is now required,” McVey wrote, noting that diversification matters more and we won’t be able to rely on shock absorbers.

KKR published its mid-year report on the heels of a really tough quarter. In the first three months of 2022, KKR reported negative asset management revenues at -$165.2 million and total investment income of $1.6 billion. You can compare that $3.2 billion of asset management revenue in the first quarter of last year, and $2.9 billion in total investment income. Gross returns for its traditional private equity portfolio were -5% in the first quarter (returns are still 19% over the last 12 months).

Other parts of the business are faring a bit better: Returns for its real estate and infrastructure portfolios were 11% and 6%, respectively. 

But KKR isn’t expecting market conditions to clear up anytime soon. So what is it going to do with the $115 billion of dry powder it’s currently sitting on across all its strategies?

McVey says the firm is advocating for shortening duration, leaning into collateral-based cash flows, and overweighting opportunistic vehicles across liquid/private markets. 

“Against this backdrop, our models suggest that Credit feels cheaper than Equities, and Public Equities appear more attractive than peer-to-peer Private Equity,” McVey wrote.

For early-stage companies in innovative sectors of the private markets, KKR says that convertible preferred shares or PIK/Equity structures could make sense—and media, biotech, gaming, and blockchain companies could be a good opportunity, as traditional banks may be less interested in offering capital.

Downturn or not, KKR says it does anticipate certain themes to stay intact, or even do better in the given environment, such as companies focused on security or de-carbonization, and KKR says there may be good investment opportunities “at reasonable prices.” There are also still opportunities in the European private equity market. 

But the sentiment in KKR’s mid-year report was clear: It’s time to rethink.

Programming note… I will be taking the next week off for a scuba diving adventure off the East Coast of Mexico. In my absence, Kevin Kelleher will be writing Term Sheet. Please make him feel welcome, loved, and important, because he is. And continue to send all deal news to Jackson Fordyce at the email address mentioned below my signature.

If I survive this year’s whale shark migration (yes, that’s funny), you will be hearing from me next Tuesday. 

Until then,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Platform.sh, a Paris and San Francisco-based cloud hosting platform, raised $140 million in Series D funding. Digital+Partners, Morgan Stanley Expansion Capital, and Revaia led the round and were joined by investors including BGV, Eurazeo, Hiinov, and Partech. 

- Magic Eden, a San Francisco-based NFT marketplace, raised $130 million in Series B funding. Electric Capital and Greylock led the round and were joined by investors including Lightspeed Venture Partners, Paradigm and Sequoia Capital. 

- Jit, a Tel Aviv-based product security platform for developers, raised $38.5 million in seed funding. boldstart ventures led the round and was joined by investors including Tiger Global Management and other angels. 

- Rivet, a Salt Lake City-based health care billing platform, raised $20.5 million in Series B funding. Catalyst Investors led the round and was joined by investors including Ankona Capital, Menlo Ventures, Pelion Venture Partners, and Lux Capital. 

- CEIPAL, a Rochester, N.Y.-based talent acquisition platform, raised $16.5 million in Series B funding. Camden Partners led the round and was joined by investors including Topmark Partners, Evergreen Mountain Equity Partners, Mistral Venture Partners, and Resolve Growth Partners.

- GreyNoise Intelligence, a Washington D.C.-based cybersecurity company analyzing internet scanning traffic, raised $15 million in Series A funding. Radian Capital led the round and was joined by investors including CRV, Inner Loop, Stone Mill Ventures, and Paladin Capital. 

- Nibble Health, a New York-based B2B health care payments company, raised $8.5 million in seed funding. Wing Venture Capital and Tiger Global Management led the round and were joined by investors including A* Capital and Expa.

- RapidFort, a Sunnyvale, Calif.-based software attack surface management platform developer, raised $8.5 million in seed funding. Felicis Ventures led the round and was joined by investors including ForgePoint Capital, Bloomberg Beta, Global Founders Capital, Plug & Play Ventures, GIT1K Club, and others.

- Saysh, a Los Angeles-based lifestyle brand, raised $8 million in Series A funding. IRIS and Athleta led the round and were joined by investors including Redpoint Ventures and Springbank Collective.

- Wilco, a Tel Aviv-based upskilling platform for software developers, raised $7 million in seed funding. Hetz Ventures led the round and was joined by investors including Vertex Ventures, Flybridge Capital Partners, and Shopify vice president of engineering Farhan Thawar.

- Augmenta, a Toronto-based building design automation company for the construction industry, raised $4.1 million in seed funding. Hazelview Ventures led the round and was joined by investors including Ferguson Ventures and Whiteshell Group. 

- Axomove, a Lille, France-based physical pain prevention and rehabilitation startup, raised €1.6 million ($1.68 million) in funding. Faraday Venture Partners led the round and was joined by investors including Santélys and Groupe JLO. 

PRIVATE EQUITY

- JAB agreed to acquire stakes in Crum & Forster Pet Insurance Group, an Akron, Ohio-based pet insurance company, and PetHealth, an Oakville, Ontario-based pet insurance company, for about $1.4 billion, from Fairfax. Per terms of the deal, Fairfax plans to invest $200 million in JAB’s consumer fund. 

- Garnett Station Partners acquired a majority stake in Woof Gang Bakery & Grooming, an Orlando-based pet services and retail franchisor. Financial terms were not disclosed.

- Planet Group, backed by Odyssey Investment Partners, agreed to acquire Launch Consulting, a Seattle-based digital transformation firm. Financial terms were not disclosed. 

- Solomon Capital Holdings, backed by J.C. Flowers, agreed to acquire Beaufort Group, a Redhill, U.K.-based financial planning firm. Financial terms were not disclosed.

EXITS

- Lloyd’s Register acquired OneOcean, a London-based voyage compliance, safety and environmental solutions provider, from Equistone Partners Europe. Financial terms were not disclosed. 

OTHER

- Jyske Bank agreed to acquire the Danish unit of Svenska Handelsbanken, a Stockholm-based bank, for $10 billion.  

- Mondelez agreed to acquire Clif Bar & Company, an Emeryville, Calif.-based snack bar business, for $2.9 billion. 

- Freepik Company acquired Videvo, an Oxford, U.K.-based stock video supplier. Financial terms were not disclosed.  

- Reddit acquired Spell, a New York-based machine learning platform. Financial terms were not disclosed. 

- SteadyMD acquired BlocHealth, a St. Petersburg, Fla.-based clinician licensing, credentialing, and payer enrollment platform. Financial terms were not disclosed.

IPOS 

- Aethon Energy Management, a Dallas-based gas producer, is considering an initial public offering that could value the company at more than $10 billion, according to Bloomberg. RedBird Capital Partners backs the company.

- ABB, a Zurich-based electric car charging business, delayed its $750 million initial public offering in Zurich due to market conditions. Cevian Capital backs the company. 

- Ivanhoe Electric, a Vancouver-based mineral and metal mining projects owner and developer, plans to raise $174 million in an offering of about 14.4 million shares priced between $11.75 to $12.50. The company plans to list on the NYSE and Toronto Stock Exchange. 

PEOPLE

- Emerald Development Managers, a New York-based venture capital firm, hired Abbe Serphos as operating partner and head of communications. Formerly, she was an independent communications consultant.