Private equity firms KKR and Capital Group attract potential investors towards private market opportunities through the launch of fresh funds
Cashing in on the Private Market Boom: Capital Group and KKR's Joint Venture
In a groundbreaking move, two heavyweights of the investment world, Los Angeles-based Capital Group and private equity titan KKR, are teaming up to provide a unique blend of traditional assets and unlisted ventures for individual investors.
Capital Group, the globe's leading active asset manager, and KKR, giants in private equity, have decided to pool their resources to launch a diverse array of funds aimed at common investors. These funds will focus on private loans, corporate buyouts, and infrastructure and property deals, marking the latest collaboration between traditional asset managers and private capital firms.
Starting Tuesday, the partners will unveil their debut debt funds. By 2026, they aim to present strategies that combine listed stocks with buyouts, in addition to other funds focusing on real estate and infrastructure. Top execs from both companies, as reported by the Financial Times, shared this roadmap.
Racing Against the Tide
Alternative firms are in a mad dash to manage private funds for individual investors, who compared to pension funds, have minimal exposure to unlisted assets. On the other hand, traditional investment houses are eager to break into the private market, offering potential for higher returns but often associated with greater risks and fees.
Earlier this month, industry behemoth Blackstone forged a "strategic alliance" with Vanguard and Wellington Management, aiming to offer public-private funds to high net worth individuals and retirees.
"This hybrid market space is a really elegant entry into private assets for a lot of folks who have never used alternatives before," said Mike Gitlin, Capital Group's CEO.
Easing Private Access
According to Scott Nuttall, co-CEO of KKR, the new strategies have been designed with a mission: to make private assets "easier to buy and easier to own" for individual investors. The partnership between Capital Group and KKR comes after a year of talks, with each company considering potential acquisitions.
In the end, talks of a merger didn't get far, and it was decided that a partnership would better serve each firm's interests. "Capital Group will remain a private company," said Gitlin, "but synthetically we're creating a merger of public and private capabilities."
Going Global
Capital Group and KKR plan to extend their public-private partnership beyond the US. Gitlin predicted that their plans would culminate in a category exceeding $100bn together.
While details about KKR's own new funds are scarce, its reputation for private equity investments and alternative asset management strategies underscores its unique position in the world of finance. As such, it represents an exciting potential partner for Capital Group in this innovative initiative.
The partnership's debut debt funds, launching this week, require a minimum investment of $1,000 and charge fees of 0.84 percentage points for a "Core Plus+" fund and 0.89 percentage points for a "Multi-Sector+" fund. While these fees are "significantly lower" than other private funds, they're higher than the 0.58% cost of exchange-traded funds focused on public markets.
Amidst the exodus of investors into private funds, it's crucial for newcomers to understand the array of complex risks associated with these types of investments. As Morningstar analyst Karen Zaya pointed out, private funds can be more complex, expensive, and come with reduced transparency.
In light of this, the alliance between Capital Group and KKR provides an attractive option for those looking to delve into the private market for the first time, offering an "elegant entry" into this lucrative, yet challenging arena.
- Capital Group and KKR have decided to collaborate on a joint venture, pooling resources to launch a variety of funds for common investors.
- Starting Tuesday, they will unveil their debut debt funds, with a goal to present strategies that combine listed stocks with buyouts, as well as funds focusing on real estate and infrastructure by 2026.
- In order to make private assets more accessible, the partners have designed strategies that aim to make them "easier to buy and easier to own" for individual investors.
- Mike Gitlin, Capital Group's CEO, marked this hybrid market space as an "elegant entry into private assets" for those without previous experience in alternatives.
- KKR's venture into this partnership highlights its unique position in the world of finance, with a reputation for private equity investments and alternative asset management strategies.
- The partnership's debut debt funds require a minimum investment of $1,000 and charge fees slightly higher than those of exchange-traded funds focused on public markets, while offering an attractive option for those looking to explore the private market for the first time.
