KKR, Capital Group to start public-private credit fund in Asia
The partnership comes as rival firms also ramp up their own public-private offerings
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[SINGAPORE] KKR and Capital Group plan to launch a public-private credit fund in Asia this year, in the latest tie-up between private-markets specialists and traditional asset managers seeking to attract more retail money.
The fund is set to start in the second half and follows similar ones introduced by KKR and Capital Group last year in the US that have drawn in more than US$500 million, according to Mike Gitlin, chief executive officer at Los Angeles-based Capital Group. Those vehicles have included a mix of 60 per cent public-credit assets managed by Capital Group, and 40 per cent private-credit ones managed by KKR.
The combination of public and private investments “makes the vehicle more liquid, it’s cheaper, it’s more transparent”, Gitlin said at the firm’s Singapore office this week. “It’s a calmer way to introduce private markets to wealth management,” especially with a number of negative headlines about private credit in recent months making clients nervous, he said.
A spokesperson for KKR confirmed the launch of the new fund partnership.
Private credit has boomed in recent years as investors have sought higher yields and companies have looked for alternative ways to raise money apart from bank lending. Optimism has been punctured this year though, due to a few high profile blowups of companies backed by private lenders in the US, and concerns about their exposure to the software sector. That has led to a surge in withdrawals from funds run by the likes of BlackRock and Blue Owl Capital, and spurred efforts by private bankers in Asia to allay client anxiety.
“In general, private credit as a whole is OK,” Gitlin said. “We’re not seeing material pickups in defaults,” though redemption restrictions have been “nerve-wracking” for wealth management clients who “probably feel like they need more liquidity,” he said.
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The KKR-Capital Group partnership comes as rival firms also ramp up their own public-private offerings. Blackstone, Vanguard Group, Wellington Management, and Apollo Global Management are among those offering mixed strategies to draw in retail money.
Still, public-private credit funds are likely to remain a niche for Capital Group, the world’s largest active fund manager with US$3.3 trillion in assets under management. The funds “will scale, but even as they scale, they will be small relative to our total assets”, Gitlin said. BLOOMBERG
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