By Niket Nishant
(Reuters) -KKR and Capital Group launched two funds that would target investments in a blend of public and private credit, tapping into a vast pool of retail investors looking beyond traditional assets for diversification.
The funds, Capital Group KKR Core Plus+ and Capital Group KKR Multi-Sector+, will allocate 60% of their assets to public fixed income and the rest to private credit, the companies said on Tuesday.
“We are aiming to unlock the benefits of private investments for the 95% of individual investors who have not historically been able to invest in the private markets,” KKR co-CEOs Joe Bae and Scott Nuttall said.
A growing class of asset managers is looking to tap into the high demand for private credit — loans typically made by non-bank institutions.
The market is estimated to grow to $2.8 trillion by 2028, up from nearly $1 trillion in 2020, according to Morgan Stanley, as banks continue to retreat from riskier forms of lending.
Being relatively insulated from the volatility of public debt markets, private credit can be a crucial source of portfolio diversification.
So far, however, these assets have mostly been the domain of institutional investors such as pension funds, insurers and family offices.
Limited liquidity, looser regulatory oversight and higher barriers to entry have kept them out of the reach of everyday investors.
The new funds “will extend KKR’s presence beyond qualified and accredited segments, into the mass affluent,” TD Cowen analysts wrote in a note.
They will allow investments starting at $1,000, lower than the typical $2,500 to $10,000 minimum investments such funds have, according to Morningstar.
The funds will offer redemptions periodically, allowing shareholders to sell up to 10% of their outstanding shares every quarter, under normal conditions. Low annual fees will also appeal to retail investors, KKR said.
(Reporting by Niket Nishant in Bengaluru; Editing by Krishna Chandra Eluri)
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