KKR, Capital Group debut first public-private investment products

KKR and Capital Group have launched their first two public-private investment products, interval funds focused on credit strategies, while announcing ambitions to deepen the exclusive strategic partnership they formed last May.

The private markets firm and asset manager have been working together since announcing their tie-up to broaden access to private market investment solutions. The collaboration has yielded the Capital Group KKR Core+ and Capital Group KKR Multi-Sector+ offerings.

According to product disclosure documents, the Capital Group KKR Core+ fund invests in a range of public market debt securities, including US and other government securities, corporate bonds, mortgage-related securities, and cash. The fund's private credit allocation typically focuses on corporate direct lending and asset-based finance.

The fund seeks to capture a "broader opportunity set," affording investors the ability to pursue higher income and total return across the credit spectrum. It generally targets an allocation of approximately 60% to public fixed income and 40% to private credit.

Meanwhile, the Capital Group KKR Multi-Sector+ fund invests in public markets across the high-yield corporate debt, investment grade corporate debt, and securitised debt sectors. Its private credit allocation, similar to the Capital Group KKR Core+ fund, focuses on corporate direct lending and asset-based finance.

The fund seeks to offer "strategic exposure" to higher income-focused sectors across public and private fixed income markets, targeting an allocation of approximately 60% to public credit and 40% to higher income seeking private credit sectors.

However, for both funds, the allocation between public and private credit may fluctuate, "potentially significantly," depending on market conditions and its subscription activities.

The Capital Group KKR Core+ fund has a total expense ratio of 84 basis points, while the Capital Group KKR Multi-Sector+ fund is priced at 89 basis points.

Capital Group president and chief executive Mike Gitlin said the new solutions demonstrate the power of the firms' combined scale and experience.

"What Capital Group and KKR can do together is unmatched - blending best-in-class public and private market exposures to deliver diversified and differentiated investment outcomes at a compelling fee. I think of these public-private solutions as the best of both worlds," he said.

KKR co-chief executives Joe Bae and Scott Nuttall said the partnership with Capital Group was forged knowing that the two firms have complementary strengths, and that the launch of the first two funds "shows what's possible when our teams come together."

"... we're 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. We've only scratched the surface of what we can offer investors as we look to expand our collaboration across additional asset classes, geographies, and formats," they said.

Gitlin added that expanding access to private markets is much more than two public-private credit solutions, noting that a joint, cross-company project team is already working on public-private equity solutions.

"We're discussing how we can bring public-private model portfolio solutions to our clients," Gitlin said.

"There is a role for private market solutions in retirement, including target date strategies.

"We're working on the best way to bring public-private solutions to clients outside the US."

Capital Group is also exploring how it can work more closely with KKR to support its insurance business.