KKR & Co. and Capital Group have expanded their partnership with a new public-private fund that provides wealthy European and Asian investors access to private credit assets as well as the liquidity cushion offered by public fixed-income markets.
The Capital Group KKR Global Multi-Sector+ fund will allocate around 60% to public credit assets managed by Capital Group, while the rest will be invested in private credit assets overseen by the buyout giant, according to a statement on Wednesday. It will be available initially through HSBC Private Bank in select markets.
Investors will be able to repurchase 3% of the fund’s value monthly, compared with the 5% typically permitted on a quarterly basis by evergreen structures.
The partnership between the two firms was first implemented in the US and then Asia. It follows similar deals, including the one between Apollo Global Management Inc. and Schroders Plc, as asset managers look to enable wealthy clients to dip their toes into riskier and less-liquid private markets.
Los-Angeles based Capital Group has remained largely out of the spotlight since its founding in 1931, focusing on mutual funds through its core American Funds offering. But it has lately been altering its approach in a bid to remain competitive as rivals reinvent themselves. The tie-up with KKR is designed to help both the firms attract more retail inflows amid a push into private markets.
Private credit funds have come under focus in recent months after suffering large outflows amid broader worries over credit quality and also rising concerns that many are overly exposed to software companies facing the risk of being upended by artificial intelligence. Retail investors in particular have raced to pull out cash, prompting some vehicles to cap redemption requests.
Still many in the finance industry are arguing that as companies remain private for longer, wealthy investors should be allocating more to non-listed assets, citing increased returns over the long term.
The newly launched fund is a “whole-of-credit solution designed to sit between traditional bond funds and alternative investments,” said Guy Henriques, Capital Group’s president of Europe and Asia Pacific client group. It allows “the potential for enhanced returns, lower volatility and greater diversification.”