Capital Group and KKR & Co. won approval from the U.S. Securities and Exchange Commission to begin selling two credit funds, a key step in their joint effort to build a suite of products for individual investors.
The firms linked up last year to combine their respective expertise in traditional and alternative assets to create a series of funds that will mix public and private investments.
Capital Group KKR Core Plus+ and Capital Group KKR Multi-Sector+ will have asset targets of 60% publicly traded debt and 40% private credit, including direct loans and asset-backed credit.
A representative for Capital Group, which oversees $2.8 trillion, confirmed the funds were approved.
KKR, which manages $638 billion of alternative assets, declined to comment.
With a minimum investment of $1,000, clients will pay fees as low as 84 basis points (0.84%) on the Core Plus+ product and 89 basis points on the Multi-Sector+ fund, according to regulatory filings. Neither fund will use leverage or charge performance fees.
Alternative asset managers and traditional asset managers have been racing to form partnerships to develop and sell products to individual investors, who represent the next frontier of growth. Traditional firms are trying not to get left behind as alternative assets boom, while private equity firms are looking to diversify beyond institutional investors — some of which are running short of cash to invest in new funds.
Other retail-investing partnerships between traditional and alternative asset managers include BlackRock and Partners Group Holdings; Blackstone, Vanguard Group and Wellington Management; and Apollo Global Management and State Street.
Capital Group and KKR are seeding the funds and will jointly manage them. They’re structured as so-called 40 Act interval funds and allow quarterly redemptions of much as 10% of the fund’s net asset value. The firms will provide daily valuations.
The hybrid credit funds are the first products that Capital Group and KKR have developed, with an eye to eventually selling an array of products across private equity, real estate and infrastructure that could be placed in premixed portfolios offered to wealth advisers.
