Alternative asset manager KKR & Co. reported growing momentum in its mutual funds targeting retail investors and advisory clients during second-quarter earnings. The firm also signaled that the first products developed through its partnership with Capital Group will debut in 2025.
Among its existing investments in the wealth channel – what the asset manager calls Series K – KKR operates a range of semi-liquid funds focused on private credit, private equity, private real estate and infrastructure, and open to accredited investors and qualified buyers. . KKR said Series K, in total, now has $11 billion in assets — up from $3 billion a year ago. Product flows have accelerated from $500 million per month at the end of 2023 to $900 million per month in the last quarter.
“We think the interesting part here is the long-term secular opportunity,” said Craig Larson, KKR's head of investor relations, during the company's earnings call. The mass affluent market has not had an easy way to get into alts. We expect trillions of assets to flow into these products and we feel like we are well positioned.”
In May, KKR and Capital Group announced a joint venture to develop a range of products that combine private and publicly traded investments, open to mass affluent investors and aimed at tapping the credit, capital, real estate and infrastructure markets.
During the second quarter meeting, KKR executives said they expected the first funds from this partnership – two hybrid credit-based funds with a mix of public bonds, direct lending and private asset-based loans – to debut in 2025. Capital Group will manage the public components, while KKR will handle the private strategies. In general, the funds will have 60% in public bonds and 40% in private loans.
For other types of assets, KKR executives said the partnership is still in the design stages and there is no timeline for when the products will be launched.
KKR's retail fundraising pace parallels comments from alternative asset giant Blackstone during their earnings call earlier this month. In addition, Robert A. Stanger & Co. recently raised his forecast for fundraising for alternative investments from retail investors to $115 billion in 2024 after a solid first half of the year.
Overall, KKR posted adjusted net income of $971.9 million during the quarter, or $1.09 per share, an increase of 49% from a year ago. That beat estimates of analysts polled by Bloomberg, who had expected earnings of $1.06 per share.
Total investment earnings, which include performance income and gains on asset sales, rose 57% from a year earlier to $240.6 million. Assets under management reached $601 billion at the end of June, a 16% increase from a year ago. KKR raised $32 billion in new capital, including $18 billion in real assets and $12 billion in loans. It raised $2 billion in private equity.
Additional reporting by Bloomberg contributed to this story.