Asset managers Capital Group and KKR have submitted registration statements to the SEC for two public-private fixed income funds, Capital Group KKR Core Plus+ and Capital Group KKR Multi-sector+. Pending regulatory approval, the two funds are expected to launch in the US in the first half of 2025.
Recordings are the first products of strategic partnership the two firms announced in May. Both strategies will operate as mutual funds, according to SEC filings. Among the types of semi-liquid vehicles, interval funds have been especially popular in the wealth pipeline in 2024, raising more than $20 billion this year through the end of September, according to data from Robert A. Stanger & Co. Inc. There are now more than 100 interval funds on the market with total assets approaching $100 billion.
“As a firm, we don't enter a new market unless we're committed to the long term and believe we can deliver something meaningful and sustainable to our customers,” said Holly Framsted, head of global product strategy and development. at Capital Group. a statement. “Our focus remains on providing unique solutions that serve unmet needs in investors' portfolios. These strategies aim to solve the access gap that individual investors currently face when it comes to private investments, and we expect these two public-private strategies to be the first of many across all asset classes and geographies.”
The core plus fund will invest in publicly traded fixed income securities and private credit and securities, including private corporate direct lending and asset-based financial investments. It will share about 60% for public debt (managed by Capital Group) and 40% for private credit (managed by KKR).
Both funds will offer four separate classes of shares: Class A, Class F-2, Class F-3 and Class R-6 shares. Class A shares will be offered primarily to retail investors “by broker/dealers who are members of FINRA and who have an agreement with the fund's distributor.”
Public debt assets will include corporate bonds and mortgage-backed securities and other asset-backed securities. The private credit arm will focus primarily on direct corporate lending and asset-based financing, including bonds, secured bank loans, mezzanine debt, CLOs and other securities.
The multi-sector fund will also invest in publicly traded fixed income and private credit and equity securities with a target mix of 60/40, but in different segments. The public portion (managed by Capital Group) will focus on high yield corporate debt (25%), investment grade corporate debt (10%) and securitized debt (25%). As with the core fund, KKR's private arms will focus on direct corporate lending and asset-based financing.
Both funds may also invest in lower rated junk bonds.
“KKR and Capital Group share a deep commitment to making private markets assets more accessible to individual investors,” Eric Mogelof, partner and head of global client solutions at KKR, said in a statement. “We are pleased to take this next step in our strategic partnership and look forward to providing additional solutions that bring our best-in-class private markets investment capabilities to a broader group of investors.”
KKR has increasingly targeted wealth channel with its fundraising efforts. 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. . As of mid-year, KKR said K-Series, in total, had $11 billion in assets — up from $3 billion a year earlier. Product flows have accelerated from $500 million per month at the end of 2023 to $900 million per month as of the second quarter.
Capital Group, home of American Funds, manages over $555 billion in public fixed income assets, while KKR manages over $100 billion in private credit assets. Overall, Capital Group manages more than $2.8 trillion in equity and fixed income assets.