Capital Group and KKR will launch new funds covering private loans, corporate acquisitions, and infrastructure and real estate transactions in the latest collaboration between large traditional asset managers and private capital firms.
Los Angeles-based capital group (the world's largest active asset manager) and private equity giant KKR have agreed to jointly provide a wide range of funding for individual investors who will mix traditional stocks and bonds with unlisted assets such as corporate acquisitions.
The groups will also launch the first two debt funds on Tuesday and will offer strategies to combine listed stocks with acquisitions in 2026, with senior executives at each company telling the Financial Times, in addition to other funds specifically for real estate and infrastructure.
Compared with pension funds, alternative companies are competing for funds to manage private funds for non-resident assets, and pension funds for pension funds have significant private market risks. Meanwhile, traditional investment companies are eager to enter the private market, which has higher returns but often brings greater risks and expenses.
Earlier this month, Blackstone joined forces with Vanguard and Wellington Management to participate in a "strategic alliance" that provides public-private funding for the wealthy and retirees.
“For many people who have never used alternatives before, this public-private mixed market space is very graceful to enter private assets,” said Mike Gitlin, CEO of Capital Group.
Scott Nuttall, co-CEO of KKR, added that the new strategies are designed to make individual investors “easier to buy and easier to buy.”
The partnership is after a year of talks between the two companies, both independently considering whether to make an acquisition. KKR looked at asset purchase managers to gain more opportunities for individual investors, while Capital Group praised the purchase alternative manager.
The investment team briefly discussed the possibility of a merger, but their negotiations did not go ahead until they thought the partnership would be more beneficial to each company.
"The capital group will remain a private company, but overall we are building a merger of public and private capabilities," Gitlin said.
Over time, Capital and KKR also plan to expand their private public partnership outside the United States. Gitlin predicts that “we will build this category from scratch to something over $100 billion.”
The first two fixed-income funds launched this week, with a minimum investment of $1,000, are open to more investors, with the "Core plus+" fund costs 0.84 percentage points and the "Multi-sector+" fund costs 0.89 percentage points.
Morningstar analyst Karen Zaya said the expenses of the funds were “much lower than other competing private funds. The average adjusted expenditure ratio for all stake classes in all "interval" funds is 2.49%. But they are above 0.58% of the cost of exchange-traded funds, which are mainly concentrated in the public markets.
Capital and KKR's funds will provide investors with limited ability to sell their shares in full, a protection the industry sees as necessary as their investments in the more difficult sale of private assets. The funding plan distributes 40% of the portfolio to private assets, and the rest invests in publicly traded debts that are easier to sell. They offer investors the right to redeemed funds up to 10% of the quarter, twice as much as the majority of the interval funds.
Morningstar's Zaya said pushing individuals to private money requires investors to understand countless new risks. Such funds, she said, "maybe more complex and more expensive; there may be less transparency."