Capital Group and KKR Form Exclusive Strategic Partnership to Create Public-Private Investment Solutions
Rhea-AI Summary
On May 23, 2024, Capital Group and KKR announced an exclusive strategic partnership to develop hybrid public-private investment solutions. The collaboration aims to provide mass affluent investors with access to alternative investments, historically reserved for high-net-worth individuals. The first two strategies, focusing on public-private fixed income, are slated for a 2025 U.S. launch. Capital Group oversees $2.6 trillion, with $500 billion in public fixed income, while KKR manages over $500 billion in assets, including $200 billion in credit. This partnership leverages Capital's active management and KKR's private market expertise to create more liquid investment strategies. The global assets in alternatives are projected to grow 12% annually over the next decade.
Positive
- Capital Group and KKR's partnership expands access to alternative investments.
- First hybrid investment strategies to launch in 2025 in the U.S.
- Capital Group manages $2.6 trillion, enhancing credibility.
- KKR has over $500 billion in assets, with $200 billion in credit.
- Partnership enables a more liquid investment strategy than standalone private credit.
- Potential for significant growth as individual wealth in alternatives is projected to grow 12% annually over the next decade.
- Capital Group's long-term investment approach complements KKR's private market expertise.
- Mass affluent investors, representing over 40% of the global wealth market, gain access to alternative investments.
- Strategic partnership anticipated to expand into additional asset classes and channels.
Negative
- Details of the solution will be announced later, implying uncertainty.
- Initial strategies will not launch until 2025, indicating a delayed impact.
- Potential risk if the new hybrid solutions do not meet client expectations.
- Alternative investments bear higher risk, which could affect investor sentiment.
- Complexity of integrating public and private market strategies may pose operational challenges.
News Market Reaction – KKR
In the trading session that priced this news, KKR declined 1.69%, reflecting a mild negative market reaction.
Data tracked by StockTitan Argus on the day of publication.
AI-generated analysis. How Rhea-AI works. Not financial advice.
"Capital Group sees a real opportunity to deliver hybrid public-private market solutions for our clients," noted Capital Group President and CEO Mike Gitlin. "For over 90 years, we have been committed to delivering a strong long-term track record of excess returns for clients, overseeing
While alternatives have been available to high-net-worth individuals and accredited investors for some time, mass affluent investors, which represent more than
Gitlin continued, "We will bring the strategies of a premium alternatives manager to our clients with a compelling fee and greater accessibility. Clients should think of this as 'the best of both worlds' – a hybrid investment solution that combines Capital's active management and long-term investment approach with KKR's private market expertise. We are entering this market, in strategic partnership with KKR, with long-term plans and aspirations. Listening to our clients' needs, we are confident that this will be the seed of a new platform, not just a product launch."
Global assets in alternatives have grown significantly over the last 20 years and it is estimated that individual wealth invested in alternatives is expected to grow
"Capital Group and KKR have highly complementary capabilities and similar cultures and together we are committed to delivering for clients," said Joe Bae and Scott Nuttall, Co-CEOs of KKR. "We believe individuals should have access to alternative investments and are thrilled to be partnering with Capital Group, which has world-class investment capabilities, strong client relationships and a leading sales and distribution network. We look forward to bringing these solutions to market and expanding our strategic partnership into additional asset classes and channels."
"We see interest in alternatives only continuing to grow over the next decade as wealth investors gain access to high quality investment solutions," said Eric Mogelof, Partner and Head of Global Client Solutions at KKR. "We are pleased with the momentum and growth that we've seen in our private wealth business and believe these new hybrid solutions will be a strong complement to our existing platform and offer a compelling way to bring the benefits of alternatives to an even wider audience of investors across wealth and retirement who may not have had access to them historically."
Matt O'Connor, President of Capital Group's Client Group stated, "The investable universe has expanded. We are committed to creating a meaningful public-private category for the benefit of our clients over the long term. Financial professionals tell us that we can add more value by bringing a fuller set of solutions to their clients' portfolios and are looking to us to be their partner."
Gitlin continued, "Some of our clients want us to bring them a full investment solution including alternatives. Capital has been researching the broad alternatives market for the past two years and considered whether to buy, build or partner. Buying would disrupt our culture, building could distract our investment professionals, so partnering with a subject-matter expert to deliver a holistic investment solution for our clients was the best course of action. For many investors, private credit can be out of reach. The lens we used was a simple one – how can we help clients while staying true to our culture and maintaining our focus on what we do best."
Solution details will be announced later this year.
About Capital Group
Capital Group has been singularly focused on delivering superior investment results for long-term investors using high-conviction portfolios, rigorous research, and individual accountability since 1931.
As of March 30, 2024, Capital Group manages more than
For more information, visit https://www.capitalgroup.com/about-us.html.html.
About KKR
KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR's insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic Financial Group. References to KKR's investments may include the activities of its sponsored funds and insurance subsidiaries. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR's website at https://kkr.com. For additional information about Global Atlantic Financial Group, please visit Global Atlantic Financial Group's website at https://www.globalatlantic.com/.
Past results are not a guarantee of future results. This content is published by American Funds Distributors, Inc., which will be renamed Capital Client Group, Inc. on or around July 1, 2024, and copyrighted to Capital Group and affiliates, 2024, all rights reserved.
For more information, including our detailed disclosures, visit www.capitalgroup.com/global-disclosures.
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Media Contacts:
Hannah Coan
hannah.coan@capgroup.com
Kristi Huller
kristi.huller@kkr.com
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SOURCE Capital Group Companies