Chuck Schwab and KKR Friends: Can You Say Alternatives?

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Besides TIAA-CREF's "lip balm" swag (it really is good), financial advisors here at Schwab IMPACT 2012 in Chicago had on their lips incredulity: Chuck Schwab advocating alternative investment ETFs and a closed-end fund?

Schwab-affiliated RIAs were a bit puzzled: Schwab spent the last couple of years removing alternative investment offerings from its RIA platform, but here we are: Having a deluxe panel hosted by my "friend" Maria Bartiromo of CNBC all about the beauty of alternatives and how this is the right moment to seek selected positions in good-quality equities in the U.S. (and basically everywhere else and, oh, "credit" instruments, most importantly).

The well-attended chat-fest with Chuck Schwab himself, Scott Nuttall, head of global capital and asset management at KKR, and Big George Roberts, co-CEO of and a founder of KKR, was interesting save for the details. The ideas: America has so much potential (if only its growth potential could be unleashed by proper political leadership --- yep, Chuck made his political views known, and God bless him for that; he did his best to behave) and so does Vietnam and China and Korea and India and Souteast Asia; they are in general good places to look for investments --- specifically credit instruments (banks aren't lending).

Basically KKR - and this was the point of the event - is offering two NEW retail-oriented funds (KKR seems to be moving to retail, what with its retail foray with CNL) for financial advisors with a yen for yield (and who isn't "jonesing" for yield?).

Emerging market debt, distressed debt in Europe, in short KKR is bringing its successful private equity prowess (so we hear) to 1940 Act funds. The KKR folks kept referring to the "private credit area," presumably direct loans to individual businesses around the world. (Note that while promoting liquidity, it is my understanding from KKR's funds' literature that getting your clients' money out of the funds would take years, in 20% traunches per quarter.)

Some takeaways: Use this political "fiscal cliff" to selectively buy good U.S. equities, since, Nuttall pointed out, equities are sold "indescriminatetly" during time of such uncertantity. (The U.S. euqity market is off by 5% or so since Barry Obama was re-elected) and uncertainty rules the day.

Other fun tidbits: George Roberts and Chuck Schwab launched their companies on the same day about 40 years ago. They were playing tennins, says Chuck, when George asked him for a $50,000 investment into his newly launched KKR. "If I had $50,000 I would have invested it into something called 'Schwab'. . . Now we play golf.'"

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