Asset managers Capital Group and KKR have filed registration statements with 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 U.S. in the first half of 2025.
The filings are the first products of the strategic partnership the two firms announced in May. The two strategies will both operate as interval funds, according to the SEC registration statements. Among semi-liquid vehicle types, interval funds have been particularly popular in the wealth channel 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 in the market with total assets approaching $100 billion.
“As a firm, we do not enter a new market unless we are committed for the long term and believe we can offer something meaningful and durable for our clients,” Holly Framsted, head of global product strategy and development at Capital Group, said in a statement. “Our focus remains on delivering distinct solutions that serve unmet needs in investor 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 will be the first of many across asset classes and geographies.”
The core plus fund will invest in publicly traded fixed-income securities and private credit loans and securities, including private corporate direct lending and asset-based finance investments. It will allocate about 60% to public debt (managed by Capital Group) and 40% to 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. The Class A shares will be primarily offered to retail investors “by broker/dealers which are members of FINRA and which have agreements with the fund’s distributor.”
The public debt assets will include corporate bonds and mortgage-backed and other asset-backed securities. The private credit sleeve will focus primarily on corporate direct lending and asset-based finance, including bonds, secured bank loans, mezzanine debt, CLOs and other securities.
The multi-sector fund will also invest in publicly traded fixed-income securities and private credit loans and securities with a targeted 60/40 mix 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 sleeve will focus on corporate direct lending and asset-based finance.
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 offering additional solutions that bring our best‐in‐class private markets investment capabilities to a broader group of investors.”
KKR has increasingly targeted the wealth channel with its fundraising efforts. Among its existing investments in the wealth channel—what the asset manager calls its K-Series—KKR operates a series of semi-liquid funds focused on private credit, private equity, private real estate and infrastructure, and open to accredited investors and qualified purchasers. As of midyear, KKR said the K-Series, in aggregate, had $11 billion in assets—up from $3 billion a year ago. Flows into the products 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.
