In its recent regulatory filing Kohlberg Kravis Roberts & Co. (KKR) announced that it was set to close KKR Alternative High Yield Fund and the KKR Alternative Corporate Opportunities Fund. These funds have already stopped transactions in the market and are expected to liquidate by Mar 31. The investors will receive their money at the same time.
The aforementioned funds were launched in 2012 with the primary focus on retail investors with limited resources to invest. Deviating from the convention of catering to a wealthy client base, the funds seemed promising with the potential to drive Kohlberg Kravis’ profitability in the long run.
Preferred stock has been around for more than 150 years. One study suggests that the first shares of preferred stock were issued in 1836 by internal improvement companies in Maryland. However, some investors might not have given this asset class much thought until the government commandeered preferred shareholders' dividends in the government-sponsored enterprises Fannie Mae Read More
However, given the competitive landscape, other companies like BlackRock, Inc. (BLK) soon came out with similar products that adversely affected the funds’ performance. Further, as per a Bloomberg report, these funds were designed in a faulty manner due to which they failed to survive the market challenges.
Moreover, adding to the woes, the application for KKR Alternative Corporate Opportunities Fund involved tedious paperwork for both the advisors and investors. Additionally, the fund’s policy permitted quarterly cash redemption that imposed restriction on investors’ withdrawal of money.
Despite the latest wind-down, Kohlberg Kravis will continue with its efforts to attract individual clients by offering innovative products and asset management solutions. Going forward, we believe that these initiatives, along with the company’s strategic investments will continue to aid top-line growth.
The investment scenario has witnessed drastic changes with investors being inclined toward alternate forms of investment in recent times. It is expected that overall improvement in the equity market, along with increasing risk appetite of investors will continue to boost profitability for asset managers like Kohlberg Kravis.
Currently, Kohlberg Kravis carries a Zacks Rank #3 (Hold). However, some better-ranked investment managers include Waddell & Reed Financial, Inc. (WDR) and Fortress Investment Group LLC (FIG). Both these stocks have a Zacks Rank #1 (Strong Buy).