Would MM consider KKC Fund for the Active Income portfolio?

Hi Carl,

A good and topical question. Our caution around private credit hasn’t been justified as yet with more and more private credit funds successfully raising capital, while Regal Partners (RPL) that we own in our Emerging Companies Portfolio has just purchased Merricks, a fund management company in that space for $235m. We think it’s a very valid area, here to stay and the growth is testament to the investor demand for these sorts of assets. The caution we have is around the yields being offered which are clearly attractive, and the risks involved.  Because private credit does not really trade on an open market, revaluations don’t happen, so you get this illusion of stability, and the lack of transparency underneath means that we could be buying something at Net Tangible Asset (NTA), however it’s not a true reflection of what the assets are worth. P

KKC does hold a combination of traded credit and private credit, so the pricing is more transparent than a credit manager that holds all private credit. Ultimately, we have looked at KKC for income, we’re likely to buy the more vanilla exposure in the space, which is the Perpetual Credit Income Fund (PCI), due to greater simplicity, while it is not a fund of fund structure like KKC.

As a side note, when markets go through tough periods, the GFC, COVID, and other more benign events, one of the things that we lean on at Market Matters is knowing and understanding what we own. That doesn’t mean prices will not go down in value, but it does mean we have a good handle on what the underlying asset is. We don’t like buying things that we don’t understand, or cannot really see what we’re buying, and that is the main crux of our concern around private credit, amplified by the amount of capital flowing into this area.

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KKR Credit Income Fund (KKC)

LAST UPDATED 27/06/2024 15:09

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KKR Credit Income Fund (KKC)

LAST UPDATED 27/06/2024 15:09