KKR is doubling down on asset-based financing as private credit has become an increasingly crowded market.
The firm is leveraging its ABF strategy to differentiate its private credit offerings for retail investors and generate more origination opportunities.
During its Q2 earnings call, executives said the firm is using an ABF product to stand out in the retail distribution channel amid intensified competition among traditional private credit products, especially within the direct lending space.
As part of this move, KKR is converting a retail-focused multi-sector credit fund, KCOP, into a vehicle that primarily focuses on ABF investments, and renaming it KABF—to meet growing demand from retail investors for dedicated exposure to this strategy.
“As we look at this opportunity in asset-based finance, it feels to us there is real demand for a dedicated, evergreen ABF product tailored to individuals,” said Craig Larson, the head of investor relations at KKR.
The conversion is expected to take place around the end of August, he said.
Executives also emphasized the strong growth potential of the ABF market, estimating that the addressable market will expand to $9 trillion in the next four years from $6 trillion today.
Meanwhile, KKR continues to boost its ABF portfolios and investment capacity through partnerships with other originators, taking advantage of the increasing number of companies trying to free up capital from their balance sheets for other initiatives.
To that end, KKR, alongside PIMCO, inked a landmark deal with Harley-Davidson Wednesday to acquire over $5 billion in retail loan receivables.
As part of the deal, the two firms will also take a common equity stake in the motorcycle manufacturer’s finance arm.
KKR currently manages $75 billion in ABF assets, representing the bulk of its $120 billion in private credit assets as of the end of Q2.
On Wednesday, KKR closed its latest fund targeting asset-based financing deals at $6.5 billion, including separately managed accounts.
The firm’s Q2 earnings came in ahead of expectations, driven by a 17% year-over-year rise in fee-related earnings. Its total AUM increased 14% YoY to $686 billion, bolstered by $28 billion of new capital raised in Q2 alone.
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