Victoria Quach, Senior Client Analytics Manager/Portfolio Strategy Manager for Capital Group, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss the potential benefits of holding both private and public market investments in a portfolio.
Adding private market investments to publicly traded assets improves portfolio diversification. For more than a decade, Quach has been studying the role of private and public investments in portfolios. While each investment has its own return drivers and risk exposures, there are interaction effects across the portfolio that must be considered. It is important for investors to consider allocating across all market segments, both public and private.
Capital Group announced a partnership with KKR to offer access to both public and private markets in a single interval fund. The current suite includes two funds with allocations to private credit and one fund with private equity exposure.
Before allocating to private markets, financial professionals and their clients should consider three key questions. First, what is the investor’s time horizon? Second, what is the investor’s capacity for risk? Third, what are the investor’s liquidity needs? Private market investments may be appropriate for clients with an intermediate to long-term investment horizon, at least a moderate risk tolerance and low to moderate liquidity needs.
Capital Group is focused on education that empowers financial professionals to help make the right investment choices for their clients. Capital Group has a dedicated RIA sales team that is available to answer detailed questions financial professionals may have.
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Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the interval fund prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
For Public-Private+ Funds: The funds are interval funds. Repurchase Risk: Each Public-Private Credit+ Funds currently offers quarterly repurchases of up to 10% of its outstanding shares and the Public-Private Equity+ Fund currently offers quarterly repurchases of 5% of its outstanding shares, which may limit shareholders’ ability to liquidate their investments when and in the amounts desired. Investment Risk: Strategies are not guaranteed to meet objectives and are subject to loss. Past performance is not indicative of future results. Credit and Liquidity Risk: Each credit fund invests in private illiquid credit securities, and may also generally invest substantially in high-yield, lower-rated securities and structured products, all of which carry higher credit and liquidity risks; Interest Rate and Inflation Risk: Investments may fluctuate in response to changes in interest rates and real interest rates;Derivatives Risk: The use of derivatives involves various risks; Foreign Investment Risk: Investing outside the U.S. involves risks such as currency fluctuations and price volatility. The equity fund’s exposure to KKR Private Equity Conglomerate LLC (“K‑PEC”) and co‑investments alongside KKR entails risks associated with private equity, including illiquidity, speculative investments, long holding periods, valuation challenges, dependence on financing markets, and exposure to companies with limited histories or unproven business models. The fund’s large position in K‑PEC also creates concentration risk. Co‑investment opportunities sourced by KKR may be limited and competitive, and the fund may receive different or less favorable terms than other investors. Private equity investments typically carry higher fees and expenses. Fund shareholders indirectly bear asset‑based and incentive fees associated with K‑PEC, other KKR vehicles, and co‑investments. Incentive fees reduce net returns when performance exceeds specified hurdles. Nondiversified Fund Risk: Each fund can invest a larger percentage of assets in fewer issuers, increasing the impact of poor results from a single issuer.
Capital Group and Kohlberg Kravis Roberts & Co. L.P. (“KKR”) are not affiliated. The two firms maintain an exclusive partnership to deliver public-private investment solutions to investors. KKR serves as the sub-adviser of Capital Group KKR Core Plus+ and Capital Group KKR Multi-Sector+ with respect to the management of each fund’s private credit assets. KKR is not a sponsor, promoter, investment adviser, sub-adviser, underwriter or affiliate of Capital Group KKR U.S. Equity+.
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