New York, March 11 - KKR's publicly traded private credit fund has experienced some near-term pressure, the firm's chief financial officer said on Wednesday, while the firm continues to view non-traded private BDCs as an area of potential opportunity.
At the RBC Capital Markets Global Financial Institutions conference in New York, CFO Robert Lewin outlined how KKR's direct lending footprint is structured and where the pressure has been concentrated. "The minority of our capital, roughly $17 billion in direct lending, sits in BDC format," he said.
Lewin noted that of that BDC-format capital, "$14 billion of that sits in FSK which 'has had pressure on returns of the near term, largely from some subordinated exposure.'" The comments highlighted that much of the short-term drag on returns is tied to subordinated holdings within the publicly traded vehicle.
The public markets have reflected investor concerns: shares of KKR FSK Capital Corp are down 29% so far this year. The decline in share price comes amid broader investor unease with some private debt structures and the software sector, which market participants have flagged as an area of concentration.
Lewin also drew a distinction between capital deployed in publicly listed BDCs and non-traded versions of similar funds. "We don’t have much capital in that private BDC space, and we think there can be a real opportunity for us here," he added, signaling that KKR sees potential to allocate selectively into non-traded vehicles where it currently has limited exposure.
The comments come as business development companies - private debt funds operating in a BDC format - have seen share prices fall on public exchanges and redemption requests from non-traded counterparts increase, driven by investor worries about credit markets and exposure to the software sector.
Context and implications
Lewin's remarks make explicit the size and distribution of KKR's direct lending capital in BDC format and identify the immediate source of pressure on returns at FSK as subordinated exposure. They also indicate a strategic posture toward non-traded private BDCs, where KKR currently has limited capital but sees potential opportunity.
This account does not introduce new figures beyond those Lewin provided and reflects the limited scope of details presented at the conference.