KKR's publicly listed private credit vehicle has come under pressure, yet the firm is framing privately held, non-traded credit funds as an area with greater potential, Chief Financial Officer Robert Lewin said on Wednesday.
Speaking at the RBC Capital Markets Global Financial Institutions conference in New York, Lewin addressed strains on business development companies - or BDCs - that have materialized across public markets and in some non-traded versions of these funds.
He described a backdrop in which share prices of publicly traded BDCs have declined on exchanges while certain non-traded BDCs have faced increased redemption requests. Investors, according to the remarks, have grown more cautious because of concerns about credit markets broadly and exposure to the software sector specifically.
KKR FSK Capital Corp.'s shares have fallen 29% so far this year, Lewin noted.
Capital mix and exposure
Lewin said that only a minority of KKR's capital in direct lending is held in BDC form - roughly $17 billion in total direct lending, of which about $14 billion is in FSK. He added that FSK "has had pressure on returns of the near term, largely from some subordinated exposure."
He also stated that KKR does not have a significant amount of capital in the private BDC space and that the firm perceives a potential opportunity in that area.
Implications and positioning
The comments outline how KKR is parsing performance differences between publicly traded credit vehicles and privately structured funds. While the public vehicle has faced valuation and liquidity pressures, Lewin signaled interest in markets where the firm has less deployed capital, suggesting selective focus on privately structured strategies.
The firm did not provide additional numerical detail beyond the direct lending figures and the performance mention for FSK.