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Tuesday, February 11, 2014

KKR Withdrawal Demonstrates Brutality of Alts

News summary by MFWire's editors

It seems like everybody wants to get into alts. Nervous Nelly investors love the promise of downside protection, while fundsters love the idea of investment strategies that can’t be commoditized and turned into an index. But KKR’s closing of two funds shows that entry into this battlefield may be harder than you think.

You can’t blame fundsters for wanting to go into alts, the category synonymous with miscellaneous. Heck, virtually everyone was talking about it yesterday at the IMCA Conference for investment consultants being held through today at the New York Marriott Marquis. (They were also talking a lot about the other end of the ’40 Act spectrum as well: ETFs.)

But the looming specter of growing regulatory attention, plus ongoing debates on how these products are to be categorized, analyzed and gauged (many of these strategies have little to no track records in the mutual fund space, although they may have years under the belt as SMAs or hedge funds), aspiring alts-sters have their work cut out for them.

And KKR had a lot of things in their favor. They are one of the premier names in many of the strategies and asset classes entering into liquid alts territory.

Nonetheless, as reported by the Wall Street Journal and Reuters both report, KKR has closed two such funds.

It’s not the first bit of trouble KKR experienced in this space. William Sonneborn, the man tapped to lead KKR’s foray into this space, left the company in July 2013, and the funds soon after.

KKR may have left, but there are style other alts goliaths in the battlefield. Goldman Sachs also has big plans for this area, recently hiring former Morningstar alts guru Nadia Papagiannis as well as experiencing some recent flows successes.

Of course, there are scores of other players, both big and small. Soon to become legion.

You want to do well in this space? Bring your A-Game.  

Edited by: Tommy Fernandez

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