KKR Says, Invest in Alternative Credit!!!

The famed private equity fund of Kohlberg, Kravis & Roberts (KKR) is advising investors to increase their holdings in Alternative Private Credit, i.e., Debt Funds! According to KKR, the historical negative correlation between Equities & Bonds is broken. Investing experts have long recommended a 60/40 allocation between Equities and Bonds. Why?  Heretofore, the 60/40 portfolio paradigm assumed that as interest rates increase, bond prices decrease, while equity prices increase  – due to an increase in macro-economic activity. This 60/40 blended portfolio was deemed to produce attractive risk adjusted returns.  Inflation, however, creates a “fly in the ointment”. Both Bonds and Equities are priced based on the discounted cash-flow model. When investors perceive increased risk (i.e., inflation), discount premiums increase. Today, the applied discount rate used to price Bonds and Equities is increasing. Thus, the value of  both Bonds & Equities is decreasing in lockstep, i.e., positive correlation producing less return and more risk. KKR now recommends a portfolio blend of 40/30/30 – Equities-Bonds-Alternative Private Credit. As KKR realizes, Alternative Private Credit offers investors bond-like security, while producing equity like investment returns. Happily, WINPRO offers several Alternative Private Credit platforms from which investors can participate in Private Credit.

Contact Stan Wood – 303-917-2580 – stan@winprofunds.com
Tony Hemminger – 720-344-1174 – tony@winprofunds.com

Leave a Reply