Kohlberg Kravis Roberts is closing two mutual funds less than two years after it started them, a setback for the private equity giant as it looks to attract smaller investors.
The two funds, the KKR Alternative High Yield Fund and the KKR Alternative Corporate Opportunities Fund, have stopped selling shares and plan to liquidate by around March 31, according to regulatory filings on Monday. Investors will get their money back at that time.
Started in 2012, the funds were part of K.K.R.’s strategy to attract capital from investors who would not be able to access traditional private equity funds, which cater to wealthy individuals and institutions. Some of K.K.R.’s big rivals, including the Carlyle Group and the Blackstone Group, have also unrolled products aimed at retail investors.
But the two K.K.R. funds were hurt by a competitive marketplace and a flawed design, according to a person briefed on the matter who was not authorized to speak publicly about it.
The corporate opportunities fund had an application process that was too onerous, adding paperwork for financial advisers and investors, this person said. In addition, its quarterly liquidity feature was a deterrent to investors who expected to be able to get their money back whenever they needed it.
In the case of the high-yield fund, which invested in risky debt, K.K.R. found it difficult to offer a unique angle in a highly competitive market, the person briefed on the matter said.
Still, K.K.R. is continuing its push to attract individual investors. The firm raised $4.7 billion from individuals last year, including wealthy customers, roughly 22 percent of the total money it raised.
“Over the last three years, K.K.R. has been expanding its investor base to enable individual investors to participate in K.K.R.’s investments,” Kristi Huller, a spokeswoman for K.K.R., said in a statement. “We have a number of other offerings for individual investors, including private equity, under development for launch this year.”
The funds’ closing was reported earlier by Bloomberg News.