Blending Public and Private Credit: KKR and Capital Group’s New Play for Retail Investors

The partnership between kkr and Capital Group, two giants of global finance, has taken a bold step toward democratizing access to private markets. On April 29, 2025, they launched their first two interval funds—Capital Group KKR Core Plus+ and Capital Group KKR Multi-Sector+—designed to bridge the gap between public and private credit investments. This move not only redefines the retail investment landscape but also underscores a broader industry shift toward hybrid solutions for individual investors.

The Structure: A Hybrid Approach to Liquidity and Yield

The funds blend 60% public fixed income (e.g., corporate bonds, Treasuries) with 40% private credit (direct lending, asset-based finance), offering a diversified income stream. Key features include:
- Enhanced Liquidity: Quarterly repurchase offers of up to 10% of NAV, doubling the 5% liquidity standard for interval funds.
- Cost Efficiency: Expense ratios of 0.84% (Core Plus+) and 0.89% (Multi-Sector+), competitive even after fee waivers expire in April 2026.
- Accessibility: A $1,000 minimum investment, far below the typical $1 million threshold for private credit funds.

This structure aims to attract retail investors seeking higher yields than traditional bonds but wary of the illiquidity of pure private investments.

The Rationale: Democratizing Private Markets

KKR and Capital Group’s partnership, announced in May 2024, targets the 95% of U.S. individual investors excluded from private markets, as noted in their 2024 analysis. The firms argue that retail investors have historically been locked out of asset classes like private credit, which now total an estimated $1.7 trillion globally (per Morgan Stanley) and are projected to reach $2.8 trillion by 2028.

The funds are the first step in a broader strategy. By 2026, the duo plans to expand into equity-focused public-private hybrids, model portfolios, and retirement vehicles. This ecosystem will be supported by an educational platform for financial advisors, featuring modular resources, data tools, and direct access to Capital Group’s portfolio construction desk.

Risks and Rewards: Balancing Act

The blended strategy carries inherent trade-offs. Private credit investments face credit risk (e.g., non-performing loans) and liquidity risk due to the 10% quarterly redemption cap. If redemption requests exceed this threshold, shareholders may face proration.

However, the funds’ public-private mix offers diversification benefits. Public fixed income can stabilize returns during private credit downturns, while private assets provide yield uplift. As Mike Gitlin, Capital Group’s CEO, put it: “This is the best of both worlds—public market transparency paired with private market returns.”

Market Context: The Rise of Hybrid Solutions

The launch aligns with a growing trend toward hybrid investment vehicles. Retail investors, disillusioned by volatile public markets, are increasingly seeking alternatives. KKR and Capital Group’s move also reflects a strategic response to regulatory shifts, such as the SEC’s push to expand private market access through vehicles like interval funds.

KKR’s $600 billion in AUM and Capital Group’s $2.8 trillion provide scale and credibility. Yet, success hinges on overcoming advisor skepticism. The educational platform aims to address this by demystifying private markets through tools like interactive data dashboards and case studies.

Conclusion: A New Era for Retail Investors?

KKR and Capital Group’s joint venture is a milestone in democratizing private credit access. With expense ratios as low as 84 basis points and a $1,000 entry barrier, the funds cater to a retail audience historically excluded from such assets. Their liquidity terms—while imperfect—are a marked improvement over traditional private funds.

The partnership’s long-term viability depends on two factors: market performance and advisor adoption. If the funds deliver consistent returns, and if advisors embrace the educational tools, this could mark the start of a paradigm shift.

Consider the numbers:
- The private credit market is projected to grow at a 6.3% CAGR to $2.8 trillion by 2028 (Morgan Stanley).
- KKR’s 2023 private credit fund returned 6.1% net of fees, outperforming the Bloomberg Aggregate Bond Index’s 3.8%.

Yet, risks remain. A recession could strain private credit portfolios, testing the hybrid model’s resilience. Still, for investors willing to accept moderate illiquidity, these funds offer a compelling entry point into an asset class long reserved for the wealthy.

In short, KKR and Capital Group have set the bar high. If they succeed, the retail investment landscape may never look the same.