KKR and iCapital Network announced today that iCapital’s RIA subsidiary has been appointed investment advisor for the iCapital KKR Private Markets Fund. The joint venture represents iCapital’s expansion of its register fund management business unit, iCapital RF Adviser.
According to iCapital Chairman an CEO Lawrence Calcano, the fund will provide mass affluent investors access to private equity. The universe of accredited investors is estimated at 13 million. While these individuals may technically have been able to invest in private equity, the reality is that this was largely limited to institutions and qualified purchasers.
“Private equity is the last frontier for mass affluent investors,” said Doug Krupa, managing director and co-head of KKR’s private wealth partners group. In contrast, retail investors gain access to private credit through a variety of vehicles, including traditional mutual funds.
The fund has been restructured to appeal to retail investors. It has lower minimums than traditional private equity funds and doesn’t require capital calls—just a single, one-time allocation. In addition, investors receive a 1099 instead of a complicated K-1.
Krupa says it is possible investors could receive higher returns because they "stay in longer." Moreover, they could see potential returns as the holdings are “a more mature, fully deployed portfolio [that is] closer to realization and possibly some exits.”
According to a press release, the $430 million fund was formerly known as the Altegris KKR Commitments Master Fund. It “is registered under the Investment Company Act of 1940 as a closed-end investment company, and its shares are registered for public offering under the Securities Act of 1933.,” the release said.
It was “launched in August 2015 and has current net assets of $430 million across nearly 400 underlying portfolio companies in buyout, growth equity and real asset strategies as of December 31, 2020. Since the Fund’s inception in August 2015 and through November 2020, the class I shares of the fund has annualized at 8.7% net of fees while delivering less than 45% of the volatility of global equities,” the release said.
Krupa says there are four major themes within the portfolio. They include technology and digital businesses, health and wellness concerns, corporate carve-outs and the rise of global millennials and the global middle class.
“Advisors are seeking quality registered fund offerings to meet their investors’ burgeoning appetite for alternative investments, such as private equity, and the important role they play in diversifying a portfolio,” said Lawrence Calcano, chairman and CEO of iCapital Network. “This is a unique opportunity to offer investors access to one of the most respected investment managers in an established, innovative product customized for accredited investors.”
The iCapital RF Adviser team is led by Nick Veronis, head of portfolio anagement, co-Founder and managing partner of iCapital Network, according to the release. “The dispersion of returns in private equity is extremely wide,” Veronis said. “The ability to access a diversified portfolio of investments sourced and managed by KKR, one of the most established and experienced firms in the industry, represents a unique opportunity for accredited investors.”
Calcano maintains that private markets are very different than they were two decades ago, when there were twice as many public companies. “In the 1990s, if you wanted to grow, you needed to go public to get a public currency,” he said.
Today, there are deep and broad private credit markets and private companies can offer key employee vested shares possessing liquidity. Many companies are opting to stay private longer, Calcano addee. One result is that public investors can miss out on the steep part of a business’s growth trajectory.
Access to a greater array of investment options is one reason “why DB (defined benefit plans) have outperformed DC (defined contribution) plans,” Krupa said.