A KKR & Co. fund created to take advantage of credit-market dislocations during the pandemic is now devoting most of its capital to private debt.

The $2.8 billion Dislocation Opportunities Fund, initially a vehicle for buying up the wave of beaten-down corporate bonds and leveraged loans, is currently comprised of 78% in private debt, according to a person familiar with the matter. That’s after it turned toward originating its own deals to generate better returns than public markets could offer, the person said.

Funds that target distressed credit have run low on options as monetary and fiscal easing keeps borrowing costs low for even the most troubled companies. They have instead turned to the more complex, creative or one-off deals that comprise the world of private credit --- where investments can include direct loans to smaller companies, or securitized products that aren’t syndicated.

For KKR, that included assets like rights to intellectual property-related revenue streams. Back in January, the firm bought into a deal for certain copyrights and royalties for songs of Ryan Tedder and his band OneRepublic. That was one of several such deals for the fund, said the person, who asked not to be named discussing its strategy.

In a Thursday letter to investors seen by Bloomberg, KKR’s head of leveraged credit, Chris Sheldon, described how the landscape for distressed debt has changed in the past decade.

“The opportunity to find distressed-for-control or to buy good companies with bad balance sheets for pennies on the dollar is now more rare,” Sheldon said in the letter, which reflected on the second quarter of this year. “This is a new era of investing whereby we believe investors need to be even more hands-on, structurally creative, and proactive in managing their portfolios,” he said, adding that the “more flexible” investors can be, the better.

The fund returned 52% in 2020, according to a person familiar with its investments.

This article was provided by Bloomberg News.