KKR's McVey: Regime Change in Markets Favors Private Credit

Henry McVey, KKR's Chief Investment Officer, notes a regime change in markets benefiting private credit as investors seek alternative assets for yield. KKR's 2024 Insurance Survey reveals Chief Investment Officers allocating 31% of portfolios to non-traditional assets, despite interest rate hikes.

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Mahnoor Jehangir
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KKR's McVey: Regime Change in Markets FavorsPrivate Credit

KKR's McVey: Regime Change in Markets Favors Private Credit

Henry McVey, Chief Investment Officer (CIO) of KKR, believes a regime change in markets is benefiting private credit. In a recent Bloomberg TV interview, McVey discussed how Chief Investment Officers sought alternative assets to generate yield when interest rates dropped to zero, allocating around 31% of their portfolios to non-traditional assets.

Why this matters: The shift towards private credit and alternative investments has significant implications for the broader financial industry, as it may lead to a reevaluation of traditional investment strategies. As major players like KKR adapt to the new market environment, it could have a ripple effect on the entire investment landscape.

Despite the Federal Reserve raising interest rates 21 times since then, McVey highlighted that the allocation to non-traditional assets has remained relatively stable. "When rates went to zero, CIOs were looking for ways to find yield and were about 31% allocated to non-traditional assets. Even though the Fed raised rates 21 times since then, that percentage has barely come down, which tells us they have had a really good experience using alternatives," McVey stated.

The stable allocation suggests a positive experience with alternative investments, and McVey emphasized that CIOs are now focused on creating all-weather portfolios. This shift indicates a regime change in markets that is advantageous for private credit.

McVey's comments are part of KKR's 2024 Insurance Survey, which examines how leading insurance companies are navigating and evolving their asset allocation priorities in today's more volatile interest rate environment. The survey is based on a proprietary survey of nearly 50 Chief Investment Officers who collectively oversee over $8 trillion in assets.

KKR recently announced its Q1 2024 earnings results and held a conference call to discuss the company's performance. The discussion of the regime change in markets and its impact on private credit provides valuable insights into the current investment landscape and the strategies being employed by leading investment firms like KKR.

Key Takeaways

  • KKR's CIO Henry McVey sees a regime change in markets benefiting private credit.
  • CIOs allocated 31% of portfolios to non-traditional assets to generate yield.
  • Allocation to alternatives remained stable despite 21 Fed rate hikes.
  • CIOs now focus on creating all-weather portfolios, favoring private credit.
  • KKR's 2024 Insurance Survey reveals shifting asset allocation priorities.