KKR Sees Growing Opportunity in Risk-Transfer Deals With Banks
(Bloomberg) -- KKR & Co. executives see a strong market for synthetic risk-transfer deals, as US banks seek to shift their loan exposure ahead of stricter capital requirements in the wake of last year’s regional bank crisis.
Most Read from Bloomberg
US and Saudis Near Defense Pact Meant to Reshape Middle East
NYPD Arrests Over 300 Protesters in Crackdown on College Campuses
The Ozempic Effect: How a Weight Loss Wonder Drug Gobbled Up an Entire Economy
Treasuries Rally With Fed Not as Hawkish as Feared: Markets Wrap
“It does feel like we are starting to see more activity in the US,” Chief Financial Officer Robert Lewin said on a call with analysts Wednesday.
While assets underlying SRTs typically consist of corporate loans, fund finance facilities and consumer-term loans, banks are starting to explore other asset classes for risk transfer, Lewin said.
“We’re knowledgeable across a host of assets, and we do like to partner with banks,” he said. “The potential opportunity set could be expanding.”
Read More: JPMorgan Mulls Two Synthetic Risk Transfers as Market Heats Up
KKR is less eager to jump into the market for second-hand private equity stakes, which it had previously considered.
“It is not a need to have for us,” Lewin said. “We’re perfectly comfortable focusing on the aspects of our business we’re already in today.”
The firm could get into secondaries if the right opportunity emerges, he said.
The market for private equity secondaries has grown in recent years as higher interest rates have crimped dealmaking, leading sponsors and their investors to pursue alternative avenues for liquidity. KKR is one of the few major alternative-asset managers that doesn’t have a secondaries strategy.
Co-Chief Executive Officer Scott Nuttall said in 2021 that KKR was pursuing opportunities to get into secondaries.
“We’re analyzing whether we want to build or whether there’s something that might make sense to buy,” he said.
KKR reported first-quarter results Wednesday that beat analyst estimates as fee-related earnings and strength from its insurance unit drove profits through a prolonged downturn in asset sales.
Most Read from Bloomberg Businessweek
AI Is Helping Automate One of the World’s Most Gruesome Jobs
Modi Is $20 Trillion Short on His Grand Plan for India’s Economy
China Launches Rockets From Sea in Bid to Win the Space Race
©2024 Bloomberg L.P.