KKR executives are raising at least $1 billion from investors for an existing KKR-managed hedge fund. The goal is to snap up bargains from some of the $300 billion in junk bonds and high-yield loans weighing on Wall Street banks that have promised financing for a gaggle of mega-LBOs. With many of those bonds and loans expected to be available for a song amid the market, KKR figures it can generate a fat profit down the road once the "anxiety in the debt markets" ebbs and the debt rises in value.
So confident is KKR of a sharp rebound in the corporate credit market, it's telling prospective investors in the KKR Strategic Capital Fund they can expect to reap hefty returns. An Augustbrochure for the new fund-raising drive by the KKR fund states, "Unprecedented opportunity to invest in current corporate credit 'meltdown' and earn estimated gross returns in excess of 20%." The 24-page circular continues, "Opportunity exists due to credit market technical issues, not deterioration in credit fundamentals."
More at Business Week.