Capital Group Partners With KKR in Strategy Shift

Core Insights - Capital Group, historically low-profile, is shifting its strategy to adapt to the changing investment landscape, particularly the rise of passive investing and ETFs [2][3] - The firm is launching a marketing campaign, expanding its ETF offerings, and forming a partnership with KKR to attract retail investors [3][5] Company Strategy - The $3.3 trillion firm is concerned about being left behind as competitors like Apollo and Blackstone enhance their retail offerings [4] - Capital Group's CEO Mike Gitlin emphasizes the need for the firm to evolve and strengthen its client relationships [4][7] - The partnership with KKR aims to create diversified portfolios that combine public and private market assets [6][25] Financial Performance - Over the past decade, Capital Group has experienced net outflows from its equity mutual funds, with clients withdrawing $122 billion from its largest fund since 2015 [7][20] - The firm’s ETFs, launched in 2022, have accumulated about $100 billion in assets, but this is not enough to offset the losses from traditional mutual funds [18] Market Position - Capital Group has strong distribution networks, with relationships with over 20 million households and 75% of U.S. financial advisers [23] - The firm is attempting to capture a share of the growing retail investor market, which is seen as a significant opportunity for future growth [32] Product Development - The new funds created in partnership with KKR will target a mix of 60% public debt and 40% private credit, with plans for additional funds focusing on private equity and real assets [25] - The co-managed funds will charge lower fees compared to KKR's traditional offerings, aiming to be more accessible to retail investors [27][31] Organizational Changes - Recent leadership changes include the appointment of new executives and a shift in Gitlin's role to focus solely on business operations [15][16] - The firm is also hiring for a head of private markets, indicating a strategic pivot towards this asset class [17]