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 distress, 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 August marketing brochure 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.