KKR hires exec to focus on 401(k) market

KKR is hoping to extend its reach into new territory – 401(k) plans – recently hiring its first head of defined contribution to help it accomplish that.

Last month, the firm hired TIAA and Prudential alum Melissa Kivett for the role. According to Bloomberg, which reported on Kivett’s hiring Monday, she is tasked with leading KKR’s product development and distribution for that market and reports to Global Atlantic co-president Rob Arena and KKR chief operating officer for global client solutions Daniel Celeghin. Global Atlantic, an insurer and annuities provider, is wholly owned by KKR.

Although the alternatives category – private equity, in particular – is scantly used in defined-contribution plans like 401(k)s, the industry has long been looking for ways in.

Currently, the opportunity is managing small allocations within target-date funds, something KKR leaders alluded to in recent earnings calls and events.

“The majority of new dollars going into 401(k) plans are going through target-date funds,” said Craig Larson, KKR’s head of investor relations, in the third-quarter earnings call in October. “You probably won't be surprised to hear that we think there's a lot of industrial logic to introducing alternative strategies into target date strategies, as individuals invest behind their continued retirement. So, we expect that's where you'll see alternative strategies first introduced. It's a massive market. It's one that we do view as being a really interesting long-term opportunity.”

Larson also pointed to KKR’s partnership with Capital Group, which has materialized in two forthcoming public-private fixed income funds for individual investors. Those funds are pending regulatory approval and are expected to launch in the first half of this year.

“Remember, we've got our partnership with Capital Group. We've got a big target date fund business. And don't forget about [Global Atlantic] here. Annuities, we think, are also going to be very relevant within the framework of these pools over time, as well,” Larson said during the call.

The Department of Labor has indicated that private equity is an acceptable component of asset-allocation strategies within DC plans, stating that in a 2020 letter to Pantheon Ventures. The regulator clarified during the Biden administration that it did not endorse private equity in such plans, particularly as a standalone investment option.

Private equity firms, however, have hinted that they are optimistic about further gentry to 401(k)s during President Donald Trump’s second term.

“The reality is that unless the DOL changes their position … it really shouldn’t be a standalone investment,” said Fred Barstein, founder of The Retirement Advisor University. “But I do think that you’re going to see [private equity] more and more … [within] target-date funds and managed accounts.”

Proponents of PE have cited performance benefits of including it as a component of asset-allocation strategies, but the asset class could be held back by high costs, liquidity constraints, and a lack of transparency, he noted.

But for PE firms to really take advantage of the market, getting embedded in target-date funds or managed accounts may be all that they need, he said.

In KKR’s case, Kivett’s recent hiring shows that the firm indeed sees an opportunity.

“How much do they have to lose?” Barstein said.