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Mogelof: 401(k)s will hit 10-15% private market allocations within a decade
“There's no doubt in my mind in a decade from now, we will see very meaningful allocations within that DC market to private markets. Whether it's 10%, 15%, it's going to be really, really big.”
Mogelof: Over 80% of Private Wealth Flows Will Target Evergreens
“If you ask me, I think the drawdown vehicles serve a very important purpose for institutional investors. But over time, I would expect 80 plus percent of all wealth flows to go into these evergreen investment solutions.”
Mogelof: Daily Liquidity for Private Markets Erodes the Illiquidity Premium
“If you're going to do that, then you need to have some liquidity function, and that always is going to come at a cost. It could be an explicit cost, it could be an implicit cost, but at the end of the day, you can't magically say something that's illiquid is l…”
Mogelof: The Biggest Risk in Wealth Alternatives Is Advisor Mis-Selling
“I think the biggest thing that could go wrong is that these products are not sold appropriately. We saw a little bit of that in the past, but I think the biggest risk here is that advisors don't spend the time to fully understand the liquidity profile, the ris…”
Mogelof: Wealth Allocations to Alternatives Will Exceed 10% to 15%
“Based upon our conversations with wealth platforms and advisors, we think that two to three percent should ultimately be 10, 15 plus percent. And if you were to do the numbers, that just means that there's literally trillions of dollars of money that's in moti…”
Mogelof: Expanding Private Markets Prevent Return Dilution From Retail Inflows
“The reality is private markets are growing by leaps and bounds. And if you think about it, even in the equity space, More and more companies are staying private for much, much longer. So it's early, early days before we worry or get concerned about our ability…”
Mogelof: Some Wealth Advisors Exceed Sovereign Wealth Funds in Sophistication
“We work with some advisors that I think are more sophisticated than some of the big sovereign wealth funds and pension plans we work with. On the flip side, we work with some advisors that have never allocated to anything other than public equity and public fi…”
Mogelof: Private Markets Generate Hundreds of Basis Points Over Publics
“I'd also tell you that the value add is much more significant, whether it's in credit or infrastructure, real estate, there's anywhere from a couple hundred to hundreds of basis points of excess returns that you can generate relative to public benchmarks.”
KKR Partners With Capital Group to Target Non-Accredited Investors
“Capital Group actually approached us, and they had Their own business strategy around deciding to want to partner with an alternative manager, and it was just such a perfect fit. They have this really strong business, especially in the independent broker-deale…”
Mogelof: 30% to 50% of KKR Capital Raised Will Come From Wealth
“I think our co-CEO, Scott Nuttall, was on the record saying that over time, we would envision that 30 to 50% of our capital that we're raising is coming from the wealth channels.”
Mogelof: Asset managers won't add private markets to existing target date funds
“One is you can have these asset managers use their existing target date funds and add alternatives to them. I personally think that's highly unlikely, and as a matter of fact, as you talk in the industry, it's pretty apparent that that's not the avenue.”
Mogelof: Industry will likely develop daily pricing for private markets in 401(k)s
“What's more likely is we over time as an industry work on daily pricing, all of the various different private markets.”
Mogelof: Managed accounts and custom target dates will drive private markets adoption
“I would say over the next three to five years, the off-the-shelf is going to take the longest time to get adoption to move, but in the meantime, you're going to see a lot of allocations through managed accounts and custom target date.”
Mogelof: KKR Avoids Direct-to-Consumer Distribution in Private Wealth
“Today, our focus is on the intermediary part of the market, so we don't engage directly with investors. There are a lot of really great companies that have built out direct To investor models. We want to participate in that by simply having our investment solu…”
Mogelof: Institutional Drawdowns Do Not Work for Most Wealth Clients
“Historically, this industry had taken some of the institutional investment strategies and just plugged them into the wealth channels. And that's okay, and for some individual investors, those drawdown or institutional vehicles might make sense, but for the lar…”
Mogelof: Evergreen Wealth Products Hold Identical Investments to Drawdown Vehicles
“All of our evergreen investment solutions have the same investments that you would find in our drawdown vehicles, and that's a really important differentiator.”
Mogelof: KKR Fund Docs Give Wealth Vehicles Top-Tier Waterfall Allocation
“Most alternative firms, their first in the waterfall is always just their institutional vehicle. We have created in our documentation that first in the waterfall to have an allocation to our wealth vehicles as well.”
Mogelof: Fourth-Quartile Private Market Managers Fail to Justify Fees
“What we have seen in private markets is a very, very wide range between first quartile and fourth quartile managers. There, I would say, if you're a fourth quartile manager, you're probably not delivering value above your fees.”
Mogelof: Drawdowns Yield Higher IRR, but Evergreens Yield Higher MOIC
“All else equal, you would see the IRR of one of our private equity drawdown vehicles, for example, higher than the expected IRR that you'd find in an evergreen private equity solution. Having said that, because you're investing fully invested day one, your mul…”
Mogelof: KKR Public Stock Is Not Pure-Play Private Markets Exposure
“Anyone could buy our stock, which is certainly one way to get exposure to some of these investments. But if you think about it, the investment in KKR stock trades at a multiple to earnings and reflects the number of things that we do here at KKR, which include…”
Mogelof: Private Wealth Alternatives Will Consolidate Around Large Brands
“My gut tells me that there actually won't be a lot of winners. There'll be a handful of winners in each of the asset classes, and they'll likely be the larger, well-branded alternative firms.”
Mogelof: Limited Liquidity Structures Are the Best Access to Private Markets
“There's no magical wand that you can wave over a private market investment and make it liquid. That's the reason why, in my mind, the wealth solutions that take advantage of these limited liquidity vehicles are the way to get exposure. The interval fund, the t…”
Mogelof: US retirement accounts hold over $40 trillion in assets
“If you were to look at the retirement market in the United States today, there is more than 40 trillion dollars of assets in, quote, retirement accounts.”
Mogelof: Defined contribution is $12.5T, with DB and IRAs ~35% each
“The defined contribution market, which is about 12 and a half trillion dollars, represents about 30% of the overall retirement market, and then DB and IRAs are split pretty evenly, about 35% each.”
Mogelof: Public DB plans allocate over 30% to private markets
“Public DB plans are heavily allocated to equity beta, equity type of risk, north of 30% in public market equities, north of 30% in private market allocations.”
Mogelof: Corporate DB plans hold 50-60% fixed income, 20%+ alts
“Now, about 20 years ago, there was some accounting changes which gave companies a really strong incentive to start moving more assets to a liability hedge, and so that's why you probably see north of 50 to 60% in fixed income, but still 20 plus percent in alte…”
Mogelof: 40% of DC assets are in target date or managed accounts
“If you look at where we are today, roughly 40% of all DC assets are in some type of investment solution, whether it's a Off the shelf target date fund, a custom target date fund, or some sort of managed account.”
Mogelof: Defined Contribution assets are virtually entirely in public markets
“There is very little money in DC today that's in alternatives or private markets. Small amounts, very bespoke plans, but virtually all of the allocations today are sitting in public markets.”
Mogelof: Over 60% of new DC inflows flow into target date funds
“I should mention, north of 60% of all new flows in DC are going into target date funds.”
Mogelof: Six asset managers control over 85% of target date fund assets
“There are really six managers that dominate the market, probably have 85 plus percent of the assets. That's Vanguard, Fidelity, BlackRock, State Street, T. Rowe, and Capital Group.”
Mogelof: Financial Advisors Shift to Models to Expand Client Services
“Financial advisors now have a much broader value proposition that they are holding out to their investors. Sure, they're building portfolios, but they're also providing financial advice and planning, tax perspectives, sometimes they're a financial concierge, s…”
Mogelof: Wealth Portfolios Allocate Only 2% to 3% to Alternatives
“If you look at the typical institutional investor, you can see that they are allocated to alternatives and private markets anywhere from 20 to 30 to even 50% of their portfolios. If you look at the wealth market today, that number is two to three percent.”
Mogelof: Advisor Education Is Alts' Biggest Long-Term Challenge
“One of the biggest challenges that the industry will have over time Is ensuring that advisors and investors understand how alternatives can be incorporated into portfolios, and importantly, the risks and benefits that those investment strategies offer.”
Mogelof: KKR Lacked a Marketing Department Five Years Ago
“When I first got here about five years ago, we actually didn't have a marketing department.”
Mogelof: Modern Fund Vehicles Expand Access Down to Non-Accredited Investors
“Through whether it's an interval fund, a tender offer fund, a non-traded BDC, an operating company, there are now a number of new vehicles that asset managers can utilize, which really widen the aperture for investors to invest. And that includes not just qual…”