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KKR Income Opportunities Fund At A 9.2% Discount To NAV

Dec. 07, 2018 4:34 PM ETKKR Income Opportunities Fund (KIO)DSL8 Comments


  • A review of the KKR Income Opportunities Fund.
  • Recently, these credit funds got slammed amidst market turmoil.
  • Some of them have strong teams and interesting portfolios.
  • Looking for more? I update all of my investing ideas and strategies to members of Special Situation Report. Start your free trial today »

A reader suggested to look at the KKR Income Opportunities Fund (NYSE:KIO) and compare it to the DoubleLine Income Solutions Fund (DSL) I reviewed yesterday. I thought that was a great suggestion and got on it with it. Let's first look at what KKR Income Opportunities fund does:

KKR Income Opportunities Fund buys any credit instruments to invest in those it thinks are relatively attractive. They also try to protect against macroeconomic risks. This adds up to what KKR calls "potential for attractive levels of current income through monthly distributions." In practice, most people consider this an income fund just like the DoubleLine Income Solutions.

The expense ratio is high (but comparable to peers with strong management teams) at 2.74%, of which 0.63% can be chalked up to interest expenses. The fund trades at a 9.2% discount to net asset value or NAV, which compares favorably to the 5% discount at the DSL:

ChartKIO Discount or Premium to NAV data by YCharts

But both funds trade at relatively modest discounts to NAV. You can easily find high yield bond funds trading at 15% discount to NAV and some of those are run by great firms. To clarify, firms I like to see as manager tend to invest based on a fundamental value type of style.

The fund got slammed in the recent market turmoil which happened at DSL as well:

ChartKIO data by YCharts

These funds have large yields but do not forget how volatile they are.

I have a lot of confidence in KKR as an organisation. The firm seems wired the right way to set up successful funds. Erik Falk co-manages this portfolio with Christopher Sheldon and a team of 2 but also function as heads of leveraged credit at KKR. There's a lot of special situation experience present throughout the

ChartKIO Distribution Yield (TTM) data by YCharts

Check out the Special Situation Investing report if you are interested in uncorrelated returns. We look at special situations like spin-offs, share repurchases, rights offerings, M&A events, etc. But we also have a keen interest in the commodity space. Especially in the current late stages of the economic cycle.

This article was written by

Bram de Haas profile picture
Special-Situation And Event-Driven Ideas To Improve Risk Adjusted Returns
15 years of investing and I feel like a rookie in his first year at the academy. My roots are in the value school but over time I've learned to respect different approaches. I'm interested in what quants do, options traders do, and even what WallStreetBets is doing (keep your friends close and...)

I gravitate towards special-situations. That means situations around companies or the market where the price can move in a certain direction based on a specific event or ongoing event. This eclectic and creative style of investing seems to suit my personality and interests most closely.

Since 2020 I host a podcast/videocast where I discuss (special-situation/event-driven) market events and investment ideas with top analysts, portfolio managers, hedge fund managers, experts, and other investment professionals. I highly recommend it (pick episodes around topics that interest you) for the amazing guests that come on with regularity.

I've been writing for Seeking Alpha since 2013 after playing p0ker professionally. In 2018 I founded Starshot Capital B.V. A Dutch AIF manager. Follow me on Twitter @Bramdehaas or email me Dehaas.Bram at Gmail

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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