KKR stock ownership broadens on C-corp switch

Index funds are widening the firm's investor base, while market volatility is taking a toll on the share price.

KKR has been seeing the benefits in its move to a C-corporation with a broadening of its shareholder base, but the stock’s performance, after closing at record high last month, has been pummeled by market volatility.

KKR’s shares are held by about a dozen index funds at Vanguard and some passive funds that focus on the broad stock measure S&P Total Market Index, according to Craig Larson, the firm’s head of investor relations. KKR sought greater participation from investors as part of its decision to convert from a partnership almost six months ago. Being included in index funds can help broaden ownership on the premise that investors who seek to mimic the performance of an index tend to buy shares that make up that stock measure.

“In short it feels like we’re attracting a shareholder base that thinks about our business and our stock more similarly to how we think about our business and our stock and that’s great to see,” Larson said during the firm’s third-quarter conference call on Thursday.

KKR’s stock had posted strong gains in the past few months. It closed at record $28.25 on 21 September, indicating a 31 percent advance since its 3 May announcement of the upcoming switch, which went into effect on 2 July. The private equity giant’s shares have taken a dive recently, wiping out virtually all of those gains, as they tracked losses in the broader market of the past few weeks amid concern on the global economy. Since the 17 September the stock has lost almost 19 percent, compared to the 6 percent decline for the S&P 500 Index and the Dow Jones Industrial Average.

KKR’s stock was trading at $22.93 at 10am in New York on Monday.

Co-president and chief operating officer Scott Nuttall said that losses in markets outside the US, namely in Europe and Asia, are much greater, and that volatility plays into KKR’s strengths.

“We believe our stock will be worth more down the road because of what’s going on, and we continue to be committed to equity value creation. So in our view if the volatility continues, we think our long-term value will be higher,” Nuttall said.

He added the recent volatility is a sign “the US is starting to catch up a little bit with the rest of the world”, pointing to a “meaningful sell-off” in China and “the beginnings of some valuation changes” in Europe, and adding that KKR has “been waiting for this, to some extent”.