Impact 2012

Great Time for 'Grave Dancers': KKR, Schwab


With the U.S. in political and fiscal turmoil, Europe in recession and the overall rate of global growth slowing, now would be an easy time for investors to cash out and wait until things clear up before getting back in.

That's just what some are counting on.

Scott Nuttall, head of private equity giant KKR's Global Capital and Asset Management Group, affectionately calls the latter type of investors "grave dancers" who love a chance to swoop in when others are cowering.

"They get excited about buying opportunities like these," Nuttall said during a talk at the Charles Schwab Impact 2012 conference. "If you've got the right perspective and long-term approach, it could be a great time."

Seated a couple chairs away on the dais, Schwab himself said there's nothing like a good global crisis to present opportunities to make money. (Read More: The Death of Equities Seems Exaggerated.)

Among the main perils: The "fiscal cliff" of tax increases and spending cuts in 2013 that Schwab thinks is fairly unavoidable.

"It's just all this part of this uncertainty that we all live with," he said. "We have a difficult time seeing a resolution before December 31."

Despite the perils going over the cliff, which will happen unless Congress and President Barack Obama agree to deficit-reduction measures before the end of the year, Schwab thinks investors can still make money.

"When the environment is such uncertainty, it has always been a fantastic place," he said. "There will be a fantastic opportunity for equities and some credits."

KKR founder George Roberts concurred, particularly on the idea that conditions will be volatile well into the future.

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"It's a pretty good time to invest for a lot of different asset classes and around the world," Roberts said. He cited a "lack of leadership" globally and said, "You've got more of politically caused economic difficulty in the world today than you probably ever had."

The power troika of Schwab, Roberts and Nuttall convened both to discuss the state of global markets as well as to offer some solutions for the 4,000 or so investment professionals on hand at the Impact conference. (Read More: Flight to Safety in Bonds May Actually Mean More Risk: Pro.)

Like many in the audience, they've been looking for alternatives — assets that aren't tied to other classes that mostly have been moving up and down together and making diversification increasingly difficult.

They've developed two funds together that they see as helpful to investors looking for alternatives and income.

One of the funds is the KKR Alternative High Yield mutual fund, while the other is a closed-end distressed corporate opportunities fund.

Both funds mark new ground for Schwab in marrying up with a private equity fund, as well as for KKR, which has stayed away from traditional funds and has usually only been open to those with deep pockets. The Schwab venture will allow investors with as little as $2,500 to hop aboard.

"It's the marriage of the two things that we're really excited about," Roberts said.

As far as specific types of investment opportunities, Nuttall touted the private credit realm, with companies looking away from traditional banks for funding.

The KKR officials also cited foreign markets such as Vietnam, Korea and Singapore as attractive places to put capital.

Closer to home, the climate might be a little rougher, with Schwab openly worried about what will happen in the U.S. during Obama's second term. Stocks have fallen more than 5 percent since the president's Nov. 6 re-election.

"We have enormous growth potential if it is just released," Schwab said. "All we need is the right leadership and we can get cracking."