What KKR does like right now are investments in areas including private credit for small- and medium-sized businesses, because lending terms have shifted to favor lenders more than borrowers as of late. But it's also an opportunity for firms like KKR (which also runs a lending business aside from its private equity operations) because big banks are less likely to make as many loans now as they were before the global financial crisis.
The trends come at a time when there is growth in negative-yielding credit elsewhere, which is tied to central banks driving yields to new lows. Even KKR is downshifting its expectations for interest rate hikes in the U.S.; McVey wrote that the firm is cutting 2016 hike expectations from two to zero, and from four to three in 2017.
Nevertheless, it looks like McVey is ready for more rate hikes.
"In our humble opinion, we may have reached an inflection point where central banks have gone too far with their unconventional policy tools," he wrote.