The forecast would be equivalent to at most two quarter-point rate hikes over the next four years.
KKR has $131 billion in assets and is the second-largest PE fund in the world, according to Private Equity International. Though the firm's total assets surged 14 percent through the first half of 2016, its shares have performed poorly, down 3 percent year to date and more than 22 percent over the past 12 months.
The lower-for-much-longer view meshes fairly well with traders in the fed funds futures markets, though it is in substantial conflict with Fed projections.
In June, Federal Open Market Committee members estimated that the policy rate would be at 2.4 percent in 2018, with 3 percent the longer-run level. The projections spanned a wide range, with one member estimating the rate could be just 0.6 percent in 2018, though most coalesced in the 2 percent to 3.4 percent range.
Traders, conversely, see the funds rate at just 0.84 percent in August 2019, compared with the current 0.4 percent. At present, the chance of a September move is 21 percent, moving to 25.9 percent for the November meeting and 50.6 percent in December, according to CME calculations.
The Fed has been loathe over the years to surprise markets, and traders are betting that won't change.
"Against this backdrop, we think that the asset allocation implications of our thesis are quite significant for long-term investors," McVey wrote. "Specifically, we think that the opportunity for a traditional 60/40 equity/bond strategy to achieve a 7 or 8 percent return for its constituents is now quite limited."
The investment ramifications are significant under that scenario.
Pensions funds will continue to struggle to achieve their traditional expected returns, and investors will need to begin focusing away from domestic stocks for returns, McVey said.
The firm is advocating a five-pronged approach: yield and growth; avoiding investments tied to Chinese growth and focusing instead on its exports; focusing on large U.S. domestically focused companies; providing liquidity to nonbank lending operations; and "increasing exposure to complex stories, including earnings misses, restructurings, and/or corporate repositionings."
"The good news, we believe, is that dislocations and distractions create opportunity for our approach to investing," McVey added.