Conflicts of Interest in Buy-out Vehicles

The booming demand for investing in 'Private' Equity funds allowed a few of the more prominent Buy-out firms to launch listed closed-end funds. One has to assume that the shares on offer were mostly bought by smaller institutions as well as retail investors that would otherwise not have been able to get into the funds that are launched by the major players in the industry.

Apart from the poor aftermarket performance of the shares (not surprisingly they now trade at a discount to net asset value) we are concerned about how large firms like KKR can manage the conflicts of interest if they continue to manage traditional funds that are mostly placed with their regular institutional investors.

The only fair method would be to allocate new holdings between the various funds under management, ideally pro-rata on the basis of the individual fund's total assets.