KKR Credit Income Fund · ASX:KKC

KKR Credit Income Fund — Investor Presentation (January 2021)

21 slides from KKR Credit Income Fund's investor presentation, Jan 29, 2021

  1. Slide 1: Presentation accompanied video recording

    For personal use only The following presentation deck accompanied a video recording. To view the video recording please visit the KKC website - www.kkcaustralia.com.au 1

  2. Slide 2: KKR Credit Income Fund Market Update January 2021

    For personal use only KKR Credit Income Fund Market Update January 2021

  3. Slide 3: Important Information

    Important Information You must read this notice before reading or making any use of this Document or any information contained in this Document. By continuing to read, use or otherwise act on this Document, you agree to be bound by the following terms and conditions, including any modifications to t

  4. Slide 4: Agenda

    Agenda For personal use only 1. KKC Performance Update 2. Update on KKC Structure Optimization 3. Market Update 4. KKC Portfolio Overview 5. Key Takeaways 3

  5. Slide 5: KKC Performance Update

    KKC Performance Update For personal use only KKC NTA Since Inception 2.60 2.45 2.40 2.26 2.20 2.00 1.91 1.80 1.60 1.40 1.25 1.20 1.00 21-Nov-19 28-Nov-19 05-Dec-19 12-Dec-19 19-Dec-19 26-Dec-19 02-Jan-20 09-Jan-20 16-Jan-20 23-Jan-20 30-Jan-20 06-Feb-20 13-Feb-20 20-Feb-20 27-Feb-20 05-Mar-20 12-Mar

  6. Slide 6: Update on KKC Structural Optimization

    Update on KKC Structural Optimization Background For personal use only • KKC is improving some of the “financial plumbing” in order to lower cost and increase flexibility • KKC currently holds two fund positions; one in GCOF and the other in EDL. Solution • Convert KKC’s holding in GCOF into a separ

  7. Slide 7: There Has Been No Shortage of Headlines

    There Has Been No Shortage of Headlines March 10, 2020 October 2, 2020 December 14, 2020 For personal use only March 31, 2020 September 18, 2020 January 6, 2021 August 11, 2020 August 21, 2020 January 8, 2021 Source: The Wall Street Journal, The New York Times, The Washington Post, Los Angeles Times

  8. Slide 8: It's Been An Eventful Months

    It’s Been An Eventful 12 Months Steepening Yield Curve(3) New Cases of COVID-19 Continue to Rise(1) For personal use only 600,000 10 Year YTM 2 Year YTM While Vaccine 2.0% 500,000 Deployment Continues to 400,000 1.5% Lag Behind Expectations 300,000 … 1.0% 200,000 ~34% Of Doses 100,000 0.5% Distribut

  9. Slide 9: Spreads in the Market Have Tightened Since the March Selloff

    Spreads in the Market Have Tightened Since the March Selloff High Yield – Spread to Worst(1) For personal use only 2500 2000 1500 1000 500 0 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Dec-19 Dec-15 Sep-16 Dec-16 Sep-17 Dec-17 Sep-18 Dec-18 Sep-19 Sep-20 Dec-20 (2) HY Index

  10. Slide 10: Credit Looks Attractive vs. Other Asset Classes

    Credit Looks Attractive vs. Other Asset Classes Yield Across Various Asset Classes over time(1) Yield Across Various Asset Classes(1) For personal use only 25 8.00% 20 6.00% 5.0% Yield to Maturity (%) Yield to Maturity (%) 4.7% 15 4.00% 3.3% 10 2.00% 1.8%1.8% 1.7% 5 1.1% 0.6% 0.00% 0 REIT US Treasur

  11. Slide 11: 2020 Was a Year of Winners and Losers

    2020 Was a Year of Winners and Losers Reinforcing The Importance Of An Active Approach For personal use only 2020 High Yield Returns 15% 10% 19% Range 5% Between Top 0% And Bottom Performing Sector -5% -10% Utility Insurance Media Leisure Banking Automotive Healthcare Retail Capital Goods Energy Ser

  12. Slide 12: 2020 Was a Year of Winners and Losers…

    For personal use only 0% -80% -60% -40% -20% 20% 40% 60% Integrated Energy Printing & Publishing Food & Drug Retailers Telecom - Wireless Auto Loans Food - Wholesale Specialty Retail Diversified Capital Goods Insurance Brokerage Metals/Mining Excluding Steel Software/Services Tech Hardware & Equipme

  13. Slide 13: …Which Enhances the Importance of Credit Selection

    For personal use only % 0 50 100 150 200 300 250 2-Jan 8-Jan 14-Jan 20-Jan 24-Jan 30-Jan 5-Feb 11-Feb 17-Feb 21-Feb 27-Feb 3-Mar 9-Mar 13-Mar 19-Mar 25-Mar 31-Mar 6-Apr 13-Apr 17-Apr 23-Apr 29-Apr 5-May 11-May 15-May 21-May 27-May 1-Jun 5-Jun 11-Jun 17-Jun 23-Jun 29-Jun 3-Jul 9-Jul 15-Jul 21-Jul 27-

  14. Slide 14: Volatility is the New Normal

    Volatility is the New Normal High Yield Daily Standard Deviation (30-Day Moving Windows) For personal use only 30% 25% 20% 15% 10% 5% 0% May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 May-20 Nov-20 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 Au

  15. Slide 15: GCOF has Outperformed Following Periods of Volatility

    GCOF has Outperformed Following Periods of Volatility KKR OCS Rolling 12-Month Alpha and High Yield Credit Spreads For personal use only 2500 25% 20% 2000 15% 1500 10% 1000 5% 500 0% 0 -5% May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15

  16. Slide 16: Returns Not Dependent on Market Direction

    Returns Not Dependent on Market Direction OCS Monthly Returns versus the BAML HY Master II since inception 112% For personal use only Up Capture since 5.0% Inception(1) 4.0% High Up Capture in Strong Market Months 78% 3.0% Opp Credit Gross Monthly Returns Outperformance in Market 2.0% Down Months Do

  17. Slide 17: Dispersion Dissipates Quickly As The Market Constantly Evolves

    Dispersion Dissipates Quickly As The Market Constantly Evolves Markets Will Change Rapidly And The Resulting Investment Opportunities Are Often Brief And Fleeting; Successfully Investing In These Moments Requires Nimble And For personal use only Flexible Capital To Execute On Time Sensitive Opportun

  18. Slide 18: GCOF Portfolio is Not the Index

    GCOF Portfolio is Not the Index Reinforcing The Importance Of An Active Approach For personal use only GCOF Yield to Worst (“YTW”) v. High Yield Index YTW (% of Issuers) 60% 50% 40% 30% 20% 10% 0% <4% 4 to 5% 5 to 6% 6 to 7% 7 to 10% >10% HY Index GCOF Source: KKR Credit Analysis and ICE BofAML US H

  19. Slide 19: KKC - Current Portfolio Positioning

    KKC - Current Portfolio Positioning For personal use only SENIOR vs. SUBORDINATED FLOATING vs. FIXED ASSET TYPE DIVERSIFICATION 3% 8% 4% 36% 27% 43% 57% 66% 56% Senior Secured Senior Unsecured High Yield Bonds Bank Loans Other % Floating Rate % Fixed Rate Subordinated Other SECTOR DIVERSIFICATION RA

  20. Slide 20: The Opportunity

    The Opportunity Value in ‘No Man’s Land’ by Providing Liquidity Where Others May Not Go For personal use only Market Buyers No Man’s Land Absolute Return Buyers 110% 100% Illustrative Bond Price 90% 80% 70% 60% 50% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Illustrative Return Note: For illustrative pur

  21. Slide 21: Key Takeaways

    Key Takeaways • KKC’s NTA has almost recovered to its issue NTA. Discount to NTA continues to narrow For personal use only • KKC is currently undergoing a structural optimization that could lead to lower cost and increased flexibility • 2020 was a year of winners and losers, illustrating why credit

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