KKR’s McVey Says Avoid Government Bonds for Riskier Investments

Jan 13, 2014 12:28 pm ET

Jan. 13 (Bloomberg) -- Henry McVey, head of global macro and asset allocation at private-equity firm KKR & Co., said he likes riskier assets and is avoiding government and investment- grade bonds.

“I think you’re going to be compensated for going out on the risk curve, particularly how it relates to fixed income around the credit arena,” McVey said in a Bloomberg Television interview today with Erik Schatzker and Stephanie Ruhle. “Government bonds pose among the greatest risk in the market. You can use that capital to go elsewhere.”

McVey, who joined New York-based KKR from Morgan Stanley in 2011, said traditionally “safe” investments in government and investment-grade debt won’t produce sufficient income or provide enough of a buffer to market shocks as they did prior to 2013. In the emerging markets, McVey said he likes Mexico and Korea, and he expects China to perform better this year than last year.

Gross domestic product in Europe will expand about 1.2 percent this year, McVey said, and he expects peripheral countries such as Ireland and Spain to grow faster. KKR is taking advantage of a recovery in Europe by raising money to invest in distressed companies. The firm last year agreed to acquire credit manager Avoca Capital to fill the lending void left by banks hampered by heightened regulations.

--Editors: Sree Vidya Bhaktavatsalam, Josh Friedman