Superior, leveraged risk-adjusted returns. A multi-asset class strategy. Value-oriented, and credit and liquidity focused. A combination of “top-down” and “bottom-up” analysis. These are the characteristics that begin to define our investment strategy — but only begin.

As long-time, experienced investors, we recognize that sectors in favor today will very likely be out-of-favor tomorrow, and vice versa. We also believe that capital flows have a tremendous impact on business performance over the long term, and if you have an illiquid portfolio, you cannot take advantage of these opportunities. With this in mind, we are opportunistic and patient in identifying investments that meet our leveraged risk adjusted return requirements. Our goal is to maximize shareholder returns, and always preserve shareholder value. How do we achieve that? By executing on new ideas, building strategic relationships, and continuously evolving, we believe we can expand our platform and create solid value for the company and our shareholders.

Key Investment Factors and Principles
We conduct a rigorous and ongoing analysis of current and potential investments that focuses on five major factors: credit standards, management quality, valuation, relative asset class valuation, and our views on macroeconomic conditions.  Building on these factors, we are guided by the following key principles:

Credit Philosophy: We have an intense focus on it as part of our ongoing analysis of each investment opportunity — this includes anticipating credit performance by analyzing the competitive environment and industry dynamics.

Fundamental Investing vs. Momentum: We are driven by company and investment fundamentals, rather than “momentum” driven investments.

Multi-Asset Class Strategy: We invest in multiple classes of assets that allow us to rotate sectors as industry and economic factors dictate to generate the highest risk-adjusted returns possible under our operating and tax model. [See chart to the right that highlights asset mix.]

Investment Targets: Consistent with the above principles, we target our KFN investments to companies that meet the following requirements:

• Operate with a clear and understandable business model
• Proven, ethical management team
• Demonstrated ability to generate free cash flow and competitive returns on capital
• Sustainable margins
• Ability to withstand various economic environments
• Sustainable competitive advantages
• Favorable long-term industry trends
• Sufficient liquidity

Investment Process
We have a deliberate, collaborative, and highly disciplined investment process. It is a parallel process that involves both debt and private equity analysts and industry teams working together to create a portfolio that is designed to provide shareholders with competitive returns. For each proposed investment, our manager’s investment committee reviews each of our investment memoranda and all related financial projections.