Beyond S&P 500: KKR Flags Asia, Biotech, Infrastructure As Next 'High-Grade' Trades For 2026

Investment giant KKR & Co. Inc. (NYSE:KKR) is advising investors to look past the crowded trades of the U.S. large-cap market for the next phase of growth.

In its “High Grading” Outlook for 2026, the firm argues that while the S&P 500 valuations appear stretched, significant opportunity remains for those willing to diversify into Asian corporate reforms, a resurgent biotechnology sector, and critical infrastructure.

Asian Reform Trade

KKR identifies a structural shift in Asia as a top conviction for 2026, driven by corporate governance overhauls rather than pure economic growth.

The report highlights Japan and South Korea as standout opportunities where companies are shifting from “capital heavy to capital light” models to unlock shareholder value.

Despite 50% gains in 2025, 70% of the Korean market still trades below book value, compared to 40% in Japan and less than 7% in the U.S. KKR views these markets as mispriced relative to their reform potential, offering a “High Grade” alternative to expensive U.S. equities.

Here’s how Asian benchmark indices have performed in 2025.

Indices	YTD Performance	One-Year Performance
Kospi Index	71.20%	68.28%
Hang Seng Index	31.57%	28.46%
Nikkei 225 Index	28.10%	28.99%
CSI 300 Index	21.19%	16.22%
S&P 500 Index	17.74%	14.40%
Nasdaq Composite Index	22.20%	22.20%
Dow Jones Index	14.27%	11.88%

See Also: Top AI Infrastructure Stocks For 2026 Industrial Super-Cycle

Biotech: Innovation At Discount

After years of underperformance, biotechnology is flagged as one of the most attractive entry points in public markets.

KKR views the sector as a “secular growth story” bolstered by aging demographics and, crucially, the integration of AI into the drug development process.

With large pharmaceutical companies facing patent cliffs and seeking AI-driven pipelines, the report suggests biotech offers innovation-led growth comparable to the broader tech sector but at far more compelling valuations.

Here’s a list of a few biotech ETFs for investors to consider.

Biotech ETFs	YTD Performance	One-Year Performance
State Street SPDR S&P Biotech ETF (NYSE:XBI)	36.45%	35.78%
iShares Biotechnology ETF (NASDAQ:IBB)	29.49%	28.48%
ARK Genomic Revolution ETF (BATS:ARKG)	23.22%	24.65%

Infrastructure: Cooling The AI Boom

While cautious on speculative data center projects, KKR is bullish on the “picks and shovels” required to power the digital economy—specifically HVAC and cooling systems.

AI training clusters require exponentially more cooling capacity than traditional offices, driving a sustained upcycle in electrical capital expenditures.

Additionally, the firm points to U.S. Liquefied Natural Gas (LNG) as a multi-year structural winner, driven by energy security demands from Europe and Asia.

Here’s a list of a few infrastructure ETFs for investors to consider.

Infra ETFs	YTD Performance	One-Year Performance
Global X US Infrastructure Development ETF (BATS:PAVE)	22.11%	18.81%
iShares Global Infrastructure ETF (NASDAQ:IGF)	17.24%	17.80%
iShares US Infrastructure ETF (BATS:IFRA)	15.27%	14.92%

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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