Investors have long coveted hot initial public offerings. But access to the biggest IPOs usually requires big money and insider connections. However, a deal between Fidelity Investments and Kohlberg Kravis Roberts & Co. may change that.

The companies are reportedly near a deal to give some of Fidelity's 20 million individual and institutional clients access to IPOs by the stable of companies in which KKR has made private equity investments.
The alliance could help both companies, The Wall Street Journal reported today. KKR wants to use its own capital markets unit to underwrite offerings by its portfolio companies. That could be a boon to the private equity giant; after all, the investment banks that usually act as middlemen in such transactions don't do so for free. And Fidelity could win new customers eager to buy what could become the next big stock as soon as possible.

Even so, the move carries risks for both companies. For KKR, underwriting its own portfolio companies' IPOs could anger the investment banks being cut out of the loop and make it harder to get merger advice, sell debt or do other kinds of deals. Meanwhile, Fidelity could face a backlash if its customers start losing money on KKR IPOs that flop.

Indeed, IPO stocks are riskier to invest in than shares of more established companies. They're tougher to value and prone to big fluctuations in price. But their record this year has been decent, to say the least: Four of the last five companies to go public are trading well above their IPO prices. And Renaissance Capital's index of recent IPOs is 27 percent higher this year, outperforming broad market measures.

Still, KKR and Fidelity's pact may not truly bear fruit until the IPO market comes back to life. And that's unlikely to happen before the big issues facing Wall Street and the economy are mended.

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