KKR near $12 bln for 12th flagship as fundraising remains strong

Kohlberg Kravis Roberts & Co approached the $12 billion hard cap on its flagship Americas Fund XII in the third quarter as part of $1.9 billion in new capital raised in its private markets business amid a healthy fundraising environment.

The firm expects to start deploying Fund XII early next year, with Fund XI now about 75 percent deployed.

“The fundraising environment remains very strong and a good one for us,” Scott Nuttall, head of the global capital and asset management group, said on the firm’s Oct. 25 conference call with Wall Street investors.

“We’ve got a lot of different products that we are talking to investors about. And the overall backdrop is great. I would say people are looking for places to invest to generate returns and, in particular, yield. And that plays to our strengths, and we are seeing more allocations to alternatives and investors looking to do more.”

The firm said it’s wrapping up its Americas Fund XII, its second opportunistic real estate fund, its second private credit opportunities fund as well as two products in growth equity. It’s also fundraising for its real estate credit strategy as well as taking aim at direct lending in Asia.

Nuttall said KKR decided against raising a China Growth II Fund, which would have been the successor to the 2010 China Growth Fund, which raised $1 billion.

The firm will instead focus on investments in the region from its Asian Fund III, the successor to the vintage 2013 Asian Fund II, which drew in $5.8 billion in commitments.

“The China Growth vehicle that we had created, we think, is performing nicely,” Nuttall said. “But we’ve seen a significant increase in competition at the smaller end of transactions in China and have decided … to focus our efforts where we think the puck is going, which is around some of the larger transactions on a go-forward basis, which would be coming out of Asia III.”

KKR’s funds turned in a strong performance in the quarter, with a 23 percent gain in its Asia II fund, an 18 percent jump in its Europe III pool and a 16 percent rise in North America XI.

The firm deployed more than $3.7 billion in capital, even while dry powder increased 40 percent to $38 billion. KKR has raised $28 billion in the past year across its platform.

KKR is committing 8.3 percent of the capital for Fund XII, its largest contribution to its private equity funds currently investing. By contrast, the firm committed 5.7 percent of the capital for its $3.5 billion European Fund IV and 2.9 percent of North America Fund XI, which raised $8.7 billion in 2012.

Henry Kravis and George Roberts, co-chairmen and co-CEOs, said in a statement that “strong underlying fundamentals across fundraising, deployment, exit activity and investment performance” drove the firm’s earnings.

The firm said its after-tax economic income swung to $598 million from a loss of $331.1 million in the year-ago period.

Action Item: KKR’s Q3 results: www.businesswire.com/news/home/20161025005276/en/

Photo of Scott Nuttall courtesy of KKR