Buyout major KKR & Co expects to raise close to $100 billion for its three largest funds and other strategies over the next three years, the firm’s co-president and co-CEO Scott C. Nuttall said.
Speaking during the firm’s third-quarter 2019 earnings call on Tuesday, Nuttall said KKR will launch fundraising for its flagship Asia and Americas private equity funds and a global infrastructure fund over the next 12 months.
Further, going forward, KKR will also launch more than 20 additional strategies, including Asia Infrastructure, Technology Growth, Healthcare Growth, Opportunistic Asia RE, Asia Private Credit, and Private Credit Opportunities.
KKR raised $94 billion in the last three years outside of its big three funds. The firm now expects to exceed that number over the next three years with the launch of major funds and the additional strategies. The firm’s three largest funds aggregated $30 billion in their last vintage.
The three private equity flagship funds posted a combined 26 per cent gross returns in the last 12 months, surpassing funds focused on real assets, alternative credit, and leveraged credit.
KKR’s last Asia PE vehicle was a $9.3-billion fund in 2017. It remained the largest buyout fund focused on this region until it was surpassed by Hillhouse Capital’s $10.6-billion vehicle in September 2018.
KKR Global Infrastructure Investors III closed in 2018 at $7.4 billion, while KKR Americas XII Fund raised $13.9 billion when it closed in 2017.
Nuttall said KKR’s management fees have grown 50 per cent over the last three years from about $800 million to $1.2 billion.
“So given what’s coming to market, plus our ongoing distribution efforts, if the fundraising environment cooperates and we continue to perform, we believe we can grow our management fees by at least 50 per cent, again over the next three years,” Nuttall said.
Additionally, he said KKR’s investor base grew from 275 investors 10 years ago to over 1,000 at present. He also pointed out that 18 of the firm’s current 22 investment strategies were launched in the last 10 years.
“As we continue to generate investment performance, mature our track records, expand our distribution footprint and create new products, we see significant growth ahead,” Nuttall added.
In Asia, the firm has beefed up its presence by adding Kate Richdale from Goldman Sachs to lead new investment strategies. It had appointed John Pattar from CLSA Capital Partners and David Luboff from Macquarie Group to head its real estate and infrastructure investing platforms, respectively, in July.
The buyout major had in July announced an initial close for its first Asia real estate fund without revealing the fund size or how much it raised for the first close. The firm’s first Asia realty fund is said to target a $1.5-billion corpus.
During the earnings call Tuesday, the firm reported a 23 per cent year-on-year drop in its quarterly after-tax distributable profit, as fee revenue slid amid a broader slowdown in asset sales by buyout firms.
KKR said after-tax distributable earnings, the cash available for paying dividends, fell to $388.8 million in the third quarter, from $496.7 million a year earlier.
Meanwhile, the firm is raising its second fund dedicated to growth equity investments in technology, media and telecommunications, Bloomberg has reported. The fund, which is expected to close by the end of this year, is about thrice the size of its debut growth fund; KKR Next Generation Technology Growth Fund had raised $714 million in 2016.
KKR and other big buyout firms are increasingly seeking to make early investments in startups. In September, DealStreetAsia had reported that the PE major is considering a move to ramp up its focus on early-stage investing, with plans to raise over $300 million for a technology, media, and telecommunications (TMT) fund for the region.
In Southeast Asia, the firm has backed startups such as aCommerce, Voyager and PropertyGuru.