KKR to launch democratized products for PE and infrastructure

The firm plans to expand retail offerings across all its asset classes in an attempt to fill the 'white space' in the market, says head of investor relations Craig Larson.

KKR is set to roll out private equity and infrastructure-focused products for individual investors in the coming months, the firm revealed in its second-quarter earnings call on Tuesday.

“You’re going to see more innovation here. We expect over the coming two or three quarters we will have launched democratized infrastructure and PE strategies, and we expect to see those launched quite broadly both in the US as well as internationally,” Craig Larson, partner and head of investor relations at the firm, said on the call accompanying the earnings results.

Larson noted that democratized products across the industry have mainly been focused on real estate and credit. KKR intends to expand offerings into other asset classes and fill that white space, he said.

Assets under management from KKR’s wealth channel stood at $5.7 billion as of end-June this year, from $3.5 billion a year ago, Larson added. The GP’s senior executives have said in previous earnings calls that they expect new capital raised from individuals to make up roughly one-third of all inflows in the medium-term.

The retail channel is a strategic focus for the New York-headquartered firm; it has been hiring distribution talent and making investments in headcount and sales over the last 18 months. In March 2021, it invested in online fundraising giant iCapital and offered accredited investors on the fintech platform access to its portfolio of private markets strategies.

Another notable update from the Q2 earnings call is the firm’s decision to split private markets into two business lines: private equity and real assets.

The PE business line comprises traditional PE, core PE and growth strategies, while real assets includes real estate, infrastructure and energy.

“The driver of these changes is the growth and increasing significance of our real assets business. KKR today is a meaningfully more diversified firm by strategy and by geography than it was only a few years ago,” Larson said.

Real assets under management grew fourfold from $28 billion in 2019 to $114 billion as of end-June 2022. At the same time, the firm’s PE AUM has grown from $92 billion at the end of 2019 to $172 billion as of the end of the second quarter, driven by inflows from its flagship PE funds, as well as the scaling of its core PE and growth strategies.

“Real assets is a larger and larger part of our firm, so we thought it was time to break it out… But no change in focus,” Scott Nuttall, co-chief executive officer of KKR, said on the call.

KKR raised $25 billion of new capital across strategies during the quarter, according to earnings materials. That compares with $59 billion in Q2 2021.

Gross returns for the firm’s traditional PE portfolio were -7 percent in the second quarter and 4 percent over the last 12 months.

KKR’s AUM as of end-June was at $491 billion, up 14 percent from the previous year.