KKR’s AUM Jumps $4B On Big Asia Fund

  • KKR’s NAXI Fund Reaches $8 billion
  • Firm in market for real estate fund
  • Cites high prices of targets

KKR reached $8 billion in its flagship KKR North American Fund XI and confirmed that it is currently in the market for two other new funds, one targeting real estate, and another for royalty and drilling investments in the energy sector.

Scott Nuttall, head of global capital and asset management at KKR, said fundraising efforts for new vehicles typically take in about $1 billion, and estimated that these two funds could be in that ball park. He also said KKR is planning an a second infrastructure fund and is mulling a second generation of originated credit strategy funds.

Reflecting on the current macro environment after wrapping up its second quarter on June 30, Nuttall said KKR continues to see an “improving” economy, adding that the firm is well positioned to deal with a widely expected increase in interest rates.

Asked about a lack of merger and acquisition activity overall among buyout firms, Nuttall said, “It’s down to price.” But he added that the firm is seeing more deals in the pipeline as the year unfolds.Nuttall said KKR has been active in the energy, healthcare and industrial sectors, as it is looking at fresh deals in retail and financial sectors.

Overall assets under management rose 8 percent to $54.5 billion at the end of the second quarter, driven mostly by new capital raised for Asian Fund II, with limited contributions from appreciation in fair value of KKR’s private equity portfolio. The Asian Fund II marked the largest ever pan-Asian private equity fundraise, the firm said.

Henry Kravis, co-founder of the firm, said in a prepared statement the firm’s realization activity in the second quarter drove the highest cash carry KKR has reported since going public — contributing to a quarterly distribution of 42 cents per unit, up sharply from 27 cents per unit in the first quarter and 13 cents per unit in the year-ago period.

Overall, KKR’s second-quarter earnings dropped by 74 percent to $144 million from $546 million in the year-ago period because its private equity portfolio growth fell sharply to 0.9 percent, from a growth rate of 5.1 percent a year ago.

Buoyed by fresh capital and its acquisition of hedge fund unit Prisma Capital Partners LP, KKR’s fee-related earnings moved up to $98.2 million from $69.8 million a year ago.