KKR’s Scott Nuttall: regulatory change “a positive” for large PE incumbents

“Our job,” Nutall said, “is to react to what the regulators talk to us about and so far we actually think it has been long-term helpful to our business.”

KKR is unfazed by SEC initiatives aimed at making private equity more transparent, believing changes may instead be beneficial to industry giants like itself.

“I think the level of regulatory scrutiny of our space is probably a positive for larger players that are more institutional,” co-CEO Scott Nuttall said in the firm’s fourth-quarter 2021 earnings call.

“There are aspects of how the regulatory environment has developed that I think the barriers to entry in our space have gone up,” he said. “And that’s good for incumbent players.”

Nuttall was replying to a question about KKR’s view of regulatory options floated by SEC chair Gary Gensler. Unveiled last year, these options touch on key issues of interest to GPs and LPs alike. They include everything from transparency of fees and expenses and the use of side letters to the potential need for greater public oversight of a fast-growing asset class.

In January, the SEC took a major first step in its transparency agenda, Buyouts reported. It proposed dramatically enhanced disclosure rules that would compel PE firms to share more information about things like GP-led secondaries deals, GP and LP clawbacks and key-person events.

None of this seems to alarm Nutall. “Nothing that we see I would call out today,” he said. “Our job is to react to what the regulators talk to us about and so far we actually think it has been long-term helpful to our business.”

Nuttall last October assumed KKR’s top leadership alongside co-CEO Joe Bae with the stepping down of storied co-founders Henry Kravis and George Roberts. In the earnings call, he and other executives highlighted KKR’s solid performance in 2021, including on the fundraising trail.

KKR reported amassing a record $121 billion in fresh commitments across its flagship strategies last year, $19 billion of which came in from October to December. This helped increase managed assets to $471 billion, up 87 percent from 2020.

Fourth-quarter activity added capital to KKR’s 13th flagship buyout offering. As a result, KKR North America Fund XIII secured more than $17.7 billion as of year’s end, well ahead of a $14 billion target. The vehicle, which appears to remain open, is now the largest in the firm’s 46-year history, exceeding the $17.6 billion KKR Associates 2006 Fund.

KKR also in this period closed a second healthcare growth equity fund at $4 billion, 3x the size of its predecessor.