KKR sets $8.5b hard cap for Asia fund, schedules first close

A private placement memorandum for the new vehicle was issued in early November, with a target of $7 billion. The hard cap – confirmed by multiple sources familiar with the situation – could be seen as a barometer of LP interest in the fund, and on a broader level, the demand for Asian exposure from large institutional investors. KKR, which announced a final close of $13.9 billion on its latest North America fund earlier this week, declined to comment on the Asia fundraising.

The LP roster for KKR Asian Fund III includes Minnesota State Board of Investment, which approved a commitment of up to $150 million. This represents the pension fund’s first commitment to a KKR Asian fund, and also its first to any vehicle dedicated to the region. Meanwhile, Louisiana State Employees’ Retirement System is said to have agreed to invest $50 million in the fund.

KKR closed its second fund at $6 billion in mid-2013. According to the private equity firm’s most recent annual report, the fund had generated a net IRR of 21.9% and a multiple of 1.6x as of December 2016. The IRR and multiple for Fund I, which closed at $4 billion in 2007, were 13.6% and 2.2x, while for the firm’s $1 billion China growth fund – raised in 2010 – they were 7.8% and 1.4x.

Last July, KKR announced a full exit from Fund II portfolio company Gland Pharma, as Shanghai Fosun Pharmaceutical agreed to pay up to $1.26 billion for the business, generating proceeds of $576.3 million for the PE firm. Then in November Mitsui & Co. paid JPY54.1 billion ($510 million) for a 22% stake in Panasonic Healthcare. Another Fund II investee, COFCO Meat, went public in Hong Kong.

There have also been investments in two Indonesian companies, agri-food business Japfa Comfeed and ride-hailing and delivery platform Go-Jek, and the GP is engaged in take-private bids for two Japanese groups. In November, KKR agreed to buy Nissan Motor’s controlling position in Calsonic Kansei Corporation and launched a JPY498.3 billion offer for the entire company. It then struck a similar deal involving Hitachi Koki.

The fundraise comes amid a degree of senior team turnover. David Liu and Julian Wolhardt, who led KKR’s China business, have departed to start their own PE firm, with Paul Yang, CEO of China Development Financial Corporation, coming in as head of Greater China. Meanwhile, Ashish Shastry, managing partner at Northstar Group, has joined as head of Southeast Asia.

KKR’s second fund remains the largest pool of private equity capital ever raised for Asia, but several other managers – such as Baring Private Equity Asia, RRJ Capital, Bain Capital, PAG Asia Capital and MBK Partners – have seen a substantial step up in fund size on their previous vintages. TPG Capital is also currently in the market, seeking between $4 billion and $4.5 billion for its seventh Asian fund.

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• Topics
• Fundraising
• Buyout
• GPs
• LPs
• KKR
• Asia