KKR secures $5.8b first close on third Asian fund

The first close took place on March 31, according to sources familiar with the situation. It was originally scheduled for March 15, but with the expectation that the total be smaller – nearer to half the hard cap.

A private placement memorandum for the new vehicle was issued in early November, with a target of $7 billion. The hard cap and the sizeable first close 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.

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. For the firm’s $1 billion China growth fund – raised in 2010 – they were 7.8% and 1.4x.

The PE firm has announced or completed four investments in the past month, most of which represent Fund II commitments. Two tender offers for Japanese companies – a JPY498.3 billion ($4.5 billion) offer for auto parts maker Calsonic Kansei Corporation and a JPY147.1 billion deal for power tools player Hitachi Koki – closed within hours of one another on March 23. The capital for these investments will primarily come from Fund II.

Subsequent to that, KKR and Canada Pension Plan Investment Board (CPPIB) paid INR62 billion ($953 million) for a 10.3% stake in the cell tower arm of Indian telecom services provider Bharti Airtel. And then this week, the GP agreed to invest $100 million Masan Group and $150 million in the Vietnamese conglomerate’s meat industry subsidiary. The India deal includes contributions from Asia Fund II, KKR's latest global infrastructure fund and other vehicles, while Masan is solely a Fund II investment.

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