KKR closes third Asian fund at $9.3b

Asian investors account for 24% of the corpus in dollar terms, according to a source familiar with the situation. The Americas share is 53% with the rest coming from Europe, the Middle East and Africa. Significant disclosed LP commitments are from the likes of New York State Common Retirement Fund, Minnesota State Board of Investment, Washington State Investment Board, and New York State Teachers’ Retirement System.

The private placement memorandum for KKR Asian Fund III was issued in early November with a target of around $7 billion. Following strong initial demand from investors, the institutional hard cap was set at $8.5 billion and the GP completed a first close of $5.78 billion at the end of March. The final total includes $500 million from KKR’s balance sheet and $300 million from employees of the firm – together they represent the second-largest internal commitment ever made to any KKR fund.

"The Asia market offers many compelling investment opportunities in private equity given its secular growth and attractive valuations,” Joe Bae (pictured left, with KKR co-founder Henry Kravis and Ming Lu, head of Asia private equity), KKR’s managing partner for Asia, said in a statement. “This flagship fund is a testament to KKR’s ability to drive meaningful growth and value creation in our investee companies as a partner of choice to leading Asian businesses, families and management teams.”

The sizeable and rapid fundraise is also indicative of the level of interest in private equity generally, and Asia specifically, from large institutional investors. GPs including Baring Private Equity Asia, RRJ Capital, Bain Capital, PAG Asia Capital and MBK Partners have all achieved final closes on regional vehicles in approximately the last two years – and each one saw a big step-up in fund size on the previous vintage.

KKR closed its second fund at $6 billion in mid-2013. As of March, the fund had generated a net IRR of 20.6% and a net multiple of 1.5x. The IRR and multiple for Fund I, which closed at $4 billion in 2007, were 18.9% and 1.8x.

Since opening its first office in Asia Pacific in 2006, KKR has committed more than $12 billion to private equity investments in the region, backing approximately 55 companies across 10 countries. Fund III will be deployed by around 60 investment professionals – supported by KKR Capstone, the firm’s operations division, and KKR Capital Markets – based in offices in Beijing, Hong Kong, Mumbai, Seoul, Singapore, Sydney, and Tokyo.

The firm has invested more than $2.5 billion in equity over the last 18 months. Japan has been particularly busy recently, with the firm closing two tender offers – 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 – in March. Since then, KKR has teamed up with Japan Industrial Partners and Hitachi on a third tender offer worth JPY257.1 billion for Hitachi Kokusai Electric.

In the last three months the private equity firm has also invested INR62 billion ($953 million) in the cell tower arm of Indian telecom services provider Bharti Airtel, alongside Canada Pension Plan Investment Board (CPPIB), and announced a $100 million commitment to Masan Group and a $150 million investment in the Vietnamese conglomerate’s meat industry subsidiary. All of these deals are primarily Fund II investments.

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• Topics
• Fundraising
• Buyout
• Greater China
• North Asia
• South Asia
• Southeast Asia
• Australasia
• KKR
• GPs
• LPs
• Joseph Y. Bae