
KKR to raise Asia growth fund in 2022
KKR expects to raise a growth-stage fund in Asia – first flagged more than two years ago – in 2022 as part of ongoing efforts to boost its presence in the region across multiple strategies.
Speaking on a fourth-quarter earnings call, CFO Robert Lewin identified Asia as one of four key themes in fundraising. In addition to the growth fund, there are plans to raise new capital for Asia-dedicated vehicles in infrastructure, real estate, and credit. Final closes on the most recent infrastructure and real estate funds, of USD 3.9bn and USD 1.7bn, were announced in January 2021.
KKR’s assets under management (AUM) in Asia have risen from USD 20bn to USD 42bn in the past two years, primarily through the core private equity strategy. The firm closed its fourth pan-regional fund on USD 15bn in April 2021. It is the largest US dollar-denominated PE vehicle raised for Asia.
The firm has a growth equity team that works alongside professionals from different strategies across the region. In December 2021, Mukul Chawla, formerly of Temasek Holdings, was appointed to the newly created position of partner and head of growth equity for Asia Pacific.
To date, most growth-stage investments – typically in the technology sector – have come from the main pan-regional funds. Asia Fund IV has an opportunistic bucket that serves this purpose. Recent additions include Moody, a China-based cosmetic contact lens brand, Vietnam software developer KiotViet, and Lenskart, an Indian eyewear retailer, and China dairy player Adopt A Cow.
Most of KKR’s regional peers take a similar approach as they scale up activity in the growth-stage technology space. Baring Private Equity Asia, for example, expects 10% of its latest fund to be deployed in growth-stage deals.
However, Hillhouse Investment, the buyout and growth capital unit of Asia-focused Hillhouse Group, has split its latest vintage into three separate strategies - buyout, growth, and venture. The growth vehicle closed last year on USD 5.2bn, more than twice the original target.
Scott Nuttall, co-CEO of KKR, first referenced an Asia growth fund in 2019 as an expansion of a strategy already operational in North America, Europe, and Israel. The firm closed its debut Next Generation Technology Growth Fund, which doesn’t cover Asia, in 2016 with USD 711m in commitments. A successor vehicle closed on USD 2.2bn in early 2020.
KKR had USD 471bn in AUM globally at the end of 2021, up 87% year-on-year. This includes USD 160bn in perpetual capital, a seven-fold increase on 2020. The firm raised USD 121bn in new capital and deployed USD 70bn, compared to USD 30bn the previous year.
Lewin repeated previous assertions that KKR’s Asia business could one day match the North America operation in size. He gave two reasons for this: an expectation that half of global growth will come out of Asia in the next several years; and the firm’s “huge head start and competitive advantage versus our competitors.”
Tapping into private wealth channels is another key fundraising theme. KKR manages approximately USD 50bn in private wealth assets globally, and this channel historically accounts for 10-20% of capital raised every year. With investments in people, technology, and product innovation, there is an expectation it could reach 30-50%.
The firm now has professionals dedicated to this area in Asia, including a private wealth head who is building a team to cover private banking channels, ultra high net worth individuals, and single- and multi-family offices. Asia Fund IV features 290 LPs, more than any other KKR fund globally. Of the 80 who had not previously participated in the strategy, half were private wealth clients.
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