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Nephila Capital and KKR form partnership

KKR & Co has acquired a 24.9 per cent interest in Nephila Capital, an investment manager focused on investing in natural catastrophe and weather risk.

Shares will be acquired pro rata from Nephila management and from Nephila’s minority stakeholder, Man Group, which will retain an 18.75 per cent interest. Financial terms of the transaction have not been disclosed.

Nephila was established in 1998 by Frank Majors and Greg Hagood as part of Willis Limited, at the time a KKR portfolio company. Nephila specialises in investing in reinsurance risk, including insurance-linked securities, catastrophe bonds and weather derivatives. Through its investment strategies, Nephila provides its investors with access to sources of returns that are uncorrelated to the global financial markets relative to other asset classes.

Henry Kravis and George Roberts, co-chairmen and co-CEOs of KKR, say: "In backing Nephila, we are partnering with a team we have known for more than 15 years, dating back to our investment in Willis Group. As the first dedicated manager of catastrophe risk investment strategies, they share the entrepreneurial spirit that pervades KKR’s culture and, with an excellent 14 year track record, we think they are the best team in the industry.”

Nephila’s management committee says: “Having access to KKR’s global network of relationships, infrastructure and management expertise will open up new doors for Nephila and our investors. We’re confident that our new partnership will strengthen relationships with our insurance counterparties and introduce new sources of investment opportunity, particularly with state governments that are exploring new ways to transfer catastrophe exposures.”

Through its investments, Nephila provides capital relief to primary insurers, reinsurers and state governments in catastrophe-prone areas, giving them the flexibility to write additional insurance for homeowners and businesses.

The entire Nephila management team will continue to manage the business as they do today, and Nephila’s investment strategies will also remain unchanged. In addition, all proceeds received by management at closing will be reinvested in Nephila funds.

The investment in Nephila is part of KKR's efforts to broaden its offering of liquid alternative investment strategies and further the expansion of the firm’s hedge fund platform. The investment was made by the firm and not through KKR’s investment funds.

Nephila also announced that it will be closing its Juniper Catastrophe Fund and Triton Catastrophe Fund to new investor subscriptions based on its current assessment of market conditions. Its other strategies remain open.

Nephila’s investment committee says: “We are committed to building the optimal profile of risk/return for our investors and will continue to actively monitor our investment capacity in each strategy relative to market opportunities.”

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