KKR continues fundraise spree with USD19 billion close for largest North America private equity fund

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Private equity behemoth KKR has completed its second mega-fundraise in the space of six weeks, announcing the final closing of KKR North America Fund XIII at USD19 billion.

The fund, which will pursue opportunistic private equity investments in North America, is the largest to be raised in the firm’s 45-year history. It was over-subscribed – with reports suggesting that total commitments to the fundraise were around USD24 billion. KKR itself is investing USD2 billion in the fund alongside investors, through balance sheet, affiliates, and employee commitments.

KKR said the latest fund – named NAX3 – had received strong support from a diverse group of both new and existing investors globally, including public and private pension plans, sovereign wealth funds, insurance companies, endowments and foundations, private wealth platforms, family offices, high-net-worth individual investors, and other institutional investors.

“Particularly at a time of continued volatility, we believe we are entering a macroeconomic environment that is tailor-made for private equity and for KKR specifically, and are grateful to have the support of our investors and their confidence in our team,” says Pete Stavros and Nate Taylor, co-heads of the Americas Private Equity platform at KKR.

Over the past decade and across NAX3’s two predecessor funds, KKR North America Fund XI and KKR Americas XII Fund, KKR has delivered an average gross IRR of 30.1 per cent (25.1 per cent net) and a gross multiple on invested capital of 2.6x (2.2x net). In comparison to the S&P 500, this has resulted in net outperformance of more than 850bps, against what the firm describes as “the backdrop of near-unprecedented performance of the index over that decade”. 

KKR Americas XII Fund, which began investing in 2017, is now fully deployed. It has generated a gross IRR of 50.1 per cent (41.9 per cent net), with a gross multiple of 2.6x (net 2.2x), as of the end of 2021. With the closing of NAX3, the firm’s Americas Private Equity platform has more than $90 billion in assets under management across its flagship, growth, and core investment vehicles.

“We are pleased to have been able to deliver consistent and attractive risk adjusted returns to our investors, even in the face of a global pandemic,” says Alisa Amarosa Wood, global head of private markets and real assets product strategies at KKR. “With this closing of KKR’s largest fund in our history, we are excited by our investors’ shared enthusiasm for the investment opportunities we continue to see ahead.”

KKR said the new fund would implement the firm’s broad-based employee ownership programme at majority-owned companies in which it invests. Since 2011, KKR has focused on employee ownership and engagement as a key driver in building stronger companies and driving greater financial inclusion. 
The firm says it is committed to deploying the model in all control investments across its entire Americas Private Equity platform. To date, KKR has awarded billions of total equity value to over 45,000 non-senior employees across more than 25 companies. Earlier this month, KKR joined more than 60 organisations in becoming a founding partner of Ownership Works, a non-profit created to support public and private companies transitioning to shared ownership models.

The latest fundraise follows hot on the heels of the closing in March of a new USD17 billion global infrastructure vehicle KKR Global Infrastructure Investors IV – which will focus on global infrastructure investments in OECD countries in North America and Western Europe.

That fund’s closing comes at a time of significant growth in demand for private infrastructure investment. According to the McKinsey Global Institute, supporting projected levels of GDP growth will require USD3.7 trillion of annual investment in global infrastructure between 2017 and 2035, which could increase by an additional USD1 trillion annually to meet the United Nations sustainable development goals.

“Global demand for building and upgrading critical infrastructure, as well as supporting responsible energy transition and growing broadband access, requires funding far in excess of public sources, which provides a big opportunity for private capital,” says Brandon Freiman, head of North American Infrastructure at KKR.

KKR established its Global Infrastructure strategy in 2008 and has since been one of the most active infrastructure investors around the world with a team of some 75 dedicated investment professionals. The firm currently oversees around USD40 billion in infrastructure assets globally and has made approximately 65 infrastructure investments across a range of sub-sectors and geographies. 

Underlining the strength of demand from institutional investors for exposure to infrastructure assets, KKR Global Infrastructure Investors IV is more than double the size of its predecessor fund.

Brandon Donnenfeld, a managing director at KKR who leads capital raising and business development for the firm’s infrastructure business, said: “When we first launched our infrastructure investing business more than a decade ago, we did so with a distinctive strategy focused on downside protection, which has served us well in performing for our investors, particularly throughout the Covid-19 pandemic. We are thrilled to have their continued support and look forward to continuing to perform for our investors through this strategy.”

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