Kohlberg Kravis Roberts (KKR) raised USD 6.02bn for its latest flagship infrastructure fund by the end of 1Q18, according to the company’s 3 May earnings call.
“Our definition of infrastructure is disciplined and risk-based, with a focus on downside protections,” said Craig Larson, head of investor relations during the call. “We can navigate through the complexities [in infrastructure investing] and turn it into something simple. LPs have recognized this and it has been helpful…as we continue to expand the investor base.”
The milestone marks the firm’s success in its fundraising efforts, as the capital raise has so far almost doubled the firm’s previous flagship infrastructure fund’s hard cap close at USD 3.1bn in July 2015. The fund, which has three years left in its six-year investment period, has generated net returns of 9.8% and 73.80% deployed as of 31 March 2018 , according to Inframation Deals.
The new fund, which has a 12-year term with three optional one-year extensions, will predominantly invest in brownfield assets in OECD countries across the transport, telecoms, power and renewables sectors.
KKR is a co-investor within the fund, with a minimum participation of 5% of commitments. First close investors are eligible for a 5% discount in carried interest, meaning the fund’s performance fee will be reduced from 20% over an 8% hurdle to 15%. The GP is targeting net returns in the low-teens, and is expected to offer substantial co-investment opportunities to its LP investors.
New York commitment
Additionally, the New York State Common Retirement Fund finalized a USD 400m commitment to KKR III on 28 March, according to board meeting materials made available on 2 May.
The New York City-based pension system and KKR have a substantial business relationship. Inframation reported last year that the system plans to commit approximately USD 3bn to KKR for investments in private equity, infrastructure and real estate. It is understood that KKR has agreed not to receive any contributions from its investments associated with the USD 192bn pension system.
The NYSCRF is a regular investor in infrastructure funds, with total commitments to the industry now aggregating to USD 1.6bn, according to Inframation Deals. A spokesperson for the institutional investor told Inframation that the board was considering revising it USD 1bn investment plan for infrastructure in January of this year.
The NYSCRF holds commitments with KKR Global Infrastructure Investors II (USD 150m), Meridiam Infrastructure North America III (USD 200m), Brookfield Infrastructure Fund III (USD 300m), and three other funds.