North America: KKR raises USD 7bn for third infra fund

Kohlberg Kravis Roberts (KKR) recently closed on its third infrastructure-focused fund, KKR Global Infrastructure Investors III, bringing the total valuation of the fund to USD 7bn, according to a 9 July investor presentation.

The investor presentation was disclosed on 23 July.

The close is comfortably ahead of the fund’s USD 5bn target since launching in 2H17. The final close for the fund is expected in the latter half of the year, according to the presentation.

KKR is targeting a 10-13% return for the fund, which will make investments over a six-year period and hold them for up to 12 years, inclusive of three optional one-year extensions.

KKR’s first two funds closed at USD 1bn (2012) and 3bn (2015), respectively. Fund II recently closed on two investments in 4Q17; its acquisition of the Netherlands-based Q-Park, and UK-based Calvin Capital, as previously reported. 

“Infrastructure is one of the poster childs in our firm,” the presentation reads. “It is a relatively young strategy…but we have an ability to punch way above our weight in this business because of our capital markets team.” Of the GBP 1bn (USD 1.3bn) transaction value for the Calvin Capital acquisition, about GBP 600m of that was equity (GBP 200m from KKR Infra II, 400m syndicated to co-investors), and GBP 400m came from debt.

Fund III, according to the presentation, is expected to include a 1.2% blended management fee and 16% carry rate. The GP reported that it raised USD 6bn for the fund at the end of 1Q18.

KKR focuses predominantly on brownfield investments with development components, where KKR believes it can provide value through operational improvement and constructive engagement. According to Inframation Deals, institutional investors in the fund include the New York State Common Retirement Fund (USD 400m), Alaska Permanent Fund Corporation (USD 200m), Minnesota State Board of Investment (USD 150m), and the Washington State Investment Board (USD 100m), including others.

As of 31 March 2018, KKR’s second infrastructure fund has generated gross and net IRRs of 15.9% and 12.8%, respectively, meanwhile their first infrastructure fund has posted gross and net IRRs of 14.4% and 12.4%. Fund 2’s portfolio and returns is as follows: