KKR closes largest ever pan-Asia fund on $9.3bn

The firm’s Asian Fund III, raised in less than seven months, has now surpassed its $6bn predecessor Fund II as the region’s largest fund.

Private equity giant KKR has amassed $9.3 billion for its latest pan-Asia vehicle, raising the largest Asian fund in private equity history, according to the firm.

The firm launched Asian Fund III in the third quarter of 2016 with a target of $7 billion, and held a first close on $5.8 billion in the first quarter of 2017.

Asian Fund III had a high re-up rate from KKR’s existing investors, a source with knowledge of the matter told Private Equity International. In terms of geography, 53 percent of the investors in the fund are from the Americas, 22 percent from EMEA and 19 percent from Asia. Limited partners from the Americas committed 53 percent of capital raised, while Asian investors committed 24 percent and EMEA LPs, 23 percent, the source added.

The Washington State Investment Board committed $500 million to the fund, while the New York State Common Retirement Fund invested $275 million, and the Minnesota State Board of Investment, $150 million, according to PEI data.

The firm has made a GP commitment of $800 million, marking its second largest commitment to a KKR fund, following the nearly $1.4 billion committed to the $13.9 billion KKR Americas XII Fund closed in March this year. Of the $800 million, $500 million came from KKR’s balance sheet while $300 million came from its employees.

Capital raised from Fund III will be invested across corporate carve-outs in North Asia, cross-border partnerships, large-scale minority investments, as well as deals focused on Asia’s rising urbanisation and consumption trends, environmental initiatives, and food and agriculture, the firm said.

“The Asia market offers many compelling investment opportunities in private equity given its secular growth and attractive valuations,” Joseph Bae, member and managing partner of KKR Asia, said in a statement. “This flagship fund is a testament to KKR’s ability to drive meaningful growth and value creation in our investee companies as a partner of choice to leading Asian businesses, families and management teams.”

KKR has raised two other pan-Asia funds: the 2007-vintage, $4 billion Asian Fund which is partially liquidated and delivered a gross IRR of 18.9 percent  (net IRR of 13.7 percent) and  gross multiple of 2.2x gross (net multiple of 1.8x); and 2013-vintage Asian Fund II which closed on $6 billion. Fund II is fully deployed and has so far generated a gross IRR of 29.1 percent (net IRR of 20.6 percent) and a gross multiple of 1.5x (net multiple of 1.3x) as of end-March 2017.

With the closing of this fund, KKR's private equity business manages more than $68 billion in assets under management worldwide. The firm has deployed over $2.5 billion in equity over the last 18 months, including big-ticket transactions such as the $4.5 billion takeover of Calsonic Kansei and the $1.3 billion acquisition of Hitachi Koki.

Since 2005, KKR has invested over $12 billion in Asia Pacific private equity investments across 55 companies.