KKR courts European, Middle Eastern LPs

The firm has been working to expand its base of limited partners, including talking to institutions in Europe and the Middle East, and for the first time making a big effort to attract high net worth people and family offices.

Economic uncertainty in the Eurozone has not stopped institutional investors in the region from committing money to alternative investments, Scott Nuttall, head of Kohlberg Kravis Robert’s global capital and asset management group, said during an earnings call Friday.

KKR wants to expand its base of LPs from Europe and the Middle East, which currently accounts for about 20 percent of the firm’s total capital raised, Nuttall said.

“We’re finding investors in Europe, despite some of the market turmoil, are continuing to be active,” Nuttall said, answering a question about fundraising in the region for its various investment vehicles.

“A lot of them invest on a global basis and they’re looking for ways to generate excess return,” he said. “They’ve got the overall environment on their minds but in some cases that’s accelerating their move to invest outside of Europe.”

Until a few years ago, we didn't proactively target the high net worth and family office market.

Scott Nuttall

KKR also has made an effort to attract high net worth individuals and family offices into its investor base, Nuttall said, explaining the firm has a small group within its fundraising operations to focus just on that segment of the LP universe.

“Until a few years ago, we didn’t proactively target the high net worth and family office market,” Nuttall said. The team that focuses on that segment has been “spending a significant amount of time with high net worth [individuals] and family offices … it’s early days, but so far so good.”

KKR counts about 400 investors in its LP base, but its fundraising group is working to grow that. The firm’s fundraising group has expanded from four individuals in 2008 to about 40.

KKR reported Friday that its private equity business overall had appreciated about 9 percent in the first quarter, which drove economic net income – a measure of earnings that includes realised and unrealised investments – of $727.2 million for the first quarter. First quarter ENI decreased about 2.1 percent from the same period last year.

The firm’s fee-related earnings dropped significantly – by about 58.4 percent — from the same time period last year in part because of lower transaction fees resulting from fewer deals in the first quarter, KKR said.

The firm returned about $750 million to LPs in the first quarter. While private equity deals were scarce in the first quarter, the firm did find opportunities in energy and infrastructure and announced the first deal from its real estate team. The firm bought a suburban retail mall called Yorktown Center for $200 million, with KKR using about $75 million of equity, Nuttall said.