KKR extends fundraising period for Fund XI

The firm is expecting to raise close to $8bn for its latest North America fund, following a year in which KKR’s private equity portfolio grew 24%, says KKR's Scott Nuttall.

Kohlberg Kravis Robert has extended the fundraising period for its North America Fund XI to the second half of 2013, Scott Nuttall, head of KKR’s global capital and asset management group, said during an earnings call Thursday. The fund has attracted “or hard circled” about $7.5 billion of capital, according to Nuttall.

“We said last quarter that we ultimately think the fund will be between $7 billion and $8 billion. Given the extended fundraising timeline and the line of sight we have today, we feel very comfortable about hitting the high end of that range,” Nuttall said.

KKR raised a total of $11 billion for its various investment vehicles in 2012, and has “documentation in hand” for more than $5 billion of commitments for its KKR Asia II fund, according to Nuttall. The firm is “confident we will achieve the hard-cap of $6 billion with a final close in the next 30 to 60 days,” he said.

Despite the uncertain macro backdrop [in Europe], our funds appreciated by nearly 50 percent in 2012

Scott Nuttall

Much of KKR’s fundraising success can be attributed to significant growth in the firm’s limited partner base, which grew from about 380 at the end of 2011 to more than 450 as of 31 December 2012. The additional investors exclude some 110 new relationships coming from KKR’s acquisition of Prisma Capital Partners, a portfolio manager that specialises in hedge funds, last June.

About 42 percent of the capital in KKR North America Fund XI comes from new investors, while 24 percent of KKR Asia II has been committed by new LPs.

KKR reported Thursday that its private equity business overall had appreciated about 24 percent in 2012, which drove economic net income – a measure of earnings that includes realised and unrealised investments – of $2.1 billion during the year, compared to $751 million in 2011. Fourth quarter ENI was about $348 million, representing a 22 percent increase from the same period last year.

“We also feel good about some other specifics, in particular our European private equity portfolio, where – despite the uncertain macro backdrop – our funds appreciated by nearly 50 percent in 2012,” Nuttall said.

We haven’t taken a company public of size in the past year or so. However, as the capital markets arena picks up, there’s always going to be an opportunity for us

Bill Janetschek

Last year, KKR’s private equity teams participated in more than 20 liquidity events, returning more than $9 billion to its fund investors. “In the fourth quarter alone, we had over $3 billion of realisations in our private equity portfolio,” Nuttall said.

One of the few categories in which KKR saw a decline was fee-related earnings – which fell to roughly $86 million during the fourth quarter from about $117 million last year. Fee relating earnings for the year were also down from 2011, falling from $417 million to $320 million.

On the realisation front, strategic buyers continued to provide exits for the firm’s portfolio companies.

“What was quite a bit surprising to us was the activity in the strategic area,” KKR chief financial officer Bill Janetschek said on the call. “When you think about what happened to KKR in 2012, we were able to actually exit several investments from the strategic route … As it relates to the IPO arena, we haven’t taken a company public of size in the past year or so. However, as the capital markets arena picks up, there’s always going to be an opportunity for us to take companies public. We have a wide breadth of private portfolio companies – they number in excess of 80 – and there will be an opportunity at certain times to take those companies public.”

KKR’s total assets under management totaled $75.5 billion as of 31 December 2012, up from $66.3 billion at the end of the previous quarter.