KKR launches senior debt fund

The new Lending Partners fund follows the dip in KKR’s private debt fundraising last year.

KKR has officially lifted a third direct lending fund off the ground, regulatory documents filed with the US Securities and Exchange Commission show.

The firm did not specify a target for Lending Partners III.

The Lending Partners funds are part of KKR’s direct lending strategy, which focuses on senior debt. The “focus on the top of a company's capital structure” allows the firm’s direct lending strategy to “capture the illiquidity premium”, or higher returns than those of syndicated loans, KKR said in an April 2015 statement about the Lending Partners II’s final close.

The firm declined to comment on fundraising.

Lending Partners II garnered $1.34 billion in commitments, according to PDI data. KKR’s latest earnings report shows the fund had invested $848 million as of the end of last year and its three-year investment period ends in June.

Lending Partners II had a management fee of 1.25 percent on contributed capital, according to South Carolina Retirement System Investment Commission October 2014 meeting minutes. The fund had an internal rate of return of 13.16 percent as of 31 December, according to a Minnesota State Board of Investment quarterly report.

The second fund raised capital from new and existing investors including public pensions, insurance companies, private banking platforms, family offices and individual investors, according to the April 2015 statement.

The first fund, launched in December 2011, closed on $460.2 million in capital, including commitments from several large pension plans like Virginia Retirement System ($250 million) and Arkansas Local Police and Fire Retirement System ($10 million), PDI data shows.

KKR’s total private debt fundraising last year trended slightly down from 2015, as Private Debt Investor previously reported. In 2016, the firm brought in $12.6 billion for its public markets platform, which encompasses the firm’s alternative credit funds and collateralised loan obligations. This marks a slight dip from $12.9 billion raised in 2015.

KKR’s opportunistic credit and direct lending funds were among the best performers of its portfolio in 2016, Scott Nuttall, head of global capital and asset management group at KKR, said on a fourth quarter earnings call.

The firm, which invests in private equity and private debt, raised a record $29 billion in overall capital last year, as PDI reported. This pushed the firm’s assets under management up by 8 percent, from $120 billion at the end of 2015 to $130 billion by the end of 2016.