KKR targets larger LP base

The firm deployed about $2.3bn of private equity capital during the first quarter, and has generated about $4bn in actual and expected distributions since the beginning of the year.

Kohlberg Kravis Roberts has set an ambitious goal for itself: raising capital from more than 1,000 limited partners. The firm has grown its LP base from 380 in 2011 to around 580 as of the end of March.

“We’re working our way toward [1,000]”, Scott Nuttall, head of KKR’s global capital and asset management group, said during an earnings call Thursday, adding that the average limited partner in its funds invests in 1.7 of the firm’s products. KKR added 110 new LP relationships last year by acquiring Prisma Capital Partners, a portfolio manager that specialises in hedge funds.

KKR is coming off a particularly active first quarter of the year in which the firm closed or announced six new private

There are some sectors where we’re seeing recovery, like autos, housing, energy and manufacturing, but it’s just slow growth overall

Scott Nuttall

equity investments, deploying about $2.3 billion despite the “uneven” US recovery, according to Nuttall.

“There are some sectors where we’re seeing recovery, like autos, housing, energy and manufacturing, but it’s just slow growth overall.”

KKR was also active on the exit front, agreeing several exits during the first quarter and generating a total of $4 billion in actual and expected distributions to private equity LPs so far this year, Nuttall said.

“This is a really interesting time in that we’re finding good opportunities to both deploy capital and exit investments,” Nuttall said. “The transaction activity was global, with deals in the US, Europe and Asia, and we’ve also been busy in our originating credit business, in particular direct lending and special situations.”
In March, KKR sold its majority stake in music company BMG to German media conglomerate Bertelsmann for an estimated €700 million to €800 million, netting the firm a return within the 1.5x – 2x range, according to a source close to the situation.

“We’re pleased that there’s been more strategic exit activity recently,” Nuttall said. “I would expect that we’ll see a mix…with frankly more on the public exits side and strategic exits, and selectively some dividend recaps from time to time.”

On the fundraising front, KKR has collected about $7.5 billion for its North America Fund XI, which has a $10 billion target and is expected to close sometime in the second half of 2013, Nuttall said. 

KKR reported Thursday that its private equity business overall had appreciated about 19 percent during the last 12 months. During the first quarter, the firm generated economic net income – a measure of earnings that includes realised and unrealised investments – of about $648 million, compared to $727 million during the same period last year. 

KKR grew its total assets under management to a record $78.3 billion as of 31 March, up from $75.5 billion at the end of the previous quarter.