Saying ‘Hi’ to HNWs

KKR, which wants to start raising a new private equity fund in the ‘next few quarters’, has formed a team to specifically attract high net worth individuals onto the LP roster.

Kohlberg Kravis Roberts is making a big effort to expand its limited partner base ahead of raising its next private equity fund, which could begin in the “next few quarters”.

As part of the expansion effort, KKR has assembled a team to specifically target high net worth individuals, Scott Nuttall, the firm’s head of global capital and asset management group, said during the firm’s second quarter earnings call in early August.

“We recently started a small, high net worth effort; we’re talking to high net worth [investors] on a direct basis for the first time,” Nuttall said.

KKR has about 300 limited partners across all its private equity funds, dating back to the first fund it launched in 1976. The firm’s roster of LPs is “a fraction of our competitors’ numbers”, Nuttall said.

The firm, founded by George Roberts and Henry Kravis, has been “building new sets of relationships all over the world”, Nuttall said. “We’re seeing increased interest across public and private markets from people that have never invested with us before.”

Potential LPs include sovereign wealth funds, pensions in the US and Europe, insurance companies, and “increasingly, we’ve had conversations with endowments and foundations”, Nuttall said.

KKR raised about $18 billion for its last buyout fund, which closed in 2006. The fund is close to 75 percent invested, and has about $5 billion of dry powder.

The firm is preparing for a fundraising environment that has changed greatly since 2006, when capital was a lot easier to come by. These days, limited partners are not committing as much money as a few years ago, or they are making large commitments but to fewer managers.

An example of what may be facing KKR when it hits the fundraising trail occurred at the Oregon Investment Council meeting earlier this month. Oregon is one of KKR’s oldest LPs, having committed capital since at least 1980.

Oregon is “contemplating” cutting its future commitment to KKR’s next fund to better balance its portfolio of large managers, the pension council said in documents.

Oregon committed about $1.3 billion to KKR’s 2006 fund, plus an additional commitment to a co-investment vehicle related to the 2006 fund. The pension’s last commitment to KKR was $412 million to firm’s third European fund.

KKR had called about $1 billion from Oregon’s commitment to the 2006 fund, and the fund was generating a 1x multiple, with a zero internal rate of return.