KKR infra fund hits $2.5bn mark

Kohlberg Kravis Roberts (KKR) has held a second close on its second infrastructure vehicle, raising $2.5 billion to date and reaching the low end of its $2.5 billion to $3 billion target range, the firm’s global head of capital and asset management, Scott Nuttall, said during an earnings call on Thursday.

Global Infrastructure Investors II, which has a 12-year investment horizon and will invest in long-lived (10+ year contracts) core infrastructure assets globally, is already more than double the size of its predecessor fund. Global Infrastructure Investors reached its final close in June 2012 on $1.04 billion.

The new capital raised in the infrastructure fund, added to the fresh equity raised for European Fund IV and the appreciation in fair value of the firm’s private equity portfolio, were the primary contributors to KKR boosting assets under management in its private markets segment by $600 million to $62,1 billion as at end March.

Overall, KKR’s first quarter results were strong, achieving a 28.6 percent increase in net income from $210 million in the first quarter of 2014 to $270.5 million in the quarter ending March 31, 2015.

“We had a good start to the year with strong returns and cash flow generation, which translated into $599 million of economic net income and $517 million of total distributable earnings,” KKR’s co-chairmen and co-chief executives Henry Kravis and George Roberts said in a statement.

Low commodity prices, however, did result in a modest mark down of KKR’s energy portfolio with balance sheet energy assets and energy funds down 4 percent and 5 percent, respectively, in the first quarter.

In contrast, KKR’s infrastructure funds were up 5 percent in aggregate in the quarter.

“Stepping back three years ago, the combined assets that we managed in alternative, credit, energy and infrastructure were $7 billion,” Nuttall said. “Today, including closes since March 31 and shadow AUM, we manage $24 billion in these strategies.”

Energy and infrastructure went from $3 billion to $8 billion during that time.

“This growth has been entirely organic and the balance sheet has been a real accelerator of our efforts in all these areas,” Nuttall noted.

Asked about the firm’s outlook going forward, Nuttall said KKR expected to see growth across all asset classes and around the globe.

“The opportunity to go from fund I to fund II is more economically powerful than just we raise more money. Because if you think about what happens when fund I gets raised you have all the expense before the revenue,” Nuttall said.

“When you raise fund II we still get paid management fees from fund I and fund II tends to come on two to three times the size of fund I. And carry starts to be generated from fund I at the same time management fees come on for fund II,” he continued.

“So we see a lot of opportunities for growth in economics, which is the more important thing to look at than just AUM,” he concluded.