KKR raises $6bn for third infrastructure fund

In less than a year, the firm has raised twice the amount of capital its second infrastructure fund raised in total.

KKR‘s third infrastructure fund has raised $6 billion and was the “largest contributor” of capital raised in the first quarter, the firm said in its quarterly earnings report.

The New York-based fund manager on Thursday reported raising $11 billion of capital to start the year, with over half going to Global Infrastructure Investors III. After around 8 months of fundraising, KKR has pooled its largest infrastructure fund yet and has already surpassed its $5 billion target.

“It has been a very busy 12 months for us,” Craig Larson, KKR’s head of investor relations, said on an earnings call. Of the $25 billion of private capital raised in the past year, he said, 70 percent of that has gone to infrastructure and private equity strategies.

KKR declined to comment for this story.

The infrastructure fund’s hard-cap has not been made public, but sources familiar with the fundraise suggested to Infrastructure Investor the cap is set at $7 billion.

The first quarter earnings report shows the fund, which launched last September, has $270 million of uncalled commitments. Institutional investors that joined the fund in March include the New York State Common Retirement Fund and the Minnesota State Board of Investment, which committed $400 million and $150 million, respectively.

The fund is targeting investments in core and core-plus infrastructure assets primarily in OECD countries, according to a transaction report published by the New York State comptroller, which manages NYSCRF.

The vehicle’s predecessor, Global Infrastructure Investors II, which closed on $3.1 billion in 2015, is roughly 75 percent invested, the fund manager said, and has been delivering a gross return of 20 percent in the last 12 months. As at 31 March, it  had $756.6 million of uncalled commitments.

Along with its quarterly earnings, KKR also announced its decision to convert from a partnership to a corporation, effective 1 July 2018.

“KKR’s conversion from a partnership to a corporation is designed to broaden our investor base, simplify our structure and make it easier to invest in our shares,” Henry Kravis and George Roberts, co-chairmen and co-chief executives, said in a statement.

“We believe this change, together with continued strong performance, will increase our ability to generate significant long-term equity value for all of our shareholders.”

According to sister publication PEI, “The new C-corporation stands to benefit from the recent tax law, which lowered the corporate tax rate to 21 percent from 35 percent”.

As Infrastructure Investor first reported in January, Jesús Olmos, KKR’s global co-head of infrastructure, resigned from the firm after a decade of service, having left at the end of April. Olmos departed to set up a new investment venture and will be replaced solely by Raj Agrawal, who worked alongside him as co-head of infrastructure.