KKR has closed its third infrastructure fund on $7.4 billion, becoming the largest infrastructure vehicle to be raised this year.
The final close of KKR Global Infrastructure Investors III is $2.4 billion more than its original $5 billion target and 2.4 times larger than its predecessor, which closed in 2015.
KKR executives said in July the fund would have a close of “roughly” $7 billion, with the caveat that “the final closing of the fund and ultimate amount of capital raised are subject to uncertainty and change”. The fund’s hard-cap was understood to be $7 billion, although KKR said it will be investing $358 million alongside the funds raised by external investors.
LPs in the fund include the New York State Common Retirement Fund ($400 million), the Minnesota State Board of Investment ($150 million), Alaska Permanent Fund ($200 million) and the Washington State Investment Board ($100 million). It is unclear how much co-investment capital has been raised, although syndicated equity co-investments are a key part of KKR’s strategy. An investor presentation from July shows that €1.5 billion of the €1.8 billion in equity used to fund the €3 billion acquisition of Q-Park was syndicated to co-investors.
KKR’s closing comes after the departure of several of the European infrastructure team’s early hires. The first high-profile departure, which Infrastructure Investor reported earlier this year, was Jesus Olmos, formerly the global co-head, who left in April and is understood to have launched his own vehicle. Directors Ram Kumar and Guido Mitrani have also departed the firm in recent months. Raj Agrawal became the sole leader following Olmos’s departure.
The fund has so far secured two deals, KKR confirmed. Its $1.2 billion acquisition of natural gas services company Discovery Midstream alongside Williams Partners, announced at the end of July, and Starlight, a French telecoms towers business. KKR says it is “risk-based” rather than sector-based, but notes the fund has “a broad investment mandate across infrastructure sectors”. It will target OECD countries, “predominantly in North America and Western Europe”.
The targeted IRR for Global Infrastructure Investors III is unknown, although its predecessors were generating net returns of 12.4 percent and 12.8 percent respectively, as at the end of March 2018. They are also displaying 1.5 and 1.1 times net money multiples.