KKR is gearing up to launch its fifth global infrastructure fund in the third quarter of the year, sources have told Infrastructure Investor, with an expected target of $20 billion.
KKR Global Infrastructure Investors V’s target will exceed the $17 billion raised by KKR Global Infrastructure Investors IV, which closed in March last year, having initially targeted $12 billion.
KKR declined to comment.
The return to market this year will mark a significantly quicker route than previously undertaken by KKR. Fund IV was launched in May 2021, following on from the September 2018 close of its predecessor on $7.4 billion.
Its launch in Q3 will see KKR join EQT, currently in market targeting €20 billion for EQT Infrastructure VI, and also likely join Stonepeak, which is also expected to imminently launch its fifth flagship vehicle, also targeting $20 billion. Global Infrastructure Partners‘ and Brookfield Asset Management’s latest flagships are the other mega-funds in market right now, both seeking $25 billion.
Infrastructure was a shining light for KKR in 2022. The portfolio – excluding its Diversified Core Infrastructure Fund – generated a gross return of 9 percent, according to its Q4 2022 results, dwarfing that of traditional private equity (-14 percent), opportunistic real estate (3 percent), leveraged credit (-3 percent) and alternative credit (2 percent).
KKR’s flagship infrastructure funds typically target a gross IRR of 14-15 percent and a net IRR of 12-13 percent. Fund III was generating a gross IRR of 11 percent at the end of last year, KKR’s earnings revealed, while Fund IV was generating a net IRR of 2.3 percent as of the end of June 2022, according to a KKR presentation last year seen by Infrastructure Investor.
The fourth fund is still investing and had $9.7 billion of uncalled commitments, according to the firm’s 2022 results.
It is currently embroiled in a battle with Macquarie Asset Management for control of Italy’s Gruppo TIM’s fixed access network and submarine cable unit Sparkle. KKR had submitted an offer for the assets in February but was told at the end of last month that its offer, believed to be valued at about €20 billion, “does not wholly reflect the value of the asset and TIM’s expectations”, according to a company statement. This week, TIM revealed that Macquarie had teamed up with Italian state lender Cassa Depositi e Prestiti to also bid for the assets, with a decision expected by the end of the month.