KKR is aiming to leverage its strong Asia-Pacific presence to boost the firm’s new infrastructure strategy in the region, the head of the strategy told Infrastructure Investor.
“We will look to invest in countries where KKR already has a team on the ground or a track record of investment across asset classes,” said David Luboff, whom KKR hired in January as head of KKR’s Asia-Pacific infrastructure strategy.
“Having a local presence is a competitive advantage, since it provides local insights and relationships,” he added.
The firm’s Asian private equity AUM reached $17 billion in 2018, according to company documents.
KKR is aiming to recruit around 12 people for its infrastructure team. The firm has 150 investment professionals based in the region, Infrastructure Investor understands.
Luboff singled out India, South Korea, the Philippines, Japan and the South-East Asia region as specific regions the strategy would target.
“We will look at China and Australia opportunistically,” he added.
Luboff explained that the new strategy will target different assets depending on the investment country.
“As a […] general rule, we are looking at both developed and developing Asia, mainly at core-plus assets in developed countries, while in developing Asia we will focus on core assets that can still be found at attractive prices,” he explained.
Luboff argued that its region-wide approach allows KKR to quickly chase emerging opportunities in new markets.
“Our strategy is based on opportunistically pivoting our focus to invest where we see best risk-adjusted returns,” he said.
“If a market doesn’t have consistent investment flow, its assets are looking overpriced, or it’s experiencing other local risks such as currency movements, we have the opportunity to invest elsewhere,” Luboff explained, adding that the strategy will be focusing on proprietary deals rather than auctions.
KKR closed its first deal in the region in April, partnering with Singapore’s GIC to acquire a 57 percent stake in IndiGrid, an Indian infrastructure investment trust, according to a KKR statement. The vehicle managed six electricity transmission assets and was planning to add five more assets to its portfolio, the statement said.
KKR declined to provide more details on the transaction.
According to a source familiar with the matter, KKR launched its first Asia-focused fund, KKR Asia Pacific Infrastructure Investors, in June. The vehicle is aiming to raise between $1.5 billion and $2 billion, Infrastructure Investor reported in November, quoting sources.
KKR declined to comment on any fundraising plans.
Several infrastructure fund managers are aiming to expand their presence in the APAC region either through region-specific funds or gaining exposure through their global vehicles. Macquarie Infrastructure and Real Assets closed Macquarie Asia Infrastructure Fund II on its $3.3 billion hard-cap last year.
Similarly, Brookfield has expanded its footprint in India this year with several high-profile acquisitions, including the record-breaking $3.6 billion acquisition of Reliance’s telecom tower portfolio announced in July.
Luboff saw increasing competition in the region as a welcome development and part of the “natural evolution” of the asset class in Asia.
“More capital is mobilising to invest in the steady flow of new opportunities,” Luboff said. “This is a very positive development for the industry because Asia – which is such a large part of the world economy – has historically been under-represented in infrastructure funds’ share of investment,” he said.