KKR has raised $17 billion for its fourth infrastructure fund, exceeding its initial $12 billion target by more than 40 percent.
The closing of KKR Global Infrastructure Investors IV, which was launched last year with a $16 billion hard-cap, also more than doubles the $7.4 billion raised for its predecessor in September 2018, which had an initial target of $7 billion.
Vincent Policard, KKR’s co-head of European infrastructure, said investors were relaxed about the increase in size.
“Each fundraising has been a step up from the previous one,” he told Infrastructure Investor. “When looking at the overall picture, many of the deals in our funds have been meaningfully bigger from an equity standpoint than what we would be able to do with the fund, so we have always offered significant co-investment. Investors look at how much has been deployed. For Fund III, in addition to $7.4 billion [raised], we actually deployed about $12 billion, when including co-investment.”
Policard said it was unclear how much co-investment would be deployed from the latest vintage at this stage. Alongside capital raised from its broad base of global institutional investors, KKR also received $1 billion of the fund’s capital from its balance sheet, affiliates and employee commitments, the firm said.
Industrial-sized fund for industrial infra
The fourth vehicle continues the fund series’ North America and Western Europe-focused approach, investing in assets in digital communications, energy transition, transportation, water and waste, KRR said. One such transaction from the fund was November’s tie-up with Global Infrastructure Partners, which saw the pair agree a $15 billion take-private of US data centre REIT CyrusOne. Fibre investments have also been made with Telefonica in Colombia and Metronet in the US. More recently, KKR clinched its first “industrial infrastructure” deal with the investment in beverage solutions group Refresco.
“Refresco is a good example of assets that don’t fit in the traditional sectors of infrastructure, but when you look at the balance sheets of many companies in multiple sectors, you find a lot of infrastructure assets in terms of asset-backed and long-dated contracts,” Policard said.
He added that KKR will continue to pursue energy transition-based opportunities, although it will be looking to do things slightly differently than in the past.
“In our infrastructure business, we continue to play a role in the energy transition space, but it is an expanded one from what we did before,” Policard said. “Over the last 10 years, we have focused on renewables and then district heating and smart meters. Now it will be be that but also more brown-to-green opportunities, such as industrial opportunities.”
The fund has a targeted gross IRR of 14-15 percent and a net IRR of 12-13 percent. KKR’s first two vintages are generating gross IRRs of 17.6 percent and 20.2 percent respectively, as of Q4 2021, a spokesperson at the firm said, adding that the funds are generating net multiples of 2.1x and 1.9x.