KKR raises $9.3b for biggest Asian PE pool

KKR's Asia PE head Ming Lu
KKR Asia PE head Ming Lu speaks at a conference. Source: KKR's Twitter account

Private equity firm KKR & Co. has raised $9.3 billion for its Asia Pacific-focused KKR Asian Fund III, its biggest ever investment vehicle in the region.

KKR had set out to raise $8.5 billion initially. The fund, it said, surpassed the limit amid strong backing from new and existing global investors, including public and corporate pensions, sovereign wealth funds, insurance companies, endowments, family offices and high net worth individuals.

The previous fund in the series — Asian Fund II — had raised $6 billion and stands fully deployed now, according to a KKR statement issued on Friday. Asian Fund II started investing in 2013 and generated a gross IRR of 29.1 per cent (net IRR of 20.6 per cent) and a gross multiple of 1.5x (net multiple of 1.3x) as of March 31 this year.

“We see a diverse set of opportunities across Asia Pacific stemming from rising consumption and urbanisation trends in key markets as well as larger carve-out and cross-border transactions in countries such as Japan,” said Ming Lu, KKR Member and Head of Asia Private Equity while announcing the close of third Asia fund on Friday.

With the closing of this fund, KKR’s private equity business manages over $68 billion in assets under management worldwide.

The firm’s recent big-ticket Asia investments include its acquisition of Japanese firm Hitachi’s chip-making equipment and video solution unit in a $2.3 billion deal that followed an earlier acquisition of Hitachi’s power-tool unit Hitachi Koki Co for $1.3 billion earlier this year.

KKR is stepping up its Japan investments, with the country accounting for more than half of the firm’s $4.7 billion worth of transactions in the region this year, according to Bloomberg data.

KKR not alone in being lured by opportunities in Asia

KKR said it has focused on Asia since 2006 when it opened its first office in the region. The firm has invested over $12 billion in pan-Asia PE investments in approximately 55 companies across 10 countries.

It is not the only one lured by the growth momentum in Asia. A consumption-led economy fuelled by a rising middle class population and growing income levels has caught of attention of others, including TPG Capital, Gaw Capital Partners, Carlyle, Baring Private Equity. These PE firms have all either raised or are on the road to raise funds focused on the region.

TPG is raising about $4.5 billion for its seventh Asia fund which is nearing closure. Currently, TPG Capital Asia manages about $6 billion in assets.

Similarly, Carlyle is looking to raise a $1-billion Asian growth fund, which would largely focus on investing in India and China. Hong-Kong based private equity PAG Asia Capital, too, announced that it raised $3.66 billion for its second Asia buyout fund.

Last year, RRJ Capital closed the largest-ever private equity fund for an Asian firm at $4.5 billion. The year 2016 also saw Hong Kong-based Baring Private Equity Asia raise $4 billion for its sixth Asia fund. Warburg Pincus LLC followed suit late last year by raising a new $2 billion fund to focus on growth investments in China.

Meanwhile, the Asian real estate market has also attracted great interest from investment firms such as Savills Investment Management (launching a billion dollar Asia-focused fund) and Blackstone (over $5 billion in Asia real estate focused fund). Similarly, Gaw Capital Partners’ latest pan-Asia vehicle – Gaw Capital Real Estate Fund V – has funds of around $1.3 billion.

Focus on Southeast Asia

“Many Southeast Asian companies are starting to realize their inherent growth potential, driven by demographic, consumption and technology trends. Some of the region’s most distinguished families are charting an ambitious course to embrace generational change, selectively bring in professional management, and expand into new areas. We look to partner with these families and business groups to build new champions that can become regional — and even international — leaders,” said Ashish Shastry, Member & Head of KKR Southeast Asia.

KKR has maintained a strong track record of investing in Southeast Asia since 2005, and has deployed more than $2 billion in equity in companies from the region to date. Its Southeast Asia private equity portfolio companies are based in markets such as Indonesia, Malaysia, Singapore and Vietnam.

Also Read: KKR Asia Fund III to reach $9b final close in summer 2017

KKR & TPG near first close for their Asia-focused funds

KKR to buy Hitachi unit valued at $2.3b

Japan: KKR completes $1.3b acquisition of Hitachi Koki, $4.5b takeover of Calsonic Kansei

PE deal value in SEA rebounds 14% above historical average: Bain & Co