New York-based KKR & Co has raised $1.1. Billion for its first credit fund that focuses on investments in Asia-Pacific, betting on opportunities and high returns sparked by volatility.
KKR & co-manages $184 billion globally and has earmarked between one-third and half of the fund for Australia and South Asia, according to Brian Dillard, the Asia Credit Head at KKR. The firm, along with its employees, has contributed more than $100 million to the credit fund targeting low to mid-teen returns.
As per Bloomberg News, more than half of KKR’s fundraising has come from Asia in 20 months, while the balance came from other regions. The most prominent investors were the private investment groups and Asset Managers, and smaller contributions came from public Pension Funds.
KKR had made 14 credit investments in the Asia Pacific, totaling $ 2.4 billion since 2019, before raising its first Asia Fund. It has taken part in acquisition financing and financial sponsorship in real estate, education, health care, infrastructure, and environmental sectors.
According to Paquin, a research firm, private equity firms face delays in finalizing capital pools with U.S. endowments and pension funds reluctant to invest in China. Funds that are U.S. dollar-denominated and invested in China, the second-largest economy, had raised $1.4 billion in the first quarter, which was the lowest since 2018 and the decline in their consecutive quarters.
According to Dillard, KKR has zero exposure to Chinese real estate developers. However, they have invested in businesses that have links to this sector or have been lending against assets that are a source of liquid cash for cash-strapped developers. This also included investing in a subordinate credit of a car park operator and looking to acquire more such assets as cash-strapped property developers divest.
KKR’s $50 billion platforms have boosted Asia credit that spans sectors from private equity and infrastructure to real estate. Three-fourths of the opportunities are internally driven, while the credit team assesses the remaining situation after accessing resources from the KKR global or Asian teams before investing.
Dillard says that with rising interest rates and turmoil in global markets, KKR is sticking to a conservative playbook in loans and healthy funding, capital structures, and strong businesses while safeguarding its downside risks.
New Opportunities
Dillard said that KKR sees most of the opportunities from Australia and Southeast Asia as demands are high from corporates and financial sponsors. In the past 12 months, the KKR fund has done deals in China, India, and South Korea. Both India’s and China’s exposures are 15% and 5%.
While there are reopening in Australia and South Asia, North Korea has seen closings. Asia is the largest credit market globally, growing faster than Europe, and U.S. risk-averse banks dominate the market. The amount of credit available is only 25% of the level of Europe, whereas private equity reached 150% in Asia. Despite accounting for two-thirds of global growth, Asia gets only 8% of the Private credit capital.
