Oregon re-ups $500 mln in KKR’s next flagship fund

The Oregon Investment Council delivered a massive re-up for one its oldest private equity managers at its Dec. 9 meeting, allocating up to $500 million to Kohlberg Kravis Roberts & Co’s latest flagship buyout fund, CIO John Skjervem told Buyouts in an email.

Oregon’s Dec. 9 commitment to KKR North America Fund XII matches its largest private equity commitment of the year, a $500 million allocation to Blackstone Group’s $17.5 billion mega buyout fund approved in April. KKR set a $10 billion target for the fund, according to Oregon documents.

The pension will benefit from a number of discounts, including a six month waiver on management fees for first close investors. KKR also is offering incentives for large commitments, according to Oregon documents. The GP expects to kick in at least $700 million to Fund XII.

KKR will invest Fund XII in around 25 investments with enterprise values ranging from $500 million to $2 billion in size, though it may invest outside those ranges, according to a TorreyCove Capital Partners memo included in Oregon’s meeting materials. As its name suggests, Fund XII will primarily invest in North American companies, though it may pursue opportunities in Latin America as well.

The $68.9 billion retirement fund is a limited partner in 18 of KKR’s private equity funds, according to pension documents. Oregon was one of the first public pensions to back the firm, allocating $194.1 million to KKR’s 1980 Related Fund.

The relationship continued to expand following Oregon’s initial commitment. KKR now manages approximately 17 percent of Oregon’s $14.2 billion private equity portfolio, according to investment council documents. Roughly 13 percent of the portfolio is invested in KKR’s flagship vehicles.

“KKR’s weight in the portfolio is the result of a long and very productive relationship, and that exposure has normalized significantly across recent fundraising cycles as the program continues to mature,” according to an Oregon investment memo.

While Oregon remains heavily exposed to KKR, it gradually reduced the size of its commitments to the $98.7 billion asset manager over the last decade. The pension committed nearly $1.5 billion to KKR’s $17.6 billion 2006 fund and related co-investments. Its re-up to the firm’s 2012 follow-up – the $9 billion KKR North America Fund XI – totaled $750 million.

Oregon staff could not be reached for further comment.

Action Item: For Oregon’s complete report on KKR North America Fund XII, visit http://1.usa.gov/1IJP5nH

Photo courtesy of Reuters