With GP help, KKR Next Generation Tech Growth Fund gets $688 mln

  • KKR and its affiliates contribute $156.3 mln
  • Firm determined to eat its own cooking
  • Exec sees PE as good use of balance sheet

 

Kohlberg Kravis Roberts held fast to its plan to invest in its own funds by committing $156.3 million of a total of $688 million raised thus far for its KKR Next Generation Tech Growth Fund.

The fund’s target is unclear, but past first-time KKR funds often tip the scales at about $1 billion. A spokeswoman declined comment.

The tech fund is the latest in a series of middle-market or smaller-deal funds. Other recent entrants include Apax Partners, which is raising its first growth-oriented middle-market fund focused on tech with an estimated target of $750 million to $1 billion; and Vista Equity Partners, raising a microcap fund for business-software companies, with a target estimated at $400 million to $500 million.

Thoma Bravo weighed in with its Discover Fund with more than $1 billion raised in February. Abry Partners, Clearlake Capital and Harvest Partners are all raising funds aimed at smaller investments compared with their flagships.

Capital-raising for KKR Next Generation Tech Growth Fund is nearly complete, the firm said on its Oct 25 conference call.

“We are … in the market with a technology growth fund that we should be wrapping up fundraising for in the relatively near term,” Scott Nuttall, member and head of global capital and asset management group, told Wall Street investors at the time.

Nuttall said that the firm’s heavy investments in its own funds are a good way to get more exposure to its PE business and gain access to an “attractive” return opportunity. “We are big investors in everything that we do,” Nuttall said. “And we like to make sure that we are eating our own cooking in a big way.”

KKR CFO Bill Janetschek said the firm is targeting 40 percent to 45 percent of its balance-sheet asset allocation to PE. As the firm has monetized investments such as Zimmer and Walgreens, it’s had to make bigger commitments to its own funds to maintain its asset allocation.

KKR has been touting investments in its own funds from its balance sheet for a few quarters now, particularly with its latest flagship, Americas Fund XII. KKR contributed about 8 percent to that fund’s total commitment of $12 billion as of Sept. 30.

At last check, KKR’s balance-sheet assets totaled $13.5 billion, with about $7.5 billion of that in investments, including about $3.1 billion in PE, or 42 percent of its investment holdings. Breaking out its debt obligations, the firm’s book value of its balance sheet amounted to just under $10 billion as of Sept. 30.

Action Item: See KKR’s Q3 results: http://files.shareholder.com/downloads/KKR/930869467x0x913186/C3947903-3947-4C9A-9833-B7F66C455EF6/KKR_Q3_16_Earnings_Release.pdf

Kohlberg Kravis Roberts CEO Henry Kravis (right) departs after meeting Prime Minister Narendra Modi of India in Manhattan on Sept. 29, 2014. Photo courtesy Reuters/Carlo Allegri