KKR Sets New Record with $6.4 Billion Raised for Asian Infrastructure Fund
KKR has achieved a milestone by raising a record $6.4 billion for its latest Asian infrastructure fund, marking a period of intense investment activity in the sector amidst a broader slowdown in private equity fundraising.
With the introduction of a second fund, the New York-listed private equity firm's Asian infrastructure arm now manages $13 billion in assets. Notably, KKR's investment strategy has predominantly steered clear of China, opting instead to focus on markets like India and Southeast Asia.
In recent months, private equity has shown increased interest in infrastructure investments, particularly in energy transition and digitalization projects. Investors are drawn to the stable, long-term returns that infrastructure assets offer, especially during times of heightened global volatility.
David Luboff, KKR’s co-head of Asia-Pacific and regional head of infrastructure, anticipates heightened deal activity this year, driven by new capital sources such as direct investors alongside traditional private equity players.
The infrastructure sector has witnessed a flurry of activity recently, with asset managers acquiring infrastructure investment firms to gain market access and raising substantial private infrastructure funds.
For instance, BlackRock acquired Global Infrastructure Partners for $12.5 billion to create the world’s largest infrastructure firm, while Macquarie raised over €8 billion for its new European infrastructure fund. Other firms like Blackstone, Stonepeak, and I Squared Capital have also signaled increased interest in the space.
KKR's Asia Pacific Infrastructure Partners II fund, at $6.4 billion, is now the largest pan-regional infrastructure-dedicated fund. Luboff emphasized that the fund would leverage modestly in deals and concentrate on geographies with supportive regulatory frameworks and ample opportunities.
Although KKR has made significant investments in countries like India, South Korea, Singapore, and Australia, it has largely avoided deals in China from its Asian infrastructure funds. Luboff highlighted that less than 2% of the infrastructure equity has been allocated to China due to more favorable opportunities in other markets.
Investors in KKR's fund hail from various regions, including Asia, the Middle East, Europe, and North America, reflecting a diversified investor base.
Despite the enthusiasm for infrastructure investments, concerns linger regarding private equity's approach to cost-cutting and service reduction, particularly in industries like utilities. However, Luboff emphasized KKR's commitment to operating with a social license and considering the broader impact of its investments on society.
In summary, KKR's record fundraising underscores the growing interest in infrastructure investments in the Asian region, despite challenges and concerns surrounding the sector's practices and dynamics.
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