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KKR Infrastructure Fund Raises Over $500M

02 December, 2010

The infrastructure fund of buyout group Kohlberg Kravis Roberts & Co has reached a $515 million fundraising close, a source familiar with the matter said on Tuesday.

“The close took place in the last couple of weeks. The capital raising continues and KKR expects to raise between $1 and $2 billion,” the source said.

A KKR spokesman could not immediately comment.

KKR executive Scott Nuttall told analysts in a conference call earlier this month the firm did not have a target for the infrastructure fund but the fundraising process would continue beyond the $500 million mark.

When plans for the infrastructure fund were announced in May 2008, a source familiar with the matter told Reuters it could pursue about $5 billion. Market research firm Preqin later said the target of the fund was $4 billion.

Global unlisted infrastructure fundraising dried up in 2009 as institutional investors, such as pension funds and insurers, moved into more liquid assets in response to the financial crisis. But appetite for the asset class has started to recover.

Unlisted infrastructure funds reached a final close on a total $9.8 billion globally in the third quarter of 2010, the highest quarterly sum since the fourth quarter of 2008, according to Preqin.

KKR moved beyond the traditional private equity fees model to attract investors with a 1 percent management fee and a 10 percent carry.

Carried interest is typically the 20 percent that private equity executives take from the profit made on their funds, after compensating their investors, which can be huge if the funds perform well. Fees are usually 2 percent.

As opposed to KKR’s private equity funds, its infrastructure fund has a hurdle rate — the minimum return to investors before a carry is permitted — of 8 percent, Nuttall said on the conference call.

Last month KKR teamed up with South Korea’s National Pension Service to buy Chevron Corp’s (CVX.N) stake in Colonial Pipeline Company. KKR said it raised $1.1 billion in an account separate from the infrastructure fund for that transaction.


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KKR Infrastructure Fund Raises Over $500M

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