Global alternatives fund manager KKR has held a final close of its first dedicated asset-based finance fund with $2.1 billion.
The vehicle, KKR Asset-Based Finance Partners, received support from both existing and new investors including public and corporate pensions, sovereign wealth funds, commercial banks, insurance companies, asset managers and family offices. In addition, KKR invested $150 million through its balance sheet and employee commitments.
KKR has been active in ABF investments since 2016 with more than $6 billion committed in 54 investments through a combination of portfolio acquisitions, platform investments and structured investments.
Its ABF strategy will focus on four key themes: consumer and mortgage finance, hard assets, small and medium enterprises and contractual cashflows. It will invest across industries including aviation, real estate, automotive finance, mortgages, royalties and equipment leasing.
While the fund will target a wide variety of different type of loans, KKR’s co-head of private credit, Daniel Pietrzak, said: “While loans or leasing in aviation can be very different to acquiring a portfolio of mortgages, certain underwriting approaches are rooted in the same structured finance methodology.”
In a statement, Pietrzak and his fellow co-head of private credit Matthieu Boulanger, said: “Investors are increasingly looking for solutions that can deliver collateral-based cashflows with attractive yield and downside protection in today’s highly volatile and inflationary environment. We are seeing growing recognition of ABF as a standalone asset class that can deliver attractive risk-adjusted returns.”
KKR said demand for ABF has been driven by global bank deleveraging, a need for fast and sophisticated credit solutions and the inability of traditional sources to supply them.
“LPs’ private credit portfolios have been very centred in corporate credit and they have not been getting much diversification,” Petrzak told Private Debt Investor. “We wanted to offer something that offers a very different risk profile.”
Boulanger added: “The timing reflects the growth of our business and the building out of our team but also investor interest in this type of vehicle has increased as LPs look for less correlated assets with downside protection.”