New York-based investment giant KKR has closed a new dislocation-focused strategy on $4.0 billion, raising $2.8 billion for its KKR Dislocation Opportunities Fund and more than $1.1 billion for separately managed accounts that will be committed to the same investment opportunities.
The fund will have what the firm described as a “flexible mandate” to invest in evolving opportunities across both public and private markets over an initial investment period of just 18 months. KKR said the fundraising, which closed on 19 May but has only now been announced, took place over a lightning fast eight-week period.
With a strategy that straddles public and private markets, together with notably short fundraising and investment periods, KKR is typical in some ways of the new trend of dislocation funds that have been launched to take advantage of the havoc wrought on companies by the covid-19 outbreak.
The need for speed is in relation to the perceived fleeting nature of the opportunity. Many of these funds, we are told, have investment periods of between one and two years – with the KKR fund in the midpoint of this range.
However, KKR’s approach is also different in some ways – most obviously in being the largest dislocation fund raised to date. It’s also unusual in terms of the number of commitments, including 20 new institutional investors to KKR and 40 new investors to KKR Credit. It’s a characteristic of dislocation funds that, as part of the desire to move quickly, they may be backed by a single LP or, at most, a small group of LPs.
A recent report by consultancy bfinance identified 130 launched and “soon to be launched” funds across seven types of strategy targeting opportunities arising from covid-19 dislocation. Fundraisings we have noted this year seeking to take advantage of dislocation have included AlbaCore, Pemberton and Arena Investors.
KKR’s dislocation strategy will be headed by co-portfolio managers Jennifer Box and Blaine MacDougald. It will target “attractively priced credit risk in the secondary markets and provide liquidity and capital solutions to high-quality borrowers as they manage through the crisis resulting from covid-19”.
Target investment areas will include corporate credit and asset-backed and real estate credit in North America and Europe. Chris Sheldon, head of leveraged credit at KKR, said a “significant amount” of capital had already been deployed into the March sell-off.
According to a statement, KKR and its employees committed approximately $447 million of capital to the fund.