KKR sees positive private credit results, increased capital

The alternative asset manager has boosted a high-performing portfolio with private debt globally, while raising $28 billion in capital.    

In a third quarter earnings call on Tuesday, KKR said its credit funds performed particularly well during the quarter, results that come as the firm prepares to seek out global sources of funding for private credit investments.

The New York-based firm’s special situations, mezzanine and direct lending funds earned 4 percent, 5 percent and 3 percent gross returns, respectively. Alternative credit now makes up 11 percent of KKR’s holdings.

Scott Nuttall, the head of the global capital and asset management group, said the firm is currently on the trail for a number of investment vehicles. Currently, KKR is seeking contributions for its second opportunistic real estate fund and its second private credit opportunities fund, which has a target of $2 billion. Another Asia-focused direct lending fund is also on the way, Nuttall added.

The firm’s realised performance income for the quarter hit $354 million, among its strongest quarters since going public in July 2010.

The firm deployed over $3.7 billion of capital during the quarter across the US, Europe and Asia, with $1.5 billion of that deployment comprising investments made across its alternative credit vehicles, primarily within direct lending and special situations.

In total, the $3.7 billion in total capital deployment still leaves KKR with approximately $38 billion of dry powder across the firm as of 30 September, a 40 percent year-on-year increase.

Nuttall said that following KKR’s 2014 acquisition of KKR Financial Holdings (KFN), an external specialty finance company, KKR’s balance sheet has had more credit exposure than pre-merger, which the firm has brought down. However, the firm may “see more of a bias” for alternative credit; as an example, Nuttall cited the size of the special situations fund, which closed in April at $3.35 billion.