In its Q4 2017 earnings call, New York-headquartered fund manager Kohlberg Kravis Roberts (KKR) revealed that its mezzanine strategy had delivered a 20 percent gross return in 2017. This is above the level of performance typically expected of mezzanine, which is low to mid-teens.
Its alternative credit strategy also saw a gross return of 18 percent from its Special Situations II fund last year and a 10 percent gross return from its Lending Partners II direct lending fund. The performance across credit was described as “strong”.
The firm’s gross return for private equity last year was 34 percent, while real assets – covering real estate, infrastructure and energy funds – delivered gross returns ranging between 9 percent and 15 percent.
KKR said it saw a high level of capital inflow into CLOs and alternative credit separately managed accounts (SMAs) in 2017, part of a $16 billion fundraising haul for the firm. By year end, it said it had $57 billion of dry powder across all strategies.
The firm used the earnings call to remind listeners of the deal it struck with FS Investments in December last year to create a business development company (BDC) platform with a combined $18 billion in assets under management. It said it expected the deal to complete around midway through this year and that it would boost KKR’s credit assets by around a third.
Scott Nuttall, co-president and co-chief operating officer, said the firm saw further “significant upside” in its non-private equity businesses, which had already seen 19 percent growth over the last four years. “They are benefitting from a lot of secular tail winds,” he noted.