New KKR fund seeks $700m more than predecessor

The firm’s Lending Partners III, a six-year vehicle, comes as the its previous fund will wrap up its investment period this month. 

KKR is seeking $2 billion for its third direct lending fund that will invest in companies with EBITDA exceeding $25 million, documents from the Minnesota State Board of Investment showed.

The New York-based asset manager has so far locked down at least $421.91 million for KKR Lending Partners III, as Private Debt Investorpreviously reported.

The vehicle will target deals with and without a private equity sponsors, which will be sourced through sponsors, company relationships and advisors, according to the St. Paul, Minnesota-based pension fund’s May meeting materials. SBI was set to allocate $200 million for the fund.

KKR and SBI declined to comment. 

Lending Partners III lists a 1.5 percent management fee on invested capital and a 15 percent incentive fee, the documents disclosed. KKR will make a general partner commitment of at least $50 million to the third fund, or if less, 6 percent of capital contributed to the vehicle. The fund has a three-year investment period, subject to a possible extension, and a six-year life, which offers the option of two one-year extensions.

SBI is a repeat investor in the firm’s direct lending strategy, having made a $75 million commitment to Lending Partners II. That fund has so far generated a net internal rate of return of 16.2 percent and a 1.18 multiple on invested capital as of 31 March, according to the documents. The Alaska Retirement Management Board is also doing due diligence on the fund.

Lending Partners II garnered $1.34 billion in commitments, according to PDI data. KKR’s first-quarter earnings report shows the fund, to which the firm made a 3.7 percent GP commitment, had invested $867.1 million as of the 31 March. Its three-year investment period ends this month and charged a 1.25 percent management fee on contributed capital.

Additional investors in Lending Partners II were the Virginia Retirement System and South Carolina Retirement System, which each committed $150 million, and the Main Public Employees Retirement System, which allocated $60 million.

The first fund, launched in December 2011, closed on $460.2 million in capital, including commitments from pension plans like Virginia Retirement System ($250 million) and Arkansas Local Police and Fire Retirement System ($10 million), PDI data shows.

KKR is a global asset manager that invests in private credit, private equity, real estate and infrastructure, among other strategies, and managed $138 billion in assets as of 31 March.