News

KKR (KKR) is seeking about $20 billion from investors for its latest flagship North America private equity fund, North America Fund XIV. This new fund follows its predecessor of similar size launched three years ago. The firm, managing $578 billion in assets as of March, faces a more challenging fundraising environment. Investors have been cautious about new commitments due to receiving less capital back from private equity firms amidst high-interest rates, making it difficult to refinance or sell companies to other buyout firms.

The new KKR fund targets a net internal rate of return (IRR) of at least the high-teens, with an annual deployment of 20% to 25% of its capital. The fundraising effort will test investors' confidence in KKR's recent buyout performance. As of March, KKR's last fully deployed North American fund from 2017 reported a net IRR of 20.5%. In comparison, Carlyle Group's (CG) 2018 fund had an 8% net IRR, and Bain Capital's 2017 fund had a 17.1% net IRR. KKR's $19 billion predecessor fund, North America Fund XIII, has deployed 64% of its capital three years into its six-year investment period.

Market Overview:

• KKR targets $20 billion for its new North America buyout fund.


• Investors cautious due to high-interest rates impacting returns.


• KKR's previous North America fund shows strong performance with a 20.5% net IRR.

Key Points:

• New fund aims for high-teens net IRR and 20%-25% annual capital deployment.


• Comparison with Carlyle and Bain Capital funds highlights KKR's strong performance.


• KKR’s predecessor fund has deployed 64% of its capital within three years.

Looking Ahead:

• Fundraising market remains challenging but shows signs of improvement.


• KKR’s employee ownership program boosts productivity and revenue.


• The success of the new fund will gauge investor confidence in KKR’s strategies.

KKR has acknowledged the challenges in the fundraising market, with activity significantly slowing down. The first quarter of 2024 saw a 57% drop in U.S. buyout fundraising closures compared to the previous year, according to LSEG data. Despite this, KKR's CFO Robert Lewin noted an improvement in fundraising conditions at the TD Cowen financial services summit. KKR raised about $180 billion from investors between early 2022 and Q1 2024. Additionally, KKR's broad-based employee ownership program, led by Pete Stavros, has been expanded in North America, showing positive impacts on revenue, productivity, and employee retention.

KKR’s innovative employee ownership initiative has reportedly added significant income for employees in its portfolio companies. Henry Kravis, KKR's co-founder, highlighted the success of this program, citing a $175,000 increase in income per employee at CHI, a company previously owned by KKR. This strategy, traditionally reserved for senior executives, is now benefiting rank-and-file employees, contributing to better performance and lower turnover rates.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.