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KKR has raised a record $6.4 billion for its latest Asian infrastructure fund, capping a month of frenzied investment activity in the sector at a time when private equity fundraising has slowed.
With the addition of a second fund, the New York-listed private equity group’s Asian infrastructure business now has $13 billion in assets under management, although its bet has largely avoided China, the region’s largest economy, to instead focus on other markets, notably India and the south. -East Asia.
Private equity has rushed into infrastructure in recent months, raising funds to invest in the energy transition and digitalization, while investors have flocked to the stable, long-term returns that this asset class offers at a time of greater global volatility.
David Luboff, KKR’s co-head of Asia Pacific and regional head of infrastructure, said he expects more trading activity this year after a shortage in 2023, with many new ones emerging sources of capital, including direct investors, in addition to private equity players.
Infrastructure has been the center of intense activity in recent weeks, with some asset managers buying up infrastructure investment firms to gain a foothold in the market and others raising their largest-ever private infrastructure funds .
US manager BlackRock paid $12.5 billion to acquire Global Infrastructure Partners to create the world’s largest infrastructure company, while Australian bank and investment group Macquarie raised a record amount of more than $8 billion. billion euros for its new European infrastructure fund. Blackstone, Stonepeak and I Squared Capital have also signaled growing interest in the sector as governments’ ability to finance infrastructure comes under pressure.
At $6.4 billion, KKR’s Asia Pacific Infrastructure Partners II fund is the largest pan-regional infrastructure fund. In an interview with the Financial Times, Luboff said the new fund would apply “modest leverage” in its transactions and focus on “geographies where we believe the track record, as well as the provision of opportunities and the regulatory context, were favorable.” This includes India, South Korea, the Philippines, Japan, Singapore, Australia and New Zealand, he added.
KKR has made 10 investments from the new fund so far, deploying more than half of the capital in energy, digital infrastructure and manufacturing assets. So far, it has largely avoided deals in China from its Asian infrastructure funds.
“This is a pan-Asian fund, so we can allocate capital dynamically, but in terms of $13 billion of infrastructure equity, less than 2 percent has been allocated to China” , Luboff said. “As KKR, we have a very strong presence in China, but the opportunities are in the markets I mentioned.”
Foreign investors have become unhappy with China as the country’s growth has faltered and geopolitical tensions with the United States have increased. Investors in the KKR fund were equally distributed across Asia, the Middle East, Europe and North America, Luboff said.
Deals so far include a $650 million investment in Indian decarbonization group Serentica Renewables, an $800 million injection for a 20% stake in the Singaporean telco’s data center business Singtel and a $400 million investment in Asian submarine cable company OMS Group.
However, concerns have been raised about the rush of private equity into infrastructure and whether a long-term trend of cutting costs and reducing services is in the best interests of customers and businesses. Troubles at Thames Water in the UK have fueled these concerns in recent months.
Luboff said KKR was “very conscious of the social license to operate,” adding: “We are very conscious of that. This fuels all of our investment theses.