The capital will be committed to privately originated and negotiated credit investments backed by large and diversified pools of financial and hard assets, with attractive risk-adjusted returns
KKR announced the final close of KKR Asset-Based Finance Partners, the global investment firm’s first fund dedicated to asset-based finance investments (ABF). The approximately $2.1 billion fund will commit capital globally to privately originated and negotiated credit investments that are backed by large and diversified pools of financial and hard assets, with attractive risk-adjusted returns.
Dan Pietrzak and Matthieu Boulanger, Partners and Co-Heads of Private Credit at KKR claimed that the $4.5 trillion ABF market is one of the most compelling and fastest-growing opportunities within the company’s private credit business. At the same time, he added that investors are increasingly looking for solutions that can deliver collateral-based cash flows with attractive yield and downside protection in today’s highly volatile and inflationary environment.
“We are seeing growing recognition of ABF as a standalone asset class that can deliver attractive risk-adjusted returns. Through the close of ABFP, we are pleased to play a leading role in meeting this demand while also serving the financing needs of consumers and businesses globally,” Dan noted.
According to Avi Korn, Chris Mellia, and Varun Khanna, Managing Directors who oversee the ABF investment strategy at KKR, there are significant and growing opportunities for scaled private capital across the ABF universe. “Demand has been driven by global bank deleveraging, the need for fast and sophisticated credit solutions and the inability of traditional capital to provide them. We believe that the global footprint and breadth of our ABF strategy positions us well to serve this need and to source differentiated opportunities with compelling risk-adjusted returns,” they said in a joint statement.
KKR claimed that ABFP has received strong support from a diverse group of new and existing investors, including public and corporate pensions, sovereign wealth funds, commercial banks, insurance companies, asset managers, and family offices. It invested approximately $150 million alongside external investors through its balance sheet and employee commitments.
“We are thrilled with the demand and support that we’ve seen from new and existing Limited Partners. There is clearly excitement around this strategy and the benefits that it can provide, especially in today’s environment,” said Kevin McMahon, a Managing Director who leads capital raising and business development for KKR’s credit business.
KKR has deployed more than $6 billion across 54 ABF investments globally since 2016 through a combination of portfolio acquisitions, platform investments and structured investments. It has approximately $35 billion in ABF assets under management and a team of approximately 35 dedicated ABF investment professionals globally.
KKR’s ABF portfolio focuses on four key themes: Consumer/Mortgage Finance, Hard Assets, Small-Medium Enterprise and Contractual Cash Flows. The investment company has established lending businesses in partnership with industry management teams to pursue opportunities in lending markets that the firm finds attractive.
ABF platforms and partnerships provide KKR with access to lending opportunities across a diverse range of industries, including aviation, real estate, automotive finance, mortgages, royalties and equipment leasing, among others.
KKR established its credit platform in 2004 and made its first private credit investment in 2005. Over the past 17 years, it built one of the largest private credit platforms globally that could invest across the capital structure and liquidity spectrum.
Today, it manages approximately $184 billion of credit assets globally, including approximately $71 billion in private credit, approximately $102 billion in leveraged credit and approximately $10 billion in strategic investments, as of March 31, 2022. KKR has a team of approximately 170 credit investment professionals across nine cities in seven countries, including approximately 90 private credit investment professionals globally.