KKR Amasses $9.3 Billion in Biggest Ever Asia Private Fund Pool

(Bloomberg) -- KKR & Co. has raised $9.3 billion for its third Asia fund, amassing the biggest ever pool by a private equity firm in the region, as the firm steps up investment in Japan.

About $800 million of the pool comes from the firm's balance sheet and employees, the company said in a statement. The fund is 55 percent larger than its second Asia fund, which had generated a net internal rate of return of 20.6 percent as of March 31, the New York-based firm said in the statement Friday.

The pool of money was amassed even as the number of megadeals, or transactions larger than $1 billion, dropped in the region last year and total investment declined by 26 percent, according to Bain & Co. data. Still, one bright spot has been Japan, where more companies are targeting overseas acquisitions and selling non-core assets. More than half of KKR's $4.7 billion in transactions in the region so far this year were in Japan, according to data compiled by Bloomberg.

‘Diverse' Opportunities

"We see a diverse set of opportunities across Asia Pacific stemming from rising consumption and urbanization trends in key markets as well as larger carve-out and cross-border transactions in countries such as Japan," Ming Lu, head of Asia private equity, said in the statement.

KKR bought control of Hitachi Kokusai Electric Inc. in a $2.3 billion deal in April, three months after the private equity firm purchased Hitachi Koki Co. for $1.3 billion. In November, the U.S. fund acquired Calsonic Kansei Corp. for $4.5 billion from Nissan Motor Co., as Japan's second-biggest automaker looks to spin off less important businesses to focus on electric vehicles and self-driving cars.

With the latest fund, KKR's private equity business has $68 billion in assets worldwide. KKR raised $4 billion for its first Pan-Asian fund in 2007 and $6 billion for a follow-on pool in 2013.

The firm started raising its third fund amid the departures of two of its most senior China executives David Liu and Julian Wolhardt, who have been investing in the country for two decades and were behind some of the firm's most successful investments in the region. While the Greater China area represents close to half the total Asia-Pacific market, valuations reached record levels last year amid ample capital chasing deals, according to Bain & Co.

A KKR China-focused fund raised in 2010 generated a 7.8 percent net return as of March 31, lagging the rest of its Asia funds, according to the firm's latest quarterly filing. KKR's first Pan Asian fund produced a 13.7 percent net return.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net.

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Andy Sharp, Sree Vidya Bhaktavatsalam