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KKR raised a record $6.4 billion for its latest Asian infrastructure fund, capping a month of frenzied investment activity in the sector as broader private equity fundraising slowed.
With the addition of a second fund, the New York-listed private equity group’s Asia infrastructure business, which now has $13 billion in assets under management, has largely steered its bets away from China, the region’s largest economy. , is instead focusing on other markets including India and the South. -East Asia.
Private equity has rushed into infrastructure spending in recent months, attracting capital to invest in energy transition and digitalisation, while heightened global volatility has left investors looking to the long-term stable returns the asset class offers. Crowded.
David Luboff, co-head of Asia Pacific and head of regional infrastructure at KKR, said 2023 was hit by a cash crunch, but this year many investors, including direct investors in addition to private equity players, He said he expected new funding sources to emerge and more trading activity.
Infrastructure investment has been at the center of activity in recent weeks, with some asset managers acquiring infrastructure investment companies to gain a foothold in the market and raising the largest private infrastructure fund ever. There are also management companies that do this.
US operator BlackRock paid $12.5 billion to buy Global Infrastructure Partners, creating the world’s largest infrastructure company, while Australian bank and investment group Macquarie announced plans for a new European infrastructure fund. raised record funding of over 8 billion euros. Blackstone, Stonepeak and I Squared Capital have also signaled increased interest in the sector as governments’ ability to fund infrastructure comes under pressure.
KKR’s Asia Pacific Infrastructure Partners II Fund totals $6.4 billion and is the largest dedicated pan-regional infrastructure fund. In an interview with the Financial Times, Labov said the new fund would apply “moderate leverage” to its trades and focus on “regions where we feel the track record, supply of opportunities and regulatory context is supportive”. said. These include India, South Korea, the Philippines, Japan, Singapore, Australia and New Zealand, he added.
KKR has made 10 investments so far from the new fund, with more than half of the capital allocated to energy, digital infrastructure and manufacturing assets. Until now, the firm has largely avoided doing business in China from Asian infrastructure funds.
“This is a pan-Asia fund, so we can allocate capital dynamically, but less than 2% of the $13 billion in infrastructure capital is allocated to China,” Lubov said. . “We at KKR have a very strong presence in China, but the opportunities are in the markets I mentioned.”
Foreign investors’ attitudes toward China have worsened as China’s growth slows and geopolitical tensions with the United States increase. Labov said investors in KKR’s funds are evenly split between Asia, the Middle East, Europe and North America.
Previous deals include a $650 million investment in Indian decarbonization group Serentica Renewables, an $800 million injection into Singapore telco Singtel’s 20% stake in its data center business, and an This includes a $400 million investment in OMS Group’s submarine cable business.
But concerns are being raised about private equity’s rush to invest in infrastructure and whether the long-term trend of lower costs and services is in the best interests of customers and businesses. The disruption on Britain’s River Thames has heightened those concerns in recent months.
Labov said KKR was “very aware of its social license to operate,” adding: That is reflected in all our investment themes. ”
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