KKR successfully raises $6.5 billion for an asset-based financing venture.
KKR, the global investment firm, has recently completed a $6.5 billion fundraise for its Asset-Based Finance (ABF) strategy. This strategic move underscores KKR's focus on the expanding private credit segment, which is expected to reach $9.2 trillion globally by 2029.
The ABF business at KKR operates two strategies: an opportunistic approach and a high-grade strategy focusing on investment-grade opportunities. Varun Khanna, Avi Korn, and Chris Mellia serve as the global co-heads of ABF at KKR.
KKR's ABF strategy emphasizes specialized credit expertise, scale, and capital flexibility to invest in diverse pools of financial and hard assets. These assets include consumer loans, industrial equipment, commercial aircraft, and intellectual property. This approach targets historically attractive yields, portfolio diversification, and a market gap left by traditional banks retreating from certain lending markets.
The $6 trillion ABF market is experiencing significant growth, with private non-bank lenders filling credit gaps created by traditional banks scaling down lending activities. This trend is driven by increasing demand for credit from households and businesses, with U.S. household debt alone surpassing $18 trillion by 2024.
After a decade favoring direct lending, ABF is now gaining prominence within private credit due to its scale and complexity, requiring managers with deep industry relationships and credit expertise. Investors are attracted by ABF’s historically higher yields and its resilience across economic cycles since its asset backing reduces macroeconomic sensitivity.
KKR's ABF portfolio has four key themes: consumer/mortgage finance, commercial finance, hard assets, and contractual cash flows. The firm's ABF strategy, established in 2016, now manages over $74 billion in assets.
The fundraise, named KKR Asset-Based Finance Partners II (ABFP II), received backing from a diverse group of new and existing investors globally. These investors include public and corporate pensions, sovereign wealth funds, private banks, insurance companies, asset managers, and family offices.
ABFP II offers investors a chance to diversify their portfolios with high-quality non-corporate collateral-backed cash flows. With a focus on credit investments backed by large and diversified pools of financial and hard assets, ABFP II is more than 2.5 times the size of its predecessor.
KKR has 18 "captive" ABF platforms across these four segments, enabling proprietary sourcing and structuring of investments. ABFP II received nearly $1 billion from separately managed accounts seeking similar investment opportunities. The fund is intended to help fill this gap by providing long-term capital to the real economy.
In a statement, Daniel Pietrzak, partner and global head of private credit at KKR, mentioned that the asset-based finance market is one of the most dynamic opportunity sets today. Pietrzak also stated that the market remains relatively undercapitalized.
In a separate development, KKR has partnered with Itaú AM to offer investors in Brazil access to private markets. This partnership underscores KKR's commitment to expanding its global footprint and providing diverse investment opportunities to its clients.
- KKR's focus on the ABF strategy for investing, as demonstrated by the recent $6.5 billion fundraise, signifies a strong commitment to the business segment, with the intention to invest in diverse pools of financial and hard assetssuch as consumer loans, industrial equipment, and intellectual property.
- The completion of the $6 trillion ABF market's significant growth and the increasing demand for credit from households and businesses, along with private non-bank lenders filling credit gaps created by traditional banks scaling down lending activities, attests to the growing popularity of ABF among investors seeking historically higher yields and portfolio diversification.
