KKR To Take Minority Stake In Hedge Fund Nephila

Jan 24 2013 | 11:01am ET

Kohlberg Kravis Roberts will buy almost a quarter of catastrophe reinsurance hedge fund Nephila Capital as it moves to expand its hedge fund footprint.

The private equity giant will pay an undisclosed amount for the 24.9% stake in the Bermuda-based hedge fund. It will buy one-quarter of the Man Group's 25% stake, leaving the hedge fund giant with an 18.75% interest in Nephila, and the rest from Nephila's management. The proceeds from the purchase of the latter portion will be invested in Nephila's funds.

The deal will leave Nephila, which has $8 billion in assets, independent and operating under its own name. KKR's most recent hedge fund moves have, by contrast, given it control of operations; in 2011 it hired Goldman Sachs proprietary trader Bob Howard and his team to launch an in-house hedge fund and last year bought fund of hedge funds Prisma Capital Partners.

Nephila was set up in 1998 as part of reinsurance brokerage Willis, which was owned by KKR at the time. The hedge fund was spun off 10 years ago.

"In backing Nephila, we are partnering with a team we have known for more than 15 years," KKR's Henry Kravis and George Roberts said. "As the first dedicated manager of catastrophe-risk investment strategies, they share the entrepreneurial spirit that pervades KKR's culture."

For its part, Nephila said that it would close two funds, Juniper Catastrophe and Triton Catastrophe, to new investments. The move will help both funds achieve their targeted returns of between 10% and 15%, the hedge fund said.

Man bought its 25% stake in Nephila five years ago.


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