KKR Shuts First Equity Hedge Fund

Jun 2 2014 | 6:32am ET

Kohlberg Kravis Roberts’ first foray into stock hedge funds has come to an end after less than three years.

The firm has liquidated its KKR Equities Strategies, launched with great fanfare in 2011, a year after the private-equity giant hired a team of Goldman Sachs proprietary traders to lead the effort. KKR blamed a “lack of scale” for the decision; KES managed only $500 million last month, one-third of which came from KKR and firm employees. The fund has fewer than 20 outside investors.

KES posted annualized returns of about 5% during its short life.

KKR continues to run two credit hedge funds. But the firm said it will now focus on buying stakes in established managers rather than running funds in-house.

“As our hedge-funds business has evolved, we have decided to focus on our hedge-fund solutions business, the building of strategic stakes and seeding effort modeled after what we did with Nephila Capital, and scaling our credit-oriented hedge funds,” KKR said.

Robert Howard, Goldman’s former head of U.S. proprietary trading, will remain a senior adviser to KKR. Most other members of the KES team, about a dozen people, will leave the firm.


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