KKR Raises $1.3B For New Direct Lending Fund

Apr 16 2015 | 12:35pm ET

KKR has announced a final close for its new $1.3 billion direct lending fund.

The company has been raising funds for the vehicle, named KKR Lending Partners II, for about a year, according to a press release. It attracted strong interest from a broad range of new and existing investors, including public pensions, insurance companies, private banking platforms, family offices and individual investors.  

The move comes as direct lending becomes more popular among private investment funds. Regulatory changes since the financial crisis have forced banks to decrease credit risk and raise capital standards, which has resulted in a vacuum of sorts developing in the market for corporate loans, especially in the middle market. 

The fund will invest primarily in structured transactions with a focus on the top of a company’s capital structure. It hopes to capture illiquidity premiums in order to earn strong risk-adjusted returns versus the syndicated loan market.

Erik Falk and Chris Sheldon will co-managers of the new fund, which is the second lending effort by the company. The first, a $414 million direct lending vehicle formed in 2011, has produced a 10% annualized return after fees, according to regulatory filings cited in a Bloomberg report. 

The second fund held its first close in June 2014 and began investing shortly thereafter, notes the press release. Including the recent raise, the KKR Credit division manages approximately $5 billion in capital available for direct lending within $26.9 billion in assets under management as of December 31, 2014.

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