KKR & Co. closed its latest credit-orientated fund, KKR Special Situations Fund II, at $3.35 billion, said Jamie Weinstein, member and co-head of KKR’s special situations unit, in an interview.
KKR’s first special situations fund closed in December 2013 with $2 billion.
The latest fund did not have a fundraising target or hard cap. KKR executives plan to invest in credit assets trading at distressed levels and event-driven situations.
“There has been some capital but not nearly enough for another credit cycle,” Mr. Weinstein said. “A lot of capital is in shorter-term lockup structures such as credit-focused hedge funds, which have faced significant redemptions.”
One of the new fund’s investments is in Pillarstone, an entity created to partner with banks to work out their portfolios of non-performing loans. Pillarstone already has formed partnerships with Italian banks to manage their large corporate debt exposures. Pillarstone is also finalizing deals with other European banks, he said.
These partnerships leave room for the banks to participate in the upside of the recovery, which the banks might not be receiving if they had sold the loans outright.
Investors include limited partners in prior funds as well as investors that are investing with KKR for the first time, he said. They include the $11.7 billion Maine Public Employees Retirement System, Augusta, and the $29.1 billion South Carolina Retirement System Investment Commission, which oversees investment of pension fund assets for the billion South Carolina Public Employee Benefit Authority, a separate administrative agency. Both entities are located in Columbia.
