KGAL to invest in private equity and expand investor base

KGAL is not planning to add a fourth asset class for its investments, but is ready to move into PE, said Waltenbauer, who believes that is the direction in which the market is moving. He explained that the company is now looking not only at direct investments in assets, but also at investing in companies operating in the sectors of energy and real estate. The CEO said KGAL has not yet closed PE investments, but it has participated in a bidding process.

KGAL aims to grow the share of international investors for its funds from the current level of approximately one third to a majority in five years' time, the CEO said. Besides the European countries, KGAL is targeting South Korea, Japan, Australia and south-east Asia to gain investors, he added. He mentioned that the uncertainty over Brexit has increased the attractiveness of investments in Germany.

Waltenbauer explained that the internationalisation strategy started two years ago with the setup of a London-based team dedicated to attracting international investors. At that time, 100% of KGAL's investors were from Germany, he added.

KGAL has 72,000 investors, of which 211 are institutional investors. The figure includes investors from France, the UK, Italy, the Netherlands and Spain.

KGAL raises approximately €1bn in new funds and invests around €2bn a year across the three asset classes of aviation, real estate, and infrastructure and energy, the CEO said.

Waltenbauer said that, while aviation is already a global business, KGAL is looking to increase its fund investments internationally in real estate and infrastructure. It has already done investments in some European countries and is looking at the other OECD countries for future expansion.

In 2018, in the real estate sector, KGAL made six transactions outside Germany, with first-time investments in the Netherlands and Poland. In the energy sector, KGAL has investments in wind and solar power generation in Italy, Sweden and Bulgaria, according to a company press release.

The CEO mentioned that, in terms of direct investments, KGAL is also looking at emerging countries. In April 2019, it announced that its subsidiary, KGAL New Frontiers (KNF), acquired a 22% stake in Norway-based SunErgy, which supplies off-grid electricity to towns in emerging markets. KNF's task is to test new business fields that, if successful, will be offered to the institutional investors, according to a press release.

In 2018, KGAL's investment volume reached €20.5bn.

KGAL competes with different players according to the asset class, the CEO said, and named Patrizia Immobilien in real estate and Aquila Capital and Copenhagen Infrastructure Partners in the energy sector.

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