US - KKR to launch first hedge fund

Rob
27 February 2006

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Press reports suggest that Kohlberg Kravis Roberts will launch its first hedge fund, KKR Strategic Capital Fund, at the end of the second quarter. According to a potential investor, the fund will focus on buying bonds and loans in the secondary market and will also provide direct lending. It is expected to launch with $1bn.

Nino Fanlo and David Netjes will manage the fund along with new staff the firm is seen hiring.

The KKR fund will require a $5m investment minimum and will have two separate investor classes. For Class A investors, the management fee will be 2% with a performance fee of 20% and two-year lockup. For Class B investors, the management fee will be 1.5% and performance fee is 15% with a five-year lockup.

Many hedge funds have private equity investments as part of their portfolios, including Eric Mindich's Eton Park Capital Management and Alec Litowitz's Magnetar Capital. KKR, which has financed over $162bn worth of deals, is the latest private equity name to move in the opposite direction. Carlyle Group and Blackstone Group launched hedge funds at the end of 2004 with $3bn and in 2005 with $500mn, respectively.