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KKR raises record European fund as buyout firms target region

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Via Financial Times

Kohlberg Kravis Roberts, the US buyout group, has raised its biggest-ever European fund, as investors plough money into the region in search of higher returns.

The private equity firm has already committed 28 per cent of the €5.8bn fund to deals, before closing the fundraising process on Tuesday. The speed with which a chunk of the money has been invested illustrates the industry’s appetite for dealmaking in Europe.

“Average investment periods for funds have shrunk a little as people are seeing opportunities in the market,” said Johannes Huth, head of Europe for KKR. “Some of our recent investments have been developing for a long time.”

Deals already struck under the new fund, which beat its initial €5bn target, include a stake in the German publisher Axel Springer, a deal to buy the German payments group Heidelpay for more than €600m and a 50 per cent stake in the Nordic pension adviser and non-life insurance broker Soderberg & Partners.

On average, private equity groups worldwide have so far invested 10 per cent of funds raised in 2019 and 20 per cent of those raised in 2018, according to figures from the data provider Preqin.

Buyout groups have tapped into high demand from investors who expect the industry to deliver strong returns in a world in which US stock markets are at record highs and many government bonds offer puny yields.

Historically, private equity’s performance has outstripped that of stocks by a bigger margin in Europe than in the US, according to data from Bain & Company.

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The new European fund will target western European companies worth between €500m and €2bn in industries including healthcare, financial services and retail, taking majority and minority stakes.

Firms are also keen to raise funds ahead of a potential downturn when markets may become tougher. Last month, rival buyout firm The Carlyle Group said it had raised €6.4bn for its latest European fund, exceeding its target by almost €1bn.

KKR will invest $400m from its own employees and the firm. Other investors include pension funds, insurers, sovereign wealth funds and wealthy families in the US, Europe and Asia.

Last month, KKR named Mattia Caprioli and Philipp Freise as its co-heads of European private equity.

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