KKR eyes bigger share of private wealth market as it targets US$1 trillion total AUM

Business Times

25-05-2025

[SINGAPORE] Asset manager KKR is one of the largest globally in private markets, but it is hungry for yet more capital to deploy into 'very long, interesting ideas', said KKR partner Alisa Wood.
To this end, the company has redoubled efforts to garner a larger share of the US$150 trillion private wealth market, where consulting firm Bain reckons alternative investments account for just 5 per cent.
Wood, who was in Singapore recently, said: 'The opportunity set in the private wealth channel is massive. Historically, around 10 to 20 per cent of our capital has come from individuals but in the next five years or so, somewhere between 30 and 50 per cent could come from private wealth. The more dislocated the market is, the greater the need for private equity (PE).'
'We have US$664 billion (under management) but we're actually short on capital. I have spent 25 years of my career in PE. The average company in the last 20 to 25 years has grown fivefold, and the amount of equity needed to do a buyout in the same period has grown threefold. But the amount of dry powder and institutional capital has not even doubled.
'This is an opportunity to bring new capital to the asset class from investors looking for an interesting and less correlated return stream. At the same time, they can invest alongside our institutional pools of capital and allow us to keep doing the deals we've done for 50 years.'
KKR itself reported dry powder or uncalled commitments of US$116 billion at end-March. Dry powder in the industry globally came to around US$1.2 trillion, according to Bain's Global Private Equity 2025 report.
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But the manner in which deals are funded has increasingly shifted from debt in favour of equity, where managers use their own capital and cash flows to acquire a stable of strong companies that they can own for the long term.
According to KKR, debt as a percentage of total capital structures reached 60 per cent in 2013; today it's closer to 35 per cent. Higher borrowing costs are a factor, but more than that, KKR finds value in achieving growth via operational improvements. It said in a recent insight report: 'The success of private equity investments hinges on partnering with good companies and creating value by helping them become great, and not on leverage, in our experience.'
In one week during April, Bloomberg reported that KKR inked at least US$8 billion worth of acquisitions, thanks partly to its ability to finance deals internally. This is unlike many PE firms sidelined by higher financing costs and macro uncertainty.
KKR reported a strong set of results for the first quarter, where assets under management (AUM) rose 15 per cent to US$664 billion. Its suite of evergreen products under K-Series more than doubled in assets to US$22 billion as at Apr 1, compared to US$9 billion a year ago. K-Series funds invest in private credit, PE, infrastructure and real estate. They are open-ended, semi-liquid, and are not subject to capital calls unlike traditional closed-ended PE funds – making them ideal for private wealth.
At end-2024, private wealth accounted for US$100 billion in assets for KKR, managed through relationships with wealth management firms, family offices and a network of advisers. In addition to K-Series, KKR has also partnered Capital Group to offer funds targeted at individuals – two recently launched funds blended public fixed income with private credit.
About US$80 billion of KKR's total assets is invested in the Asia-Pacific. The Singapore office, set up in 2012, manages around US$10 billion and serves as the investment office for South-east Asia. Of this, US$4.3 billion is invested in Singapore in companies such as the V3 Group, which owns Osim and TWG Tea; Goodpack, a supply chain solutions provider; and ST Telemedia Global Data Centres.
In Singapore, the Monetary Authority of Singapore has sought feedback on a regulatory framework to open up private-market funds to individuals.
In its Investor Day event in 2024, KKR laid out an ambitious plan to expand AUM to US$1 trillion, on the back of existing asset management, strategic holdings and insurance businesses. Its strategic holdings business takes a leaf from Warren Buffett's Berkshire Hathaway, where it acquires companies in a core PE strategy and holds them for the long term without any pressure to sell. This enables the firm to reap benefits from companies' long-term growth and recurring dividends.
PE gained some traction in 2024 as investment values and exits rose, said Bain. But fundraising remains an uphill climb for funds not in the top quartile of performance. Unlike traditional funds, manager skill is key to PE outperformance.
Wood, who co-heads two of KKR's open-ended perpetual PE vehicles, said the private wealth market has evolved and there is now 'very much an appreciation for the need to create new return streams to allow long-term capital appreciation'.
Rising correlations between stocks and bonds, and stickier inflation, suggest that the drivers of returns in the next five years will differ from the past. 'The only way to hold onto returns is to diversify into private markets. There will be a big compression of returns from public equities.'
Returns from PE, she said, will come from two sources – the acquisition of a controlling stake in a company and 'operational alpha' which is found in companies which provide an irreplaceable service, hold a market niche or are among the top three providers in their field.
'Controlling an asset allows you to make changes and facilitate growth in a way that a passive investor never can. And you need to think about operational alpha because market beta will no longer be enough.'
Evergreen investment funds, she said, offer private investors several advantages over illiquid closed-ended funds. One is J-curve mitigation. The J curve is typical of PE investments where returns are low in the early years as capital is drawn, but reverse in the later years when a fund begins to make distributions and return investors' capital.
But in an evergreen fund, 'you buy into a fully invested net asset value, which means 100 per cent of your dollar is working from day one, and you don't need to wait four or five years'.
'You also have higher velocity of compounding because you reinvest more efficiently,' Wood said.
Pitchbook, a global capital market data provider, expects evergreen wealth-focused vehicles to expand briskly by 20 per cent a year to exceed US$1 trillion in assets globally by 2029, from US$427 billion in 2024.