The Financial News is reporting that the top-tier buyout firm has closed its latest European fund with roughly €6 billion ($9.4 billion), well short of its initial €8 billion target. In naming the hurdles KKR faced in raising the new fund, the London paper said:
Sources close to the fundraising said the process was harder than expected this year as buyout firms coped with the dollar falling against the euro and investor concerns about the slow pace of megadeals.
The European limited partnership may be the second fund that's fallen short for the New York private equity firm. KKR just missed the $18 billion hard target for its domestic fund, KKR 2006 Fund LP, which closed with $17.6 billion, Private Equity Online reported on March 31.
With the credit crunch continuing to weigh on LBO activity, limited partners may be getting more reluctant to make large commitments to new funds for fear that the firm may have a hard time deploying the capital in the near term, while management fees continue to accrue to the buyout shops.
At Columbia Business School's Private Equity and Venture Capital Conference, John G. Morris a managing director at fund of funds HarbourVest Partners made comments that may be looming large in the minds of other LPs:
We've been an investor in the name-brand funds and gotten great returns from them, but when you see a $20 billion fund and the debt markets closed, there is a concern that management fees will erode returns if they don't put money to work in the first few years.
- George White
For more on how the shifts in the debt markets are affecting private equity and fundraising, be sure to attend The Deal's 2008 Private Capital Symposium on May 14, which will feature keynotes with Moelis & Co.'s CEO Kenneth D. Moelis and Blackstone Group LP's president Tony James.
See story about KKR from Financial News
See post about $17.B KKR fund from Dealscape
See post about John G. Morris' comments from Dealscape
See PE & VC fundraising Dealwatch
See more about Private Capital Symposium
