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KKR went on an unprecedented worldwide spending spree when the pandemic kicked off a period of buying into falling valuations. Image Credit: Reuters

London: KKR & Co. has closed its largest-ever European buyout fund, giving the investment firm ammunition for deals at a time when private equity is navigating volatile markets.

KKR has raised fresh commitments of $8 billion, including more than $1 billion of that from its own balance sheet and employee commitments, KKR said Tuesday in a statement. That compares with the $6.6 billion fund it raised in 2019.

The announcement comes at a time of volatile markets and macroeconomic uncertainty. Private equity firms have found it harder to raise commitments from institutional investors, which have remained cautious against the economic backdrop and as many of them found themselves overallocated in alternative asset classes during rising markets.

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Many private equity funds have been struggling to meet their fundraising targets.

“We want to buy at attractive valuations and sell when it’s attractive for the seller to sell,” said Mattia Caprioli, co-head of European private equity at KKR. “The next six months may not be necessarily the time to monetize investments “- what we want is to deploy in the next six months.”

Falling valuations

Dealmaking has also slowed for private equity as sellers have yet to adjust to falling valuations and buyers face higher financing costs, which are particularly important for private equity using leverage to boost returns.

“We made some of our best investments in an environment that was complex and volatile,” Caprioli said in an interview. “This is playing to our strength.”

KKR went on an unprecedented worldwide spending spree when the pandemic kicked off a period of buying into falling valuations. The firm often stayed away from using debt to finance transactions and instead bought companies entirely with equity.

KKR’s European private equity business manages assets of about $28 billion. The global private equity business has assets under management of $165 billion.

‘Very turbulent’

KKR wants to invest alongside family owners, founders, entrepreneurs and corporates, providing flexible capital for strategic partnership transactions, platforms for expansion and corporate carve-outs, it said in the statement.

“PE has always created its best vintages in times like these; that’s when our expertise matters,” said Philipp Freise, who co-heads the European business with Caprioli. “We can provide the capital and resources to truly help enhance companies. That said, the next six months will be very turbulent.”