Kohlberg Kravis Roberts has been strengthening its fundraising team over the past two years as it seeks to diversify and grow its LP roster from its traditional base of more than 300 limited partners.
The build-up comes ahead of an anticipated fundraising for its next private equity fund, which could be launched, “in the next few quarters”, firm partner Scott Nuttall said during a second quarter earnings call.
KKR’s fundraising team has gone from “five to eight people three years ago”, to about 30 people today, according to Suzanne Donohoe, the global head of KKR’s client and partner group. “It’s been a pretty steady expansion over the last 24 months.”
Donohoe was working at Goldman Sachs prior to being hired last year.
KKR wants to take advantage of some of the new pools of capital that have opened up for private equity in the last few years, Donohoe said. Those pools include sovereign wealth funds, which have been making big strides into alternative investments, as well as insurance companies and pensions in Europe and South America.
“Capital is in shorter supply today than it was just a few years ago,” said Donohoe. “There are some new pools of capital that have been formed. We’re interested in making sure we have deep relationships with our existing partners as well as other providers of capital.”
But the client relations expansion is related to more than just fundraising. The firm also has been working to meet the needs of existing LPs who are demanding more information about investment performance and other firm-wide issues.
Several firms are bolstering their efforts at greater transparency. According to a survey of institutional investors from Russell Investments, the Madoff saga acted as a “cautionary tale” to institutional investors, and “increased the focus on transparency, frequent manager reviews and operational due diligence”. One respondent commented that institutional investors could no longer invest in “black boxes”.
“LP organisations have a more complicated job today than 10 years ago,” Donohoe said. “They have also become more sophisticated. We can be more responsive by bringing more resources to the table and we’ve also stepped up the reporting we do on a regular basis. We are trying to provide more information but do so in a way that isn’t just a data dump but rather something that is useful.” The enhanced reporting is designed to help meet the needs of the firm’s existing LPs, many of whom have been investing with KKR for more than a decade, Donohoe said.
Specifically, the firm has enhanced the kind of information produced for quarterly reports to LPs, focusing in
There are some new pools of capital that have been formed. We're interested in making sure we have deep relationships with our existing partners as well as other providers of capital.
on a “more granular level of details”, for LPs, Donohoe said.
“LPs very often have a very big monitoring burden,” she said. “There are a lot of funds they’re trying to look after, and they have limited staff. As partners, we want to provide information in a way that makes their monitoring easier to manage.”
Enhanced reporting and LP communications can be an advantage, if done well, Donohoe said. Other firms in the industry also have started to include information about communications and reporting as part of their fundraising pitch to prospective investors.
Ultimately, “performance and depth of team are probably the dominant drivers” to LP commitments, but, “I think that making our limited partners’ lives easier is also a pretty important thing when it comes to being a good investment partner”, Donohoe says.