A second Asia-focused private credit vehicle (ACOF II) from global investment firm KKR will back performing credit investments across APAC, including the region's developed markets, Greater China, South Korea, and Southeast Asia, with $1.8 billion committed to the fund, and $700 million in backing from separately managed accounts (SMAs). With KKR commitments and other pools of capital added in, the total transaction volume comes to $4.6 billion.
Setting the Tone
With the second fund's total, KKR has beaten its own record in the region for private credit, and in fact more than doubled it, after deploying $1.1 billion for ACOF I that closed in 2022.
Like its predecessor, the vehicle will focus on performing credit opportunities—loans where borrowers are current on payments—rather than distressed or turnaround situations. Previous fundraises suggest target returns typically in the low-to-mid-teens, and will feature flavors across senior and unitranche direct lending, capital solutions, and collateral-backed investments.
In its statement, KKR added that the Fund combined a diverse group of new and existing investors: insurance companies, public and corporate pension funds, sovereign wealth funds, family offices, banks, corporates, and asset managers.
Trendline
While local demand for private credit remains healthy across Asia, few firms have leaned into the region as strongly, or effectively, as KKR - which now manages $282 billion across all credit strategies globally. In fact, as private credit has diversified beyond core Western markets, sourcing right-sized opportunities in the region has sometimes, perhaps surprisingly, proven a challenge for the industry.
Entering back in 2019, KKR says it has completed 60 credit deals across its Asia Credit Strategy, spanning sectors including healthcare, education, real estate, logistics, and infrastructure and totaling $27.5 billion in transaction volume. In the private credit realm, and typifying its truly pan-regional aspiration, perhaps the most interesting example of these came just late last year, after KKR supported Indonesian petrochemical major Chandra Asri Pacific in the acquisition of ExxonMobil's Esso fuel station network in Singapore.
That financing, a $750 million package pulled together from KKR Capital Markets and private credit capabilities, demonstrates the firm is thinking beyond the region's developed markets and headline EMs. Malaysia and Vietnam were also previously highlighted as possible targets for ACOF I.
Their View
SJ Lim, KKR's Managing Director and Head of Asia Private Credit, also hints that Emerging Asia will play a role in future deployment, given the thematic tilt for private credit in a region that is still a "relatively nascent yet compelling" opportunity for the firm.
"We see strong demand for private credit as an important tool for sponsors or corporates seeking flexible financing solutions and bespoke, partnership-oriented capital to support growth and meet their diverse needs," he says, adding the strategy "is based on the same long-term structural themes, such as rising consumption, urbanization and digitalization, that have underpinned the growth of private markets in Asia.”
Impact
A more competitive landscape for private credit makes a globalized - and as the sizable SMAs here suggest, more investor-centric and customized - approach attractive. Pairing this outcome with KKR's private equity ambitions for the region - reportedly a massive $15 billion target for its next fund - shows no let up in their designs on building a unique reputation, and cornering the market, in Asia.
