KKR Raises More Than $3 Billion for Road, Railway, Airport Deals

KKR & Co. raised $3.1 billion to invest in infrastructure after backing projects such as a New Jersey wastewater system and renewable energy developments.

The private equity firm gathered the maximum amount allowed by clients for KKR Global Infrastructure Investors II, Kristi Huller, a KKR spokeswoman, confirmed. The firm, run by Henry Kravis and George Roberts, finished collecting $1 billion in 2012 for its first infrastructure fund.

The funds primarily invest in renewable energy, pipelines, utilities and transportation-related assets as investors increasingly look for assets that provide steady cash flows and a hedge against inflation. Non-bank sources of money are also becoming more important in financing projects as banks adapt to heightened capital standards and governments seek to repair their balance sheets.

“Infrastructure here and around the world is really in need of substantial investment,” Marc Lipschultz, KKR’s head of energy and infrastructure, said in an interview. “We go after very low-risk, low-volatility underlying assets, but in places where operational engagement, stakeholder management and relations with the management really matter.”

PwC estimated $70 trillion will be spent on infrastructure globally in the next 10 years, according to a 2014 report by the accounting and consulting firm. Demographic changes and a shift to living in cities will drive an increase in annual spending to $9 trillion from $4 trillion, PwC said.

Other investment firms are seeking to take part in that spending. Brookfield Asset Management Inc., Canada’s biggest alternative-asset manager, finished raising $7 billion in 2013 for a global infrastructure fund, exceeding its $5 billion target. The prior year, Global Infrastructure Partners gathered $8.25 billion for its second fund.

KKR’s first infrastructure fund, which started investing in 2011, has produced a 6.1 percent annualized return after fees as of March 31, according to a regulatory filing. The investments are overseen globally by Lipschultz, as well as Raj Agrawal and Jesus Olmos, who manage the assets in North America and Europe, respectively..

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