KKR doesn’t rule out adding secondaries strategy

KKR, one of the world’s biggest private equity firms, has considered adding secondaries to its suite of offerings.

In response to a question on the firm’s first quarter earnings call on Wednesday about whether the secondaries market was an area where the firm would like to have more of a presence, co-president and co-chief operating officer Scott Nuttall said KKR had looked at adding the strategy.

“It’s a space that we continue to spend time on and have looked at from time to time,” Nuttall said. “I think there will be opportunities for the secondary space to continue to grow, and that’s one of the areas that we look to periodically as we think about other opportunities for us strategically, but nothing to report today on that front.”

Several firms including Manulife, BlackRock and TPG have added secondaries capabilities in recent years, either by acquiring teams or by taking stakes in secondaries managers.

KKR has participated in the secondaries market before: in 2016 it moved around $400 million of assets – private equity and alternative credit co-investments, growth equity investments, CLO equity – off its balance sheet into separately managed accounts, backed with capital from secondaries buyers.

On the earnings call, the New York-headquartered firm said the coronavirus crisis marked a strategic “inflection point” which it has been preparing for over the last decade.

Its entire private equity portfolio delivered a gross loss of 12 percent for the quarter, with a firm-wide loss of $1.29 billion in the first quarter. Assets under management were down 5 percent to $207 billion.