KKR softens stance on appeal of secondaries build-out

KKR, the world’s second-biggest private equity firm according to the PEI 300, appears to be less bullish about the need for in-house secondaries capabilities.

“It’s not a have-to-do but it is something we continue to spend time on,” new co-chief executive Scott Nuttall said on a third-quarter earnings call Tuesday. KKR had said as early as May last year that it was considering adding secondaries to its suite of offerings.

Nuttall had said in prior earnings calls and on the firm’s Investor Day in March that KKR was looking at the right way to enter and grow in secondaries.

While there is “nothing new” to report today, KKR continues to assess whether there are firms it can partner with or buy all or a meaningful portion of, or whether it should build its own, Nuttall added.

M&A involving secondaries firms continues to heat up, with Lexington Partners the latest firm to be snapped up. On Monday, Franklin Templeton said it had agreed to acquire the secondaries pioneer in a deal worth $1.75 billion. The transaction follows CVC Capital Partners’ agreement to acquire Glendower Capital in September, StepStone’s deal with Greenspring Associates in July and Tikehau Capital’s purchase of Singapore-based Foundation Private Equity, also disclosed in July.

At least 14 of the top 50 firms in the PEI 300 have secondaries capabilities, according to estimates by Secondaries Investor.

Responding to an analyst question about whether the firm’s customised portfolio solutions business – a unit with around $6 billion in assets under management that focuses on strategic partnerships – could be a replacement for launching a secondaries or fund-of-funds business, Nuttall said: “We will continue to scale that business…We’re getting more traction from investors around the world. It’s an opportunity for upside and a real nice performer for us, which we think will continue to get bigger over time, and we’ll keep you posted.”

– Carmela Mendoza contributed to this report