KKR Raises $19.2 Billion for Biggest-Ever Infrastructure Fund

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(Bloomberg) — KKR & Co. raised its largest-ever infrastructure fund as it looks to capitalize on opportunities in data centers and related assets.

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KKR Global Infrastructure Investors V gathered $19.2 billion to invest primarily in North America and Western Europe, the firm said in a statement Monday. The fund has already committed more than $9 billion of the total.  

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“We could not be more pleased with the fund close in a fundraising environment where oftentimes people hear capital allocations are tight, managers are struggling,” Raj Agrawal, KKR’s global head of real assets, said in an interview. “We have grown our platform, and we believe we’ve continued to take share.”

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The firm started its infrastructure business during the 2008 financial crisis, closing its first fund in 2012, according to Agrawal. Since then, it’s amassed about $120 billion in assets through a focus on protecting capital in all environments, he said. 

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KKR was able to leverage the decline in public markets during the pandemic to achieve better-than-average returns that drew investor interest, he said.

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For the new pool — KKR’s fifth infrastructure fund — the firm sees three key areas for investment: digital assets such as data centers and fiber optics, energy power and transition, and storage and logistics, Agrawal said.

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The fund has made nine investments, including the acquisition of the North American unit of renewable power producer EDF Power Solutions Inc. It also invested in European data center company Global Technical Realty and an aircraft-leasing program with Altavair LP. 

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Strategic partnerships are also a significant focus, with 50% of KKR’s infrastructure deals structured as corporate tie-ups. 

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Despite concerns around data centers and artificial intelligence, KKR sees demand that’s “very, very real” for infrastructure assets that can support the growth in demand from the biggest hyperscalers, Agrawal said. 

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“Anything that we can offer up and deliver for the next two, three, four years, it’s being snapped up,” he said. “If you can deliver it with confidence and reliability, it’s being snapped up at premiums.”

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KKR isn’t investing in assets with contracts that renew in five to seven years, he said. It’s also avoiding buying digital infrastructure assets where valuations are in the range of 30 times earnings because they need substantial growth to avoid losses, Agrawal said.

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The market doesn’t fully appreciate the difference in quality among various assets, he said. Data centers with hundreds of megawatts focused on AI inference are safer than data centers with 2 to 3 gigawatts focused on training models, he said. And KKR prefers to invest in data centers that can be used for more than one client as opposed to a customized asset for one hyperscaler, he said.

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“Today the market is pricing them pretty similarly,” Agrawal said. “Maybe that works in an upmarket when everything is going right. And in a down market, we believe the market will differentiate.”

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Nevertheless, KKR sees significant opportunity stemming from the need to build out data centers and related AI infrastructure, which spurred the creation of Helix Digital Infrastructure earlier this year. 

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“We can’t keep up. There’s a ton of opportunity,” Agrawal said.

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