KKR & Co. (KKR:US), the buyout firm run by Henry Kravis and George Roberts, won a $225 million commitment from the Oregon Investment Council for its second private-equity fund devoted to Asia.
The KKR Asian Fund II LP is seeking as much as $6 billion to deploy across the continent. Roberts and Joseph Bae, managing partner for Asia, pitched the fund to the council at a meeting in Tigard, Oregon, today. The six-member board, which administers state pensions, voted unanimously to commit the money.
The state’s investment in KKR’s previous Asia fund, started in 2007, was generating a 15 percent internal rate of return as of March 31, according to investment council documents. New York-based KKR is interested in companies that serve the growing middle class in China and elsewhere on the continent, Roberts and Bae told the board.
The U.S. buyout firm has backed milk producer Ma Anshan Modern Farming Co. in China and is on the lookout for other consumer-based businesses.
The firm has been taking minority stakes in Chinese companies, veering from the private-equity tradition of purchasing entire companies or majority stakes.
“The best businesses in China, they’re just not for sale,” Bae told the council.
KKR helps manage its Asia investments, he said. At Ma Ashan, known locally as Modern Dairy, KKR personnel are on site five days a week, getting involved in details such as barn design.
The Oregon Public Employees Retirement Fund is putting $200 million into the new KKR fund. The Common School Fund, another pool administered by the investment council, is committing $25 million.
One investment council member, Harry Demorest, said he would have approved doubling the pension’s investment in the new KKR Asia fund to $400 million.
In an interview after the meeting, Roberts said the U.S. economy will probably slow in the second half of the year. He cited a decline in consumer confidence and apprehension about the November election.
“Any time you have uncertainty, people pull back on their spending,” Roberts said. “I think you’re going to see slower growth in the second half of the year than you saw in the first half. I’m not an economist. That’s my personal belief.”
Prepared for ‘Onslaught’
The private-equity industry was prepared for the negative attention it has gotten as a result of Mitt Romney, a founder of Bain Capital LLC, being a candidate for president, Roberts said. Bain has been criticized for cutting jobs at companies it bought and focusing solely on profit.
“It’s not as though we’ve been unprepared for this onslaught,” Robert said in the interview.
KKR’s companies, including Dollar General Corp. (DG:US), the discount retailer it acquired in 2007, created 25,000 U.S. jobs in 2010 and 2011, Roberts said.
“Bain, like all of us, is going to have losses,” Roberts said. “Bain has had a lot more work out than haven’t worked out. I think they are being treated pretty unfairly.”
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