KKR’s $10 Billion Prisma Capital Starts Best Ideas Hedge Fund

KKR & Co.’s $10 billion unit that allocates money to hedge funds, has started a best ideas fund after concluding that the largest stock positions taken by individual managers performed better than other picks.

KKR Prisma created the strategy in January to invest in some of the highest conviction -- or largest -- holdings from 14 equity-focused hedge fund managers, according to a presentation dated April 23 to the Alaska Retirement Management Board. The pension system had $420 million with KKR Prisma as of March 15 and was scheduled to vote on whether to allocate as much as $100 million to the KKR strategy.

KKR has been expanding into hedge funds, joining competitors Blackstone Group LP and Carlyle Group LP in broadening its business beyond leveraged buyouts. Prisma has added more than $2 billion of assets since KKR agreed to acquire it in 2012.

Kristi Huller, a spokeswoman for New York-based KKR, declined to comment on the fund.

KKR Prisma’s Vishal Soni will oversee the fund’s allocation to individual managers, adjusting for risk and exposure to different industries, currencies and countries. The strategy targets returns of 8 percent to 10 percent a year.

The KKR Apex Equity strategy “benefits from each manager focusing on a set of core competencies rather than one team trading across all sectors and geographies,” KKR Prisma said in the presentation.

Largest Positions

The single largest long positions of hedge fund managers gained more than other picks, KKR said in the Alaska presentation, citing research it had conducted on portfolios from 2004 through 2014. The new strategy will be based on managers’ three largest picks.

The strategy is an extension of KKR Prisma’s current investments in long-short equity managers. The unit had more than $3 billion with more than 40 managers that traded stocks as of Jan. 1, according to the presentation.

The firm recently turned the strategy into a standalone fund, according to documents filed this month with the U.S. Securities and Exchange Commission.

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