KKR Targeting Small Investors With $10,000 Fund Minimum

KKR & Co., the private-equity firm run by billionaires Henry Kravis and George Roberts, is teaming up with a California money manager to create an investment vehicle designed to attract smaller investors.

The Altegris KKR Private Equity Master Fund will accept initial investments of as little as $10,000, according to a filing with the U.S. Securities and Exchange Commission. Altegris Advisors LLC will manage the new fund, investing at least 70 percent of its assets in private-equity funds and companies run by KKR, according to the registration statement.

Private-equity firms such as KKR and Carlyle Group LP, having traditionally relied on public and corporate pension funds and other institutions for the bulk of their capital, have been turning to individuals for more of their funding in recent years. KKR suffered a setback in February, when the firm closed down two funds targeting individual investors after receiving only $33 million in capital from outside investors after more than a year.

The Altegris fund “will offer broad exposure to private equity investments for accredited investors who have not previously had access to investment funds managed by top-tier private-equity firms,” according to the filing. Its structure is “intended to alleviate” burdens of directly investing in buyout funds.

Qualified Purchasers

Private-equity funds have mainly been open to so-called qualified purchasers, defined as individuals who have $5 million of investments or institutions that have $25 million. In contrast, the Altegris fund will be open to accredited investors, the term for people with a net worth exceeding $1 million, excluding their principal residence.

Carlyle took a similar approach in 2012, teaming up with Central Park Advisers LLC to create a closed-end fund that would invest in funds run by the Washington-based private-equity firm. CPG Carlyle Private Equity Fund was also available to accredited investors, with a minimum investment initially set at $50,000.

Individual investors are significantly underinvested in alternative assets such as private equity, Blackstone Group LP Chairman Steve Schwarzman said this week at the Milken Institute Global Conference in Beverly Hills, California.

“The stuff we do, the alternative class, tends to make around 1,000 basis points more than the stock market,” Schwarzman said in an interview with Bloomberg Television’s Erik Schatzker and Stephanie Ruhle. The average institution might have 20 to 25 percent in alternative investments while the average individual investor has 2 percent on average, he said.

Special Situation

The Altegris fund filed to sell shares at $10 each and is seeking to raise at least $25 million. The fund will primarily allocate its capital to buyout and special situation funds, with the latter term referring to vehicles that make loans and invest in distressed debt. It will primarily invest in newly created KKR funds, while allocating some of its assets to the purchase of interests in existing funds from other investors.

Altegris, which had about $1.2 billion in mutual fund assets under management at the end of last year, is partially owned by private-equity funds run by Jeffrey Greenberg’s Aquiline Capital Partners LLC. KKR is not a sponsor, promoter, or adviser to the new fund, which will seek to raise at least $25 million before starting up.

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