KKR Is Near $3 Billion New York City Pension Pledge

  • Commitment is latest in string of $1B-plus accounts since 2011
  • Money would target private equity, credit, real estate deals

KKR & Co. is close to clinching a $3 billion commitment from New York City’s pension system to invest in deals across the alternative-asset manager’s platforms, people with knowledge of the matter said.

The pledge is the latest in a string of separately managed accounts over $1 billion that have been formed to invest pension money in multiple strategies. The accounts are run by a single manager and typically offer breaks on fees.

The commitment from New York City’s five retirement plans has received approval from the city but hasn’t yet been finalized, one of the people said, asking not to be identified as the information isn’t public. The money will be spread across private equity, infrastructure, real estate and credit investments, the person said. The five plans combined house $180 billion in assets used to pay benefits to firefighters, police officers, teachers and other city employees.

Representatives for KKR and for the city declined to comment.

Large multi-strategy pacts between pension funds and individual managers have gained in popularity since 2011, when the Teacher Retirement System of Texas agreed to steer $3 billion each to separate accounts it formed with KKR and Apollo Global Management LLC. The pension later boosted each commitment to $5 billion. Also in 2011, New Jersey’s state pension group struck a $1.8 billion arrangement with another major alternative investment manager, Blackstone Group LP.

Those managers and others have since forged similar accords with other pension plans and sovereign wealth funds. Not all of the arrangements were publicly disclosed.

For investors, separate accounts allow them to deploy big sums with managers they trust at cut-rate terms, often in customized strategies that don’t mesh with a firm’s existing off-the-shelf funds, which pool money from many investors. For managers, the pledges add heft to current investment lines and spur diversification. Blackstone, for example, used $750 million of New Jersey’s commitment to start its Tactical Opportunities business, whose assets have risen to more than $17 billion.

KKR, led by billionaire cousins Henry Kravis and George Roberts, managed $148.5 billion in client capital as of June 30.

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