KKR partly tokenises new US$4b tech fund on Singapore's ADDX

PRIVATE equity giant KKR is targeting US$4 billion for its third technology fund and plans to raise a small portion through Singapore-based private market platform ADDX, according to documents obtained by The Business Times (BT).

KKR, which oversees US$471 billion in assets, is part of an increasing number of players expanding their reach through alternative channels as they double down on the private wealth space.

With the tokenisation on ADDX, accredited investors can access KKR's Next Generation Technology Growth Fund III (NGT III) with a minimum of US$20,000, the documents said – a fraction of the usual US$250,000 or so that high net worth investors typically would need to commit to get an allocation on standard PE funds.

KKR is targeting to raise between US$30 million and US$35 million on ADDX. Although this represents less than 1 per cent of KKR's total target for NGT III, it is the first time that the firm is known to have tokenised any of its funds.

NGT III will invest primarily in North America, Europe and Israel, with an option to allocate up to 15 per cent of the fund in Asia, according to a KKR fund presentation.

The firm's previous US$2.2 billion tech fund had a net internal rate of return (IRR) of 51.5 per cent and net multiple of invested capital (MOIC) of 1.5 times, as of end-2021. Its first US$714 million tech fund had a net IRR of 38.6 per cent and net MOIC of 3 times.

KKR declined to comment on its fundraising activities and speculation around ADDX. ADDX also declined to comment.

Asset tokenisation refers to the issuance of security tokens on the blockchain, with each token representing a fraction of an asset. Tokens may be traded on a secondary exchange, giving investors more liquidity compared to traditional private investments with lock-ups spanning years.

Fund managers are turning to such means to tap a larger pool of high net worth individuals and the growing mass affluent. Mega funds, however, are still warming up to the nascent technology.

Singapore-based ADDX counts PE-backed bonds, real estate, private credit and pre-IPO companies among its offerings. The platform is regulated by the Monetary Authority of Singapore, and backed by the Singapore Exchange and Temasek’s Heliconia Capital.

KKR partner and investor relations head Craig Larson has spoken of the firm's intention to create new democratised investment solutions, as part of a wider focus on the underpenetrated but growing global private wealth market.

A little over US$50 billion in private wealth assets is being managed by KKR, according to a February Q4 earnings call.

Private wealth has historically made up 10 to 20 per cent of funds raised by the firm annually. KKR’s management expects the contribution to increase to 30 to 50 per cent over the next several years.

Other financial institutions such as Blackstone and Apollo Global Management are similarly bulking up their private wealth businesses with a particular focus on Asia, where the population of ultra high net worth individuals is expected to see the biggest growth.

Research from Knight Frank estimates that the region will surpass Europe as the second largest wealth hub by 2026, following a 32.7 per cent surge in the number of ultra-wealthy from 2021.

Asia is also of particular interest to KKR for its growth technology investments. During an investor day in April 2021, co-chief executive Joseph Bae said the firm expects to launch and raise its first-time Asia technology fund within the next 12 months.

Last August, UBS veteran Markus Egloff joined KKR as its head of Asia wealth, tasked with building out the regional team. Egloff spent nearly 25 years at UBS and led their wholesale client coverage business across Asia-Pacific before leaving the bank.

He has since added four people to his KKR team, including former staff from BlackRock, UBS and Credit Suisse, according to LinkedIn profiles and checks by BT.

In South-east Asia, KKR has invested in property platform PropertyGuru, home interiors marketplace Livspace, and GrowSari, a Manila-based startup that helps small shops digitise.