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KKR plans to expand across geographies and sectors

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Looking for mispriced assets

KKR & Co. L.P. (KKR) invests across the sectors with a major focus on energy and infrastructure, technology and hardware, real estate, natural resources, containers and packaging, and the service industry with a focus on business services.

The company has also made investments in agriculture, electrical utilities, luxury goods, digital media, financial services, healthcare, entertainment, and capital goods. KKR has raised and deployed capital during turbulent times when its assets were undervalued.

KKR raised $6 billion in July 2013 to expand across geographies and invest in Asia when an economic slowdown triggered the sell-off of Asia Pacific Corporation’s equity. The timing gave KKR the opportunity to build up its portfolio in the Asian region.

A few of KKR’s successful investments in the region include China Modern Dairy Holdings Ltd., the Japanese recruitment firm Intelligence, Ltd., the Singapore tech firm Unisteel, and South Korea beer and baiju spirit maker Oriental Brewery.

KKR faces competition from The Carlyle Group (CG), The Blackstone Group (BX), TPG Capital, and other alternative asset managers in the Asian region.

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Unrealized losses

KKR’s energy holdings have been mainly in upstream and midstream companies that have seen an erosion in their valuations due to lower oil prices in the last few quarters. The company has written down almost $225 million of its investments in the energy space. But the majority of these losses are still unrealized since KKR hasn’t liquidated the investments.

Instead, KKR is looking to use its commitments of $5 billion to take advantage of the assets at lower prices and make up for the losses in the segment. It’s looking to acquire assets supporting or resulting in the expansion of its existing upstream and midstream portfolio companies.

Other alternative asset managers are also looking to take advantage of lower oil prices. They include The Blackstone Group (BX), The Carlyle Group (CG), Apollo Global Management (APO), and asset managers that form part of the Financial Select Sector SPDR Fund (XLF).

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