AI infrastructure is in high demand! KKR (KKR.US) successfully raised a record $19.2 billion infrastructure fund, fully betting on data center and energy transformation

The Zhitong Finance App learned that KKR & Co. (KKR.US) raised the largest infrastructure fund in the company's history to seize opportunities in the data center and related assets sector. The company said in a statement on Monday that the KKR Global Infrastructure Investors V Fund raised $19.2 billion, mainly investing in North America and Western Europe. The fund has committed more than $9 billion to invest.

Raj Agrawal, head of global real assets at KKR, said in an interview: “In the current financing environment, people often hear news that capital allocation is tight and fund managers are struggling. We are extremely pleased with the success of this fund raising. We've scaled up our platform and believe we've continued to grow our market share.”

According to Agrawal, the company began getting involved in the infrastructure business during the 2008 financial crisis and completed its first fund raising in 2012. He said that since then, the company has focused on protecting capital in various environments and has accumulated assets of about 120 billion US dollars. He said that KKR took advantage of the decline in the open market during the pandemic to obtain higher-than-average returns, thus attracting investors' interest.

Agrawal said that for this new funding pool — KKR's fifth infrastructure fund — the company sees three key investment areas: digital assets (such as data centers and fiber), energy power and transformation, and storage and logistics.

The fund has made nine investments, including the acquisition of the North American subsidiary of renewable energy producer EDF Power Solutions Inc. It has also invested in European data center company Global Technical Realty and an aircraft leasing project in partnership with Altavair LP.

Strategic partnerships are also the focus of KKR. 50% of KKR's infrastructure transactions are carried out in the form of corporate partnerships.

Despite concerns about data centers and artificial intelligence, KKR believes the need for infrastructure assets that can support the growing demand for the largest hyperscale data centers is “very, very real,” Agrawal said. He said, “Anything we can supply and deliver within the next two, three, or even four years will be sold out. If you can confidently and reliably deliver products, you can sell them at a high price.”

Agrawal said KKR will not invest in assets with contracts lasting five to seven years. He also pointed out that KKR will also avoid buying digital infrastructure assets valued at around 30 times the price-earnings ratio because these assets require significant growth to avoid losses.

He said the market is not fully aware of the quality differences between different assets. For example, data centers with hundreds of megawatts of capacity that focus on artificial intelligence inference are more secure than data centers with a capacity of 2 to 3 gigawatts that focus on model training. He also pointed out that KKR would prefer to invest in data centers that can be used by multiple customers rather than assets customized for a single hyperscale data center operator.

Agrawal said: “Currently, the market is very close to pricing them. This may work when the market is booming and everything is going well. But in times of market downturn, we believe the market will differentiate pricing.”

Despite this, KKR believes that there are huge opportunities as demand for data centers and related artificial intelligence infrastructure increases, which also prompted the establishment of Helix Digital Infrastructure Company earlier this year.

Agrawal said, “We just can't keep up. There are so many opportunities.”