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The NZ Super Fund is committing up to $US250 million to invest in North American oil and gas assets alongside private equity giant KKR.
The Super Fund, which has grown funds under management to $NZ25 billion, will split the investment two ways: up to $US175 million in new KKR private equity natural gas investments, and the remaining $US75 million in a fresh $2 billion KKR fund targeted at “unconventional” oil and gas resources.
Super Fund general manager of investments Matt Whineray says the new investments will broaden and diversify the Fund’s current exposure to energy, in line with a changing global energy sector.
The KKR investment is premised on attractive long-term returns in energy and significant market changes including the rapid development of natural gas and unconventional oil assets, he says.
“Developments in North American gas and oil are profoundly changing both global energy markets and markets within North America.
“For example, there is a large and ongoing decline in the burning of coal in the US as energy utilities transition towards gas supplies. Access to these opportunities is, however, difficult to achieve solely through listed markets. Partnering with KKR will give us the benefit of their expertise and deep relationships in the energy sector.”
While it is better known for its leveraged buyouts of companies, KKR also has a growing business in energy and infrastructure assets.
The New York-based firm, founded by Henry Kravis and George Roberts in 1976, has $94.3 billion in assets under management, including $8.7 billion dedicated to energy and infrastructure.
KKR Australia boss Justin Reizes said the North American oil and gas sector is fast-growing but capital-starved.
“The rapid development of unconventional shale basins provides attractive development and infrastructure investment opportunities for long-term investors such as the NZ Super Fund.”
Mr Whineray said that while the Fund would continue to hold a substantial passive exposure to the energy sector, consistent with its market cap-weighted Reference Portfolio, the KKR mandate offered a number of benefits to the Fund.
“These benefits include improved expected returns, resilience in relation to a rapidly changing sector and greater insight into, and control over, our investment exposures. Our focus on responsible investment will also be bolstered by KKR’s expertise in the management of environmental, social and governance factors.”
This is the NZ Super Fund’s third investment with KKR.