NEW YORK –ValueAct Capital, the $16 billion activist fund led by Jeff Ubben, has taken a 5% stake in private equity giant KKR.
“The AuM at this company is on a huge ramp,” Mason Morfit, who presented on behalf of ValueAct, said at 13D Monitor’s Active-Passive Investor Summit in New York. “We strongly believe this thing is a 50 cent dollar,” he added.
Morfit said the move of active equity money to passive funds would be bullish for KKR. The trend is “very much in favor of the big and I think the big will get bigger,” he said. The position is valued at around $750 million.
The presentation by Morfit followed KKR’s first quarter earnings release. The company reported distributable earnings per share of $0.43, a performance Credit Suisse said it viewed as a positive.
Scott Nuttall, KKR’s head of global capital and asset management, said the firm welcomed ValueAct’s ownership. He said during an earnings call that they “like to have smart” investors and believe ValueAct and KKR have a “shared vision and understanding” for KKR’s future based off previous interactions with the firm.
KKR is one of the original buyout firms. The buyout business typically involves buying up companies, often with borrowed money, and changing the companies to increase their value at a future point of sale. Those changes could include swapping out management and cutting business units or staff.
The bet on KKR represents an endorsement of what is proving to be Wall Street’s hottest business. Multiple surveys have found that institutional investors and family offices plan to hand more money to private-equity investors, while pulling money from hedge funds. For example, Goldman Sachs’ sixth annual insurance survey found that insurers expect to hand more money to private equity firms.
KKR said it had $138 billion in assets under management as of March 31.