Under pressure, KKR to close pension money deal

Henry Kravis is about to blink.

In exchange for about $ 3 billion in pension funds in New York City, Kravis’ KKR & Co. agreed not to take any part of the gain from the investment until it exceeds a minimum threshold, said. sources at The Post.

It was not known what that threshold is, but the office of New York City Comptroller Scott Stringer is targeting an annual return of 7%.

The city’s five pensions, which have a total of $ 181 billion in assets, expect returns on private market investments like this to at least match public markets.

However, KKR money could have a lower or higher minimum, sources familiar with the matter have warned.

Stringer and New York Investment Director Scott Evans are in late-stage negotiations with KKR – the company immortalized in the book “Barbarians at the Gate” – over the precedent-setting deal, sources said.

Stringer’s claim is the latest in a long-standing battle between state and local pension funds and companies that get alternative investment liquidity on high fees and low returns.

Pension funds have pushed hedge funds and private equity firms to accept lower fees and profits than the traditional management fee of 2% and 20% of profits.

Many companies have reduced their prices in order to obtain the loot from the pensions.

Stringer’s ongoing deal with KKR could be the first in the US to include zero profit taking below an agreed level of return on a variety of asset classes.

“It’s really about investing with a leading private equity firm on extremely favorable terms,” said one of the sources.

“Scott hit a lot,” the other source said.

KKR is expected to invest the $ 3 billion in its platforms, including private equity, infrastructure, real estate and credit.

At present, New York City does not have any investments with a single asset manager on a variety of its funds.

The deal, if finalized, would mark the first time KKR has received a cash pension in New York.

If KKR’s combined returns across all areas of investment exceed the minimum, the company will get its share of the upside, sources said.

Stringer approached several companies about the $ 3 billion investment, looking for similar terms before selecting KKR, one of the sources said.

“It’s a new approach” to pensions, said a source.

KKR’s choice of Stringer is a bit of a raised eyebrow.

In 2008, Stringer, then president of the Manhattan Borough, participated in a rally outside KKR offices calling on authorities to close tax loopholes that allow private equity firms to pay a lower tax rate.

KKR, who still benefits from the same shortcomings Stringer complained about in 2008, argued in recent meetings with the Controller that he strives to create lasting value in the companies he owns by overcoming the challenges. environmental, social and governance, said a source. .

KKR’s businesses include credit card processor First Data, GoDaddy and Toys ‘R’ Us.

A spokesperson for Stringer declined to comment on discussions with the PE company. KKR declined to comment.