Kohlberg Kravis Roberts (KKR), in tandem with money manager Altegris Advisors, has set up a vehicle that will allow wealthy individuals to commit as little as $10,000 to its buyout funds, according to a Form N-2 filing with the Securities and Exchange Commission (SEC).
A KKR spokesperson was unable to immediately respond to a request for comment.
The vehicle, Altegris KKR Private Equity Master Fund, will act as a feeder fund to KKR's institutional buyout funds, which have a substantially higher minimum investment requirement, usually in the millions.
Despite the lower threshold, Altegris will be required to certify that commitments to the fund are being made directly or indirectly by “accredited investors” as required under Regulation D of the Investment Advisers Act – meaning KKR will not be dealing directly with its smaller investors.
Accredited investors are defined as someone who is worth $1 million (not including their house), who earns $200,000 a year, or has a household income of $300,000.
In order to ensure only accredited investors commit to the fund, each prospective investor is required to submit to Altegris a completed “investor application” for compliance purposes.
Pending regulatory approval, the fund will be priced at $10 per share – but the fund will not actually sell any shares unless it raises at least $25 million, according to the filing.
The ability for investors to sell their shares will at first be limited. After two years, the fund may hold tender offers for shares and after the third year it will recommend repurchases on a quarterly basis. At that point investors who have held their shares for less than a year and want to sell will have to pay a 2 percent fee, according to the filing.
In addition, the fund may allow investors to sell their shares to others on a platform operated by NASDAQ Private Market, a marketplace for buying and selling shares of private companies.
The fund will pay Altegris a monthly management fee of 0.10 percent (1.20 percent on an annualized basis). The fund plans to allocate at least 70 percent of its assets to private equity funds sponsored by KKR.
Last March rival buyout giant The Carlyle Group created a similar feeder fund with independent advisory firm Central Park Advisers, which permitted investors to commit a minimum of $50,000.
A market source familiar with Carlyle's fundraising efforts said the firm wanted “a democratization of access” to its funds by lowering the commitment bar.
Carlyle maintained its 1.5 percent management fee and 20 percent carried interest rate for its funds, but investors in CPG Carlyle Private Equity Fund pay Central Park Group an additional fee of 1.8 percent (or $900 per $50,000 committed).