Management team will continue to run business, strategies unchanged

Money pounds cash Pensions Insight

Private equity firm Kohlberg Kravis Roberts (KKR) has acquired a 24.9% stake in insurance-linked securities (ILS) fund manager Nephila.

KKR said it would acquire the shares on a pro rata basis from Nephila management and from Nephila’s minority stakeholder Man Group.

Man Group will retain an 18.75% share in the company.

KKR’s investment was made through the firm itself and not its investment funds.

Financial terms of the deal were not disclosed.

KKR co-chairmen and co-chief executives Henry Kravis and George Roberts said: “In backing Nephila, we are partnering with a team we have known for more than 15 years, dating back to our investment in Willis Group. As the first dedicated manager of catastrophe risk investment strategies, they share the entrepreneurial spirit that pervades KKR’s culture and, with an excellent 14-year track record, we think they are the best team in the industry.”

Nephila’s management committee said: “Having access to KKR’s global network of relationships, infrastructure and management expertise will open up new doors for Nephila and our investors. We’re confident that our new partnership will strengthen relationships with our insurance counterparties and introduce new sources of investment opportunity, particularly with state governments that are exploring new ways to transfer catastrophe exposures.”

Nephila said its management team would continue to manage the business, and its investment strategies would remain unchanged.

In addition, all proceeds received by management at closing of the deal will be reinvested in Nephila funds, the firm said.

KKR said the Nephila investment was part of its plan to broaden its liquid alternative investment strategies offering and expand the firm’s hedge fund platform.

Nephila will also be closing its Juniper Catastrophe Fund and Triton Catastrophe Fund to new investor subscriptions based on its current assessment of market conditions. Its other strategies remain open.

Nephila was established in 1998 by Frank Majors and Greg Hagood as part of Willis, which at the time was a KKR portfolio company.

Nephila was spun out of Willis in 2003 and has grown its business to $6.7bn asset under management by mid-2012.