Activist ValueAct says invested in private equity pioneer KKR

NEW YORK (Reuters) - ValueAct Capital said it has invested in asset management group KKR & Co, as the $16 billion activist investment fund deepens its reach into the financial sector.

The holding brings together a San Francisco-based activist investor with the legendary leveraged buyout shop founded and still run by Henry Kravis and his cousin George Roberts in 1976. Shares of KKR were up more than 6 percent.

“One of the oldest and most storied LBO firms that has operated through market cycles has built up a tremendous brand,” ValueAct President Mason Morfit said at the Active-Passive Investor Summit. Morfit said ValueAct’s current exposure to the stock is under 5 percent.

“The company has 8 to 10-year locked up capital and generates a great management fee,” said Morfit. “I think the future is quite bright.” ValueAct had not previously disclosed its position in the company.

ValueAct, based in San Francisco, owns major stakes in some of the most prominent U.S. companies, including software maker Microsoft Corp., media group 21st Century Fox Inc. and energy company Baker-Hughes Inc. Morfit, who is the No. 2 person at ValueAct behind co-founder and CEO Jeffrey Ubben, is on the board of Microsoft.

The fund also has holdings spread across the financial sector, including a stake it built last year in investment bank Morgan Stanley.

Morfit said on Thursday that he likes KKR’s business at a time that investors are leaving actively managed funds in favor of both alternative investments and passive investments.

Alternative assets have compounded at a high rate and Morfit says there is no end in sight for that trend with demand coming from Asia and the Middle East.

Reporting by Michael Flaherty and Svea Herbst-Bayliss; Editing by Chizu Nomiyama, Bernard Orr