Private equity sponsor KKR agrees to acquire Prisma Capital

US private equity major KKR & Co LP (NYSE: KKR) said it had entered into an agreement to buy Prisma Capital Partners LP, an alternative investment manager focused on providing customised hedge fund solutions.

KKR offered no information on financial terms. It said it expected to finalise the deal during the fourth quarter.

Prisma was established in 2004 by Girish Reddy, Thomas Healey and Gavyn Davies, all of them former partners at Goldman Sachs (NYSE:GS). They built the business with support from joint venture partner AEGON USA Investment Management LLC, a unit of Dutch-based insurer AEGON NV (AMS:AGN). As part of the deal with KKR, AEGON will dispose of its minority interest but remains a large investors in funds managed by Prisma.

Prisma has built a strong reputation for assembling teams of hedge fund managers with stellar records and putting together custom portfolios for its clients. The company had assets under management totalling USD7.8bn (EUR6.2bn) as of 1 April 2012, more than 90% of them managed on behalf of institutional investors.

Prisma will be folded into KKR’s Public Markets unit, keeping its investment team and operations intact and continuing to do business under its own brand. Reddy will be put in charge of KKR’s global hedge fund of funds operations, while Healey and Davis will serve the company in a senior advisory capacity. Goldman, Sachs & Co and Schulte Roth & Zabel LLP provided counsel to Prisma and AEGON, while Simpson Thacher & Bartlett LLP represented KKR.

Henry Kravis, who founded KKR with George Roberts and shares the CEO responsibilities with him, noted that many institutional investors were looking for more liquid alternative investment products and customised hedge fund solutions were essential for addressing that need. Prisma fits in well with KKR’s business and its professional team is a welcome addition to the family, Kravis added.