KRW 4.5 Trillion... Private Equity Firm Breaks the '1% Own Money' Rule and Profits from Pure Proprietary Investment

KKR Sells USI, Achieves Sixfold Return on Initial Investment
Held for Nine Years Using Only Proprietary Capital, No Outside Investors
A "Warren Buffett" Style of Investing Using Only Corporate Funds

Global private equity firm KKR announced on September 1 (local time) that it has agreed to sell US insurance brokerage USI Insurance Services to industry peer Aon. The deal is valued at approximately USD 17 billion, equivalent to KRW 23.3 trillion. After deducting taxes, KKR will take home USD 3.3 billion, or about KRW 4.5 trillion. Based on its initial investment, this represents a sixfold return.

This news has attracted attention in South Korea’s private equity fund (PEF) market. This is because KKR held its stake in USI using its own corporate capital, rather than through a traditional fund structure.

Typically, private equity firms raise capital from institutional investors such as pension funds, mutual aid associations, and insurance companies to form a fund. These funds are used to acquire companies, which are managed for several years before being sold off. The portion of capital that the management company itself invests in the fund is usually about 1% of the committed amount. This mechanism, referred to as a GP commitment, is designed to ensure the fund’s general partner shoulders some responsibility. For example, in a KRW 50 billion fund, the management company typically commits KRW 500 million, while the remaining KRW 49.5 billion comes from institutional investors.

While managing these funds, management companies collect annual management fees — typically 1–2% of assets under management. When they successfully sell a company, they earn carried interest, usually around 20% of the profits exceeding a certain minimum return promised to investors. This minimum annual return is usually around 8%. Since most of the capital used for acquisitions comes from external investors, most of the profits are also distributed to them.

If it were a fund, the holding period would have been 5–7 years... Using its own capital, KKR held for 9 years and acquired about 90 companies to maximize returns

KKR adopted a strategy different from conventional investment structures. In 2017, KKR and Canada’s pension fund CDPQ jointly acquired USI for USD 4.3 billion, but KKR used corporate capital, not fund money, for the deal. The actual amount and share KKR invested was not disclosed. Over time, KKR increased its ownership by injecting additional corporate capital in 2020, 2023, and 2025.

KKR held onto USI for 9 years. During this period, it acquired more than 90 small insurance brokerages and merged them with USI. This buy-and-build strategy enabled significant growth, and if USI had been acquired through a fund, the holding period would have expired long before. KKR reported a sixfold return based on its initial investment, or 3.4 times when accounting for the additional capital it provided later. While exact figures were not disclosed, reverse calculation from the disclosed returns and multiples suggests that KKR likely invested around USD 1 billion (KRW 1.4 trillion) and recouped USD 3.3 billion (KRW 4.5 trillion).

This strategy is known in the market as the “mini Berkshire” approach. Without establishing a fund, the company acquires businesses using its own capital, holds them for the long-term, and collects dividends. The name is inspired by Warren Buffett’s Berkshire Hathaway, which owns insurers such as GEICO. Insurance companies collect premiums upfront and pay out claims much later, allowing the business to utilize these funds in the meantime. Buffett used this “float” to acquire businesses and grow Berkshire Hathaway by holding rather than selling its investments.

Major U.S. private equity firms are starting to adopt similar capital structures. In 2020, KKR acquired U.S. insurer Global Atlantic. Apollo purchased retirement insurer Athene, and Blackstone acquired a stake in AIG. Life insurance and pension funds have liabilities that mature decades later, and their guaranteed yield is typically lower than the 8% annual return promised to fund investors. With these stable, long-term sources of capital, management companies can deploy more capital when the right opportunity arises and are not pressured to sell quickly, allowing them to wait for optimal exit timing. This flexibility enables a broader range of investment strategies.

In South Korea, VC firms are increasing their own capital... “Maximizing future returns and building LP trust”

The trend of management firms increasing their own capital can also be seen in South Korea’s capital markets. However, this is more common among venture capital (VC) firms than in the PE sector. In the buyout market, where single transactions often involve several hundred billion KRW, management companies need to have considerable capital reserves to make acquisitions purely with their own money. According to an investment banking (IB) industry official, “Among domestic management firms, it is difficult to find those with enough internal capital to manage transactions of several billion KRW or more. Furthermore, since most large management companies are unlisted, they do not have access to equity markets to raise additional capital.”

For VCs, where deal sizes tend to be smaller, using their own capital is more feasible. Capstone Partners’ “Capstone 2026 AI Innovation Investment Association,” established in April, contains KRW 9.9 billion in corporate capital out of a total commitment of KRW 50 billion — nearly 20 times the 1% statutory minimum for venture investment associations. Daesung Startup Investment contributed 38% of the capital in “Daesung W-Jump up” and 23.6% in “Daesung Together Youth Startup.” Woori Venture Partners maintains a GP commitment ratio of approximately 15%. When the former KTB Network established “KTBN 13th Venture Investment Association,” it invested KRW 10 billion out of KRW 51 billion, a proportion of 19.6%. This association, along with KTBN 16, invested KRW 4 billion in Dalba Global in 2019 and sold its stake in May last year for KRW 39.9 billion, earning a profit of KRW 35.4 billion.

Increasing the corporate capital contribution in VC also reflects a shift in power dynamics. By investing more of their own capital, management firms can gain trust from institutional investors in future fundraising. A VC industry insider stated, “Even though there is a lot of money in the market, raising funds has become increasingly difficult due to polarization by size and sector. Increasing corporate capital not only maximizes returns but also leaves a positive impression with LPs in fundraising projects. As a result, this approach is steadily gaining traction.”

This content was produced with the assistance of AI translation services.