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KKR buys into money-minting energy hedge fund

Henry Kravis, co-founder of KKR
Daniel Acker | Bloomberg | Getty Images

BlackGold Capital Management has been virtually printing money, and KKR wants in.

The private equity giant announced Monday that it was acquiring a 24.9 percent interest in the $1.4 billion Houston, Texas-based hedge fund firm. The terms weren't disclosed, but the reason for the interest in BlackGoldwhich primarily invests in the debt of energy-sector companies—is obvious.

The BlackGold Opportunity Fund has produced annualized returns of 30.81 percent from January 2009 through May 2014, according to confidential performance information. By comparison, the Absolute Return Credit Index, which measures hedge funds that practice a similar strategy, gained 11.75 percent over the same period.

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"Through this strategic investment in BlackGold, we are partnering with an outstanding team with an excellent track record of delivering returns to investors. We are thrilled to add BlackGold to our hedge fund platform and we look forward to a long-term partnership with Erik, Adam and the full BlackGold team," Todd Builione, co-head of hedge funds at KKR, said in a statement referring to firm founders Erik Dybesland and Adam Flikerski.

Spokesmen for KKR and BlackGold declined to comment on the hedge fund's performance or the terms of the deal.

"With the acquisition, it appears that KKR is making a move that shrewdly combines two major investment trendsreal assets and alternatives," Susan Long McAndrews, a partner at $28.8 billion private equity fund investor Pantheon, said in an email. "Given a positive run in the area, probably not a bad time for some founder liquidity for BlackGold as well."

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BlackGold plans to take advantage of KKR's energy investing experience to improve its investing.

"KKR has nearly three decades of experience investing in the energy sector and maintains a significant presence and technical expertise in the industry. Having access to KKR's global network of relationships, institutional infrastructure and management expertise will introduce new areas of opportunity for BlackGold and our investors," Dybesland and Flikerski said in a statement.

KKR's BlackGold investment is an effort to expand its hedge fund platform and energy business. KKR already has a fund of hedge funds—$10 billion KKR Prisma—and in 2013 took a similar minority stake in Nephila Capital, a $10 billion insurance-linked securities manager.

KKR, which managed $102.3 billion overall as of March 31, recently shut down an internal stock-focused hedge fund which it said failed to attract enough assets.

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