This article was displayed on the ChosunBiz MoneyMove (MM) site at 5:42 p.m. on Nov. 11, 2025.
KKR, one of the world's five largest private equity firms, has decided to return nearly 500 billion won to the fund's limited partners (LPs). The firm has agreed to give back carried interest it had already taken as a manager.
This is because KKR's Asia investment fund's returns fell far short of expectations. It is very rare for a manager to return fees taken in advance due to poor fund performance, and the amount KKR returned to LPs this time is said to be an unprecedentedly large scale.
According to the investment banking industry on Nov. 11, KKR said on Nov. 7 (local time) that it would return about $350 million in carried interest (about 512.54 billion won) to LPs. The cost will be reflected in fourth-quarter accounting. KKR's shares briefly fell 6% immediately after the announcement.
The recovery is a measure taken because of the poor performance of the KKR Asian Fund II. The fund, raised at $6 billion in 2013, acquired auto parts maker Calsonic Kansei in 2016 and merged it with Marelli, but this year it entered bankruptcy protection and is reported to have incurred about $2 billion in losses.
KKR Asian Fund II's portfolio beyond Marelli is also financially weak. Although it has recovered a total of $6.7 billion so far, the book value of the remaining unsold portfolio is reportedly only $774 million, far short of the invested principal of $1.28 billion.
The problem is that KKR, the fund manager, had already taken part of the carried interest. That triggered the clawback provision included in the contract between KKR and the LPs, forcing KKR to return the $350 million it had taken in advance.
Clawbacks are mainly a practice used in the United States. They are commonly used in the so-called American-style waterfall fund structure.
Fund managers can receive allocations of profit on a deal-by-deal basis. When an individual deal exits, the returns from that deal are used as the basis for paying the manager's carried interest. They do not have to wait until the fund is liquidated. However, if the fund's overall return at liquidation falls short of the contractual benchmark, the clawback provision requires the manager to return some of the carried interest previously taken.
The amount recovered this time is believed to be the largest among all clawback cases worldwide since 2000. Apollo Global Management faced a crisis in 2020 during the COVID-19 pandemic when it might have had to return $965 million, but the stock market recovered quickly and it avoided the worst.
Carlyle returned carried interest in 2016–2017 due to poor fund performance, but the amount was $83 million, far short of KKR's recovery this time.
There have been no officially known cases of carried interest recovery domestically. A private equity executive said, domestic LPs such as pension funds and mutual aid associations generally do not permit the prepayment of deal-by-deal carried interest, adding that the conditions for a clawback to occur do not exist in the first place.
Some large private equity firms that receive a lot of money from U.S. LPs do settle carried interest on a deal-by-deal basis, but it is said to be rare for it to lead to a recovery.
Another private equity executive said that in blind funds, even if some portfolio companies do poorly, other successful portfolios usually offset that underperformance, adding that in KKR's case it is a very unusual situation in which not only a single portfolio but several investments performed poorly, preventing the entire fund from meeting its target return.