CORRECTED - KKR raises $6 billion in new Asia fund, region's largest

(Corrects paragraph 2 to say $908 million from new investors, not Asia investors)

By Stephen Aldred and Michael Flaherty

HONG KONG (Reuters) - KKR & Co raised $6 billion for its third Asia private equity fund, equipping the firm with the largest such fund in the region at a time when market turmoil is creating both opportunities and challenges for foreign investors.

KKR said it raised $1.5 billion, or 26 percent of the fund, from Asian investors. The firm also raised $908 million from new investors who did not participate in KKR's first Asia fund.

The Asian II Fund follows the $4 billion Asia fund it raised in 2007 and a $1 billion China Growth Fund in 2010, KKR said in a statement. The New York firm has invested more than $5 billion in Asia since 2005.

KKR's $6 billion fundraising effort, which Reuters reported late last year, comes as investors eye falling valuations inside the region's slowing economies. But volatility and tough foreign investor barriers have also presented plenty of challenges to the private equity industry in Asia.

KKR is competing with several other major firms in Asia for investor money, including TPG Capital, Carlyle Group and Affinity Equity Partners, which are also raising money to invest in the region.

For KKR, founded by cousins Henry Kravis and George Roberts, the core group of managers it brought out to run the Asia operation in 2007 has stayed in place, with Joe Bae remaining at the helm. KKR has invested in businesses across China, Singapore and South Korea since it started its first Asia office in Hong Kong in 2007. (Additional reporting by Denny Thomas; Editing by Ryan Woo)