Distressed funds calm industry fears

After months of very slow fundraising activity, unquote" is finally reporting on a slew of closings of distressed and secondaries funds. Recently, Oaktree closed OCM European Principal Opportunities Fund II on EUR1.8bn, which is both an opportunistic investor in traditional private equity and distress-for-control investments. This was closely followed by TowerBrook closing its third fund, TowerBrook Investors III, on its hard-cap of $2.8bn, which targets "difficult" and distressed situations. Apollo Management's current $14.8bn fund can also invest in distressed assets.

Other heavyweights also closed in short order during the last month: Goldman Sachs closed its latest secondaries fund with $5.5bn in capital, which will acquire portfolios as well as LP stakes in private equity funds; while Siguler Guff's distressed opportunities fund-of-funds well surpassed its original target of $1.5bn, raising $2.4bn since its November 2007 launch. This extensive length of time taken to raise funds is testament to how difficult the current market is. Other funds are not limited to distressed investing; the generalists are also looking increasingly into the distressed space, like Morgan Stanley's current $1.14bn fund-of-funds, which has the ability to invest in special situations globally in addition to venture and buyouts.

Portfolio Advisor's $1bn fund allowed LPs to select their desired sector allocations from among diversified buyouts, US middle market buyouts, European buyouts, venture capital and special situations. In aggregate, the LPs allocated approximately one third of their funds relatively equally between buyouts, venture and special situation sectors, which reflects the current sentiment that opportunities for distressed investments have never been bigger or broader in scope than currently.

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