Are Buyout Firms Making The Same Mistake As Goldman Sachs?
You may remember Goldman Sachs Liquidity Partners III LP. The group, part of Goldman's hedge fund group, raised $1.8 billion in late 2007, including $100 million from Goldman itself. Levering it 3x, the fund invested in distressed debt, including leveraged loans, mortgages and asset-backed securities. Well, they were juuuust a bit early. The fund was down more than 55% as of last fall. In fact, the effort proved so disastrous that Goldman decided last November to waive the fund’s lock-up period, allowing investors to recoup their money. The fund has a 1/20 fee structure, but with the redemptions it has received, its managers are basically working for free. Reading through yesterday’s Bloomberg article on the problems of Apollo Management, I have to wonder when that firm is going to do the same for its Apollo Credit Opportunities Fund, considering at least $2 billion worth of loans it bought have lost half their value. According to Bloomberg:
