Castlelake closes fifth fund on $2.4bn – exclusive

The Minneapolis-headquartered distressed specialist hit its hard-cap after four months of fundraising.

Castlelake, a distressed investment specialist, has hit the $2.4 billion hard-cap on its Castlelake V fund, managing partner and CEO Rory O’Neill told Private Equity International.

Final close was reached after four months of marketing. The fund has an investor base including US state pension funds, endowments, family offices, insurance companies and sovereign wealth funds.

Like Castlelake’s previous funds, Fund V will invest opportunistically in distressed assets across areas such as aircraft assets and aviation finance, European and US distressed real estate and non-performing loans, dislocated industries, corporate distress and emerging market distressed situations (with Latin America of particular interest).

“We have two broad areas of focus,” O’Neill said. “One is buying assets from financial institutions, banks, finance companies and leasing companies. The other broad bucket is sectors that the banking community has stopped providing capital to post the financial crisis [the residential sector, in particular].”

Predecessor fund Castlelake IV hit its $1.9 billion hard-cap after five months of marketing in July 2015. Investors include Maryland State Retirement and Pension System and Employees Retirement System of Texas, both with $100 million commitments, and California State Teachers’ Retirement System with an undisclosed investment, according to PEI data.

Castlelake IV had achieved a since-inception internal rate of return of 30.09 percent as of 30 September 2016, according to calculations by CalSTRS.

Castlelake has offices in Minneapolis and London. It employs around 100 people and has more than $10 billion in assets under management. It typically looks at smaller investment where there is less capital competition.

“To date our average investment size has been somewhere around $20 million and typically our transactions are somewhere between $25 million and $50 million,” O’Neill said. “They are really what we call ‘under the radar screen’ opportunities.”