Exclusive: Alchemy closes Fund III on £600m

The distressed specialist, which came to market last September, closed its oversubscribed fund last Friday.

UK-based Alchemy Partners has wrapped up fundraising for its third fund, according to several sources familiar with the matter.

The vehicle, which was “significantly oversubscribed”, held a first and final close on Friday, the sources told Private Equity International.

The fund came to market last September with a £600 million target (€724 million, $1 billion) for distressed and special situations across Europe.

It is understood Probitas Partners helped Alchemy to raise the fund. Both Alchemy and Probitas declined to comment.

Alchemy had strong support from both existing and new investors, according to one of the sources. The majority of the LPs came from the US and Europe, but Alchemy also attracted a few Middle Eastern investors as well as one from Asia. It is understood Alchemy attracted a broad range of institutions including corporate pension funds, state pension funds, UK local authority pension funds, sovereign wealth funds and insurance companies.

The firm’s Fund III is slightly bigger than Alchemy’s prior fund, a £500 million vehicle it raised in 2011. Investors in this vehicle included Greater Manchester Pension Fund, Industriens Pension, San Diego City Employees' Retirement System and Scottish Widows Investment Partnership, according to Private Equity International’s Research and Analytics division.

It is understood that Alchemy could have increased its fund size, but decided to stick with its target on the grounds that £600 million was the “right number” for investing in mid-sized distressed debt and special situations in Europe.

“Bigger funds that have raised more have struggled to deploy the capital and to grow too quickly would not be beneficial to the investors or the fund returns,” a source said.

The firm currently has a strong pipeline and is seeing good investment opportunities in the UK, France and Spain, the source added. Its next deal will be made from Alchemy’s Fund II, which is almost fully invested and is due to hit the end of its investment period at the beginning of July. At this point, Alchemy will start investing Fund III. Alchemy’s Fund I, a £300 million 2006-vintage, is now fully realised.

Alchemy, which was founded by Jon Moulton in 1997, is currently led by Dominic Slade, Ian Cash and Frits Prakke. Since inception it has invested £3 billion in more than 130 transactions across Europe into a broad range of sectors and throughout capital structures, according to its website.

Funds targeting European distressed opportunities have been popular with LPs in recent months. Last year, European GPs collected $366 million for distressed funds, a 16.5 percent rise on the $314 million collected for the strategy a year earlier, according to PEI data.