Monarch launches first private equity-style fund

Monarch Alternative Capital has launched a private equity-style distressed debt fund, its first independently raised fund since spinning out from private investment firm Quadrangle in January.

The traditional hedge fund manager and distressed debt specialist is seeking up to $600 million (€387 million) for Monarch Capital Partners, and has already secured a $300 million commitment from a major European pension fund earlier this week, according to an investor letter obtained by PEO.

The new fund will be invested primarily in senior and secured debt but will also selectively invest in higher risk debt and equity. A third of the fund will be devoted to non-US debt markets, primarily in Western Europe and Canada.

The new fund will combine “the advantages of both a hedge fund and a private equity fund”, enabling Monarch to “invest in opportunities when they are available and hold lower cash balances than typically held in a hedge fund format”, according to the investor letter.  

The fund is significant not only for its hybrid structure but also as a mark of independence for Monarch, whose core partners spent six years as Quadrangle debt recovery advisors before the spin out.

Monarch currently manages $3.3 billion in assets and expects a final close of the hybrid fund by September.

In related news, Blackstone has launched a $1.5 billion distressed debt vehicle through its recently acquired GSO Capital Partners, according to a report by Bloomberg.

Distressed debt funds have become some of the hottest assets in private equity lately, as limited partners clamour to capitalise on a broad spate of firms reeling from over-leveraging and deteriorating macroeconomic conditions.