NY Teachers’ invests $75m in Angelo Gordon fund

AG Capital Recovery Partners VII is targeting $3bn for investments in senior secured debt of companies heading for, or already in, bankruptcy.

New York State Teachers’ Retirement System has committed $75 million to hybrid firm Angelo Gordon’s seventh distressed debt fund, which is targeting $3 billion.

AG Capital Recovery Partners VII will invest in secured senior debt instruments of companies near or in bankruptcy. The fund will not use leverage, according to documents from the Los Angeles Fire and Police Pensions, which invested $20 million in the fund in January.

Management fees for AG VII are 1.5 percent on the first $2 billion of committed capital plus 1.5 percent on the net funded capital in excess of $2 billion during the investment period, and 1.5 percent of the aggregate cost basis thereafter.

Carried interest on the fund is 20 percent and the preferred return is 8 percent. The fund will have no transaction fee offsets, according to the documents.

Along with distressed debt, Angelo Gordon invests in straight private equity. The firm closed its fourth fund last year with $650 million in commitments. The firm raised $350 million in 2005 for its third private equity fund.

In 2000, Angelo Gordon launched its special situations private equity business, which manages about $1 billion in existing investments and committed capital.

Distressed debt has become a popular investment strategy for LPs in the market downturn. Firms like Oaktree Capital Management, Avenue Capital and Apollo Global Management have kept busy over the past year buying debt in troubled companies at a discount and helping shape strategy for restructurings.

Oaktree alone has been raising $5 billion for its fifth “loan-to-own” fund targeting distressed debt of struggling companies.

New York Teachers’ pension had assets of $95.8 billion at the end of 2008.