Privately Speaking: Clearlake Capital's José Feliciano

Clearlake Capital Group’s headquarters in Santa Monica are bright, white and modern, with views of sun-drenched rooftops, palm trees and the Pacific Ocean. It’s a soothing backdrop for visitors – like this one – who arrive late after battling Los Angeles’ notorious gridlock. 

“It happens all the time,” José Feliciano, one of the firm’s three co-founders, says good-naturedly about the traffic delay. “I should have warned you.”

Feliciano pulls up a chair at the conference table, occasionally glancing over self-consciously at the photographer. Some of his colleagues have been teasing him about getting his photo taken, he confesses, saying he’s ‘gone Hollywood’. Despite its glitzy offices (in Santa Monica and New York), this is clearly not a firm that’s used to the spotlight. 

‘Gone Hollywood’, however, is the sort of term you might use to describe Clearlake’s recent fundraise. The $789.3 million Fund III was raised in just six months and had to turn numerous investors away, pushing the seven-year-old US special situations firm squarely into the limelight. 


Founded in 2006 by Feliciano, Steve Chang and Behdad Eghbali (the first two were previously at Tennenbaum Capital Partners, the latter was ex-TPG) – with backing from hedge fund Reservoir Capital Group, Clearlake raised $180 million for Fund I from the GP, Reservoir and its affiliates. 

“When I started doing this type of investing in 2001, there was only really one large distressed/special situations private equity firm, Oaktree Capital,” recalls Feliciano. 

But by 2006, there were a number of other distressed investment/special situations-focused firms – like MatlinPatterson, Wilbur Ross and Centerbridge – that had grown substantially and were doing increasingly large deals. 

“We felt there was a void in the lower end of the middle market [and] there was room for a smaller firm to capture that opportunity,” Feliciano says. “We were more excited by the returns – or felt the more interesting opportunity set would be – [at that end of the market].”

Since then, an increasing number of LPs have become interested in Clearlake’s hybrid strategy, which is designed to adjust alongside market cycles and target different parts of the capital structure. 

Ask Feliciano to define what ‘special situations’ means to Clearlake, and he’ll tell you what it doesn’t signify: “We are not going to do specialty lending; we are not going to be trading bonds, we are not going to do things like offer a risk arb fund.” Clearlake is focused on special situation debt and equity investments in the lower mid-market and in industry verticals where it thinks it has an edge, he says. That hasn’t changed from fund to fund, though thanks to the success of its latest fundraise its average deal size will increase to somewhere between $50-$60 million, up from $40 million previously. 

“In a nutshell, most of our deals involve special situations, small companies, certain sectors that we know very well, low valuations or attractive valuations and where we can do quite a bit,” Feliciano says. “But how we do it does differ quite significantly depending on where we are in the cycle.”