Time to shine?
If any firm should be excited about the opportunity set arising in 2023, it’s Apollo Global Management. The US alternatives giant synonymous with complexity and investing heavily during periods of dislocation is seeking $25 billion for a flagship fund that looks poised to do just that. Fund X has collected at least $14.5 billion so far, including commitments from State Oil Fund of the Republic of Azerbaijan, New York State Common Retirement Fund and Virginia Retirement System, according to PEI data.
In many ways, 2023 feels like Apollo’s time to shine. It is with that context in mind that our colleagues at Buyouts recently caught up with the firm’s PE co-heads, Matt Nord and David Sambur. The full interview is well worth reading (registration required). Here is a short excerpt of what jumped out to us:
How do you approach distressed investing? Are you seeing more opportunities
Nord: We don’t view deleveraging transactions as a different type of deal. It’s really a different starting point. In a traditional buyout you lever up to effectuate your purchase of the business. In a distressed or deleveraging transaction, the debt is already there. We’re buying the debt and turning it into equity.
The reason why it’s so powerful is that if you’re buying first-lien debt at a discount – you have all the downside protection of being top of the capital structure and then you have a “heads-I-win, tails-I-win” dynamic. If the company refinances you, you generate a good return, and if not, you’re happy to own the business at that creation value.
So, I don’t view us as a distressed firm. I view us as a flexible private equity firm where this is an incredibly valuable tool to have when you experience downturns. We’ll take the tool out like we did in the financial crisis. We’ll take it out like we did in 2020, when we put about $4 billion of capital to work in a couple of weeks.
See EU later
Tom Rotherham-Winqvist, managing director of Wafra Europe, has left the investment manager, according to an email seen by Side Letter. Rotherham-Winqvist joined the Public Institution for Social Security of Kuwait-backed investment arm in 2018 and was responsible for leading the UK office and investment opportunities in Europe, as well as supporting its GP partnerships through the Capital Constellation joint venture, according to his LinkedIn profile. His next role is unclear, though it is understood to involve the private markets. “Wafra is a unique company with amazing people whose insights and expertise have ensured that I leave a much smarter person than when I arrived,” he wrote in his farewell email. Rotherham-Winqvist has developed a reputation as a proponent of emerging managers. He caught up with Private Equity International in 2020 to share his top tips for new GPs – read them here.
ICYMI: Japanese buyout firm Advantage Partners has held a ¥130 billion ($945 million; €862 million) final close on its latest fund, per a Friday statement. Fund VIII closed north of its ¥120 billion target and on its hard-cap with capital from both domestic and international investors. The vehicle is substantially larger than its 2020-vintage predecessor, which raised ¥85 billion. Advantage’s close comes at a pivotal moment for Japanese deal-making, and on the back of a reasonably muted year for Japan-based fundraising.
Apollo isn’t the only firm eyeing complex opportunities in 2023. Chinese distressed specialist DCL Investments has closed its latest fund on 4 billion yuan ($587 million; €527 million), per a Chinese-language press release. Special Situations RMB Fund IV is the firm’s flagship distressed fund that focuses on China. It pooled commitments from insurance companies, state-owned investment platforms, university endowments, brokerage firms and trust funds, with most being existing LP relationships.
Market uncertainty and changes in economic growth models may lead to a proliferation of distressed opportunities, per the statement. According to PEI data, DCL’s current vehicle is the firm’s largest distressed fund yet, raising 1 billion yuan more than its 2020-vintage predecessor. It also represents something of an outlier during China’s fundraising slowdown, with capital raising down 68 percent last year, per Bain & Co’s Greater China Private Equity Report 2023.
Kutcher’s new vehicle
Ashton Kutcher may well have struggled to find his ride in the 2000 cult classic Dude, Where’s My Car?, but the actor appears to be having much more success with his newest vehicle. Sound Ventures, a Los Angeles-based VC that counts Kutcher as a general partner, has raised $240 million for its debut AI strategy, per a statement. Sound AI Fund will invest alongside Sound’s early-stage funds in “category-defining artificial intelligence businesses”.
“We believe this is potentially the most significant technology we will experience since the advent of the internet,” said Kutcher. “The foundation model layer companies are defining the category, and, in our view, they have the power to transform businesses and everyday life. That is a conversation we want to be in.”
In addition to Kutcher, Sound Ventures is led by general partners Effie Epstein and Guy Oseary. The firm manages more than $1 billion in assets across funds; prior investments include Airbnb, Uber and GitLab.
LP meetings. Here are some LP meetings to watch out for this week.
- New York City Police Pension Fund
- Arizona State Retirement System
- Dallas Fort Worth International Airport
- Los Angeles County Employees’ Retirement Association
- Massachusetts Pension Reserves Investment Management Board
- Wisconsin Board of Commissioners of Public Lands
- California State Teachers’ Retirement System
- Contra Costa County Employees’ Retirement Association
- Fresno County Employees’ Retirement Association
- Marin County Employees’ Retirement Association (MCERA)
- Teachers’ Retirement System of the City of New York
- Adams County Retirement Plan
- Los Angeles Fire & Police Pension System
- Michigan State Police Retirement System
- Sonoma County Employees’ Retirement Association
- Teachers’ Retirement System of Louisiana
Today’s letter was prepared by Alex Lynn with Carmela Mendoza and Katrina Lau.