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 In their hunt for yield amid persistently low interest rates,
investors who fell out of love with private equity and its
debt-fueled excesses in the aftermath of the 2008 crisis are now
increasing allocations to the asset class.
Global private equity fundraising throughout 2013 totaled $431
billion, up 13 percent on 2012, market research firm Preqin said
last week.
Apollo's peers have also benefited. Carlyle Group LP finished
raising a $13 billion U.S. buyout fund in November; KKR & Co LP is
wrapping up fundraising for its latest North American fund with more
than $8.3 billion; Warburg Pincus LLC closed on a $11.2 billion
global fund last May and technology-focused Silver Lake has clinched
$10.3 billion.
The largest private equity fund in history remains Blackstone Group
LP's $21.7 billion fund that was raised in 2007.
Apollo and its investment professionals committed an additional $880
million toward the fund, dubbed Apollo Investment Fund VIII, the New
York-based firm said.
"Fund VIII benefited from the support of a diversified group of
investors, including many public pensions, sovereign wealth funds,
corporate pensions, endowments and foundations, funds of funds and
high net worth investors," Apollo Chief Executive Leon Black said in
a statement.
To be sure, Apollo's private equity funds go beyond the traditional
acquisitions of companies and unloved divisions of conglomerates,
often buying the debt of companies that are in distress and ending
up with their equity in a restructuring.
This has proved to be a winning combination. Apollo's previous
flagship fund, the $14.7 billion Fund VII, has been one of
best-performing private equity funds raised in 2008. The fund
generated, from inception to the end of September, gross and net
annual internal return rates of 38 percent and 29 percent,
respectively, according to Apollo.
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In Fund VII, 57 percent of Apollo's deals involved buying debt of
distressed companies or buying distressed companies outright, while
only 28 percent were straightforward acquisitions of companies not
in distress. Corporate carve-outs of divisions accounted for 15
percent.
With more money flowing into private equity, however, and
competition for deals becoming fiercer, the challenge Apollo now
faces is spending the biggest fund it has ever raised without
overpaying for assets.
Apollo started raising Fund VIII with a $12 billion target in
November 2012. But strong demand from investors resulted in it
seeking approval from them to raise the ceiling on the fund.
Apollo was founded in 1990 by Black and former Drexel Burnham
colleagues Joshua Harris and Marc Rowan and went public in March
2011. It had $113 billion in assets under management as of the end
of September, $43 billion of which was in private equity.
(Reporting by Greg Roumeliotis in New
York; editing by Matthew Lewis)
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