Apollo’s hybrid fund to focus on structured equity, senior and sub credit

  • Distressed-debt investments likely limited, absent broader volatility
  • Apollo Hybrid Value Fund targets $3 bln
  • New fund targeting returns in 12 pct to 15 pct range

Apollo Global Management’s hybrid investment fund will likely dedicate around 80 percent of its capital to structured equity and senior or subordinated credit, documents from Teachers’ Retirement System of Louisiana show.

Apollo Hybrid Value Fund also is able to invest in stressed or distressed debt, though those investments will likely be limited absent broad market volatility or dislocations, a fund presentation says.

The firm set a $3 billion target for Hybrid Value Fund, which is structured to capture investment opportunities across a wide range of PE and credit-related strategies, the presentation says. TRS Louisiana committed up to $75 million to the fund at its June 7 meeting.

Apollo divided Hybrid Value Fund’s investment strategy into three distinct buckets: capital solutions, structured equity and distressed debt.

The capital-solutions strategy generally refers to senior or subordinated credit instruments and structured instruments, the fund presentation says. Its structured equity investments will likely concentrate on growing companies seeking financing for acquisitions or organic growth initiatives.

According to Apollo’s presentation, almost half the fund’s current investment pipeline falls into the structured-equity bucket. Another 34 percent would be categorized as capital-solutions deals.

Apollo Hybrid Value Fund’s investment team is led by Partners Rob Ruberton and Matthew Michelini. Apollo Co-Presidents Scott Kleinman and Jim Zelter also hold seats on the investment committee, as does Senior Partner Sanjay Patel.

Apollo has pitched the fund as a combination of illiquid credit and PE, sources told Buyouts this year. The fund expects to generate 12 percent to 15 percent returns with downside protection similar to credit.

Apollo’s most recent credit opportunity fund, a $3.4 billion 2014 vintage fund, was netting a negative 0.6 percent IRR as of Dec. 31, according to a Hamilton Lane report prepared for TRS Louisiana.

Its most recent PE fund to generate meaningful returns, 2013’s $23.3 billion Fund VIII, was netting a 23 percent IRR as of that date, Apollo’s public investor materials show.

Apollo could not be reached for comment.

Action Item: More on Apollo Global: www.apollo.com/