Drum Capital Eyes Europe To Make Pledges

The team at Drum Capital Management is spending time in Europe looking for distressed debt and turnaround managers to back.

Those fund managers would become part of Drum Special Situation Partners III, a fund of funds in the market seeking $350 million to $500 million. So far the firm has collected about $175 million from U.S.-based pension funds, foundations and endowments.

Scott Vollmer, CEO, anticipates putting more money to work in the European market than in prior funds because deal flow has picked up there. And, according to Duran Curis, managing director, the firm is tracking about 20 funds in the United Kingdom and continental Europe, including ones based in Germany, Italy, France and Netherlands. Up to 12 of those could be a good fit for Drum Capital, and up to six will likely receive a pledge ranging from $15 million to $30 million, said Curis.

The firm prefers to commit to European funds of less than €500 million ($730 million). Some of the managers that fit Drum Capital’s profile include Paris-based Butler Capital Partners, U.K.-based Cabot Square Capital, U.K.-based Endless LLP and Munich-based Orlando Management GmbH.

Drum Capital specializes in distressed and turnaround investments made via fund commitments, secondary buys and co-investment deals. The new vehicle would be earmarked mainly to funds that invest in distressed debt or other securities of businesses that are experiencing financial or operating difficulties.

For the new fund of funds, the firm intends to pledge to about 15 to 20 underlying partnerships over a four-year period. At least 80 percent of the capital would go into partnerships. Between 15 percent and 20 percent of the vehicle is earmarked for co-investments.

Connecticut-based Drum Capital raised about $430 million for its second fund of funds, which closed in late 2007. Backers included the Nevada System of Higher Education; the Superannuation Funds Management Corp. of South Australia; and the University of California, Irvine Foundation.

Curis joined the firm in June. Previously he was a managing director at fund-of-funds manager HRJ Capital.