New : Apollo Fund V Hunts for $4.5B –

New York buyout heavyweight Apollo Advisors LP late last month kicked off fund raising for its fifth fund, which, with a target of $4.5 billion on the cover, adds to the lengthy list of mega-funds now being marketed.

A source close to the fund raising said Apollo Investment Fund V LP could raise well in excess of $5 billion, though no cap has yet been determined for the vehicle. Apollo raised $3.6 billion for its fourth fund in 1998 after setting an initial goal of $2.5 billion. As with the previous fund, Donaldson, Lufkin & Jenrette is acting as placement agent.

Like most other large buyout firms, such as Hicks, Muse, Tate & Furst, Texas Pacific Group and Clayton Dubilier & Rice, Apollo will earmark a portion of the new fund’s capital for tech investments. Partners at Apollo are telling prospective investors that approximately 20% of the fund’s capital will be set aside for “new economy” investments in the telecommunications and technology sectors, the source said.

In the near term, the firm will also continue to purchase minority positions in public companies through convertible preferred shares, a strategy in which the source said Apollo still sees great value.

Marc Rowan heads up much of Apollo’s technology investing, including the $200 million investment in CD Radio Inc. in late 1998.

Just last month, Boston buyout veteran Thomas H. Lee Co. launched what may become the largest private equity vehicle ever, the $5 billion-targeted Thomas H. Lee Equity Fund V LP. The source close to Apollo’s fundraising said that although there appears to be a glut of giant funds on the market, demand for the private equity investment class among institutional investors is also very high, and Apollo should have no trouble exceeding its fund-raising goals.