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Värde Partners nearing $1bn-plus target for debut dislocation fund

Värde expects today’s credit cycle “will be as bad or worse than” the financial crisis, co-CEO and CIO Ilfryn Carstairs said in a recent market analysis.

Värde Partners appears poised to close the latest in the market’s fast-growing collection of dislocation pools.

Värde Dislocation Fund and a parallel vehicle secured just over $969 million, according to Form D fundraising documents. The target is more than $1 billion, a May report published by North Dakota Board of University and School Lands said.

ND Trust Lands is committing $100 million. Other limited partners include San Antonio Fire and Police Pension Fund, which is supplying $20 million, and the University of Vermont’s endowment fund, which is supplying $10 million. The main offering has so far attracted 59 LPs, the Form Ds showed.

Värde, a long-time specialist in credit investing, unveiled the fund earlier this year. It is the firm’s inaugural dedicated dislocation and distressed debt vehicle, intended to invest widely across the current credit cycle.

The global fund will make 30 to 50 investments in a range of asset classes, liquidity profiles, regions and sectors, the ND Trust Lands report said. It will target opportunities across several phases of the cycle, initially in public and dislocated spaces and later in more private and distressed categories.

Värde expects some of the best deal flow to follow the early uncertainty spawned by the health crisis.

This is the so-called Phase 2, when “potential winners and losers” are clearer, the firm noted in a recent market analysis, allowing for a niche focus on impacted areas and sectors. The period will also see more illiquid opportunities, such as rescue lending and forced asset sales.

Proliferating dislocation funds

Värde’s offering is one of a number launched under the broad rubric of “dislocation.” One of the biggest is the 11th flagship fund of Oaktree Capital, which has to date raised $12 billion toward a $15 billion target, Buyouts reported this month.

All such pools anticipate the effects of demand disruption and volatility created by covid-19. The shuttering of businesses to halt the pandemic’s spread is causing major liquidity challenges. It is also causing distressed debt to spike, especially in certain vulnerable industries, generating opportunities for credit investors to snap up assets cheaply.

Värde expects today’s credit cycle “will be as bad or worse than” the 2008-09 financial crisis, co-CEO and CIO Ilfryn Carstairs said in the firm’s analysis.

Värde Dislocation Fund is targeting a net annualized return of about 15 percent, the ND Trust Lands report said. It will invest alongside Värde’s other funds, including its 13th flagship, which closed late last year at nearly $2.5 billion, ahead of a $2 billion target.

Established in 1993, Värde is led by co-CEOs George Hicks and Carstairs and executive chair Marcia Page. Hicks and Page are both founders. A third founder, Greg McMillan, is retired.

The leadership team oversees more than 300 professionals, including 95-plus investments professionals, operating from locations in North America, Europe and Asia, Värde’s website shows. The firm’s headquarters is in Minneapolis, Minnesota.

Värde declined to a provide a comment for this story.

Action item: Check out Värde Partners’ ADV filings here.