Apollo Breaks Record as Investors Flock to Buyout Funds
Apollo Global Management, private-equity firm founded by Leon Black, collects $23.5 billion for largest ever buyout fund
Apollo Global Management LLC, the private-equity firm co-founded by billionaire investor Leon Black, has raised $23.5 billion for the world’s largest-ever buyout fund.
The record-breaking fundraising is the latest demonstration of a surge in investor appetite for leveraged buyout funds, extending a run of records in recent months.
People familiar with the matter said Apollo had hit its $23.5 billion target, outlined last month in a filing with the Securities and Exchange Commission, and is set to close the fund “imminently.” One person said a formal closing could happen as soon as this week and that the final amount could come in higher than $23.5 billion.
On closing, it will be the largest pool of capital ever gathered by a buyout firm, exceeding the $21.7 billion that Blackstone Capital Partners V LP collected in 2007. The fund is also significantly larger than the $18.4 billion flagship fund Apollo raised in 2013.
Mr. Black said on a February earnings call that the Apollo flagship fund would be the biggest “single driver” of assets under management at the firm. The company, which has $197 billion in assets under management, is also raising $3.5 billion for a distressed-debt fund.
The fund adds to the mound of uninvested capital that private-equity firms are sitting on.
Faced with increasing competition for assets from sovereign-wealth and pension funds, buyout houses have slowed the rate at which they have deployed capital. The value of deals struck by buyout firms fell 14% in 2016, while deal count dropped 18%, according to Bain & Co.’s Global Private Equity Report 2017.
This, coupled with a strong fundraising environment, resulted in firms accumulating a record $1.5 trillion of dry powder, according to the same report.
The rate at which Apollo has been able to deploy the money it raises is likely to have played a role in encouraging investors to back the fund.
Despite a wider slowdown, Apollo spent $9.6 billion on private-equity deals in 2016, a record for the firm. The flagship strategy can switch between buyout deals and distressed investments, boosting its capacity to spend.
Adding to the dry powder, London-based CVC Capital Partners gathered €16 billion ($18.14 billion) earlier in June, the biggest fund ever raised by a European manager, while U.S. buyout giant KKR & Co. closed record Asia and North American funds at $9 billion and $13.9 billion, respectively.
Private-equity firms have generated consistently strong returns over the past decade, a performance that has fueled investor demand.
Over the past five years buyout shops have delivered an average net internal rate of return of 15.84%, according to data provider Preqin Ltd. Buyout firms have failed to deliver double-digit returns in just two years since 2000, including 2008 and 2011.
Hedge funds, which compete with buyout firms for money allocated to alternative assets, delivered net returns of 7.56% over the same period, according to Preqin.