Fund: Paulson Strategic Partners Fund
Target: $2 bln
As limited partners’ appetite for distressed strategies grows, Paulson & Co, a hedge fund led by the billionaire John Paulson, boosted the size of its distressed-debt private equity fund by fully a third.
Paulson Strategic Partners Fund plans to raise as much as $2 billion, a recent Form D filing showed. That’s up from the $1.5 billion target that press reports cited earlier this year.
A spokesman for the firm declined to comment.
The increased target could signal larger-than-expected demand for the fund, a PE vehicle that will invest in the debt of businesses either in bankruptcy or facing distress, as well as companies seeking rescue loans.
Paulson is listed as an executive on the fund, along with Ty Wallach, partner at Paulson & Co, and Sheru Chowdhry, co-portfolio manager.
About 26 percent of LPs plan to pare their target allocations to hedge funds, according to Coller Capital’s summer 2016 barometer of 110 institutional investors. Institutions have been moving away from hedge funds as returns for the asset class have fallen short of expectations.
But the debt space overall has been a point of keen interest.
Preqin counted 38 distressed funds in the market in the second quarter, with a total of $46 billion targeted. That’s the largest dollar target of six private-debt-fund types, including direct lending, mezzanine, special situations, venture debt and private debt fund of funds, according to Preqin.
The amount of distressed debt has climbed as energy and mining companies struggle with lower demand and lower commodity prices.
Last month, Buyouts reported 78 private equity-backed companies on the “weakest links” list by debt-research firm S&P Global Ratings. The $149.9 billion in debt held by the group represented the largest collective figure for the list since 2009.
But outside the energy and mining sectors, default rates haven’t climbed significantly.
Paulson & Co, which managed $19.3 billion as of March 1, will deploy capital in the fund over three years and won’t charge a fee to investors until the GP puts the money to work, according to a Bloomberg report. The firm is putting in as much as $500 million of its own capital, the report said.
It’s not unheard of for hedge-fund managers to launch vehicles with private-equity-type structures. Fortress Investment Group has always floated hedge funds and PE funds.
Steve Cohen, the billionaire founder of hedge-fund giant SAC Capital, launched a new firm called Stamford Harbor Capital, which is staffed with members of his family office, Point72, according to a report. The firm will manage a private fund that’ll invest in debt and other products.
SAC’s former PE group spun out in 2011 and formed Siris Capital.
Action Item: Paulson & Co: http://www.paulsonco.com/contact/
Hedge-fund manager John Paulson attends the men’s singles final match between Roger Federer of Switzerland and Novak Djokovic of Serbia at the U.S. Open Championships tennis tournament in New York on September 13, 2015. Photo courtesy Reuters/Mike Segar