Apollo targets at least $3 bln for hybrid equity/credit fund

Apollo Global Management is seeking $3 billion for a new strategy that will combine illiquid credit and private equity, sources told Buyouts.

The Hybrid Value Fund’s total could go higher depending on demand, according to a limited partner who has heard the fund pitch. It’s unclear whether the fund has a cap. The fund is in the market now and is being broadly marketed, sources said.

Reflecting the fund’s hybrid focus, the new pool is led by Robert Ruberton, global head of illiquid opportunistic credit, and Matt Michelini, partner in the PE group.

The fund’s investment committee is chaired by Scott Kleinman, Apollo’s co-president. The group will use existing private equity and illiquid credit professionals.

Hybrid Value Fund will target returns of 12 percent to 15 percent with credit-like downside protection, a fund description seen by Buyouts shows.

The fund will target senior secured debt or convertible preferred equity, non-control or control equity and non-control stressed or distressed investments, according to the description.

“By creating multiple avenues through which to enter an investment, Apollo believes it can quickly adapt to changing market environments and generate attractive risk-adjusted returns on behalf of its investors, in a market otherwise under pressure from persistently high valuations and low yields,” the fund description said.

A spokesman for Apollo declined to comment. Apollo Senior Managing Director Josh Harris described the new product on the firm’s earnings call Feb. 1, though he didn’t give a target.

Last year, Apollo closed fundraising on its ninth flagship fund on $24.6 billion, the largest traditional private equity pool ever raised.

Action Item: Check out Apollo’s latest earnings report here: http://bit.ly/2DUGldw

Apollo Global Management Chairman and CEO Leon Black (left), TPG Capital Founding Partner David Bonderman and Providence Equity Partners Founder and CEO Jonathan Nelson take part in a panel discussion titled “New Directions in Private Equity”  at the Milken Institute Global Conference in Beverly Hills, California, on April 30, 2013. REUTERS/David McNew