Exclusive: Blackstone targets $7 bln to $8 bln for next TacOpps fund

The Blackstone Group is targeting a total of $7 billion to $8 billion for its second generation Tactical Opportunities fund, according to two people with knowledge of the situation.

Blackstone’s Tactical Opportunities funds are a mix of large separate accounts with big investors and a commingled vehicle for smaller LPs. The second generation TacOpps fund will have about $2 billion to $3 billion in the commingled fund, with the balance in big accounts, one of the people, an LP who has heard the fund pitch, told peHUB.

Blackstone declined to comment.

[contextly_sidebar id=”8xpAvZfANQRraWtUm0R4ypPch0UJJGG0″]Tony James, Blackstone’s president, announced in July the Tactical Opportunities team was working on raising a second offering. At the time, he didn’t disclose details about how much the group was targeting.

The first TacOpps fund, which launched in 2012, closed in March on $5.6 billion and included investors such as the California Public Employees’ Retirement System, the Oregon Public Employees Retirement Fund, the New York State Common Retirement Fund and the New Jersey Division of Investment.

Performance on the first Tactical Opportunities fund is hard to gauge because each large account gets its own marks (also because Blackstone is not commenting, of course). The LP said the first fund was generating a net internal rate of return of around 23 percent.

“Some early mark-ups are driving the IRR,” the LP said, adding the high performance numbers “might not be sustainable. It’s a super early fund.”

The big accounts have their own performance marks. For example, CalPERS’ $800 million account with Tactical Opportunities was generating a 10.9 percent IRR and a 1.1x multiple as of March 31, 2014, according to CalPERS performance information.

Tactical Opportunities, led by David Blitzer, pursues investments that don’t fit the mandates of Blackstone’s primary business lines. The group invests across all the firm’s asset classes, chasing everything from distressed mortgage loans and property investments in Latin America to shipping opportunities, Blitzer said at a conference earlier this year.

“To have the ability and flexibility to play across the entire spectrum is something that market was missing and we felt Blackstone would be well suited for that kind of flexible fund,” Blitzer said at the conference.

In July, Friends Life Group announced it was selling its wealth management business to Blackstone for up to $577.6 million (356 million pounds), according to Reuters. Blackstone was making the investment through its Tactical Opportunities business, Bloomberg reported at the time.

Blackstone and TPG Capital also announced earlier this month they were buying UK residential mortgage lender Kensington from South African investment bank Investec for about $290 million, with Blackstone making the investment through Tactical Opportunities.

Blackstone also is in the market raising its next flagship private equity fund, Blackstone Capital Partners VII, which is targeting $16 billion, sources told peHUB this week.

Photo: Stephen Schwarzman of Blackstone. Photo by Gonzalo Fuentes of Reuters