Leon Black’s Apollo Global Management announced on Thursday it had now closed its new flagship private equity fund, Apollo Investment Fund VIII on December 31st.
The total funds raised for the new fund now stands at US$17.5 billion from third party investors.
According to the company the new Fund VIII will seek to continue Apollo’s history of successful value-oriented and contrarian private equity investing. In doing so it hopes to achieve what it calls “superior risk-adjusted rates of return across all economic cycles”.
Apollo’s private equity funds have consistently focused on three primary types of transactions including distressed investments, corporate carve-outs and opportunistic buyouts. It looks like the new fund will be more of the same, as it has been a successful formula.
Leon Black, Chairman and Chief Executive Officer, said, “We are very grateful for the overwhelming support for Fund VIII, which includes significant commitments from a preeminent global investor base consisting of both longstanding existing limited partners as well as many new investors.”
“Fund VIII benefited from the support of a diversified group of investors, including many public pensions, sovereign wealth funds, corporate pensions, endowments and foundations, funds of funds and high net worth investors.”
“We believe this support reflects our market-leading investment performance, strict adherence to Apollo’s differentiated investment approach and continued commitment to fostering strong relations with our limited partners, ” he said.
Impressive stuff, now he must hope the deal flow continues to roll in so he can deploy the funds. Appollo also disclosed that internal management of Apollo and other insider groups has also chipped in another US$880 million to the new fund, demonstrating a clear alignment of interests.
Apollo is a leading global alternative investment management company with offices in New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Mumbai and Hong Kong. The company is listed on the New York Stock Exchange, under the symbol APO.
As of September 30th, 2013 Apollo had total assets under management of approximately US$113 billion, in private equity, credit and real estate funds invested across a core group of nine industries where Apollo states it believes it has considerable knowledge and resources.
Apollo’s previous flagship private equity fund, Fund VII, which was raised in 2008, has generated annual gross and net internal rates of return of 38% and 29%, respectively, from its inception through September 30 th, 2013.
On its home page Apollo makes the statement that they are contrarian, value-oriented investors in private equity, credit and real estate, with significant distressed expertise.
Buying distressed debt can sometimes be a way to take over a company through the back door and at a big discount. Then turning such a business around can give Apollo’s investors a big profit. Timing and expertise are both obviously crucial.
Apollo also claims to differentiate itself from other alternative investment managers by operating its businesses in an integrated manner. Apollo’s performance in developing Hilton Worldwide is a good example of this latter trait. After buying the company in 2007 just before the economic and financial crash Apollo held its nerve, brought in new management and supported an aggressive growth and refurbishment strategy for the hotel group through the recession. It certainly worked, resulting in the very successful Hilton Worldwide IPO recently and showing a big paper profit so far for Apollo.
Another example remains more of a work in progress, however as this time timing worked against them. Having taken on more than US$25 billion of debt to make a leveraged buy-out of casino company Caesars Entertainment in 2008, together with another prominent private equity group TPG, so far the investment has not paid off for them yet.
Having missed out on the Macao boom when they could not get a licence there, Caesars are now trying to get an edge on their biggest competitor, Sheldon Adelson’s Vegas Sands, by making a push for online gambling in the United States, which is just beginning to become legal so far in Nevada and New Jersey. So they are working it all through.