Apollo Global Management and Ares Management are nearing closes of their latest special opportunities offerings after vigorous fundraising in 2021’s final months.
In its fourth quarter and 2021 earnings call, Apollo reported securing more than $4 billion for Apollo Hybrid Value Fund II as of the end of December. That puts the vehicle within its target range of $4 billion to $5 billion, reported last June by affiliate title Buyouts.
It is not known if the fund has a hard-cap. Apollo declined to provide a comment.
Ares reported similar momentum for Ares Special Opportunities Fund II in its fourth-quarter and 2021 earnings call. The offering collected $4.9 billion as of the end of December, well ahead of its $4 billion target, reported in January by Buyouts.
The firm is now “well on our way” to reaching the pool’s hard-cap of $6 billion, co-founder and CEO Michael Arougheti said in the call.
Apollo Hybrid Value Fund II and Ares Special Opportunities Fund II are part of a fairly new niche strategy that appears to be gaining popularity among LPs. Broadly known as special opportunities, it was pioneered just over a decade ago by Blackstone’s Tactical Opportunities, today a $36 billion platform.
While special opportunities programs vary in their details, they often share key characteristics, such as a focus on dealflow beyond the scope of a manager’s existing flagship funds. Other common features are the flexible provision of bespoke, non-control debt, equity and hybrid capital solutions and an all-weather approach to deal sourcing and investing.
Apollo’s and Ares’ vehicles are among a handful of related funds targeting a combined $20 billion to $25 billion, Buyouts estimates. Another is Blackstone Tactical Opportunities Fund IV, which late last year brought in an initial $2-billion-plus against a $4.5 billion target.
Hybrid Value was set up in 2018 as an extension of Apollo to invest non-control debt and equity among the firm’s private equity, private credit and real assets groups. Closing a debut fund in 2019 at $3.25 billion, the program now manages more than $14 billion. It is co-headed by senior partners Matt Michelini and Rob Ruberton.
Ares unveiled Special Opportunities in 2017 to invest mostly debt as well as non-control equity in businesses that are undergoing transformational change or stress. Led by Scott Graves, partner and co-head of the private equity group, it closed an inaugural vehicle in 2020 at $3.5 billion and today oversees $11.8 billion.
Both strategies have turned in robust performance. Apollo Hybrid Value Fund I was earning a 29 percent gross IRR and a 23 percent net IRR as of 31 December, while Ares Special Opportunities Fund I was earning a 55.2 percent gross IRR and a 43.1 percent net IRR.
Apollo reported record inflows of capital in 2021 of almost $68 billion, much of it through fundraising, growing managed assets to more than $497 billion. In the call, co-president Jim Zelter said “we feel comfortable” about the firm’s 2022 inflow goal of $80 billion, which includes the launch of a 10th flagship buyout offering with a $25 billion target.
Ares also accounted for record inflows last year. These totalled nearly $77 billion, increasing managed assets to more than $305 billion.
This article first appeared in affiliate publication Buyouts