Apollo raises $1.75bn market dislocation fund in eight weeks

Apollo Global Management has raised $1.75 billion for a debt fund to capitalise on the current dislocation in the market.

Accord Fund III B, which took just eight weeks to raise, will focus on “dislocated credit” and is part of the firm’s flagship Accord series, launched in 2017. Accord’s strategy focuses on providing liquidity during times of broad-based market stress by purchasing “high-quality, secured cross-asset credit risk”, Apollo said in a news release.

Apollo said the rapid fundraising was “driven by institutional demand for strategies that invest amid the volatility and market conditions seen in the first quarter of 2020”, when the coronavirus erupted in the US.

Apollo called “75 percent of the remaining capital” in its Accord III fund within seven business days in March as high-yield spreads doubled, an Apollo spokeswoman told Private Debt Investor. Accord Fund III B has a short-term investment period as it is an interim fund offering, she added.

The spokeswoman said more than 50 percent of Accord Fund III B’s investors are new to the strategy, and the firm sees a “meaningful opportunity” for the strategy because of expected volatility. She declined to comment further.

Among the fund’s investors is Investment Management Corporation of Ontario, which committed $250 million. IMCO, which said the commitment is its first to an Apollo-managed fund, said Accord Fund III will focus on investing in credits “that have traded down due to liquidity-driven selling and non-economic reasons”.

Jennifer Hartviksen, IMCO’s managing director, global credit, noted in a statement that the investment process in Accord Fund III B, from analysis to fund close, took approximately one month and demonstrates “how nimble our team can be in seeking valuable opportunities for our clients”.

IMCO, which manages $70.3 billion of assets, recently launched its global credit programme as a separate asset class to provide higher risk-adjusted returns than traditional fixed income. The investment in the Accord fund exemplifies the opportunities IMCO is pursuing, with sponsors IMCO believes have “deep expertise delivering and differentiating exposures, who are transparent, opportunistic and value-oriented”, Christian Hensley, senior managing director, private equities and credit, said in the statement.

John Zito, deputy CIO of credit and co-head of global corporate credit at Apollo, said in Apollo’s statement that the firm saw “significant opportunities” in the first quarter to invest in mispriced credit risk, driven by the volatile environment, and the firm expects volatility to continue “as markets respond to the crisis and structural conditions”. The Accord strategy is one of several the firm has designed to address opportunities across dislocation, distressed, origination and capital solutions.