Blackstone secured an initial $2 billion-plus for a fourth fund geared to tactical opportunities, a strategy launched by the private equity giant in the wake of the financial crisis.
The amount raised, recently published in Form D documents, provides Blackstone Tactical Opportunities Fund IV with just under half of its $4.5 billion target, as reported last year by affiliate title Buyouts.
Some 75 limited partners committed to Fund IV, according to the Form Ds. Disclosed LPs include Teachers’ Retirement System of Louisiana, which invested $125 million. The placement agents are Morgan Stanley and KIS.
Blackstone’s Tactical Opportunities was founded in 2011 by firm veterans led by global head David Blitzer and COO Chris James. Pioneering in concept, it was designed to be a flexible, opportunistic investor of debt, equity and hybrid capital solutions in assets, geographies, markets and sectors not typically covered by Blackstone’s flagship funds.
The strategy, today a core Blackstone platform with $34 billion of managed assets and 147 investments under its belt, inaugurated an entirely new niche category, broadly known as special opportunities.
Presently, a dozen or so large PE firms offer the strategy or one that resembles it. Along with Blackstone, these include Apollo Global Management, Ares Management, Brookfield Asset Management, Sixth Street and TowerBrook Capital Partners.
While programmes vary in emphasis, they often share key characteristics, such as a concentration on dealflow beyond the scope of a firm’s existing funds. Other common features are the provision of bespoke, non-control capital solutions, a focus on the middle of the capital structure, and an all-weather approach to deal sourcing and investing.
In addition to being new, the strategy seems to be fast-growing. Special opportunities funds now in the market are targeting more than $20 billion, Buyouts estimates. Another example is Ares’ second vehicle, which last fall collected an initial $3.3 billion against a $4 billion target.
Special opportunities funds were highly active during the height of the covid-19 pandemic. Blackstone’s Tactical Opportunities invested $4.8 billion in 2020 alone, its largest outlay ever. Investments in the period included Diligent, a maker of governance, risk and compliance software. Done alongside Clearlake Capital, the deal valued the business at about $4 billion, affiliate title PE Hub reported.
Tactical Opportunities appears to have maintained an active pace last year. Its deals included the acquisition of Sustana, a manufacturer of sustainable recycled fibre, paper and packaging products, from HIG Capital. It was announced in December.
Fund IV is targeting 35 to 45 investments in a range of global industries, each expected to be held for four to five years, Buyouts previously reported. Investing will be structured for downside protection while allowing for potential outperformance.
In its Q3 2021 earnings report, Blackstone said the strategy was generating a combined multiple of 1.6x as of September. The combined net IRR on realised investments was 19 percent, and the total net IRR, 14 percent.
Blackstone declined to provide a comment on this story.