Cross Ocean closes special situations, aviation vehicles

Both funds are the debut commingled pools of capital for the respective strategies.

Cross Ocean Partners has wrapped up two debut funds this week, raising a combined $1.04 billion for a special situations vehicle and an aviation investment fund. This comes amid a fundraising boom for special situations and distressed debt, as well as a growing interest in niche strategies.

The Connecticut-based firm raised $605 million for Cross Ocean USSS Fund I from an array of institutional investors across North America, the Middle East and Australia. Meanwhile, Cross Ocean Aviation Fund I, the aviation vehicle, raised $438 million.

Both funds have already begun investing. USSF I, which invests in senior debt and asset-backed loans for stressed and distressed companies, has drawn 39 percent of its capital. Aviation Fund I, which deploys capital into late-life commercial aircraft and engines with an emphasis on Europe and North America, has drawn 22 percent of its capital.

Special situations funds have enjoyed strong fundraising, with 33 percent of the total capital dedicated to the strategy pulled during the first six months of 2018, according to PDI data. That figure is slightly more than the 32 percent raised for special situations in 2017 and up from the 26 percent and 20 percent raised in 2016 and 2015, respectively.

Additionally, a survey of investors present at the annual PDI New York Forum showed that they favoured special situations as the strategy most likely to deliver the best returns over the next 12 months, beating out direct lending, mezzanine, distressed debt and real estate or infrastructure debt.

Aviation finance has raised large sums of money recently, with Castlelake Aviation Fund III closing on its $1 billion hard-cap in June and Apollo Aviation Group closing on $950 million for its Apollo SASOF IV. Niche strategies like aviation finance have garnered interest from institutional investors as a way of diversifying their private credit exposure.

“LPs are looking for more and more ways to get exposure to private credit without overlapping on the same deals,” NXT Capital senior managing director and corporate finance group head John Finnerty told Private Debt Investor earlier this year. “So, going into some of these niches really helps expand their exposure.”

Editor’s Note: This story has been updated to amend an error regarding Cross Ocean Aviation Fund I’s investor base.