GSO hits hard-cap in largest credit fundraise yet

The global investment firm’s new mezzanine fund overtook its original $6bn target to reach its $6.5bn hard-cap in Q3.

GSO Capital Partners announced Monday the final closing of its third mezzanine fund on its hard-cap of $6.5 billion, marking the Blackstone credit arm’s largest fundraise for a direct lending drawdown fund yet.

The firm plans to invest from the GSO Capital Opportunities Fund III in the US and Europe. Surpassing the fund’s original $6 billion target, GSO sourced commitments for undisclosed public, corporate and foreign pension funds along with financial institutions, endowments, foundations and family offices.

GSO raked in $3.2 billion for the fund in the third quarter alone. The firm’s latest mezzanine fund exceeds both its first mezzanine vehicle, at $4.1 billion; and its second, which stood at $2 billion.

The second fund’s investment period ends in November, while the initial vehicle’s investment period ended in October 2011, according to its third quarter earnings report. A “significant number” of existing investors made commitments to the third fund, GSO said in a statement.

The earnings report also shows the third mezzanine vehicle is the largest fund in GSO’s credit portfolio. Overall, that portfolio showed a gross return of 6.2 percent in performing credit and 6.4 percent in distressed strategies.

Management said in a third-quarter earnings call on Thursday that the “continued appreciation of energy investments” and distressed debt investments helped the firm post a “strong” performance.

The firm’s overall credit portfolio also reached a new high last quarter, topping a record $89.3 billion assets under management, compared to $84.7 billion AUM at the end of the second quarter.

GSO’s credit strategies earned $5.7 billion in inflows, with $3.4 billion from its mezzanine strategies, $957 million from customized credit products, $509 million from one new CLO product, $377 million from the FS Investments Corporation business development companies it sub-advises and $320 million from hedge fund strategies.

The credit team invested $605 million last quarter, with an additional $1.3 billion committed but not yet deployed year-to-date. GSO tops the chart of fund managers in New York City, PDI data shows. As of October, the firm had raised almost $40 billion in private debt vehicles since 2011.