TowerBrook’s latest structured opportunities fund to target US, western Europe

The buyout shop, which has offices in New York and London, landed a $75m commitment from a Massachusetts pension fund.

TowerBrook Capital Partners is seeking $900 million for its latest fund targeting distressed securities and structured products, according to meeting notes from a New England pension fund.

The target for the private equity firm’s TowerBrook Structured Opportunities II is $300 million above its target for Fund I, the Massachusetts Pension Reserves Investment Management Board documents show. The Boston-based retirement plan approved a $75 million commitment this month to the vehicle.

TowerBrook, which declined to comment, will execute a similar strategy for TSO II as with the fund’s predecessor. The team will seek non-controlling structured equity and structured asset investments in the US and western Europe as well as stressed and distressed debt.

Massachusetts’ PRIM is a $68.5 billion pension fund with 23.4 percent allocation to alternative assets, including 10.6% for private equity and 9.1% for real estate.  Through its allocation to TSO II, the pension fund expressed conviction in looming market dislocation opportunities, which would give rise to distressed investing opportunities that have largely been scarce in recent years.

Last year, PRIM made $450 million in commitments to distressed debt across three funds: CarVal Investors’ CVI Credit Value Fund IV ($200 million), Anchorage Capital Group’s Anchorage Illiquid Opportunities VI ($125 million) and a separate account with Canvas Capital Distressed Credit Strategy ($150 million).

PRIM joins the California Public Employees’ Retirement System as an investor in TowerBrook. CalPERS committed $222 million to TSO I, which raised at least $800 million in equity in 2015, according to PDI data.  TSO I reported an 8.1 percent net internal rate of return and an investment multiple of 1.0x as of 30 September, according to CalPERS data.

PRIM expects TowerBrook’s transatlantic footprint will help the firm spot investment opportunities based on geographic differences. Conversely, PRIM identified regional and industry concentration risk as one possible downside to investing in a firm exclusively focused on transatlantic opportunities.

TowerBrook is also raising a $4.5 billion private equity fund, TowerBrook Investors V that will focus on companies in the US and western Europe operating in healthcare, consumer and retail, financial services, aerospace and diversified industrials. PRIM also committed up to $150 million to that vehicle.