Special situations funds have raised increasing amounts of capital over the last few years. According to Preqin’s Private Debt Online database, in 2011, special situations funds raised an aggregate $6.4bn, compared with $11bn raised in 2014. As of September 2015, nine special situations funds have held a final close, raising an aggregate $4.3bn. Looking forward to the rest of 2015, there are still 29 special situations funds in market, targeting $9.9bn in aggregate capital commitments.
Ares Special Situations Fund IV is the largest fund to have closed so far in 2015, with a final size of $1.5bn. The fund will look to take advantage of dislocated markets and out of favour assets and industries. It will seek to invest in stressed and distressed corporate debt in the US and Western Europe in anticipation of a potential future corporate default cycle or European bank deleveraging.
The second largest fund to hold a final close this year is Clearlake Capital Partners IV, a special situations fund that targets North American distressed opportunities involving small- and medium-sized companies. The fund closed with a final size of $1.4bn.
The next largest funds to hold a final close this year are Fortissimo Capital IV and New Water Capital I, closing on $470mn and $406mn respectively. Fortissimo Capital IV will invest in maturing technology in Israel, while New Water Capital I focuses on the North American lower middle market. The fund will target investments in the consumer products, retail, industrials and the manufacturing industries.
The fifth largest special situations fund to hold a final close this year is BlackRock Special Opportunities Fund II, which has a final size of $300mn. The fund is industry agnostic and will target investments globally.
Average Fund Size
In comparison to 2014, the average capital raised by special situations funds has seen a decrease, with funds commanding less capital. The median value ($470mn) of funds of the five largest funds closed in 2015 so far is just over half the median value ($915mn) of the five largest funds closed in 2014. With those special situations fund managers still in market targeting $9.9bn in aggregate capital commitments, it will be interesting to see how the fundraising environment for the strategy develops throughout the rest of 2015.