The predecessor fund closed on $725mn in April 2021. Approximately 50% of the commitments came from first-time Diameter investors, the company said.
April 21 (Preqin News) - Credit manager Diameter Capital Partners has closed its second private debt fund at more than $2bn, a near-three times increase on the size of its predecessor that highlights growing demand for special situations vehicles.
Diameter Dislocation Fund II (DDF II) has secured $2.2bn, making it the largest special situations fund to close this year, according to Preqin data. The predecessor fund closed on $725mn in April 2021. Approximately 50% of the commitments came from first-time Diameter investors, the company said.
Special situations funds are increasingly popular with private debt investors. Nearly two thirds (64%) of LPs surveyed for Preqin Investor Outlook: Alternative Assets H1 2023 viewed special situations as providing the best opportunities in private debt, compared with 38% who held that view a year earlier. Direct lending (54%) and distressed debt (49%) were the next most popular fund types, according to the latest report.
Preqin is currently tracking 124 special situations funds that are open to investment, with a combined target of $54.1bn.
New York-based Diameter Capital was founded in 2017 by Scott Goodwin and Jonathan Lewinsohn, who previously worked at hedge fund Anchorage Capital Group and private equity manager Centerbridge Partners, respectively. It currently manages approximately $13bn in assets.
Diameter’s strategy and position highlight a growing overlap between hedge and private capital funds. The firm invests globally across the credit spectrum and manages structured credit vehicles. It emphasizes speed of execution, as illustrated by DDF II, which has a lifespan of just four years.
Last year, global alternative asset manager Apollo acquired a 5% stake in Diameter. Apollo said that the investment would support the continued evolution of Diameter’s alternative credit platform, with a specific focus on expansion into direct lending and European credit.
“This investment in Diameter demonstrates how Apollo can partner with leading managers to support their strategic growth plans, in this case launching new business lines, as well as geographic expansion,” Bret Leas, Partner and Head of Asset-Backed Finance at Apollo, said at the time.
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