Apollo Hybrid Value
What kind of deals these folks doing? Any insight into the actual structures they have on deals? What about the types of MOIC/IRR’s these hybrid funds get?
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Mezzanine finance in larger corp and sponsor situations. Website used to have case studies.
The following is based on a conversation I had with someone in the group. They have a very flexible mandate, investing across the capital structure in both public and private companies. Deals range from buyouts (smaller scale than flagship PE strategy) to junior capital solutions (second-lien, co-invest, preferred equity, minority common equity) to secondary distressed debt (would expect more illiquid control-the-process investments given the hurdle rate and fund size). They target 15-20% IRRs.
Helpful. Is it right to assume that this group or similar groups would rather take professionals with prior buyout experience than debt/across the capital structure types? With such a flexible mandate, wonder who the natural candidates are.
They primarily target top bucket analysts from RX and lev fin programs. From a skillset perspective, I would assume debt/across the cap stack investing experience is preferable to vanilla buyout experience, since the former makes up the largest portion of their book.
* Low teen returns (10 - 15%)
You said 15-20%, so which is it? I also think the distressed portion tends to be overblown - sure it may be part of their mandate but are they really doing that much of it?
Won’t speak for the poster but seems like they corrected their statement to low teens. Admittedly seems low in this environment given uni’s nowadays can achieve > 10% IRR’s depending on spread. Why do you think the distressed bucket is overblown?
Yup, amended to a 10-15% target per their 10-K, although the strategy has returned high teen gross returns and ~15% net since inception. Also, I'm inclined to agree that secondary distressed in not a large portion of what they, or any of their peers (BX TacOps, Sixth Street Strategic Capital, Brookfield Special Investments), do. Their bread and butter is making private structured equity investments in proprietary, off-the-run situations. Just thought I would mention HV's distressed allocation because it is a part of their mandate and may be a relevant consideration for anyone hoping to work there.
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