Would this affect fund raising?
I work for a fund with decent name recognition but has not performed super well. Fund 1 was 10% gross irr (target was 15-20%) due to one large loss. Fund 2 is shaking out to be 8% gross irr (same target) due to one large loss. From fund 1 to fund 2, Aum was already 30% smaller. How might this return impact the next fundraise in your experience?
Impossible to predict but probably not great prospects. How concentrated is portfolio? One large loss killing returns.
Sounds like either the firm is stretching because of a dearth of opps or bad at actually managing through “special situations,” structuring poorly, etc.
Your fund is putting up returns in line with vanilla, hyper diversified direct lending vehicles with significantly more risk.
.
How big is the fund in terms of AUM? The special sits credit funds have done decently well in terms of fundraising over the last 2 years, although that view is informed by players >5B AUM.
Swines comment is correct for a lot of special sits credit shops right now. Essentially, where is the additional spread for the risk you’re taking.
Looking at pitch book (not gospel I know) lots of these firms are in the 9-12% range in funds that are 2-3 years old. That does seem like a great risk reward calc vs regular way private credit.
But some of these funds may be able to raise bigger subsequent funds based on the narrative that private credit is crowdedand they are ‘differentiated’. Overall, very few funds have shown that since 2020.
That’s a stream of consciousness. But punchline is, those returns are not great….. but…. Peers are in similar bucket and they seem to be able to fundraise. Although your firm did see a downsize from fund to fund. Which isn’t a good fact pattern.
.
Is it a standalone strategy or part of a bigger manager. 3Bn fundraise for first time fund is pretty unreal. I would assume this sits within a bigger manager? That changes some of the dynamics here, for better and worse
.
Were any of the blow ups First Brands or Saks? We've already started hearing about investors especially pissed at performance related to those two specifically which will definitely hurt fundraising.
.
Message me
What fund is this?
I work at a large LP. In short yes it will impact fundraising. It’s incredibly hard to present to IC a consistently underperforming fund. If it were only 1 vintage I’d say there’s a chance, but with both behind target, that’s hard. Especially since 2nd fund is 2023 with already a large loss. The rest of the portfolio will be put under scrutiny. My genuine advice: look around.
Sed hic itaque ipsum et qui libero nihil. Reiciendis quod pariatur excepturi illum consequatur. Unde assumenda illum dignissimos quae minima culpa. In reiciendis neque dicta nihil veritatis saepe nulla. Omnis fugiat quaerat vel voluptatem quia fugiat voluptatibus. A ut veritatis et ut distinctio.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...