Current Thoughts on Opportunistic/Special Sits Groups (Oaktree Special Sits, BX TacOpps, Apollo Hybrid Value Fund, Brookfield Special Investments, KKR Special Sits)
Starting full-time in a restructuring group this summer and interested in the above groups - does anyone have updated information on returns, culture, and investments made by these groups? And how do they compare to the buyout groups at these funds in terms of exits, hours, etc.?
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Bump - would add Sixth Street here too
Are you trying to do distressed leaning special situations or catch-all groups? I gave some data but to be honest there is alot out there so would take a look around the forum - the HF forum may have more data than the PE forum for this one.
Unless you are purely focused on New York, you are missing three of the more interesting / aggressive groups in my opinion which I will include at the end. There are a ton of other funds / groups that could be included as well that do privates in distressed (AG, Centerbridge, Bain distressed, OHA, the APO spinouts, Clearlake, GSAM, Blackrock opportunistic, the Minnesota funds, + 30 hedge funds). If you are trying to do distressed turnaround private equity should be looking at KPS and SVP Global for larger check sizes.
Lifestyle can be tough at alot of distressed seats, due to the nature of the work. Exit opps are going to be different than buyout teams. They are largely going to be focused on credit / distressed / event-driven hedge funds rather than Tiger cubs. Think Elliott / Silverpoint / Baupost (which are arguably not the most desirable seats) rather than Tiger / D1 / insert everyone's favorite tech firm.
- Oaktree Special Sits -> Good seat, but isn't the flagship fund at the firm. Focused more on middle market, distressed for control situations, historically good returns though buoyed by market beta bets.
- Tac Opps -> Fund size dropped because BX has cannibalized its Tac Opps business with new business launches. Does not really play in distressed (there are GSO funds (Credit Opps) + that BAAM fund that do that to an extent). Tac Opps has had some sick exits, but this was also when they used to have growth in their mandate before Korngold came over and launched BX Growth.
- Apollo Hybrid Value: This is an interesting seat that has done pretty well with mezzanine type investments on an IRR basis through COVID. I'm not sure what the interplay is between John Zito's fund / the Accord vehicles and the mainline buyout flagship which also does some distressed for control, I'm not sure of what seat is best / how allocation works. My understanding is that Hybrid Value is more of a mezzanine and structured equity fund, that is less focused on distressed opportunities but could be wrong there. They did not hit their hard cap on their latest vehicle.
- Brookfield Special Investments: New group -> much less brand name than the others but have a decent amount of money. You are largely going to be looking at hard asset type investments due to Brookfield's legacy / investment focus throughout the firm. Less focused on distressed and more on catch-all type investments.
- KKR Special Situations: Franchise kind of relaunched during COVID after having some pretty lack-luster performance and has done well thus far. Don't know a ton here to be honest.
- Sixth Street since they were mentioned above: They have two groups -> opportunities and fundamental strategies. Opportunities does more distressed for control or situations where Sixth Street will have significant influence while fundamental strategies focuses on large cap distressed.
Three more interesting vehicles but all LA based:
- Ares Special Opportunities: Absolutely crushing it. Ares picked up the heir apparent at Oaktree (Scott Graves) and loaded up with a couple of other hungry seniors who are very aggressive and are doing extremely well with their vehicle. They will hit their hard cap on their latest vehicle which will be larger than any of the latest vehicles of the aforementioned firms.
- Oaktree Opportunities: Flagship distressed / special situations vehicle at Oaktree. More focused on liquid situations and less for control. Leanly staffed and your PM is Bruce Karsh. I'd rather have this seat than one on their special situations team.
- PIMCO: I honestly wouldn't have included them here until this Incora transaction / another couple unannounced situations came across my desk. They picked up the former head of SS at KKR and a couple of guys from Elliott / other funds. Basically they are using their massive size to crush other players and have insane market data due to being involved in basically every credit.
Good post but slightly off on Sixth Street - Their opportunistic core group got split into strategic capital and fundamental strategies. Think of them as Strategic Capital for private transactions and Fundamental Strategies for public markets investing distressed/stressed/value equities. Strategic Capital also does control/minority equity and interesting structured transactions that fall outside their Growth and Specialty Lending strategies. There isn't a lot of distressed going on.
Thanks you are probably right there - I had understood the non-fundamental strategies team to include middle-market distressed for control, but this is probably off as it makes more sense that all public market distressed is under one banner on a skillset basis.
I only talked to guys on their fundamental strats team and the post was off what I remembered from their delineation of groups.
Thank you for the detailed reply - this is incredibly helpful. Have my eye on distressed-leaning groups but given the environment it seems like a better career move to start off at one of the catch all groups. Wasn't aware PIMCO was beefing up their distressed/SS strategy - I imagine they're killing it given their platform.
Probably one of the most helpful comments I've seen describing distressed groups. Do you think you could exit into one of these shops from a lower-tier RX IB (JEF/Baird/Piper)? Or do you think you'd likely have to lateral?
Its doable but not super high likelihood for these specific groups mentioned. Quite a few of these groups will have people from lev fin / top coverage / M&A in their processes as well.
I've seen quite a few 1 year -> better RX seat for 1 year -> top fund. Other one I see on occasion is -> RX IB Jeff -> middle market distressed fund -> top fund.
Exception is if you work with a fund and you impress as an analyst, have seen some pretty offbeat profiles at good shops where it was pretty clear something like that happened. Fun part of more Tier 2 groups is that you are always working with creditor groups so you could do that a bit easier.
Out of the three you listed, I think Jefferies and Piper will place significantly better than Baird. Baird is a startup, while Jefferies has a good team (ex - PJT RSSG guy / Evercore guy recently in, and Piper has the whole TRS team (Rothschild spinout when they were good) plus an ex-PJT RSSG partner so getting referrals to funds won't be super difficult. Baird just launched so probably going to be reluctant to give referrals they only really have one guy, and unclear what pull he has (he has never been the guy when we worked with Guggenheim) and we worked with the non-Millstein team a bunch.
This is very helpful. Any particular Apollo spinouts on your mind?
TBH all are pretty sweaty but pay super well. Four main ones I can think of are Searchlight, Gamut, HillPath, and Nexus. All have buckets for distressed for control / special situations I never really considered them, as I never really wanted to do distressed for control.
any thoughts/comments on Bain Capital's Distressed & Special Situations team? I'm originally from Boston and would love to hear how they stack up to the firms you mentioned. Looks like the 2019 fund was $3+ billion and they have Asia and Europe-specific funds so seems like they're deploying ~$5 billion of capital. I'm surprised there isn't any coverage of the group on this forum.
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you're actually wrong. Think before you post.
Ares 2020 vintage was $2 billion target with $3.5 billion hard cap (which they reached). 2022 vintage is $4 billion target with $6 billion hard cap (which they will probably reach)
Have any thoughts on Tennenbaum Special Sits (BlackRock)?
Seconding PIMCO’s Special Sits becoming a larger player in the game here. They’re doing very interesting stuff, more mezzanine and preferred growth style than distressed, into music royalties, litigation firms, EV companies, and anything they can get their hands on. Makes sense as alts are more important given low yields.
As to OP’s question.. special sits investing is one of the most respected and well-paid exit opps. Your day to day varies by industries and actual underwriting of a deal so you can spin it however you want IMO.
What kind of returns to special sits funds aim for? Some Oaktree stuff is sub 10% but given how hairy their deals are id expect like 20% plus.
Why does everyone talk so well about oak tree? They have had abysmal returns and underperformed in every way possible. Really don’t think they’re special
interested as well. i'm guessing it's because the funds are big and howard marks / bruce karsh are OGs in the game. but aside from those points, i don't see what's so special about them (talking about the distressed / opportunity funds, not the special sits funds)
The global opps flagship fund has had 20% unlevered IRR out of primarily non controlling credit investments. It’s the smaller special sits buyout fund they have that’s been performing poorly
Apollo Hybrid Value have also been doing GP-led secondary transactions in totally non-distressed businesses but where there is structure/seniority.
They lead the ACON new era deal and they were a total pain in the ass. Took 6 months with docs and everyone working with them hated them.
Any color out there on Blackstone Capital Opportunities fund (Opportunistic/Mezzanine fund)?
Someone above mentioned GSAM and I wanted to add some color on it. GSAM investing roles fall mostly into Growth Equity, Private Credit Group, Hybrid Capital, and Specialty Lending Group (These 4 used to be called SSG if I remember correctly). Distressed/Opportunistic investment occurs mostly in SLG and HybridCap, SLG focuses on middle-market credit investing and some equity investing through warrants from what I have heard. Heard some rumors that although they have historically invested using GS balance sheet they are aiming to raise their first fund (not sure of $ value). HybridCap is more of a catch all opportunity, invests in credit+equity in the MM and UMM space. Pretty lean team from what I have heard. HybridCap team mostly works out of NY and I think SLG is Dallas, Atlanta, NY.
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Is it possible to get into opportunistic credit funds say at the Sr Associate level if you're coming in from an Associate role at another MF Credit platform that invests across the cap structure (senior, mezz, pref, etc.) but has a separate team for special sits?
So think an associate from Ares, KKR, Crescent, HPS, etc. (all of which have separate teams for special sits) that wants to lateral into one of 2 firms: a) Bain Cap Credit where you are exposed to both traditional L+600 lending and special sits, AND/OR, b) specific opportunistic funds like BX Tac Ops, Apollo Hybrid, Oaktree Opportunistic Cred, Carlyle Opportunistic Cred, etc.
Thanks!
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