Special Situations Investing (BX, Apollo, Ares)

Can anyone share information on the following groups, how they stack up against each other, and which headhunters cover them?

Thank you!

 

Someone should compare w/ sixth street strategic capital or fundamental strategies as well.

 
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I think you'll want to draw a distinction between the groups that do distressed / special sits buyout, and the more classic, flexible distressed and special sits investors who focus more on minority interest investments. There are some funds that do both as well. As others have said, you're missing a few funds here in the broader space as well: oaktree (global ops continues to predominate, less so special sits), pimco, GS MBD, the other MF credit groups (carlyle, kkr, bain in particular), centerbridge and fortress, the agressive distressed HFs (angelo gordon, aurelius etc) and other distressed debt funds (e.g. Canyon, Bracebridge, Monarch, Goldentree, HPS) and the bigger multistrat HFs which do distressed and sometimes distressed buyout (e.g. Elliott, Baupost, Davidson Kempner). As you can probably tell, there is a pretty significant diffference between these types of funds. In terms of reputation, I'll just say that not all of the megafund platforms are particularly good imo. Apollo Hybrid Value is one of the smartest groups on the street without a doubt, and while it's lost a few steps, BX tacopps still has a good name and brand. Oaktree is still a really solid shop, with a ton of scale (raising a new fund now as well) and a great reputation and process. The rest of the MF groups I wouldn't personally place in the top tier of distressed or special sits groups. The credit funds are hit or miss, and few do any of the buyout stuff. The multistrats that do this stuff are really smart, creative, and aggressive but the seats are hard to come by, especially focusing on distressed. 

 
spurnup3754

Any chance you could just touch on why you think BX Tac Opps has lost a step? How would you compare it to the other options? Not number one?

I don't think it ever has been number one at least against the group the comment was commenting against (distressed and special sits).  GSO was a better distressed platform than Tac Opps at Blackstone until the distressed oriented capital was disbanded after Hovnanian / Codere.   

The legacy Tac Opps group has been continually cannibalized by new business launches at Blackstone (Blackstone Growth, Blackstone Infra) making their playing field smaller and smaller.   

 

What about Ares Special Opportunities and Sixth Street. How do they compare?

 

What about Ares Special Opportunities and Sixth Street. How do they compare?

There is something to be said about being the premier group at your firm which ASOF and Sixth Street generally are (so is Oaktree opportunities). Sixth street splits its liquid distressed and illiquid teams which is a point to note if you want to do classic distressed.

 

Since this is the PE forum I am leaving out the hedge fund types and sticking to the more traditional megafunds. Oaktree, Ares, Sixth Street, and Apollo are, in my opinion, the top players in the space. Obligatory some of this is secondhand and this info may be inaccurate or outdated. 

Ares just raised a monster $7 billion second fund and is run by Scott Graves, who ran credit at Oaktree. Extremely impressive returns, lean team, and room for growth within the franchise, particularly in light of struggles at Ares Corporate PE. All special sits work is done out of LA.

Oaktree is involved in everything, particularly on the distressed side, just as a function of their size. They seem to be pivoting away from distressed and more into broader special sits in their opportunities flagship fund. Their dedicated special sits fund is much smaller but has great returns. The brand name alone makes it a great place to be as a junior. All special sits work is done in NY and LA I believe.

Apollo Hybrid Value is limited by the existing proficiency of their PE and Credit groups in the space (Some pools of capital within Apollo Credit are extremely opportunistic) but is a great place to be because of Apollo’s hairy orientation. Anecdotally have also heard that associates work across funds sometimes. I would prefer Apollo to BX Tac  Opps, which is suffering from growth in other BX businesses as it is a catch-all for anything that does not fit neatly into other BX groups. I would also prefer Apollo to KKR special sits, which I believe is on its second or third iteration due to lackluster performance, and lackluster is being generous there. I believe the new PM KKR brought in is ex Oaktree and has good returns so far however. Hybrid value is based in NYC I believe.

Sixth Street was founded by the old GS SSG partners who spun out after 2008 and joined the TPG platform. Spun out from TPG a couple years back. Similar to Oaktree, they have very interesting deals and will invest in almost anything as a function of their size. They also invest across asset classes out of a monster flagship fund like Oaktree. I believe that their special sits team sits in SF.

I also want to highlight Bain Credit. Extremely sharp team split between industry coverage groups and a dedicated distressed and special situations group. Regardless of group, everyone works across the capital structure and asset classes on all sorts of opportunities. I’d still just put them half a notch below the above four. Bain Credit seems to operate semi-independently from Bain Capital due to their history as Sankaty Advisors (a credit hedge fund) which was acquired by Bain Capital several years back. Because of this, I have seen Bain Credit do LBOs and similar. Bain Credit is in Boston.

Very importantly as another poster mentioned, there is something to be said for working at the best group at your firm. At Blackstone and KKR, you will be second fiddle and that’s why I personally prefer the above five groups over them. With that being said, these are all industry leaders and an associate offer at any of them is something to be proud of.

 

It's not really about working at the best group at your firm. It's more about what deals you have access to which is impacted by what group you are at. That statement was primarily aimed at BX Tac Opps and not really KKR. For example, originally, BX Tac Opps was a catch-all for everything that did not fit into BX's other groups. However, as Infra and Growth were added to the BX platform and other BX groups grew in size, the Tac Opps opportunity set decreased considerably.

This is less the case for KKR as they relaunched and rebranded a Dislocation Opportunities fund during Covid. However, they are really not on the same level as they manage a fraction of what every other firm in this thread manages in their special sits pool of capital. The new group is also not very opportunistic and is much less risktaking, likely due to previous failures with the old KKR SSG.

As to why I prefer Bain Credit and Apollo. Like I said above, Bain Credit seems, from the outside, to operate in an independent manner, likely due to its roots as Sankaty Advisors. I don't think they answer to Bain Capital PE or RE when chasing after deals and such, and the structure of the teams and work there is much more opportunistic, whether you are on an industry coverage group or the distressed team. If you join BX Tac Opps, you have to navigate between PE, Growth, Infra, GSO, RE, etc, and if you join GSO, you are never touching anything opportunistic. All Bain Credit associates, regardless of team, get to be opportunistic.

For Apollo, quite frankly, I just have a lot of respect for the people there and the deals that they have done, much more in recent times than I do for tac opps. They likely suffer from the same issues that BX does and I am just favoring them with personal bias. The numbers do seem to back them up however. Blackstone Tac Opps funds have been shrinking and Apollo HV is growing. If you just look at some of the deals that HV has done, they shows Apollo's ability and willingness to get involved in hairy situations that make for great special sits investments that perhaps other funds are unwilling to do.

This is really just splitting hairs and if you get a Blackstone tac opps offer, take it. If you like the BX team better than Apollo, take BX.

 
Funniest

God shut up. This IS the exit opp. You don't go into something like this thinking about how it sets you up for what's next. If exit ops are something you care about then you're likely someone who needs them because they'll wash out. Either you make it and stay (maybe moving between firms at the same level or getting a required MBA), or you wash out and keep moving downstream until you succeed or you're out of the industry altogether. 

Like literally, by the time you have apollo + IB on your resume, what do you think exits are? Nearly anything within finance will be open to you, and just about any non-technical role outside of it. Theres your answer. Now go away and think before you ask any more obvious questions

 

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