Davidson Kempner seeks up to $1bn for European NPLs

New York-based hedge fund Davidson Kempner is back in the market raising its latest distressed debt fund, which will focus on European loan portfolios including real estate.

New York-based hedge fund Davidson Kempner is back in the market raising its latest distressed debt fund, which will focus on European loan portfolios including real estate.

The firm is looking to raise between $750 million and $1 billion (€687 million to €916 million) for its Special Opportunities Fund IV, which carries nearly identical terms to its predecessor, according to Real Estate Capital’s sister publication, Private Debt Investor.

The fund will target a net internal rate of return of 10-14 percent, according to documents from the San Diego City Employees’ Retirement Association. SDCERA may commit $50 million to the fund, the same amount the Southern California-based pension fund allocated to SOF III.

A representative for the firm was not immediately available for comment.

The pool of capital will target eight to 10 deals, making it a concentrated vehicle, worth between $200 million and $500 million. Davidson Kempner’s hold size would be between $75 million to $150 million.

While the fund may invest in North America, Europe, Asia and Australia, SOF IV is expected to focus on European bank portfolios, the documents show. In some of the deals, Davidson Kempner might be the lone investor, and the firm would focus on investing in senior secured debt. There would be an emphasis on real estate and other loans backed by assets.

The vehicle charges a 0.5 percent management fee and carried interest of 15 percent with an 8 percent hurdle rate. SOF III carried the same fee structure, and it also sought a 10-14 percent net IRR.

Separate SDCERA documents show Davidson Kempner raised $1.1 billion for SOF III. Aside from SDCERA, limited partners in SOF III include a $75 million commitment from the Sonoma County Employees’ Retirement Association and $50 million from the Texas County and District Retirement System, according to PDI data.

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