Class of 2008 works on next wave of opportunity funds

Rise in distressed deals prompts managers’ return to fund raising trail

Managers of 2007/2008 vintage pan-European opportunity funds are talking with investors about raising follow-on vehicles.

Area Property Partners, Orion Capital Managers, Resolution Property and Catalyst Capital  all plan to raise equity for new opportunity funds this year.

Founding partner Peter Kasch said Catalyst Capital’s first pan-European fund, which closed four years ago, has “run out of money and we are in talks with investors about raising another”.

Catalyst extended the fund’s investment period from last October to this June, when it expects to have invested €230m.

Resolution Property is believed to be about to appoint a placement agent to work on its next fund. The group, headed by Robert Laurence, raised €808m from US and European investors in late 2007.

Area and Orion are reported to be talking to existing investors about raising funds of similar sizes to their current vehicles.

The five-year gap since most managers last raised capital reflects the slow pace of investing  from 2008 to 2010. But deal flows picked up last year as markets became more stressed and banks released more assets.

One London-based placement agent said: “No one knows how much capital is out there, but it may be more than people think.”

He added that managers may  be able to promise 20% returns again “as banks will push out assets for the lifetime of this next generation of funds”.

According to one opportunity fund manager: “There are more deals, but they take longer as sellers are losing money, plus the holding periods will be longer.

“There is less debt now than in 2009, so while fund sizes may be similar, the gross amount of assets they can buy may be less. If you can’t predict gearing, it is harder to predict your return.”

He said investors are either waiting on the sidelines, or “believe that given all that’s gone on, there are opportunities. However, I think the average investment size will be smaller, with a few exceptions.”

MGPA’s fourth European fund has already reached a €100m first closing, while Tristan Capital and Perella Weinberg are close to final closings on new funds.