Apollo Global Management LLC (APO), the private-equity firm run by Leon Black, is considering seeking approval to raise the limit on its next flagship fund after investors expressed interest in putting in as much as $20 billion, according to two people with knowledge of the matter.
The firm has talked with investors about getting permission to increase the $15 billion limit on Apollo Investment Fund VIII LP, said the people, who asked not to be identified because the deliberations are private. The New York-based firm may leave the maximum size of the fund unchanged, they said.
Apollo is on track to amass the largest buyout fund since Blackstone Group LP raised $21.7 billion in 2007 for the industry’s biggest pool. Boosted by a wave of profitable sales, Apollo is one of the few firms that is raising a larger fund than before the 2007-2009 financial crisis, which triggered a credit squeeze and hampered deal-making.
Even at $15 billion, Apollo will have slightly exceeded the size of its prior fund, which gathered $14.7 billion in 2008. Investors in private-equity funds, called limited partners, typically prefer firms to limit their offerings at a certain size as they fear that performance might suffer if their funds become too large.
Charles Zehren, a spokesman for Apollo at Rubenstein Associates, declined to comment on the fundraising.
The performance of the firm’s 2008 fund has been buoyed by Apollo’s most profitable investment, Rotterdam-based LyondellBasell Industries NV (LYB), whose debt the firm started accumulating in 2008. The world’s largest manufacturer of polypropylene filed for bankruptcy in 2009, and as the company recovered, Apollo swapped its debt for equity and bought more shares. Apollo began selling its stake in September of last year and had generated $5.5 billion on top of $1.5 billion received in dividends, on a $2 billion investment as of June.
During the second quarter, Apollo exited three companies, sold shares in five more and took three public, making $7 billion in proceeds and distributing $5.7 billion to investors.
The firm continued to hand back money in the third quarter through sales of stakes in LyondellBasell, real estate brokerage Realogy Holdings Corp. and packaging company Berry Plastics Group Inc. The firm’s 2008 fund was generating a 28 percent net internal rate of return as of June 30, according to the firm’s earnings report for the second quarter.
Apollo last year set a $12 billion target for the new fund. That differs from the limit, known as a hard cap, which is the maximum amount a fund can raise if demand exceeds the target. While Apollo has not completed raising the fund, there are investors who have committed money who need to approve a change to the size of the pool.
The firm told prospective investors in August their stakes in the fund might get scaled back if they wait too long to commit, people familiar with the matter said at the time.
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