Pacific Investment Management Co. has gathered $3.5 billion to buy distressed assets from U.S. and European banks, according to a person familiar with the matter.
Bravo II Fund, short for Bank Recapitalization and Value Opportunities, expects to have more than $4 billion when it finishes raising money in February, after amassing $2.35 billion for predecessor Bravo I, according to two people with knowledge of the capital raising, who asked not to be identified because the details are private. Like the predecessor, Bravo II will focus on residential and commercial real estate-related assets.
Pimco has been transitioning from U.S.-oriented bond firm to diversified asset manager for at least the past five years, with the addition of alternative funds, exchange-traded funds and equity products. The $250 billion Pimco Total Return Fund, run by co-founder and co-chief investment officer Bill Gross, had five straight months of withdrawals starting in May as investors fled bonds in anticipation of the end of the Federal Reserve’s unprecedented asset purchases.
Bravo II will have a similar strategy to Bravo I, which is closed to new investors and returned an annual average of 34 percent as of Jan. 31 since inception about three years ago, according to a marketing document included in the agenda for the April 4 meeting of the Arkansas Local Police & Fire Retirement System. The fund is targeting an annualized return of as much as 20 percent net of fees and carried interest.
The lead portfolio managers on the fund are Dan Ivascyn and Josh Anderson, who also run Bravo I. Michael Reid, a spokesman for Newport Beach, California-based Pimco, declined to comment on the funds.
Bravo II will take advantage of the $10 trillion in residential credit and $3 trillion of commercial credit outstanding, the document from the Arkansas pension system said. Pimco expects more than $2 trillion in holdings to be sold by U.S. and European banks as a result of global deleveraging, with European banks representing the majority of troubled asset sales over the next three years. European banks have sold assets and hoarded earnings to increase a measure of financial strength known as the Basel III capital ratio, which applies weightings based on risk.
Commercial and residential credit may each comprise 40 percent of the new fund and 20 percent could be dedicated to special situations or other asset-backed securities. The minimum investment is $5 million and the fund will have a five-year term with two possible one-and-a-half year extensions, according to the document.
Pimco is a unit of Munich-based insurer Allianz SE. It had $25.8 billion in alternative strategies, including $12.3 billion in hedge funds and $13.5 billion in cumulative capital commitments to opportunistic funds, as of May 31, according to the firm’s website. Pimco had $1.97 trillion in assets under management as of June 30.