- ARCM’s third distressed fund to invest mainly in credit
- Ercil’s ARCM has fully deployed $1.1 billion raised in 2013
Asia Research & Capital Management, started by Perry Capital’s former Asia head Alp Ercil, has raised $1.3 billion for its third fund, which invests in distressed assets globally with a focus on Asia, said a person with knowledge of the matter.
Ercil’s Hong Kong-based company completed capital raising for the ARCM Master Fund III last week, said the person, who asked not to be identified because the information is private. The new five-year pool, its largest, will primarily invest in publicly traded and private credit, the person added. Yusuf Haque, ARCM’s head of business development, declined to comment on the fundraising.
Distressed-debt funds are raising capital to snap up assets amid an uneven global economic recovery and a commodity price slump. Investors such as George Soros are predicting that the U.K.’s decision to exit the European Union will unleash a crisis in the financial markets. The vehicles are also finding opportunities as companies struggle to renew their debt terms after banks pulled back lending and curtailed proprietary trading that had been a source of financing.
The fundraising signals client appetite for the strategy at a time when investors are pulling capital from under-performing hedge funds. A net $15.1 billion was withdrawn from hedge funds in the first quarter this year, the highest capital outflows the industry has suffered since the second quarter of 2009, according to Chicago-based Hedge Fund Research Inc. Globally, 84 percent of investors in a Credit Suisse Group AG study released Tuesday said they pulled money from hedge funds in the first half of the year, with underperformance being the main driver of redemptions.
Distressed debt funds, by contrast, raised $4.3 billion this year through May 17, according to data provider Preqin. A HFRI index tracking funds focused on distressed and restructuring assets gained 3.2 percent in the first half this year, more than twice the pace of the global hedge fund index. These funds typically raise longer-term capital, and share some similarities with private equity funds.
ARCM sought capital for its newest pool after fully deploying the $1.1 billion investors pledged to ARCM Master Fund II, which finished fundraising in December 2013, said the person. Its maiden master fund, set up in 2012, generated double-digit returns, the person added. The HFRI distressed and restructuring index returned an annualized 3.7 percent since the beginning of 2012.
A significant portion of ARCM’s recent investments have been in the energy sector. ARCM also manages a $400 million dedicated energy fund that it started in January 2015, which is close to being fully invested, the person said. Ercil focused on energy and cyclical industries at Perry in addition to leading its Asia operations. He started his firm after a 10-year career at the New York-based hedge fund founded by Richard Perry.
The turmoil in the commodity market has inspired private-equity and hedge-fund managers to tap potential opportunities. John Paulson is raising a $1.5 billion private-equity debt fund that will invest in longer-term distressed debt in the metals and mining and energy sector. Energy was the second-most targeted sector by private equity debt funds, following financial companies, according to data compiled Bloomberg.