Apollo Global Management LLC (NYSE:APO) is continuing its crusade into the world of distressed European assets as the company seeks to make a return from the continent’s struggling financial system with its Apollo European Principle Finance Fund II.
The fund is set to concentrate on non-performing loans held in Europe, something the hedge fund believes are to be in ready supply in the coming years. Apollo estimates the existence of around $1 trillion worth of these assets currently available.
The fund is a successor to the Apollo European Principle Finance Fund I. That fund had realized $560 million by 30 June 2011. That return amounts to 58% of the invested capital, an impressive return in a risky arena. The original incarnation of the fund was founded in 2007.
Value Partners Asia ex-Japan Equity Fund has delivered a 60.7% return since its inception three years ago. In comparison, the MSCI All Counties Asia (ex-Japan) index has returned just 34% over the same period. The fund, which targets what it calls the best-in-class companies in "growth-like" areas of the market, such as information technology and Read More
The fund will target non performing loans in European markets and seek to acquire them at a discounted value. The fund will look mainly for loans that are backed by unsecured assets. That will allow it to follow a strategy like its predecessor that is hoped to maximize returns at the fund.
The fund will seek to return value in one of three ways. The sale of an asset will either be managed by Apollo’s team on behalf of the borrower, the asset will be repossessed by Apollo completely and sold or Apollo negotiates a repayment of the asset that is discounted. The Apollo team can certainly pick interesting areas of the macroeconomy to get involved in.
There are many funds and investment vehicles around the world who would not even consider getting involved in such a risky and unpredictable part of the world. Assets are assets however and discounted assets, even by way of credit, represent opportunities for anybody seeking undervalued investments.
Europe’s recovery is unlikely to jump into gear any time soon so Apollo expects the good times to keep rolling in the supply of non-performing loans. The firm will be looking at the United Kingdom, Italy, Germany, Spain, Portugal and Ireland as countries in which the non performing loans suit their standards.
There is no mention of riskier bets such as Greece though anything is possible. Apollo are proving that the international financial system is good at solving problems there is no solution to without the profit seeking function of private enterprise. Those loans would be left on balance sheets if not for innovative investors seeking returns.