Exclusive-Bain Capital seeks to raise $4 billion for new global special situations fund – sources

By Kane Wu and Anirban Sen

HONG KONG/NEW YORK (Reuters) – Bain Capital is seeking to raise $4 billion for a new global “special situations fund” as the U.S. firm sees an opportunity to snap up distressed and equity investments, two people familiar with the matter said.

Bain Capital kicked off the fundraising at the start of the year and has already raised about $2 billion for the new fund, said the sources, who requested anonymity as these discussions are confidential.

The firm is targeting a final close of the fund by the end of the year, the sources added.

Bain Capital declined to comment.

In 2020, Bain Capital set up a previous global fund after securing $3.2 billion in commitments. The program was previously called Bain Capital Distressed and Special Situations Fund and used to sit within Bain Capital’s credit business.

Bain Capital’s special situations strategy is now a standalone business, after being carved out with an independent team outside the umbrella of the credit unit.

As part of the strategy, Bain Capital has adopted more flexibility on deploying capital and is investing in asset classes including equity, distressed assets, loan portfolios, corporate investments, and real estate.

While dealmaking involving buyout firms has slumped this year due to a challenging environment, distressed funds have accelerated fundraising efforts over the past few years in anticipation of a downturn following a prolonged period of economic expansion.

Global buyout deals totaled $139 billion this year, down 62% from the same period a year ago, Dealogic data showed. Since the beginning of 2020, distressed funds have raised about $115 billion globally, according to data from Preqin.

DISTRESSED INVESTMENTS

A combination of rising interest rates, inflation and a regional banking crisis is driving up default rates, pressuring margins, and creating a liquidity crunch in financial services, thus providing opportunities for distressed investors.

A string of investors, including Oaktree Capital Management and MidOcean Partners, have been marketing new special situations funds since last year, targeting troubled industries and credit-strained companies, according to PitchBook.

In April, Diameter Capital closed a $2.2 billion special situations debt fund, which data provider Preqin at the time said was the largest of its kind so far this year.

Globally, Bain Capital’s special situations strategy has $16 billion of assets under management.

Since the launch of the strategy in 2002, Bain Capital Special Situations has invested over $28 billion in more than 850 deals across North America, Europe, and Asia Pacific, according to its website.

Last year, Bain Capital closed a $2 billion special situations fund for Asia Pacific to cover a range of asset types, which included a focus on real estate.

Reuters reported on Friday that Bain Capital is also nearing the final close of its fifth and biggest Asia-focused fund after having raised around $6 billion from global investors.