According to two sources familiar with the matter, Bain Capital is in the process of raising $4 billion for a new “special situations fund” that will target distressed investments across various asset classes globally. The fundraising process started at the beginning of this year, and the company has already secured $2 billion for the fund. Bain Capital aims to finalize the fund by the end of this year.
While distressed investing has become more popular over the last few years, deal-making involving buyout firms has been declining due to the current economic climate. However, distressed funds have accelerated their fundraising efforts in anticipation of an economic downturn.
The rise of default rates, inflation, and a regional banking crisis has created opportunities for distressed investors. Other investors, including Oaktree Capital Management and MidOcean Partners, have been marketing special situations funds since last year, targeting troubled industries and companies with financial difficulties. In April, Diameter Capital closed a $2.2 billion special situations debt fund, which was the largest of its kind this year, according to data provider Prequin.
As part of its new strategy, Bain Capital has adopted a more flexible approach to deploying capital and is investing in a range of asset classes, such as equity, distressed assets, loan portfolios, corporate investments, and real estate.
Bain Capital’s special situations strategy was previously part of its credit business, but it is now a standalone business with an independent team. Globally, Bain Capital has $16 billion of assets under management as part of its special situations strategy. 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.
In 2020, Bain Capital established a previous global fund, securing $3.2 billion in commitments, which was previously called Bain Capital Distressed and Special Situations Fund. Last year, the company also closed a $2 billion special situations fund for Asia Pacific, which included a focus on real estate. According to Reuters, Bain Capital is also nearing the final close of its fifth and largest Asia-focused fund after having raised around $6 billion from global investors. The firm declined to comment on the matter.