Global private equity and venture capital news and research

Apollo ups portfolio company fees for latest buyout vehicle

28 Nov 2012

Buyout giant Apollo Global Management plans to channel higher fees levied on its portfolio companies back to investors in its latest private equity fund, it is understood.

The firm plans to pass 80 per cent of the fees to LPs in its $12bn-targeting Apollo Investment Fund VIII according to Bloomberg, compared to 68 per cent for its previous buyout vehicle.

Apollo Global Management is thought to have started fundraising for its latest buyout vehicle – the joint-largest currently in the market alongside Warburg Pincus.

Its previous $14.7bn buyout vehicle raised in 2008 has posted a 35 per cent gross IRR to date, while its $10bn 2006 predecessor is running a gross IRR of nine per cent.

Bloomberg said the latest fund would keep a 1.5 per cent management fee on the first $7bn of commitments and one per cent on pledges beyond that point, adding there would be fee breaks for larger commitments.

LPs parting with $250m would get a 10 basis point per year reduction in management fee, while those committing $500m will receive a 20 basis point annual reduction.

It added the fund will have a 20 per cent carried interest on an eight per cent preferred return, the same as Fund VII.

Earlier this month the firm said its private equity funds had seen a slight rise in performance in the third quarter amid a stock market rally which has boosted the portfolios of many buyout houses.

The combined fair value of Apollo’s private equity funds rose eight per cent during the quarter and was 55 per cent above cost at the time of reporting.

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