Angelo Gordon corrals $1.9bn in first close for tenth fund – Exclusive

One limited partner considers Fund X to be value-add, although it classified the vehicle’s predecessor as opportunistic.

Angelo Gordon has raised $1.9 billion for its tenth fund, which has lower return targets than the predecessor vehicle, PERE has learned.

The New York-based firm declined to comment, but PERE understands the firm has a $2.7 billion target for AG Realty Fund X.

Investors include the Pennsylvania Public School Employees’ Retirement System, which allocated $150 million; Texas Permanent School Fund, which earmarked $75 million; and Employees’ Retirement System of the State of Hawaii, which committed $50 million, according to PERE data.

PSERS considers Fund X to be a value-add fund, although it classified Fund IX as an opportunistic fund, according to the pension’s documents on the two vehicles. The firm is targeting a 12-13 percent net internal rate of return and a 16-17 percent gross IRR for Fund X, according to an April document from the pension. Angelo Gordon’s previous vehicle targeted 20 percent gross returns, according to meeting materials from the Contra Costa County Employees’ Retirement Association. Fund IX, a 2016 vintage that closed on $1.33 billion, generated a 9.6 percent net IRR as of December 31, according to meeting minutes from the Minnesota State Board of Investment, which also committed an unspecified amount to Fund X.

Despite the lower return targets compared to the predecessor vehicle, Fund X is a continuation of the series’ investment strategy, which focuses on investing in sub-performing assets across property types in major markets. The fund will invest primarily in the US and will co-invest up to 20 percent of its capital alongside the firm’s Europe and Asia funds, according to meeting materials from PSERS.

“The next four years are likely to be an attractive time to pursue value-add real estate investments,” PSERS said in an April document, citing the US’s improving GDP, employment growth, household formation and consumer spending.

Fund X has a three- to six-year hold period. Despite the late cycle, PSERS noted that Angelo Gordon will be acquiring attractive assets across the US – including distressed retail in Chicago and workforce housing in Philadelphia – for less than 55 percent of replacement cost.

The firm is not using a US placement agent for Fund X, according to PSERS. Santiago, Chile-based Ameris Capital has been tapped to raise capital from investors in Chile, Columbia and Peru.

In May, Angelo Gordon closed its second European fund, AG Europe Realty Fund II, on $843 million – $100 million over target. The firm is also in the market with AG Asia Realty Fund IV, according to PERE data.

Angelo Gordon manages about $28 billion across strategies.