(Bloomberg) -- Credit investment firm Diameter Capital Partners has raised $4.5 billion for its latest fund aiming to seize on market dislocations.
The $25 billion firm run by Scott Goodwin and Jonathan Lewinsohn said in a statement that the haul exceeded its target for the third fund in its dislocation series. The fund has already gained 14.8% on the capital it has put to work this year, a person with knowledge of the matter said.
Dislocation funds seek gains by snapping up beat-up assets of a company whose debt prices have slumped amid market turmoil or because of industry challenges. The fund will lock up money for longer periods than traditional hedge funds and focus on stressed and distressed investments.
Diameter said in an investor letter last month that it sees trends across multiple sectors like housing and artificial intelligence-related debt issuance where distressed opportunities could emerge.
Founded as a credit hedge fund in 2017, Diameter raised its first dislocation fund in 2020, just as the Covid pandemic roiled markets. Its $25 billion in assets are spread across its flagship hedge fund, the dislocation strategies and various structured credit vehicles.
Diameter plans to raise money for its first captive CLO equity fund early next year. Such private funds are overseen by collateralized loan obligation managers to invest in the equity pieces of the CLOs they roll out.
Lewinsohn and Goodwin are also raising their second direct lending fund after winning about $1.7 billion for their debut private credit vehicle last year, the person said, asking not to be identified as the information isn't public.
Since April, the firm's $2.2 billion DDF II, the last dislocation fund it raised, has been focused on exiting its portfolio of investments to return capital to its backers.
The firm is planning a new strategy for complex and often illiquid capital solutions, and said one area where that approach could be especially useful is in preferred equity investments, according to the letter to investors.
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