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Strategic Value Partners Leads Most Distressed Funds

The low-profile firm also recently raised $3 billion for a new private equity fund.

  • By Stephen Taub

Strategic Value Partners is on a roll.

The distressed debt specialist’s hedge fund, Strategic Value Restructuring Fund, is up 7.72 percent for the year through August 3 after posting a gain of more than 8 percent last year and 21.66 percent in 2016, according to a document from investment bank HSBC that tracks hedge fund performance. 

This is better than every other firm with a similar strategy that is included in the HSBC document. That performance helped the firm attract new investors, with Strategic Value raising nearly $3 billion earlier this year.

Altogether, it manages $8.5 billion in a hedge fund as well as several private equity vehicles. The firm, which maintains a relatively low profile, declined to comment.

Founded in 2001 by Victor Khosla, it focuses on distressed, deep-value situations, often taking an active role in transactions, either during the financial restructuring process or by sitting on a creditors committee, according to its website. It specializes in “a select number of industries,” including infrastructure, power, and industrials.

For example, back in June SVP made more than $1.1 billion for its funds and investors when Cory Riverside Energy, a U.K. energy-from-waste company, was acquired by a group of investors, according to a person familiar with Strategic Value's investment activities.

The firm initially invested in Cory in 2014. The investment firm is credited with leading a restructuring the following year, bringing in a new board of directors and management team, among other initiatives.

SVP has also benefitted from its investment in shale-oil producer Penn Virginia. About four weeks ago, the company announced that its board is looking at a number of strategic alternatives, including an outright sale, merger, or other business combination.

At the end of June, Strategic Value's investment in Penn Virginia’s stock was valued at about $130 million, according to its recently filed 13F document. The shares have virtually doubled this year but are down about 9 percent since the July 23 announcement.

As of the end of June, Strategic Value only held positions in six common stocks, one of which is an exchange traded fund (ETF), according to its latest 13F filing.

Its largest public equity position is a stake in Genco Shipping & Trading, valued at around $158 million. The company transports iron ore, coal, grain, steel products, and other dry bulk cargoes. The stock is down 3 percent for the year and 34 percent from its early June high.

In May, Strategic Value raised $2.85 billion for its Strategic Value Special Situations Fund IV. It had targeted $2.1 billion. The fundraising amount was also nearly double the $1.56 billion it raised for SVSS III, according to the firm.

Its three existing funds have each generated internal rates of return (IRR) in the mid-15 percent range, according to the firm. 

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