(Bloomberg) -- Sixth Street Partners plans to activate a $3.1 billion fund raised on the contingency that it would only be tapped during an economic or market dislocation, according to people with knowledge of the matter and investor correspondence seen by Bloomberg.
The firm, founded by former Goldman Sachs Group Inc. partner Alan Waxman and nine others, advised investors that it plans to activate the vehicle raised mostly in 2018 known as the TAO Contingent Fund, on April 1. Once that occurs, Sixth Street will have more than $10 billion of dry powder to invest, said one of the people, who asked not to be identified because the matter is private.
“We believe now is exactly the type of market environment for which we collectively designed the vehicle,” Sixth Street wrote. A representative for the firm declined to comment.
Waxman, at a private conference in December, discussed Sixth Street’s adoption of a defensive position due to the late-stage nature of the cycle, which the firm reiterated in last week’s investor update.
“Although we were in hindsight early, getting defensive when we did was the prudent measure,” Sixth Street wrote. “Though we had no idea something terrible like Covid‐19 would occur, our belief for some time has been that an exogenous shock could expose the vulnerabilities of irrational credit market disciplines and asset‐liability mismatches in the corporate bond markets.”
The firm, which has a flexible mandate but is likely to skew toward credit-oriented investments, may seek out individual bets that exceed $1 billion, according to the person familiar and investor correspondence.
As the impact of the coronavirus hurts industries across the globe, Sixth Street said demands from companies needing assistance are “rapidly approaching” what its principals observed in 2008.
“During periods like this, companies and management teams wielding the power of liquidity can validate their staying power and come out the other side in a position of strength,” the firm said. “We are seeing large‐scale, multinational companies with high‐quality business models and assets seeking solutions to allow them to get through this difficult period.”
Backers of the contingent fund include the Texas Municipal Retirement System, the Oregon Investment Council and the State Teachers Retirement System of Ohio, according to filings.
Sixth Street, which has $34 billion under management, has eight core areas of focus including growth investing, direct lending, par liquid credit, infrastructure, agriculture and special situations.
It’s not the only alternative investment firm to access contingent capital amid the market upheaval caused by the pandemic. Centerbridge Partners last week activated a $3 billion pool of capital for opportunistic credit bets.
(Updates with firm declining comment in third paragraph.)
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