Milken family office alumni raise $4bn to target private capital upheaval

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Silver Rock Capital Partners, an investment firm born out of Michael Milken’s family office, has raised its largest-ever credit fund at a time when private capital has come under pressure.

The firm, which began taking in outside capital in 2016, has raised more than $4bn from endowments, sovereign wealth funds and family offices for an investment strategy looking to lend to challenged companies in acute need of financing.

Run by Vinay Kumar, who previously worked at Goldman Sachs, Silver Rock is positioning itself to take advantage of the potential for more pain across the private capital industry. As of December, the firm had just over $7bn of assets under management.

It is part of a crop of large fundraisings in recent weeks from managers including Ares and Blackstone that are looking to provide loans to private equity-owned businesses that are wrestling with high interest rates and a slowing economic backdrop.

“The era of buying something, levering it up, then taking dividends and selling it at an elevated multiple is over,” Kumar said in an interview with the FT. “That financing era, when we had zero interest rates after the financial crisis, is largely done with.”

Milken is known on Wall Street as the “junk bond king” for his role in bringing riskier non-investment-grade debt into the mainstream. Thousands of executives across the sector will descend next week on Beverly Hills for the conference he hosts. Milken is no longer invested in Silver Rock or the firm’s investment strategies, according to a person briefed on the matter.

The private equity industry has been hit with some of its biggest losses in recent years, as buyouts which have taken place over the past five years run into financial difficulties and lenders move to take over the businesses. That stress has opened the door for credit investors to step in and invest at attractive prices.

Technology-focused buyout firm Thoma Bravo is negotiating with lenders to Medallia, a customer service software company it acquired for $6.4bn in 2022, over a restructuring that may see it hand over the keys to the business.

That comes just over a year after private credit lenders led by Blue Owl Capital and Ares Management took over software company Pluralsight in 2024, with private equity firm Vista Equity Partners and its co-investors in the group incurring a $4bn loss.

The buyout industry is also wrestling with an ageing portfolio, with the sector hitting a record backlog of $4tn in unsold investments last year, according to Bain & Company.

“Private equity is continuing to struggle with non-zero interest rates,” Kumar added. “What that means for portfolio companies and continued M&A, is something they’ll continue to grapple with.”

While many firms have focused on lending to middle-market companies, Silver Rock’s new fund will be concentrated on larger borrowers, which they view as more resilient in an economic downturn. Silver Rock’s so-called Tactical Allocation Strategy will primarily look for opportunities where it can invest $100mn to $250mn, lending both in private financings and in loans secured by assets.

Larger companies were often in a better position to increase prices if needed, Kumar said. “That’s incredibly valuable when you have shifting economic plates moving around, that you have an ability to adapt to that environment . . . particularly given what’s happening in the world today.”