After the 2008 crisis, 95% of new hedge fund allocations went to firms with over $5B AUM. This made organic growth for smaller managers nearly impossible. Acquiring other GPs became the only viable strategy to achieve necessary scale, track records, and LP relationships.

When pursuing a distressed company, understand the investors' intrinsic motivations. They often prioritize avoiding a public failure and protecting their reputation with LPs over recouping sunk capital. Frame the deal as a success story for them, not a fire sale.

Sequoia secured an investment in Citadel Securities after 2.5 years of persistence. The key was framing their value around building technology businesses—an area where Citadel's Ken Griffin wanted help—rather than trying to compete on market-making knowledge.

In the cutthroat world of distressed debt, having a reputation as a frequent and fair "repeat player" is a key asset. Other creditors are more likely to collaborate and less likely to act opportunistically if they know they will encounter your firm again, leading to better resolutions.

The firm's core belief, "purchase price matters," reframes the concept of "toxic assets." Any asset, no matter how distressed, can become attractive if the price is right. This mindset allows the firm to act decisively during market dislocations when others are fearful, capitalizing on mispriced complexity.

Zelter identifies the 2008 GFC as a critical growth point. While competitors were over-leveraged, Apollo had just started building its credit business and wasn't involved in CLOs. This unencumbered position allowed them to capitalize on distressed opportunities when others couldn't.

When a fund is forced to liquidate, rivals will actively short its positions. This 'shooting against a fund' strategy drives prices down faster, amplifying the distressed fund's losses and creating a self-reinforcing downward spiral in a Darwinian but common practice.

In times of market stress, the best secondary opportunities are in LP-led transactions. Unlike GP-led deals which are often carefully curated, panicked LPs may sell entire fund stakes indiscriminately, "throwing the baby out with the bathwater." This allows discerning buyers to acquire high-quality, diversified portfolios at a significant discount.

Regulations like Dodd-Frank shifted banks from being principal risk-takers to merely financing risk. During market dislocations, banks can no longer absorb selling pressure as they once did. This structural change creates a durable and profitable role for hedge funds to provide liquidity to distressed sellers.