(Reuters) - Private equity firm Ares Management Corp is seeking to raise $4 billion for its second fund that is focused on investing in the debt and equity of companies in financial distress, people familiar with the matter said on Friday. The Los Angeles-based firm raised its first such fund, Ares Special Opportunities Fund, in the wake of the COVID-19 pandemic last year, seeking to capitalize on the woes of companies hitting hard times. It amassed $3.5 billion from investors, significantly above its $2 billion target. The launch of Ares Special Opportunities Fund II with a higher target shows the firm believes that there is still rich pickings in this space. It will be a key test of investors’ perception of the firm after it fired its Chief Financial Officer Michael McFerran earlier this month following a probe into allegations of “inappropriate” conduct with certain employees. Ares said in its latest quarterly earnings call last month that it had started raising Ares Special Opportunities Fund II without disclosing how much money it was seeking. Ares did not respond to a request for comment. Ares Special Opportunities Fund had generated a net internal rate of return of 52% as of the end of June, the firm told investors last week. By comparison, the distressed debt asset class delivered a 5.5% annualized return in 2020, according to market research firm Preqin. Some of that fund’s investments include telecoms firm Cincinnati Bell Inc, car rental company Hertz Global Holdings Inc, Swiss-based ground services firm Swissport, and British automaker McLaren Automotive. Ares was founded in 2002 by its Chairman Anthony Ressler, Chief Executive Michael Arougheti, Benneth Rosenthal, and David Kaplan. The firm has $262 billion in assets under management spread across credit, private equity and real estate. Reporting by Chibuike Oguh in New York, Editing by Nick Zieminski Our Standards: The Thomson Reuters Trust Principles.