Dive Brief:

• Sycamore Partners is raising its largest investment fund to date, doubling down on its retail focus, sources familiar with the situation told CNBC. The private equity firm declined to comment to Retail Dive on Monday.

• The firm aims to raise between $3 billion and $4 billion to funnel into retail investments, although the fundraising efforts are not yet public, the sources told CNBC.

• Sycamore most recently acquired Staples for $6.9 billion, its largest investment so far, and has interest in several other retailers including The Limited, Belk, Hot Topic, Dollar Express, Talbots and Nine West, among others. 

Dive Insight:

While many retailers have turned to private equity for support during a difficult retail environment, their turnaround ambitions have not always aligned with private equity priorities.

Take for example The Limited, a once-storied apparel retailer and style influencer with a nimble supply chain well ahead of its time. In January, about the time the women's apparel retailer was telling its customers that it was shuttering all stores, its owner, private equity firm Sun Capital, told investors it had nearly doubled its investment in the retailer, according to an email to shareholders obtained by Reuters. Due to prior distributions and dividends, Sun Capital made back its original $50 million 1.8 times over, and would write down the remaining equity value of Limited Stores to zero.

The trouble is that, with too much debt and, often, the wrong talent (two factors driven by private equity sponsors), it can be next to impossible for retailers to get back in the game. "Leverage is not your friend in today’s retail world, and many [distressed retailers] have had to either do a lot of catch up investment for e-commerce or omnichannel capabilities, or invest in the store and the brand," Moody’s Vice President and Senior Analyst Raya Sokolyanska told Retail Dive earlier this year.

"It’s not a given that a company would under-perform under private equity ownership," she said. "It’s just that the extra debt puts extra constraints on their flexibility. I would say that, depending on the company and how much turnaround works need to be done, a buyout can be done with a modest amount of leverage. It depends on the brand and the strength of the business. But, broadly, the ability to bear a high level of debt is probably lower because of the stress in the sector."

There's quite a long list of struggling retailers that seemed to gain little from private equity ownership. J. Crew is hampered by a debt load that not even a recent restructuring deal seems likely to alleviate. "Now private equity is there with billions in debt, and 'Goodbye,'" Howard Davidowitz, chairman of New York City-based retail consulting and investment banking firm Davidowitz & Associates, told Retail Dive earlier this year. 

At a time when many investors are increasingly wary of retailers’ prospects, Sycamore appears to be among the firms that have the interests of the retailers in its portfolio among its priorities. In 2013, the firm bought specialty retailer Hot Topic for $600 million and the teen apparel and accessories retailer is still holding on. The firm, which snapped up The Limited’s intellectual property rights during its bankruptcy auction earlier this year, has also helped turn around Talbots and Belk department stores.