Blue Owl’s Dyal wraps up fifth GP stakes fund on $12.9bn

Dyal Capital Partners V is by far the biggest GP stakes vehicle ever raised. It is 43% larger than the 2019-vintage Fund IV, which set the previous record.

Blue Owl Capital’s Dyal Capital reaffirmed its position as the market’s largest GP stakes investor with the outsized closing of a fifth offering.

Dyal Capital Partners V held its final close on 30 December on $12.9 billion, Blue Owl senior managing director Sean Ward told affiliate title Buyouts – above its original target of $9 billion.

At $12.9 billion, Fund V is by far the biggest GP stakes vehicle ever raised. It is 43 percent larger than the 2019-vintage Dyal Capital Partners IV, which set the previous record.

Blue Owl secured commitments from a mix of first-time and existing LPs, Ward said. Most of the money came from North American and global institutions, with new inroads made in regions like Europe and the Middle East. In addition, about 40 percent of the capital was sourced in private wealth channels – which was “more than we have raised historically”, Ward said.

GP stakes funds, which acquire long-dated minority interests in private equity and other alternative asset managers in exchange for a share of income, have emerged strongly in the past decade. Multiple firms have sold pieces of themselves to fortify balance sheets and finance priorities like commitments to new offerings and strategic growth initiatives.

Blue Owl’s Dyal, together with Blackstone Strategic Capital and Goldman Sachs’ Petershill Partners, dominate the GP staking space, accounting for the bulk of fundraising and dealmaking. As of 30 September, Dyal had a portfolio of more than 55 firms and $47.8 billion under management.

Founded in 2011 by Blue Owl co-president Michael Rees, Dyal invests in large, well-established private equity brands in North America and Europe.

Fund V will maintain the strategy, Ward said, backing some 20 managers. These will tend to fall into one of three categories: (1) new partners (without prior experience of GP staking); (2) existing partners seeking follow-on capital; (3) and acquisitions of minority interests held by other investors or alongside them.

The fund has already deployed roughly 70 percent of its pool to 17 shops. Investments, among them CVC Capital Partners, HIG Capital, I Squared Capital, KPS Capital Partners, Lead Edge Capital, MBK Partners and PAI Partners, reflect examples across the three categories.

Dyal has a particular craving for re-ups with existing partners, where it can increase the size of an initial long-dated minority interest. “We love these transactions,” Ward said, because they happen outside of competitive processes and for this reason involve “no execution risk”.

The year ahead is expected to see continuing and perhaps greater market challenges spawned by economic uncertainty and volatility. In the private equity industry, this could result in some measure of consolidation, as GPs struggle to raise fresh capital from LPs who are overallocated or otherwise burdened with major cash constraints.

In this environment, “we’re going to see a flight to quality or at least a flight to size”, Ward said.

This probably works to Dyal’s advantage, he said, because of its “good grip” on the upper end of GP staking and its ability to write especially large checks. “We’re in the happy seat of continuing to be selective about our investments. We’re never the sort to chase after deals.”

As Fund V is approaching full investment, the launch of a sixth Dyal offering is expected toward the end of 2023, Rees told Buyouts last year. Ward declined to comment.