Dyal wraps up third fund with $5.3bn

The fund is already more than half deployed and includes minority investments in such firms as Vista Equity Partners and KPS Capital Partners.

Dyal Capital Partners, which is part of Neuberger Berman, closed its Dyal Capital Partners III fund in December on about $5.3 billion, the firm said on Tuesday.

Amid a strong fundraising environment, it raised its initial target by more than $2 billion and was heavily oversubscribed at the final close. Limited partners include the State of New Jersey.

The firm has already invested more than half of the fund's capital through six investments. These investments were done in Vista Equity Partners, EnCap Investments, Silver Lake, HIG Capital, Starwood Capital group and KPS Capital Partners.

Acquiring minority stakes in private investment managers has become popular. Other firms with a similar strategy include Goldman Sachs Asset Management, Credit Suisse and Hycroft. For GPs, the injection of cash at the management company level can help fund GP commitments and address succession issues.

“As the industry continues to grow and evolve, established firms may require strategic capital,” Michael Rees, head of New York-based Dyal Capital Partners, said in a statement. 

“We want to provide that capital. We believe that the combination of our experience, the permanent nature of our funds, our dedicated operating team and our ability to customise bespoke solutions will give us an advantage over our competition.”

Dyal plans to make minority passive investments in about 10 to 12 private equity firms. The nature of investing in a GP as opposed to a fund is high cash flowing in nature, as the New Jersey Division of Investment noted in a memo in September 2015.

“Cash is regularly distributed from management fees earned on existing and future funds,” the LP wrote. “This is supplemented with expected near-term exits which Dyal will benefit from in the form of its share of balance sheet and carry profits.

The fund brings Dyal's total assets under management to more than $8.7 billion. Its two previous funds invested in hedge fund managers.