Dyal’s $9bn GP interest fund in context

Dyal Capital Partners IV, the largest GP stakes fund to date, has already deployed 64% of its capital.

Dyal Capital Partners’ giant haul for its fourth fund of firms vehicle shows investor appetite for the strategy is in no danger of slowing down.

The Neuberger Berman unit amassed more than $9 billion for Dyal Capital Partners IV, according to a statement on Monday. The vehicle held its final close on 31 October.

Fund IV is already 64 percent deployed in firms including HIG Capital, Golub Capital Partners and PEI Media owner Bridgepoint, meaning the firm is likely to be preparing yet another flagship fundraise. The firm is also eyeing complementary strategies and was planning to raise a $5 billion credit fund as of July.

Dyal’s latest fundraise brings the total capital amassed by the fund of firms market’s largest players – Dyal, Blackstone’s Strategic Capital Holdings and Goldman Sachs Asset Management’s Petershill unit – to at least $24 billion. Blackstone and Goldman, which are in market with their latest vehicles, are expected to add at least $7 billion between them to the strategy.

New York-headquartered Dyal is the largest capital-raiser in the GP stakes market, gathering a total of $17.7 billion across its four flagship vehicles, according to Private Equity International data. Its Fund IV is the largest vehicle dedicated to the strategy to date, having collected $3.7 billion more than its 2014-vintage, $5.3 billion predecessor.

To be owned by Dyal, as one London-based partner at an advisory firm told PEI in October, is to be part of an “amazing ecosystem” that has its own portfolio optimisation group.

Fund IV, which initially targeted $6 billion, was “heavily oversubscribed” at final close with approximately 51 percent of capital commitments coming from the Americas and more than a third from Asia, according to the statement. Minnesota State Board of Investment committed $250 million; Alaska Retirement Management Board, $40 million; and Cathay Life Insurance, $60 million, PEI data show. Sovereign wealth funds, public and corporate pension plans, endowments, foundations and family offices also backed the fund.

Investing in the management companies of GPs is lucrative because of their long dated contractual management fee revenue, Michael Daley, a portfolio manager at Goodhart Partners, told PEI this year.

“When you raise a fund, you’ve got seven to 10 years of management fees that you know will be there barring some sort of early exit event,” he said. “This makes investing in the GP interest industry very attractive from a down case scenario perspective.” Goodhart launched its debut GP stakes fund targeting $200 million in August last year.

With the number of funds being raised and new entrants in the market to buy GP stakes increasing quickly, GPs have in recent years been “building the requisite legal mechanism to allow them to sell a percentage of their firm in the future”, said Eamon Devlin, a fund lawyer at alternative asset consultancy MJ Hudson.

Smaller GP stakes managers such as Goodhart Partners and Stonyrock Capital Partners have launched vehicles focused on the mid-market, as previously reported. Aberdeen Standard Investments also pursued the strategy, seeking $1 billion for Bonaccord Capital Partners I.

Watch our video with Neuberger Berman’s global head of NB Alternatives, Anthony Tutrone