Dyal raises record $9bn to buy stakes in alternative asset managers

Buyout firms are increasingly selling stakes in themselves, taking advantage of booming appetite for private markets

The biggest player in the market for private equity firm stakes just got bigger.

New York-based Dyal Capital Partners, which owns stakes in some of private equity’s best-known firms including Robert Smith’s Vista Equity Partners, closed its latest fund on more than $9bn on Oct. 31, according to people familiar with the matter.

The fund is the largest ever raised for the investment strategy, surpassing the $5.3bn Dyal, a unit of Neuberger Berman Group, raised for its predecessor in 2016.

The record fund comes as institutional investors that already invest in private equity funds seek new ways to generate returns from alternative assets. Buying a stake in a fund manager such as a buyout firm gives investors a slice of its lucrative cash flows.

These include the management fees they charge investors and the profits they make from successful investments. Typically, firms receive an annual management fee of 1% to 2% of assets, plus anywhere from 20% to 30% of a fund’s profits.

Led by Dyal, a handful of players including units of Blackstone Group and Goldman Sachs Group have successfully raised multi-billion dollar funds to pursue these deals. New players have also entered the market including Ottawa Avenue Private Capital, an affiliate of the family office that manages the money of US education secretary Betsy DeVos and her husband, Richard.

As the capital has piled up, more private-equity firms have opted to sell stakes to boost their balance sheets, fund new investment strategies and help older founders cash out. Last year saw a record 24 US buyout firms sell stakes, triple the number from 2015, according to PitchBook Data.

Deal flow has remained strong this year. Dyal alone has invested in private credit firm Owl Rock Capital Partners and backed the spinout of private debt investor Arcmont Asset Management from its parent company BlueBay Asset Management, among other deals.

Although it has just closed the fund, Dyal has already invested more than half of its capital and is likely to return to market next year to raise another pool for the same strategy, one person familiar with the firm said. Private equity firms usually are restricted from raising a new fund of the same strategy until they have invested around 75% of one they currently manage.

Dyal, founded in 2011 by former Lehman Brothers Holdings deal makers Michael Rees and Sean Ward, is also expanding into new products.

The Wall Street Journal reported in July that the firm had raised around $1bn for a new strategy that plans to issue long-term loans to buyout shops that want cash to grow but don’t necessarily want to sell a stake in their firms.

Source: Financial News

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