Running start: Blue Owl’s new GP stakes fund raises initial $2.5bn

The fund secured $2.1bn in Q4, CFO Alan Kirshenbaum said in a year-end earnings call, together with more than $400m in side-car co-investment capital.

Blue Owl Capital raised a substantial amount for a sixth GP stakes offering in a first close, held at the end of last year.

Blue Owl GP Stakes VI secured $2.1 billion in the fourth quarter, CFO Alan Kirshenbaum said in a year-end earnings call, together with more than $400 million in side-car co-investment capital.

Launched in late 2023, the fund did this “earlier than originally anticipated,” co-CEO Marc Lipschultz said. The commitments came from both institutional and private wealth sources.

The firm did not disclose a target for Fund VI, though various media outlets have reported it is seeking $13 billion. The vehicle’s predecessor raised $12.9 billion in 2022, making it the largest GP stakes pool on record.

Blue Owl’s $54.2 billion GP strategic capital platform, headed by co-president Michael Rees, makes long-dated minority investments in North American and European private capital managers at the upper end of the size spectrum. Targets are typically among the top 200 GPs.

This longstanding focus is set to change. Blue Owl this week announced a partnership with Lunate, backed by Abu Dhabi sovereign wealth fund ADQ, to acquire minority interests in mid-sized private capital managers. Targets will have assets managed of less than $10 billion.

The initiative expands Blue Owl’s opportunity set. Until recently, young, small and mid-cap firms have largely been neglected in GP staking, with the space reflecting more sellers than buyers.

“We really are the market for large-cap GP solutions,” Lipschultz said in the earnings call. The joint venture with Lunate is directed to “another arena,” he said, for which Blue Owl can provide the same “real value” and resources it lends to big, brand-name shops.

The mid-cap vehicle, called Advantage Fund, also held an initial close in the fourth quarter, Kirshenbaum said, making up the balance of the $2.6 billion raised in total for the platform. Lunate committed seed capital.

Earlier this year, Blue Owl identified M&A in alternative assets as a key trend in the GP stakes market in 2024, Buyouts reported. In fact, consolidation is already being felt in the firm’s portfolio, with three major deals last year impacting four Blue Owl-backed managers.

In the earnings call, Lipschultz amplified on the topic, saying M&A is “clearly a tailwind” for the GP strategic capital platform that will ultimately contribute to performance.

“We own a vast number of stakes in GPs, some of whom will end up selling themselves to other big firms,” he said. “So, that consolidation is a lift in the potential valuation and realization of value in all our prior GP stakes funds.”

M&A “also presents new opportunities,” he said, when one GP elects to acquire another and “needs capital to do it.” In this instance, more demand is created for Blue Owl.

Blue Owl, which also sponsors private credit and real estate strategies, oversaw assets of $165.7 billion at the end of 2023, up 20 percent from a year earlier.