Blue Owl reveals details of secondaries strategy build-out

Blue Owl Capital is in market with its debut fund focusing on continuation vehicle transactions, the firm confirmed on its latest earnings call.

The Strategic Equity unit will focus on addressing GPs’ increasing demands to hold on to assets for longer, co-chief executive Doug Ostrover said on a call accompanying the firm’s second-quarter results on Tuesday.

It is unclear how much the firm is targeting for the vehicle.

The New York-headquartered firm established its secondaries unit in April and appointed Chris Crampton, a former Goldman Sachs executive, to head up the business. Strategic Equity will focus on single-asset GP-led transactions, or continuation fund investments, per a statement at that time.

Co-chief executive Marc Lipschultz said on the call that the business aims to support the more than 600 firms they finance and 60 managers they own stakes in.

“The thing about private equity is you buy a great business, you find out it’s a great some number of years later, but then you have to sell it. Everyone wants to keep them,” Lipschultz said.

“So, GP-led secondaries, continuation is the solution to this challenge. It allows the GP to maintain ownership of an asset they know well, can manage well and know has a lot of value [and] to create liquidity as an option, but not an obligation for the LPs… [and to] crystallise returns for prior funds.”

He added: “It really is a way of meeting a lot of the needs of a lot of different stakeholders in private equity… We’re here to facilitate people keeping those assets with this strategy.”

Lipschultz also said that the firm has added three professionals to its secondaries team, “have more coming” and assigned additional internal resources to the unit.

“We have a fully built capability to address what we think is a very, very large opportunity.”

Commenting on the appetite for GP-leds and continuation funds on the call, Ostrover noted that the “demand for capital is enormous, while the supply is de minimis”. As such, the firm is dual tracking fundraising via both institutional and wealth channels. He added that with the firm’s secondaries strategy, the average wealth investor has a way to access the PE market via deal flow from the top PE firms.

The firm plans to back deals with large-cap sponsors, Lipschultz told Secondaries Investor in May.

Blue Owl reached $150 billion in AUM across its credit, real estate and GP stakes business as of end-June, up 26 percent from the previous period, according to earnings materials. The firm raised $2.9 billion in the second quarter and $20.4 billion over the last 12 months.