Blue Owl targets large single-asset deals with continuation fund strategy

Secondaries Investor speaks with Marc Lipschultz, co-founder and co-president of Blue Owl, on the back of its appointment of a former Goldman Sachs partner to lead the strategy.

Blue Owl Capital has big ambitions for its recently launched continuation funds business, which will focus on mid- to large-sized transactions.

Lipschultz: The GP-led market is tiny because of a lack of capital

The firm has hired Chris Crampton – former partner and head of services and industrials private equity investing within Goldman Sachs’ merchant banking and asset management divisions – to head up its strategic equity strategy focused on single-asset GP-led secondaries transactions.

The firm will be adding additional team members shortly, Marc Lipschultz, co-founder and co-president of Blue Owl, told Secondaries Investor. The firm recognised the need for a team that would bring a private equity lens to “at least a couple of simultaneous deep dive transactions at a time”, Lipschultz added, noting the firm has “plenty of horsepower to go through thousands of companies at any given moment”.

The strategy will primarily focus on single-asset transactions and has the capacity to back concentrated multi-asset transactions, with Blue Owl looking to be a lead buyer in the deals it invests in, Lipschultz said. In terms of transaction size, he added: “We’re not a small-cap firm, we’re a large-cap. We deal with large-cap sponsors doing large-cap deals, and that’s where our centre of gravity lies. So that means middle-to-large… we’re not going to be doing small.”

In the single-asset continuation fund market, Lipschultz said he sees a dearth of firms participating on the buyside.

“I certainly see, really, nearly nobody actually with the resources required to do it fully and that shows in the total [GP-led secondaries] volume,” he said. “It’s not tiny because GPs don’t want to do it. It’s tiny because there’s no capital there. There’s no lack of appetite for GPs.”

In the firm’s direct lending business today, it covers around 700 private equity firms, offering them portfolio company financing options, Lipschultz said.

Year-end reports from advisers place the volume of single-asset continuation funds as a proportion of overall GP-led secondaries activity at between 42 percent and 50 percent in 2022, representing the largest market share.