Blue Owl Capital is waiving a large chunk of fees on one of its funds to attract European investors into private credit.
The private capital manager is offering to remove performance charges, also known as carried interest, for early investors to kickstart its first direct lending fund based in the region. It’s also cut management fees to levels typically seen in mutual funds.
The private credit fund will invest in U.S. assets and charge participants a 0.65% management fee in the initial €1 billion ($1.05 billion) of fundraising, according to people with knowledge of the matter. Private credit and special situations funds typically charge around 1-2% in management fees.
Cutting fees is common practice among private credit firms in order to attract early investors. Fundraising can be especially tough in Europe, with players like Blackstone struggling to bring in capital at the rate they have in the U.S. market, due to the complexities of distribution and a patchwork of regulations.
Limited partners — an industry term for private assets fund investors — may also benefit from a further 0.05% management fee discount on the Blue Owl fund if they write checks above €150 million, said the people, who asked not to be identified discussing confidential information.
Blue Owl Capital’s average management fee is around 1.4%, according to a presentation from the firm.
Despite choosing to raise money in the region, the firm hasn’t yet launched a direct lending strategy investing in European assets, after weighing a potential expansion in 2023.
Blue Owl’s co-Chief Executive Officer Doug Ostrover told attendees at the Bank of America Securities Financial Services Conference earlier this month that he sees European credit as the “least interesting” area to launch new strategies, when compared to opportunities the firm sees in infrastructure and secondaries.
