Eldridge Industries has agreed to buy 10% of a Blue Owl Capital fund that owns minority stakes in top-tier alternative asset managers, including Vista Equity Partners and Silver Lake Management, according to people with knowledge of the matter.
A deal for the piece of Blue Owl GP Stakes III is poised to deliver about $985 million to the firm over the next 27 months. The transaction has been communicated to investors in the fund, one of the people said. Representatives for Blue Owl and Eldridge declined to comment.
New York-based Blue Owl is one of the biggest players in the business of buying equity interests in the management companies of alternative asset managers, which are known as general partners.
Its GP minority stakes arm, which started in 2010, has raised five funds and had $56 billion in assets under management as of June 30, according to its latest quarterly report.
GP Stakes III, which closed with $5.3 billion in 2016 under predecessor Dyal Capital Partners, also owns stakes in Starwood Capital Group, H.I.G. Capital and KPS Capital Partners.
The business of taking positions in private equity firms has grown over the past decade, as the sector matured and owners of the closely held partnerships sought liquidity. Blue Owl is targeting $13 billion for the sixth fund, Bloomberg News reported last year.
Pension fund investors
This deal would provide liquidity to Fund III’s investors, which include $267.7 billion New York State Common Retirement Fund, Albany; $80.5 billion Alaska Permanent Fund Corp., Juneau; New Jersey Division of Investment; $146 billion Minnesota State Board of Investment, St. Paul; and the University of Michigan, data compiled by Bloomberg showed.
Blue Owl has already unlocked liquidity for investors in the fund. The firm created a continuation vehicle known as Blue Owl GP Stakes Atlas Fund I to buy about 5% of its assets, a move that is expected to generate about $365 million in proceeds, Bloomberg News reported in August. The vehicle’s net internal rate of return was about 24% as of June 30, according to a filing.
Eldridge, the Todd Boehly-led investment firm, last year hired former Investcorp partner David Lee to lead its GP solutions effort, which aims to provide capital to alternative asset managers. The firm participated in a continuation vehicle for J.F. Lehman & Co.’s PURIS in July.
