Dyal sees window for potential IPO, eyes $5 bln-plus closing for Fund IV

Dyal Capital has long had a plan to go public, but current market valuations might spur it to act sooner than it initially envisioned.

Michael Rees, head of Dyal, speaking Oct. 3 at Buyouts Insider’s PartnerConnect West conference in Half Moon Bay, California, said going public has long been part of the plan to provide liquidity to investors who might not want to stay invested in its portfolio of alternative-asset-management firms forever.

Such investors would be able to trade their private stakes for public shares as a way to gain liquidity. While Rees said that investors shouldn’t invest in Dyal because of a potential IPO, that scenario might happen sooner than planned.

“The likely plan is to put it all together, get the benefit of scale and diversity, and list that,” Rees said.

“We certainly are monitoring the attractive valuation that firms are achieving now in the public markets. And so, while I would have said it’s a very long term plan … the markets are pretty attractive right now, so there’s a good chance that we’ll accelerate that program.”

Rees also said he expects Dyal to close its fourth fund by year-end at greater than $5 billion. Dyal is part of Neuberger Berman.

“The reported number of a $5 billion target isn’t far off,” Rees said.

“The appetite from the investor side to want to own a piece of these large, cash-flow-generative firms is quite large, so we’re seeing a great demand for products like ours and those of our competitors.”

Much of the growth in Dyal’s opportunity set has come from large investors — like sovereign-wealth funds — that want to build strategic relationships with firms that can help them invest across private asset classes, Rees said.

That, in turn, has pushed GPs to turn to investors like Dyal, which can provide capital to help them create new strategies and offer a more diverse set of private-market products.

Those investors may never look to cash out and are comfortable with Dyal holding its stakes in GPs for long periods, as long as they provide revenue, Rees said.

“We have investors who want to own these cash-flow streams not just for the typical seven-to-10-year periods but for decades,” Rees said.

“So while they may not ever get a terminal value, they’ll get a very long-dated cash-flow stream that should adequately compensate them for the risk they’re taking.”

Action Item: Michael Rees’s bio: https://www.dyalcapital.com/_layouts/dyal/bio.aspx?id=1

Editor’s note: This story was edited after original publication.