Today, Wall Street Journal had an interesting piece about a potential deal between Dyal Capital Partners and Owl Rock Capital Partners. The two companies are in talks to merge as part of a complicated deal with a special-purpose acquisition company called Altimar Acquisition that would take them public.
In a nutshell, Dyal is a minority stake owner in many private equity funds and Owl Rock is the lender to many of the same PE companies.
Although this deal seems very interesting, what I found even more amazing was the fact that Owl Rock was founded in 2016 and in only four years, has grown to now managing $23.7 billion in assets.
The question is why was company able to grow so much? Well, the firm focuses on a fast-growing area of the market known as direct lending, in which nonbanks make loans to midsize companies, many of them PE backed, and hold them on their books.
Years of low interest rates have led institutional investors such as pension funds to pour billions of dollars into direct lending strategies in hopes of reaping higher returns than traditional fixed-income securities would offer.
With the current rates being super low and no sign of rate increase in sight at least in the next year or so, I think this space will grow even more.