BlueBay to spin out private debt team – exclusive

Dyal Capital Partners will support the BlueBay private debt team to become an owner-managed business.

BlueBay’s private debt business will become independent from BlueBay Asset Management, the firms have announced.

They said the move followed the growth in the business from a small part of BlueBay’s leveraged finance offering into a major standalone investor in its own right. It recently closed a €6 billion fund and now has €13 billion of assets under management.

BlueBay said separating the businesses would enable both to serve their clients and support their future growth. BlueBay Asset Management will continue to add new strategies and capabilities in liquid and illiquid fixed income.

Erich Gerth, chief executive of BlueBay Asset Management, said: “The private debt business has grown into a separate vertical within BlueBay and we decided it doesn’t make sense to run two businesses in parallel. This will enable us to reinvest in growing our core business in complementary strategies, such as structured credit, including CLOs.”

The spin-out of the private debt business is being backed by Dyal Capital Partners, a $20 billion private equity investor that acquires stakes in alternative asset managers. Dyal will hold a minority, passive equity stake in the debt business. The management team, led by managing partner Anthony Fobel, will hold the majority of the equity.

The transaction is expected to complete in Q3 subject to regulatory and other approvals. Until then, the private debt business will continue to operate as part of BlueBay. Following completion there will be a transition period and the entire existing private debt management team and all staff directly involved in private debt will transfer to the new company.

Fobel said: “There’s no change to the management structure of the private debt business, which has operated independently within BlueBay since the beginning. This is very much business as usual for our investors.

“We felt it would be better to operate as an owner-managed business going forward and this will enable us to use the ownership equity as an incentive to both retain and attract top talent. We also have the backing in Dyal of a leading investor in alternative asset managers, who are keen to invest in our business further.”

In February, BlueBay’s private debt team completed fundraising for BlueBay Direct Lending Fund III, closing at €6 billion, more than double its previous vintage. The fund will look to do larger deals over a longer investment period than its predecessor vehicle.

BlueBay Asset Management’s owner, Royal Bank of Canada, has invested in BlueBay private debt funds and will continue with its commitments for the time being.

BlueBay set up its European private debt platform in 2012 in response to deleveraging by European banks and has launched five funds as well as offering separately managed accounts.