After the redemption restriction turmoil, the popular PE Blue Owl raised $1.7 billion for its data center dedicated fund

Alternative asset management giant Blue Owl is accelerating its expansion in the digital infrastructure sector, having raised $1.7 billion for its latest data center special fund.

According to regulatory filings, on December 1, this non-traded real estate investment trust (REIT), Blue Owl Digital Infrastructure Trust, completed its initial fundraising and began operations.

As part of its operational launch, the fund also acquired equity in 11 data centers from industry affiliates for a net value of approximately $1.5 billion (after deducting assumed debt). The filings indicate that these data centers are primarily leased to investment-grade and hyperscale clients.

This fundraising is part of Blue Owl's significant expansion into the data center sector, where the company has provided over $50 billion in financing for Meta and Oracle's data centers this fall.

Previously, Blue Owl's stock was pressured due to the suspension of investor redemptions in another fund, raising market concerns about the liquidity of some of its operations. On Thursday, at the close of U.S. markets, Blue Owl rose 2.52%, accumulating over a 20% increase from the low point following the "redemption restriction" turmoil.

(As of the time of publication, OWL's stock price has rebounded 21.3% from its low point)

Continued Investment in Digital Infrastructure

The filings indicate that Blue Owl Digital Infrastructure Trust is designed as a private "evergreen" vehicle, meaning it can continuously raise funds from investors without a fixed duration, providing flexibility for long-term holding and operating assets.

The fund's investment objective is to purchase, hold, and operate infrastructure, including data centers, fiber optic networks, communication towers, and other related assets.

According to another document, from October 1 to December 1, Blue Owl raised a total of $4.3 billion across all its evergreen non-traded funds, with approximately $2.6 billion directed towards its physical asset platform and $1.7 billion towards its credit platform, demonstrating ongoing investor interest in the company's alternative asset strategies.

The establishment of this new fund is a continuation of Blue Owl's series of proactive actions in the digital infrastructure sector.

Last year, Blue Owl announced the acquisition of IPI Partners, a specialized investment firm in the data center field, for approximately $1 billion, which increased its managed assets by $10.5 billion.

Since then, Blue Owl has significantly accelerated its expansion in this sector. The company revealed in its latest earnings call that its reserve projects in the digital infrastructure sector have exceeded $100 billion, indicating that more investment actions are expected in the future.

Redemption Restriction Storm

Wallstreetcn previously mentioned that in November, the company's decision to suspend investor redemptions for an off-exchange fund caused its stock price to drop to a yearly low, marking the lowest level since December 2023.

On November 5th, Blue Owl announced plans to merge its $1.8 billion non-traded business development company (BDC) Blue Owl Capital Corp. II into the publicly traded entity OBDC, which has a market capitalization of $17.6 billion, while also suspending requests for redemptions of BDC off-exchange fund shares.

Although Blue Owl stated that the company plans to restore this mechanism in the first quarter of next year after the transaction is terminated, the market is concerned that investors in the acquired fund will face immediate paper losses due to the approximately 20% discount of OBDC's trading price relative to the net asset value of the BDC off-exchange fund.

At the same time, there are worries that if redemption pressure continues, fund managers may initiate a "gate" mechanism to limit capital outflows. As a result, following the merger announcement, investors responded by selling off, which not only dragged down the stock price of Blue Owl's parent company but also expanded OBDC's stock price decline to about 22% for the year.

Faced with market resistance, Blue Owl urgently halted the merger on the morning of November 19th. Blue Owl co-founder Craig Packer admitted in an interview that negative reports regarding private credit led to the stock price drop, and despite simultaneously announcing a $200 million stock buyback plan, it still failed to restore market confidence.

This represents a rare public setback for Blue Owl, which has been on a high trajectory since its establishment in 2021 through the merger of Owl Rock and Dyal Capital