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Michael Rees: how a private equity chief turned the tables on his finance peers 


Until Michael Rees became a billionaire this year, he was arguably the most popular man on Wall Street.

Like other successful financiers, Rees works in private equity, an industry with $3tn in unspent capital and a seemingly insatiable appetite for buying houses and hospitals, theme parks and prison payphone systems, genealogy websites and just about anything else that generates cash.

But unlike most of his peers, Rees makes money by buying pieces of the financial industry itself. He has won the trust of dozens of executives, who sold him shares in the closely held investment firms that underpin their personal wealth and have become the most powerful institutions on Wall Street.

In little more than a decade the firm that Rees co-owned, Dyal Capital, has paid out well over $10bn to buy minority stakes in some of the best-performing companies in finance. He has forked out hundreds of millions of dollars to the founders of private equity firms including Silver Lake and Providence Equity; to hedge fund managers including Jana Capital; and to firms such as Golub Capital and Owl Rock, which are displacing banks as chief lenders to a swath of corporate America.

“Rees realised, long before anyone else”, says Egon Durban of Silver Lake, the technology investment group that Dyal took a stake in five years ago, “that alternative [investment] firms with their resilient cash flows would be particularly attractive for investors in a low interest rate world”.

The New York Stock Exchange welcomes executives and guests of Blue Owl on May 20 to celebrate its listing
The New York Stock Exchange welcomes executives and guests of Blue Owl on May 20 to celebrate its listing © NYSE

This year Rees, 46, became a billionaire in his own right. Having started Dyal in 2011 as an experimental division on the fringes of asset manager Neuberger Berman, he broke free of his parent company and pulled off a $12bn transaction that amounts to one of the biggest ever stock market debuts by a US private capital group. The enlarged company, known as Blue Owl, instantly achieved a market capitalisation close to that of Carlyle Group, Ares Management and other more established rivals.

The deal created an all-purpose firm that not only gives top financiers a way to convert their paper fortunes into cash and potentially lower their tax bills, but also provides billions of dollars of debt to finance their buyouts. Yet it has embroiled Rees in a messy falling-out with some of the people he helped make rich.

So raw are the emotions surrounding the deal that few are willing to talk about it on the record. But in private conversations, financiers gave contrasting accounts of a transaction that depending on which contested allegations you believe either involved broken promises and purloined secrets, or an opportunistic hold-up in which Dyal’s enemies sought to extract a heavy price.

Two private credit funds — in which Dyal owns stakes — claimed to be so disturbed by the prospect of having to compete with Rees for business while also sending him their internal information that they sued to stop the deal.

The acrimonious dispute highlights the tangled relationships governing the US financial system — and calls into question whether Rees, who won acceptance into the top echelon of finance, has soured his friendships on Wall Street with his bid to create a financial powerhouse of his own.

“It turns out that $1bn is a boatload of money for Neuberger and its partners,” says a senior executive at a financial firm that counts Dyal as a major shareholder, referring to the cash that the asset management firm received as a consequence of the Blue Owl deal. In the executive’s view: “[they have] engage[d] in a transaction that’s bad for . . . clients and bad for the prospects of the Dyal business, all to enrich themselves.”

Column chart of $m showing Dyal's management fees have more than quadrupled since 2015

Making friends in private equity

To prosper as an investment banker is to hitch your own ambition to that of someone far more powerful. Rees, a Pennsylvania native who studied engineering at the University of Pittsburgh and the Massachusetts Institute of Technology, arrived at Lehman Brothers in 2001. He would go on to work for the scion of a venerable New England clan that, with the inauguration of President George Herbert Walker Bush in 1989, had become an American dynasty.

By the time George Walker joined Lehman in 2006, the then president’s cousin had already attained a certain stature, having led Goldman Sachs’ alternative investing division.

But running Lehman’s asset management division was a tricky assignment for Walker. The bank’s chief executive Dick Fuld preached growth through acquisition, and had already bought Neuberger Berman, for 70 years the portfolio manager of choice for old-money New Yorkers. The acquisition drive sat uneasily with Walker, who knew that financial groups were expensive to buy and feared a hit to Lehman’s earnings per share.

By the time George Walker joined Lehman in 2006, the then president’s cousin had already attained a certain stature, having led Goldman Sachs’ alternative investing division
By the time George Walker joined Lehman in 2006, the then president’s cousin had…



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