Blue Owl Capital Inc.

Good day and thank you for standing by. Welcome to the Blue Owl third quarter 2021 conference call. At this time all participants are in a listen only mode. After this speaker's presentation there will be question and answer session. To ask a question during the session you will need to press part one on your telephone. Please be advised that today's conference being recorded If you require any further assistance, please press star zero. I would now like to head a conference over to your speaker today. Anne Dye, Head of Investor Relations, please go ahead.

Thanks, Operator, and good morning to everyone. Joining me today are Doug Ostrover, our Chief Executive Officer, Mark Lipschultz and Michael Reese, our co-presidents, and Alan Kirshenbaum, our Chief Financial Officer. I'd like to remind our listeners that remarks made during the call may contain forward-looking statements which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described from time to time in Blue Owl Capital's filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements. We'd also like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled GAAP figures in our press release, available on the Investor Resources section of our website at blueowl.com. This morning, we issued our financial results for the third quarter of 2021 and reported fee-related earnings, or FRE, and distributable earnings, or DE, of $0.11 per share. We also declared a dividend of $0.09 per share, payable on November 30th to shareholders of record as of November 22nd. During the call today, we'll be referring to the earnings presentation, which we posted to our website this morning, so please have that on hand to follow along. With that, I'd like to turn the call over to Doug.

Thank you, Anne, and good morning, everyone. It's been a busy few months for Blue Owl, so we're excited to provide all of you with an update on what we've been doing to move our strategic initiatives forward. Before I talk about this quarter, though, I'd like to take a moment to call out the tailwinds that have been present across alternatives and which have obviously benefited not just us, but our peers as well. M&A activity has been near record levels, driving elevated lending activity across public and private markets. accommodating equity markets have allowed for sponsors to exit investments and return capital to investors who in turn putting money back into alternatives gps are raising larger funds more quickly and are broadening their investment capabilities to be more relevant to their investors which drives capital needs across their businesses the beauty of blue owl is that our growth does not take away from the growth of other alternative asset managers, but in fact supports it. We grow with our peers as we lend to their portfolio companies and provide growth equity to the GPs. And we plan to continue expanding our market share in direct lending and investing in additional premier franchises in GP solutions. Turning to the third quarter, Blue Owl's strong results reflect continued robust growth for the firm as gross originations reached a record $8.8 billion across direct lending, and we raised capital across fundraising channels and investment strategies. AUM grew 13% to over $70 billion quarter-over-quarter, reflecting ongoing fundraising across the platform and appreciation in GP solutions. A few weeks ago, we announced the acquisition of Oak Street, adding another market-leading scaled, yield-oriented capability to the Blue Owl platform. Proforma for Oak Street, our September 30th assets under management, would be $83 billion. And I'll touch on the compelling opportunities we see with Oak Street in a minute. Our distributable earnings grew 32% from the prior quarter as a result of the new capital commitments, significant capital deployment farm-wide, and a tax benefit that Alan will discuss in greater detail. Our distributable earnings are anchored by the high level of permanent capital across the business, with 97% of our management fees coming from permanent capital. This means shareholders have significant visibility into our existing earnings power, and then we continue to layer on incremental earnings through fundraising and deployment. We think this aspect of the Blue Owl story is powerful. None of our peers look like us with respect to our permanent capital profile, and it allows us to grow faster than our peers. Our focus remains on growing earnings, not AUM. And we will always prioritize profitability and scalability over asset gathering. Last quarter, for our inaugural earnings call, we presented the history of the Alrock and Dial businesses. the type of differentiated investment capabilities that each platform offers investors and how they grew into the businesses they are today. We talked about the unifying aspects of the firm as they came together under the Blue Owl banner, including, one, their positioning as market leaders in their respective spaces. Two, the commitment to creating differentiated yield solutions for investors. Three, the focus on long-dated and permanent capital streams. Four, the notable synergies that we anticipate as we leverage the power of the combined Alrock and Dial ecosystems. And five, the culture of respect and collaboration that permeates through our interactions with each other, our investors, and our counterparts in the market. And we expect to demonstrate that combining these businesses under one roof will result in greater value creation than each would have on a standalone basis. Said another way, the benefits of the Blue Isle ecosystem should be measurably positive. The steps we are taking today in building out our investment capabilities, investing in our corporate infrastructure, and creating a cross-collaboration framework across business lines are creating the runway for continued and meaningful growth ahead. Let me highlight a few things that I think will be important areas of focus for the firm over the coming quarters and years, and then I'll turn it over to Mark and Michael to discuss direct lending and GP solutions in greater detail. First, I want to spend a minute on our technology lending BDC, which has reached nearly $7 billion of assets under management and has generated a gross IRR of 23% and a net IRR of 18% since inception, a strong result for BDC that focuses on senior secured lending. When we went to market with this strategy in 2018, we had the first tech-focused BDC of its size in the space, and it was tough to raise that equity. Tech lending sounded risky to people, and they couldn't imagine our vision, which was a fund focused on making top-of-the-capital structure, senior secured loans to well-established upper-middle market technology companies with mission-critical products and recurring revenue bases. We have been able to construct the portfolio with significant downside protection, and our track record in this product has been terrific, with no losses since inception and no loans on non-accrual. We think the industry is in the very early innings of the adoption of private credit solutions to technology firms. And we are a leader due to our scale, domain expertise, and broad relationships, which we have been developing for many years. For many of the tech companies to which we lend, we're providing growth capital at an attractive cost relative to raising another equity round. And we can provide bespoke solutions to fit their specific needs. The growth of this tech lending strategy could be very meaningful for Blue Owl over time, and we look forward to providing more updates in future quarters. The next area I'd like to highlight is retail, which has been a primary focus for the Alrock team since we founded the business. While retail flows to alternative assets have really begun to accelerate in recent years, We believe retail allocations to alternatives have a lot of room to expand and expect Blue Owl to be amongst the meaningful beneficiaries of this trend. We're still in the very early days of rolling out direct lending, GP solutions, and down the line net lease products to retail, particularly in the wire house channels. The early feedback on our products has been very positive, with retail investors appreciating the yield profile we provide for a senior secured product, as well as the fact that they are invested in the same loans as our institutional investors. Our BDCs are compelling alternatives to traditional fixed income products. And as you know, retail allocations to fixed income are very large. For the third quarter, we raised over $1.1 billion of equity capital across retail, with approximately $500 million of that coming from direct lending and $600 million coming from GP Solutions. And pro forma for Oak Street, our retail fundraising for the third quarter would have been over $1.6 billion as Oak Street raised more than $500 million from retail during the quarter. We don't want to get ahead of ourselves on the potential opportunity in retail, but clearly large amounts of capital can be raised in this channel. and we intend to be fully in the mix with a number of differentiated products. Finally, as I mentioned earlier, I'd like to spend a moment on our acquisition of Oak Street, a leading real estate private equity firm focused on the triple net lease market with over $12 billion of AUM as of September 30th, as we detail on slide eight of the presentation. We're very excited to have the Oak Street team join Blue Owl. They've built a great business with a market-leading position in net lease, and we expect it to be complementary to Blue Owl's platform in many ways. This transaction fits the parameters we've been looking for, namely, one, an ability for Blue Owl to take a strong industry-leading franchise and leverage our scale and infrastructure to accelerate its already robust runway for growth. Two, a product set that can translate well to both institutional and retail investors and lends itself to long-dated and permanent capital structures, which NetLease certainly does. three a firm with an investment focus that does not compete with our existing blue owl investment capabilities but rather is complementary and which has a big addressable market and finally we wanted to have the ability to create synergies for our stakeholders in the following ways this transaction offers rlps who may not have known oak street or invested in net lease previously exposure to a world-class investment platform now supported by the scale of blue isles infrastructure and the same is the case for oak street's lps the potential for cross-selling is meaningful given the limited three percent overlap in our respective lp bases We also believe Oak Street's net lease expertise can be very beneficial to the sponsors that we work with, Indirect Lending and our partner managers in GP Solutions. From a retail perspective, we welcome the opportunity to leverage Blue Owl's broad distribution platform to further expand Oak Street's retail presence across existing and new strategies. And finally, for our public shareholders, We expect that the Oak Street transaction will be 5% to 7% accretive to distributable earnings per share starting in 2022 based on Oak Street's existing growth trajectory. But as we consider all the things that we can do as a combined platform, the benefit to Blue Isle shareholders could exceed that over time. I also like to add that our team has known Marc Saar, the CEO and founder of Oak Street for a number of years now. And we have a lot of admiration for the business he's built and importantly, the culture he's created at Oak Street, which we think is very similar to what we have at Blue Owl. We're excited to share more about the business once the transaction is closed and to introduce Marc to our Blue Owl stakeholders. Mark will be joining Blue Owl's Board of Directors and Executive Committee and will play an integral role in the strategic initiatives we have planned. With that, I'd like to turn the call over to Mark Lipshultz to give you an update on our direct lending business. Mark.