Blue Owl Capital Inc.

Good morning, and welcome to Blue Owl's Capital Fourth Quarter 2021 Earnings Conference Call. During the presentation, your line will remain on listen-only mode. I'd like to advise all parties that this conference is being recorded. I would now like to turn the conference over to Ann Dye, Head of Investor Relations of Blue Owl. Please go ahead.

Thanks, Operator, and good morning to everyone. Joining me this morning are Doug Ostrover, our Chief Executive Officer, Mark Lipschultz and Michael Reese, our co-presidents, and Alan Kirschenbaum, 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 would also like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to 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 fourth quarter of 2021 and reported fee-related earnings, or FRE, and distributable earnings, or DE, of 12 cents per share. We also declared a dividend of 10 cents per share payable on March 7 to shareholders of record as of February 28. 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'll turn the call over to Doug.

Thank you, Anne, and good morning, everyone. Today, we reported outstanding growth for Blue Owl with AUM growth of 77 percent, fee-paying AUM growth of 60 percent, and revenue growth of 73 percent for the year, with permanent capital driving 98 percent of our management fees and robust demand for our income-oriented strategies We are starting 2022 with strong momentum and high visibility into our future growth. More broadly, 2021 was an extraordinary year for alternative asset managers with robust levels of fundraising and investment activity across the space. Allocations to alternatives have continued to rise across institutional and retail investors driven by a need for yield and demand for differentiated uncorrelated returns. And managers were able to deploy their dry powder across a wide spectrum of investment opportunities, driving record M&A activity for the year. As a solutions provider to the alternative space, Blue Owl has benefited from these ongoing secular tailwinds, providing the capital that managers require to finance acquisitions in their funds through our direct lending business, and the capital that managers need to expand and diversify their platforms through our GP solutions business. We closed on our acquisition of Oak Street at the end of 2021, adding a triple net lease real estate capability that further broadens the solutions we offer. I'll discuss our strategic vision for Oak Street in a few minutes. But suffice it to say, we've been running on all cylinders across Blue Owl. We're very pleased with the results we've announced today, which cap off a year of growth and transformation for the firm and the industry. Before I cover business performance, I'd like to spend a moment on a subject that is top of mind for investors these days, inflation and the interest rate environment. Higher than expected inflation has impacted expectations for the pace of rate hikes, driving market volatility and adjusting investors' views on earnings growth for many public companies. For Blue Owl specifically, we anticipate a net positive effect on our business from a rising rate environment. We expect direct lending to be a beneficiary of rising rates, as investor demand would increase for senior secured floating rate assets, and over time, the effect of rising rates would be positive for the net interest income of our loan portfolios. For GP solutions, market volatility should drive demand for products managed by large diversified managers, benefiting the types of firms Dial has typically taken stakes in. With respect to Oak Street, we believe there will continue to be strong demand for real estate strategies with long-term contractual income that are positively correlated to inflation and backed by investment-grade tenants. Contractual rent escalations are structured into all of Oak Street's triple net leases, and 100% of all operating expenses, including cost increases, are borne by the tenant, which further limits the strategies from any adverse effects of inflation. Moving on to our quarterly and full year results, Blue Owl generated meaningful growth across all metrics with strong direct lending gross originations of $7.6 billion for the fourth quarter and nearly $24 billion for the year. AUM grew 34% quarter over quarter to $94 billion, reflecting the Oak Street acquisition and nearly $4 billion of equity raised across the platform. pro forma for the wealth lead acquisition, which we announced this week, AUM would be over $100 billion. On a year over year basis, we have grown AUM by 77% and fee paying AUM by 60%. But even excluding Oak Street, we still grew AUM and fee paying AUM organically by 48% and 38% respectively year over year our fee related earnings for the quarter reached 165 million up 17 percent from the prior quarter as a result of new capital commitments and significant capital deployment this substantial growth has been reflective of the initiatives we've highlighted over the past couple of quarters ongoing fundraising and gp solutions and fundraising and capital deployment indirect lending across a number of new and existing products. And in the first quarter of 2022, our revenue and earnings will further benefit from the addition of Oak Street. Retail was a meaningful contributor to our results for the quarter. Of the $3.9 billion of equity capital raised during the fourth quarter, retail constituted approximately 40% or $1.6 billion a meaningful step up from the roughly $1 billion in the third quarter and three times the $500 million raised in the second quarter. While the Oak Street transaction did not close until the end of the quarter, Oak Street raised a further $175 million from retail during the fourth quarter and would have brought our total retail fundraising to roughly $1.8 billion. Annualizing this 1.8 billion quarterly fundraising figure over our September 30th AUM, we are generating 9% organic growth just from our current retail flows, which we think we can grow meaningfully over time. And this doesn't take into account any institutional fundraising, new products that we plan to introduce to the market, or continued expansion of our retail syndicates. This represents the highest level of organic growth from retail that we are aware of within the publicly traded peer group, and these assets are permanent capital. In January, we raised a further $725 million from retail across direct lending, GP solutions, and real estate. Though we have already made meaningful strides in expanding our retail presence, we are still in the early innings of this initiative. We're optimistic about the future of our retail business, and we continue to invest for growth. During the quarter, we added to our distribution platform globally, including in Asia. And in January, we announced an agreement to bring access to our retail products to the Canadian market, which is a large market under-allocated to alternatives. We look forward to sharing more developments about our growing retail business throughout the year. Moving on, I'd like to provide some brief comments on Oak Street, and then I'll end my remarks with a look at the year ahead. We see a terrific growth trajectory ahead for our real estate strategy, given the vast opportunity in triple net lease. Oak Street brings scale and expertise to a fragmented market, and they've built a very strong brand in the space. Their products meet an important void in today's market, providing much needed long duration income to institutional and retail investors while helping businesses unlock value from their balance sheets. And their business fits very well with our platform vision of being a one-stop shop solutions provider. Looking back at 2021, we have accomplished a great deal in a short period of time including completing the alrock and the dial merger announcing and closing the oak street acquisition expanding our already robust retail distribution and further expanding our institutional relationships we achieved all of this while maintaining our strong track record and launching new products looking ahead We remain focused on growing our direct lending, GP solutions, and real estate businesses while evaluating new opportunities organically and through M&A. Fundraising continues for our GP solutions flagship strategy, which has reached 6.2 billion of equity committed to the fifth fund today, keeping us on track to meet or exceed our initial targets. We continue to raise equity across retail and institutional channels for our direct lending strategies, where, as a reminder, we generally earn fees on total assets, which includes leverage. And as I mentioned earlier, we plan to support Oak Street's existing robust growth trajectory with the resources of the Blue Owl platform, expanding the opportunity set in real estate. Each of these strategies and each new product within them can be meaningful to our growth trajectory. We have a stable earnings base with 98% of our management fees coming from permanent capital. Between new capital raised and the earnings potential embedded in capital that we have already raised, we have high visibility into the drivers of our growth over the next couple of years. And with a current average fee rate of over 1.5%, and FRE margins of 60%, the incremental profitability from each dollar of new capital raised and deployed is very powerful. Finally, let me end by expressing my appreciation for the support that all of our stakeholders have shown us throughout the year. We're very grateful for your trust and partnership, and we look forward to another great year in 2022. With that, I'd like to turn the call over to Mark to give you an update on our direct lending business. Mark?