Blue Owl Capital Inc.

Good morning, and welcome to the Blue Owl Capital's first quarter 2024 earnings call. During the presentation, your lines will remain on listen-only mode. Later on, we will have a question-and-answer session, and if you'd like to ask a question later, please press start and number one on your telephone keypad. I'd like to advise all parties that this conference call is being recorded. I will now turn the call over to Anne Dye. Head of Investor Relations for Blue Owl. Please go ahead.

Thanks, Operator, and good morning to everyone. Joining me today are Mark Litchfield, Co-Chief Executive Officer, 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 Isle capital 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 to GAAP figures in our earnings presentation, available on the Investor Resources section of our website at blueisle.com. Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blue Owl Fund. This morning, we issued our financial results for the first quarter of 2024, reporting fee-related earnings, or FRE, of $0.20 per share and distributable earnings, or DE, of $0.17 per share. We also declared a dividend of $0.18 per share for the first quarter, payable on May 30th to holders of record as of May 21st. 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 Mark.

Great.

Thank you very much, Anne. We reported another strong quarter of results for Blue Owl this morning, with 12 straight quarters in consecutive management fee and FRE growth since we've been a public company. We're very pleased with the predictable, consistent, and robust growth we've been able to generate for our shareholders across a range of market backgrounds, reflecting the benefits of our FRE-centric and permanent capital-heavy business model. Said plainly, our earnings consist almost entirely of management fees, so we're not subject to the volatility and uncertainty of revenues tied to realized gains and capital markets activity. And having long-duration capital means that very little leaves our system. providing us with a resilient asset base that grows faster than our peer group for the same number of dollars raised. We think the market is starting to understand and appreciate the value of these stabilized attributes and how they contribute to our premium growth profile. On a 12-month, year-over-year basis, we grew FRE revenue and FRE by 24% and DE by 20%. We're humbled to be among the leaders in these metrics across our whole peer group that includes very accomplished firms in our industry, and it's something we don't take lightly as we continue to plant the seeds for future growth at Blue Olive. Globally, demand for differentiated income-driven returns remains very strong, and we continue to see good interest in our credit, chief and strategic capital, and real estate strategies across institutional and wealth investors. During the quarter, we held the final close on our latest triple net lease fund, bringing in nearly $500 million. We raised $5.2 billion total after receiving approval to exceed our hard cap of $5 billion. This fund was the largest U.S.-focused real estate fund in 2023 and more than doubled the size of its predecessor fund, demonstrating significant investor demand despite a very challenging backdrop for real estate fundraising generally. In the wealth channel, growth flows into our perpetually distributed products reached $2.1 billion in the first quarter, 16% higher than the fourth quarter and almost double what we raised in the first quarter of 2023. And in April alone, we've raised close to $1 billion in those perpetual products. We also closed on $1.4 billion of institutional capital in our direct lending business across separate accounts and closes for our first lien lending and strategic equity strategies. complementing the continued growth in wealth. And our new mid-cap GP strategic capital strategy is off to a very good start, with over half a billion dollars raised during the first quarter. Subsequent to quarter end, we announced two acquisitions that further expand our suite of investment offerings and broaden the markets to which we provide capital solutions. First, we made a preferred investment into Kuvera and announced our intention to acquire Kuvera Asset Management. reflecting a creative and accretive way to broaden Blue Owl's value proposition to the insurance space. The global life and annuity market is over $20 trillion in size, and an increasing number of insurance companies are looking to partner with specialized asset managers that can create better risk-adjusted returns through differentiated sourcing, underwriting, and structuring. By adding a set of more IG-focused credit and real estate capabilities to Blue Owl's existing and scaled origination platforms, we can bring a more comprehensive insurance asset management solution to the marketplace. We'll also benefit from Cuvier's growth, as we expect they will continue to take market share in an expanding annuities market. Acquiring Cuvier Asset Management adds $20 billion of AUM for Blue Owl, not inclusive of incremental growth at Cuvier. I think we approached this acquisition in a very blue-all way, meaning we came from a mindset of providing solutions to not competing with our clients. We had no desire to become balance sheet heavy or to become an insurance company. Instead, we planned to partner with them and allow them to continue to do what they do best, underwriting liabilities, while we focus on what we do best, managing assets. This solutions mentality is in keeping with what you see across the rest of our business. In direct lending, for instance, we provide financing solutions to sponsors for their portfolio companies. In GP stakes, we provide capital to the sponsors themselves. We prefer to help them grow their businesses as opposed to competing with them in those businesses. Now, turning back to M&A, the second transaction we announced recently was our intention to acquire Prima Capital. an investment manager focused on real estate lending with approximately $10 billion of assets under management. Structurally, we see an increasing need for capital to finance real estate and have been interested in expanding our capabilities in this area. Prima struck us as a great fit for Bilal, given its leading position, high-quality portfolio, and strong historical track record through cycles, and we expect to leverage Bilal's scale and expertise to accelerate expansion. Pro forma for these two transactions, Blue Owl's AUM would exceed $200 billion, crossing another meaningful milestone. Now moving on to business performance. In credit, we saw a fairly constructive environment for deployment with elevated repayment activity. As a reminder, the return of syndicated market activity reflects greater market participant confidence, which over time will enable increasing M&A activity. We've proven we can deploy significant capital when syndicated markets are active, and we believe we're well-positioned to do it again. Noting the outsized market share the direct lenders have seen over the past year and a half, the longer-term secular trend has been one in which sponsors have increasingly gravitated towards direct lenders for the value proposition they offer, and we see this trend continue. We see healthy sponsor appetite to deploy incremental dry powder and monetize existing investments over time. And we expect Blue Isle to play a meaningful role in new capital deployment and refinances. As Alan will detail, direct lending metrics remain strong. We have had just seven basis points, annualized and realized loss, which has largely been offset by realized gains. And the underlying revenue and EBITDA growth of the portfolio remains in the low double digits on average. High level, our observation is that the economy is sound and rates are likely to be higher for long. while we would have loved for spreads to stay 100 basis points wider as they were a year ago, we believe the opportunities we're seeing today offer very compelling spreads for the risk we're being asked to take. In our GC stakes business, our partner managers continue to benefit from two meaningful secular trends, growing allocations to alternatives and GP consolidation. Collectively, our partner managers now manage nearly $1.8 trillion, giving us an unparalleled view over the alternative asset management industry, Over the past decade, we've observed significant diversification across the industry, including the emergence and scaling of notable asset classes, such as private credit, as well as the expansion in the universe of investable assets for private capital. We've also seen market share accrue to the most established, largest private market managers, where our flagship funds have leading market share. In addition, now that we've closed onto the initial capital for our mid-cap strategy in partnership with Lunette, We also are able to invest in the most exceptional managers that were not the right fit for our existing mandate. We're ready to capitalize on a visible pipeline of differentiated managers who are at an earlier stage of development, and we think investors are very excited about this opportunity as well. In real estate, we continue to actively deploy capital at attractive cap rates close to 8% behind our four major themes, digital infrastructure, onshoring, healthcare real estate, and essential retail. The capital needs in each of these areas is very significant, and we have a good line of sight in the capital deployment. In addition to the success we saw with our drawdown fundraise, which is not finished, we continue to see a meaningful step up in private wealth flows. First quarter flows in our perpetually offered net lease product were 45% higher than the fourth quarter as a result of the stronger production from new distribution platforms. In summary, we're pleased with the continued expansion of our existing business, and to supplement the robust growth we're already generating, we've announced some new acquisitions in areas that we find adjacent, strategic, and synergistic, and which can become quite substantial in the coming years. With that, let me turn it to Alan to discuss our financial results.

Thank you, Mark. Good morning, everyone. Thank you for joining us today. To start off, we're pleased with the strong results we continue to report. with the first quarter of 2024 being our 12th consecutive quarter, every quarter since we listed, of both management fee and FRE sequential growth, the only public alternative asset manager that has demonstrated this over this period. We've been able to achieve this because of our differentiated asset base and earnings profile, with long-duration assets creating a recurring revenue profile, while fundraising adds new layers to our layer cake of management fees and FRE. So let's go through some of the key highlights on an LTM year-over-year basis through March 31st. Management fees are up 22%, and 92% of these management fees are from permanent capital vehicles. FRE is up 24%, and our FRE margin is right on top of our 60% target. And DE is up 20%. As you can see on slide 12, we raised $4.7 billion in the first quarter and $16.7 billion for the last 12 months. Inclusive of debt capital, new capital raised was over $28 billion over the last 12 months. I'll break down the first quarter fundraising numbers across our strategies and products. In credit, we raised $3 billion. $2.6 billion was raised in our diversified and first lien lending strategies, of which $1.3 billion was raised in our non-traded BDC OCIC, up over 100% compared to the first quarter of 2023. The remainder was raised across software lending and our newly launched strategic equity strategy. In GP strategic capital, we held an initial close of approximately $600 million for our new mid-cap strategy. In real estate, we raised approximately $1 billion, with nearly $500 million for the sixth vintage drawdown fund, bringing that fund to its final close at $5.2 billion, and over $500 million in our non-traded REIT O-RENT, up more than 70% compared to the first quarter of 2023. We are seeing increased engagement on the distribution platforms that added O-Rent in late 2023 and continue to see opportunities to expand distribution globally for this product. We're pleased with the increasing breadth of fundraising across strategies and products, which will continue to expand with the expected closing of our announced acquisitions of Kuvera and Prima. In addition, we've had very few assets leaving the system, with distributions, redemptions, and capital return aggregating just 4% of our average AUM over the last 12 months. We believe this number is approximately double for our peers and could increase further for them during more active monetization environments, highlighting Blue Owl's more durable asset base. Finally, to supplement the staying power of existing AUM and the benefit of ongoing fundraising, we have substantial embedded earnings that we will unlock over time. AUM not yet paying fees was $16.8 billion as of the first quarter, corresponding to roughly $240 million of incremental annual management fees once deployed. This equates to a fee rate of approximately 1.4%. We also have approximately $135 million of incremental management fees that would turn on upon the listing of our remaining private BDCs over time. These two items alone would represent an increase of over 20% from our 2023 total FRE revenues. Moving on to our credit platform, we had gross originations of 8.9 billion for the quarter and net funded deployment of 2.9 billion. This brings our gross originations for the last 12 months to 24.9 billion with 9.8 billion of net funded deployment. Our credit portfolio returned 3.7% in the first quarter and 17.4% over the last 12 months. Weighted average LTVs are in the high 30s across direct lending and in the low 30s specifically in our software lending portfolio. For our GP strategic capital platform, total invested commitments for our fifth GP Stakes Fund, including agreements in principle, are over $11 billion of capital with line of sight into over $3 billion of opportunities. which, if all signs, will bring us through the remaining capital available in Fund 5. And performance across these funds remains strong, with a net IRR of 23% for Fund 3, 42% for Fund 4, and 15% for Fund 5, which compare favorably to the median returns for private equity funds of the same vintages. And in our real estate platform, our pipeline of opportunities continues to grow, with nearly $4 billion of transaction volume under letter of intent or contract to close. With regards to performance, we achieved gross returns across our real estate portfolio of over 6% over the last 12 months, comparing very favorably to the broader real estate market as a result of our distinctive net lease strategy and the timing of capital deployment. The net IRR across our fully realized funds has been 24%, which we think is impressive for essentially an investment grade and creditworthy tenant risk profile. Okay, let's wrap up with a few closing thoughts. On taxes, just a reminder that we expect to return back to a low single-digit rate, say 2% to 3% for the remainder of 2024, which should result in a roughly 5% tax rate for the full year, as I've discussed on our last earnings call. In light of the recent acquisition announcements, I want to reiterate our outlook for a 60% FRE margin for the foreseeable future, investing dollars back into the business to drive long-term growth. Subsequent to quarter end, we closed a $750 million, 6.25% 10-year bond offering. We were pleased to see such strong levels of interest, with the deal nearly four times oversubscribed from both investors who have been longtime supporters of our business, as well as many debt investors that are new to our name. Finally, I'd like to touch on the significant shareholder transition that we've achieved since Blue Owl went public. In May of 2021, about 10% of our shares were held in the hands of public investors. Our float was about $1.5 billion. The other 90% of our shares were owned primarily by Neuberger Berman, management, and private phase investors. Over the past three years, we have largely replaced our legacy private phase investors with long-term oriented public shareholders, And we've also seen strong demands from public shareholders for the occasional sales by Neuberger Berman over the same period. Today, we have more than a third of our total shares in the hands of public investors, increasing our float to more than $9 billion, six times greater than where we started. As for management, our lockup expired about a year ago, and there has been essentially no selling outside of charitable donations and estate planning. We're very pleased with the progress we've made in working through the technical overhang in Blue Owl stock and think that the shifting demand supply balance is a factor in how the stock has traded recently. With that, I'd like to thank everyone who has joined us on the call today. Operator, can we please open the line for questions?

We are now opening the floor for question and answer session. If you'd like to ask a question, please press star and number one on your telephone keypad. Please limit yourself to one question and hop back in the queue for follow-ups. Our first question comes from Alex from Goldman Sachs. Your line is now open.

Alex, we can't hear you.

Really nicely, you highlighted that, I think, in your prepared remarks as well. Can you pull back the layers a little bit and talk through sort of sources of increased sales? Is it same platforms, addition of new platforms? To what extent is it also including some broadening of the existing FAA base within the platforms that you're already on? So just to kind of help us frame how to run rate the current pace of sales on a go-forward basis.

Alex, the very beginning of that we didn't hear. Can you just repeat the very beginning, please? Apologies. Yes.

Sorry, yeah, so I was just asking about the Wealth Channel trends you guys are seeing so far in the second quarter. It looks like April 1 subscriptions were really strong. So I was hoping to get a little bit more detail around the sources of strength in terms of new product or new platforms, rather, or sort of expanding footprint within the existing platforms and how to think about the run rate on the forward basis.

Absolutely. Thank you, Alex. So Wealth has been and continues to be strong. You are You obviously know our position, which, of course, is now coming up on taking nearly a decade to build to this sort of platform. We really have a great embedded position with some products, which are growing, as you say, sort of by expansion of usage within a platform. And then we have products that we have introduced that are growing by expansion of platforms. So, actually, we see both when you look at our results as well. So in credit, in our core income and our tech income products, what we're really seeing there is increased adoption. That is more FAs and more clients using the product. So this is the virtuous circle of we're on a lot of platforms, and we deliver great results for those investors. And so we have more FAs understanding how this is a really effective part of essentially a core allocation, and our product works well. really well for them. And so, in the case of credit, I think you're seeing primarily the growth of user increasing, more FAs, more customers. And, of course, the beauty of that is this is still so limited in its penetration. When you really dive into the the details, which obviously we do, on what's really being sold in a platform, how many people are using it, how many clients does each FA that uses it have involved. You get very excited about the forward look in this opportunity set, which you can also see from the macro numbers when we just look at penetration of alts in general versus this very, very large world. You'll call it retail, call it private wealth, however you want to slice it. So we're seeing the virtuous circle of being a market leader in that credit platform at a very early participant and having, frankly, really, really great results. Real estate is a bit more of a study in the benefits. In this case, you get twofold benefits. ultimately become what we have in credit, which is you become more about deeper and deeper penetration. Today, we're still, you know, even in the early stages of this, increased platforms. So we, this year, will be adding in quite a number of platforms in real estate, and we're seeing the benefits of that as we bring this product onto new platforms. It's given us whole new audiences. Remember, this is a product where we're delivering a 7% tax advantage return current plus appreciation with triple-net leases on generally investment-grade, credit-worthy counterparties. I mean, it's a really special product, and consider this is a time when, you know, in real estate, most people are delivering... negative returns and are having negative flows, we're growing and adding. So I think you have both actually perfectly well studied. And listen, any given month, any given quarter, but the trend line is crystal clear, right, which is we are continuing to see significant growth in wealth as a part of our platform and the continuously offered business. products I'm really zeroing in on because you always have episodic moments if we bring products like GP Solutions where you go on for a while and then you come back off of the platform. So we really feel good about wealth. And one other comment just while we're on it, you know, and it's not about wealth, it's just about product in general. You take April, as you said. So in April, we raised a billion dollars in these continuously offered products. And I think something that gets lost sometimes in a lot of the discussion and I'm sure people appreciate it, but not all dollars are created equal. And you just take a step back, and when you raise a billion dollars in kinds of high-quality, high-value-added products that we do, which we get appropriately paid for, you square that against dollars raised. There's a lot of very commoditized product that alts managers buy. And that's fine. Different people have different strategies. As you know, our focus has been very much on high-value-added product. But, you know, if you take a step back and you think about what we earn on something like a billion dollars in continuously offered products relative to, say, a highly commoditized product that we see people lazing capital for, that literally could be the equivalent of needing to raise $10 billion in a commoditized, you know, insurance-like product. or highly commoditized fixed income kind of products. So a billion dollars in April, quite literally, mathematically, could be the equivalent of $10 billion of what many other people raise these days. So I think that gets lost in this conversation about, it's not just wealth, that's just about nature of product in general. So sorry to go off on that sidetrack, but I think it's an important point also when we talk about the nature of dollars raised.

Yep. No, thank you. All helpful detail. Appreciate it.

Next question comes from Brandon Hawkins from UBS.

Good morning. Thank you for taking my question. We've heard a bit more recently about spread compression in private lending markets. So I was hoping to hear your perspective on what you're seeing on the ground and, you know, if we are seeing some spread compression, what you think that might mean as far as the outlook for FRPR that's begun to come through on the P&L for you.

Absolutely. So, look, spreads, so let's start with this. Yes, there's been spread compression. Point of fact. There was spread expansion a year ago, a year and a half ago. Before that, spreads were tighter. You know, I look over the long arc of time that we've done now about $100 billion or so in originations. And it's no doubt the case that spreads go up and spreads come down. The key to our business, and something really distinctive about private credit done right, again, we are deeply focused on credit, credit, credit, principal preservation, downside protection, and strong income results. And that has worked. We're running at a seventh basis point, realized loss rate. So everything about doing this strategy right, growing our business, which of course grows our fee base, is about delivering on the credit promise where we have been best to breathe. And so the key to us, unlike many alternative products, let's call them the high-octane products, where vintage is a big question. You get in at the right time, you get out at the right time, you make Great returns, but gee, if you get into the wrong equity product in 2021 and now you're sitting here today with a couple of years just dead time behind you, you're probably going to struggle with returns. The big difference for us is unlike the kind of entry moment and entry and exit moment, I think about this more as a box, a range, a band. The key is, do we have really strong credits and are we getting an attractive return, attractive spread, for those credits. And here's the good news on the corollary to our spread, compressed. They have compressed. Is it attractive? Absolutely. Absolutely. The credit that we are seeing and the return we are earning, remember, we're at a 532, 90-day LIBOR. So when you take spreads, it's what I prefer, the 100 basis points wider spreads than we were seeing a year and a half ago. But the spreads we're seeing today, you know, they aren't that different from what we saw three years ago, and those were really attractive loans and returns, too. So I'm not being dismissive. We'll always prefer a higher spread. But that isn't what matters to us is a band in which we're earning a very good return for a very moderated risk. And we're certainly operating in that band and feel good about it. As to FR, PR, I mean, we're in a pretty tight band, but I'll turn that over to Alan.

Thank you, Mark. Brennan, I guess what I would add to that is a few things. We continue to expect to see our part one fees coming up quarter over quarter, year over year as we go through 2024. There's a series of reasons for that. One, you know, Mark just touched on the very strong fundraising we continue to see in our non-traded products like CIC and TIC. We continue to deploy good capital in products like OTF2 So as we continue to deploy, fundraise, we're going to continue to see strong increases in part one fees. Also, if you go back to the end of last year where the SOFR curve was and where it is today, throughout, let's say, 2024, we're still averaging, let's say, 20 or 30 basis points higher. And in 2025, where the curve is, we are 60 to 80 basis points higher. today than where we were back in December. So we will continue to see strong returns on our Part 1Cs, or at least we would expect to because of all these things.

Great. Thanks for that, Culler.

Thanks, Brandon.

Our next question comes from Glenn Short from Evercore ISI. Your line is now open.

Hi. Thanks. Big picture question on credit. Obviously, direct lending, you're an animal. You're expanding in healthcare infrastructure. You're expanding real estate lending, and Kibari brings investment grade. Yet, I'm still going to ask the question of, do you feel like you have enough across private credit broadly? And maybe that's just really a question on what do you already have in asset-backed finance, and what's your plan in terms of expanding there? Thanks so much. Thanks, Glenn.

It's a great question. First, I want to reinforce we indeed consider ourselves credit animals. Thank you for that. I like that one. With regard to the range of offerings, you characterized well. We certainly have built out adjacencies that take us from diversified direct lending. That led us, of course, a long time ago now to understanding the great merits of software lending, which has really worked. It led us to first lead lending, another derivative thereof that's really worked. We now have, as you point out, with our new acquisitions with Prima, we add it's very strong-rated real estate-oriented debt at a time when that market is steeply disrupted with Cuvier. We add, of course, other adjacent investment grade or stronger credit, derivative opportunities. So we definitely have widened that range, and we like that. To answer your question very spot on, we have some parts of alternative credit very strongly. As we've commented, but I'll share this again, beneath the surface, we actually do a lot of lending in areas people don't particularly share of our large business, may not focus on, but we've developed very strong skills in rail car leasing, in aircraft leasing. in ADL finance with Wingspire, in life settlements, in royalties, in healthcare, as you pointed out, we've done about $13 billion in loans. So there's a lot we have built organically, and we will continue to utilize that capability for both our diversified products and over time as appropriate in other specialized or asset-backed products. So we have the organic tools. Are there other areas, to put it rhetorically, that we could add in an alternative credit or asset-based credit? Absolutely true. So we continue to look at build, buy, and they're neither mutually exclusive nor mutually required, which is to say we've got a lot of tools to be successful in asset-based finance. We would be perfectly open to and interested in adding more tools, and we have our eyes open for that.

Thanks so much. Thank you.

Our next question comes from Stephen Chua from Wolf Research. Your line is now open.

Hi. Good morning, Mark. Good morning, Alan. Hope you're doing well.

You as well. You as well, Stephen.

So, you know, now that you've added both real estate, debt, and insurance capabilities to the platform, I was hoping you could just speak to your confidence level in hitting or approaching the dollar divvy in 2025. It might just be helpful to outline the roadmap similar to actually, Alan, how you laid it out last earnings call, just given the building block should look a little bit different than before.

Yeah, again, thank you. Look, it is our favorite topic. We talk about it all the time, which is continued path to the dollar dividend. And sitting here today, you know, we continue to feel the same way. We are moving right forward being in and around that dollar. And every quarter where we march forward up and to the right to, quote, I think Glenn's title, or the Blue Street continues, I think to use yours, We move a quarter closer, and the band effectively gets tighter when we complete steps. And it's not an enormously complicated ladder or set of steps. But when we get things done, like this quarter, we said, look, we expect it will include a strategic acquisition as part of it. We did two this last quarter. We expect we'll take three. our other BDCs, some of them public over time. We did that with BDCE, which is trading really well. In the meantime, old BDC trades at a premium to book. So, you know, we're slowly ticking it off in the sort of I'm going to compile now also that Brennan's title as well. We think we are the boring blue streak moving up and to the right. So I think I've merged with proper attribution three titles together. And, you know, that's the destination. The goal is to get to that dollar. And we continue to feel good about being in and around that level. So let me turn it over to Alan to give you the building blocks to go with that.

Thanks, Mark. Stephen, thanks for the question. We are on track to be in or around the dollar share. I'm going to... Approach this in two ways, if that's okay. I just want to remind everyone we have a significant amount of embedded earnings power in our business. We have about a billion dollars of revenues that would, over the course of three different things, that would bring our 2023 revenues up over 60%. And so that billion dollars of revenues is about a quarter of that, $240 million, is just deploying to AUM that has not yet earning fees. that we've already raised. We've got over $200 million in BDC step-up fees, of which to Mark's point, 80 we just turned on earlier this quarter in January. And those two items alone, that's almost half a billion dollars. That's over a 25% increase to our 2023 revenues. And then when you add fundraise for just our GP Stakes 6 product and our two BDC non-traded products, that's another $600 million over the course of this year and next year. that would increase revenues by over 60%. But to narrow in now on the dollar share, so, you know, Mark has already talked about a number of things. There's a lot of exciting things we're working on. Almost all of those, as I think we've all talked about in the past, are actually diluted to the dollar share. That's us putting dollars back into the business to focus on keeping our industry-leading growth beyond the dollar share, beyond 2025. There's just three things now. So last quarter there were four things we needed to do. Now there's three things we need to do to get in and around that dollar a share. Mark touched on the fourth, which fell away now. We've done an accretive transaction. We've done two. And so we checked that off. That's done. So there's three things left. And on my scorecard, at least, when I think of those three things, we've got a fundraise for our non-traded products. That's TIC, TIC, and O-Rent. And as we just talked about in the earlier question, we are certainly on track and doing very well towards achieving what we need to in fundraise for our non-traded products. So I check that as on track. Fundraise for GP Stake 6, we continue to get a lot of interest in that product, and we expect fundraising to go very well there. We expect to hit our $13 billion target. So I consider that on track as well. And then the third of the three items left is to list one of the two software lending BDCs. And I won't comment on timing for either of those, but we continue to think that there's something to do there over the course of this year or next year. So we are tracking very well to be in and around that dollar a share for 2025.

Great color and nice job weaving the titles together. So thanks for taking my fun.

If someone doesn't mind printing that somehow in a follow-up note just so I can claim that actually existed in writing, that would be great. Stephen, thank you.

Our next question comes from Craig Siegstein from Bank of America. Your line is now open. Thank you.

Hey, guys. I think they got my last name better on your call than the last one, but good morning.

Good morning, Craig.

So my question's on M&A. You've added real estate debt and insurance just this year, and I think this morning the FT is citing infrastructure as the next slightly white space. So I wanted to get your updated thoughts on M&A, and real specifically, what do you think of infrastructure equity and infrastructure debt?

Sure. So let me just take one step back and frame. Our business has a very, very clear DNA, right? We focus on a product. being buried deep in an adjacent and tightly bound set of products. And we've talked about this metaphor before, but there's different strategies. There's the all directions on the compass strategy, and many of our very successful peers pursue that strategy. You know, picture what we're doing as a northbound highway. It's got a lot of lanes. In the lanes we occupy, we intend to be V leader or A leader. We're clearly the leader in triple net lease, the leader in GP state, a leader in direct lending, a couple other cars, but that makes for a pretty uncrowded commute when there's just a few cars in the lane. And then we've added some other pieces that are direct adjacencies, and you know them, but let me now get on to these exact ones and then answer your infrastructure question. So Prima and Insurance, Cuvier, offer two quite different additions to our capability set. So, look, we're in real estate and we're in credit, and we have certainly watched for a very long time as to when we could do real estate credit. Well, not too hard to figure out the efficiency of that statement. And we've said it, you know, on these prior calls before. Here's the history with real estate credit. We, as a credit firm, of course, have been approached all the time with, I think we've now looked at close to 10,000 different loans, and certainly we've been approached about real estate loans. And the phenomenon we had for years and years is we would be willing to do the work in our current diversified products. In theory, we could do real estate loans as a piece of it. But every time we finished doing the credit work on what was behind the leases, what was behind the credit, we ended up saying, like for like, the spreads were way tighter and leveraged higher than a comparable direct corporate loan. So we didn't do it. And, you know, I don't know, the time we always said to each other, I don't understand why if you say the word real estate, all of a sudden it's supposed to be at a tighter spread. Well, lo and behold, it's not. It turns out it's not. And here we are now where the market has become very disrupted, and it becomes a very interesting point for us to bring our skills in real estate and credit into this highly disrupted market. And by bringing Prima on board, who are really good at this, remember, again, this is a very focused strategy. Prima does stuff in single asset, single borrower focus, risk retention, really good at it. This is a much higher grade product. So they have a very good book. We're not spending time thinking about, gee, what is the workout going to look like in real estate as almost any real estate lender would. So that's a wonderful addition. You're using M&A in a sort of strategic and tactical way to add some terrific skills that we can build off organically. So that's a fill-in of a really nice capability product and team. Insurance, think about that as horizontal, right? We have successfully become a leader in delivering institutional solutions, institutional fundraising, wealth, where we're a market leader. The one we've been missing is insurance, delivering solutions properly packaged, properly structured for the insurance user. Remember, we always talk about this. We don't have... different products for different people. We have different entry ramps. We customize the structures. We customize and continuously offer products because individual investors value some of that flexibility. It's different from what institutions value, so we customize their product. Now, with Puvert, we've added some complementary capabilities, but most importantly, we now have a way of customizing the solution for that user of capital. So now we have the third core leg of the stool. We now have wealth, and we have institutional, and we have insurance. So think about that as horizontal, taking our capabilities. And again, our product suite is particularly well-suited to the insurance user. And now we have the ability to bring that bundle together and deliver the solutions to not compete with the insurance industry. So I would say those two, you can see, are quite different. One adds a capability right in our sweet spot. One is horizontal. It's not really about adding new products. It's about adding a way to deliver those products in a way that's perfectly packaged for its user. So last, to the FT article. I mean, I can't control their title, and the emphasis on infrastructure is a little disproportionate. It's just compatible with what we've observed before, which is when we think about our products, which is which is downside protection with strong, predictable returns, generally current income, inflation protection, that brings you very naturally to a few areas. It brings you to, at the right moment, something like real estate credit. Okay, well, we have our foothold there. It brings you to things like asset-based lending, and we just talked about that. We have a lot of organic capabilities, and we'll have an eye on both organic and inorganic possibilities there. And to our way, another example would be infrastructure. I don't do anything in infrastructure or not. Again, I think the emphasis is a bit excessive with the title. But I think if you read through the article or kind of incorporate it with what I'm about to say, it's a natural area that's adjacent for us because it's a space that is about lower risk, principal preservation, strong returns, and income orientation. And that could either be in infrastructure debt or infrastructure equity. And so I view that as more an example of how we can stay very tight to our strategy. Do what we do well. Understand our DNA well, but do it in an adjacent product. Whether we do that or not, it's not as if, okay, next up. I think it's more about an example of how we think about the world strategically, which is to stay very deep in a very, very tightly bound, strategically aligned set of products.

Thank you. Thanks, Craig.

Next question comes from Bill Tatch from TD Cohen, your line is now open.

Okay, thank you very much for taking the question. So just one of the debates that comes up a lot is just a hire-for-longer backdrop and how does that sort of the ebbs and flows of that, the puts and takes. So I was wondering, I think the part one of these are pretty straightforward, but I was wondering if you could talk a little bit about just the resilience of the platform, particularly on the credit side, if we were to stay in a hire-for-longer and had to think through the bear case that it would have a pickup in credit losses against a portfolio that hasn't been proven over prior credit cycles as currently put together. Thank you.

Sure. And then Alan and I can write each comment on it. But let me start with the headline. Look, we do floating rate debt. That is our business for our investors. And that mathematically, definitionally means when rates are higher, the absolute returns for our investors are on average higher. And when rates are lower, on average, they'll be a little bit lower. Sitting here today, and look, there's a lot of things we've been right about and wrong about, and that will continue to be true. But I will say that a year ago, and a lot of people on this call probably can check us on this one, we have been talking about the hire for longer case for quite a long time. And we see it through our portfolio. Remember, we have almost 400 companies that we lend money to, and we study them and work with them very, very closely. And what we have seen consistently is, for the last year and still today is inflation has not gone away. Now that's consensus view. It seemed like a lonely voice in the woods a year ago. Even four months ago, we'd go and have this conversation when the world was talking about seven rate cuts. Now we're in a world where it's somewhere balanced between zero rate cuts and one. Right, that's the new consensus. And that's a reality of what's happening from the ground up. We see wage pressures continue. We see cost pressures continue. Importantly, we see all these companies raising their prices. Someone's paying for that. So when you add it all together, inflation's not, of course, it's not raging the way it was a year and a half ago. It's very real. So, look, that does bring us to the higher for longer view from the ground up. We're not macro experts. But as a result of that, in a higher for longer world, which now seems pretty likely. Of course, that does fall through in ever higher returns for our investors and, you know, to a degree, FRPR. Remember, what's really important, though, other than the small amount of variance around fee-related, which is not the FRPR, which is a modest part of our revenue base, you have to remember we at Blue Owl, and I know you know this, but I'm saying it more broadly, we at Blue Owl get paid fees to manage the business. We don't carry. We have no capital markets fees. We don't have all these other variable fees that other people have to manage, which is complicated. Our business is very straightforward, and even with gyrations and spread or whether we do have a rate cut, don't have a rate cut, those are really, really moderate impacts on our business. So I'm going to let Alan comment on that, and then I'll come back to the credit question you had in its application.

So... Two points here, I guess. One, I made the comment earlier in 2025, when you look at the curve today versus at the end of the year, we're 60 to 80 basis points higher on the curve than where we were. To translate that to how that impacts our business, I mentioned in the last quarter's call when asked about a rate decline question, I had said that about 100 basis points of rate decline would be about $40 million, 4-0, $40 million of increased or decreased, and now in this case it's increased, as opposed to the question last quarter, which would be decreased, about $40 million of increased annual management fees.

And then let me tack back on to the credit question and attack it a couple ways. First of all, and I said this before, within the land of our credit business, credit is everything. It's what we focus on. It's what we focus on from day one. It's why we focus on the large end of the market. It's why we focus so intensely on low, low-end values, which in our portfolios, they remain, on average, in the 40s. And in software, lower. Our portfolio performance. We look at our most recent results. On average, the EBITDA and revenue in our portfolio companies grew on average in the last quarter that we just finished our data analysis on at double digits. Double digits. So we understand, and of course we're always thinking about, gee, the credit downturn, which is really an economic downturn. There's no separate thing called a credit downturn unless you do credit poorly, and I feel confident we haven't done that. And so at the end of the day, you know, we're still growing robustly in our portfolio on average. Of course there's going to be peculiar credit issues. Of course there's companies that have their own peculiar challenges. But remember, our non-accruals are well below 1% of our book. And our loss rate historically now has been at seven basis points per year. So I think we're starting from an incredibly good place. And here is, you know, I guess two things to take away from that. We care intensely about credit. As an investor in the Blue Owl stock, though, again, remember, we get paid fees to manage these funds. So ultimately, that's not really a question that bears on the shareholder of Blue Owl in any meaningful way. It matters to us, and it matters a lot to our LPs, and that's who we work for every single day. So we're intensely focused on it, but it's not really an earnings question. Last point, you know, I think this is what also gets lost in the conversations about credit. I absolutely do get and agree that, you know, people can say, hey, we just don't know because there's this new thing called private credit, not so new, and it hasn't been fully tested. Well, it has gone through its tests. But it is a good way of just creating, for those who wish to, uncertainty. There's a lot of data, a lot, right? I just told you our data on nearly 100 billion of loans, and it hasn't exactly been smooth sailing to the land of COVID and wars and runs on banks anymore. And again, it hasn't been a deep, dark recession, but actually, deep, dark recessions have happened in the land of leveraged credit. This isn't new. We're making loans to the same companies, except with tighter documents and lower loan-to-values. than the syndicated market did back in the 2000s. And we actually do know what that looked like. And frankly, if it was even that bad, so to speak, think about the returns. We're starting with unlevered returns today, depending on, again, which spread we're all using, but 10% to 12%. You can take pretty meaningful changes in defaults and still have one heck of a risk return. So, you know, we think about it all the time, but I really think this sort of propensity of people saying, hey, this market's just untested, it actually is extremely well tested. It just hasn't been tested, frankly, in this more durable format. And I think what you will find, when that test comes in this exact format, I think you're going to find out that loan losses are lower. Because you have... Parties in bilateral arrangements with very aligned incentives, which is, you know what? We all want this company to do well. We all want this company to thrive and pay back its capital. There aren't games. There aren't tricks. There aren't credit default swaps. There aren't credit on creditor violence. All that stuff will happen in the syndicated market. So, yeah, you'll live that stuff again. Private credit, I would proffer that you're going to see a better experience when that version of days comes again.

Thank you.

The question comes from Patrick from Autonomous Research. Your line is now open.

Hey, good morning, everyone. My question is on Kuver. Could you help us frame maybe how much run rate organic flow you expect from the insurance entity post-close, maybe how fast that has been growing? And then more broadly, contrast how you see OWL's insurance TAM versus others given your asset classes are generally outside of the lower fee, quote, unquote, fixed income replacement assets most of the other alts are focusing on. Thank you.

Sure. So I don't want to speak on behalf of Kuvera, the insurance company, which remember, we are by the asset manager, and we're an asset manager, balance sheet-like provider of management services, and they are a really strong insurance originator. So that's their side of the equation. I don't mean that in a lack of partner way. We're very much partnered, but I want to understand that they are the insurance company. We are their partner asset manager. With that said, we know that, for example, last year, they grew their book by $5.6 billion. So part of this whole exercise was to get more capital freed up and focused on supporting the growth of their insurance company, including our $250 million preferred investment. So, you know, last year was $5.6 billion. They were looking for more capital to continue to grow, and to grow, I think, will continue to see very healthy growth. They have a great origination business. I've mentioned this before, but they punch way above their weight. Here's a firm of a size that is in the Japanese market, which is one of the most discerning markets, as I understand it, for these types of annuity products. And they're right in there with the very biggest and the very best. And I think it's a real credit to what they've done. on the insurance origination and management side. So I don't want to forecast their number for them, but I think it's safe to say that given the growth they've had in the past, we expect to see that kind of growth continue. That's why they want the capital.

The vast majority of that growth is going to come for assets that we manage going forward.

Yeah, and remember, we now have acquired the whole of their asset management business, which means we do have all the product capabilities built out. that you just described. So with this brings us the ability to deliver the comprehensive solution you just postulated about others. So we do have all that now. Our focus isn't on the low fee products. But we have the capabilities now and it's not like we dismiss having that or just having the comprehensive set of solutions. It'll be part of our growth profile going forward too. So we do have that full range today. In terms of the addressable market, it's actually a really interesting question. We all know this is evolving in a relationship between insurance and asset management or alternative asset managers. And there's different models, and I don't think there's one singular right model. I will say that our model is built around staying very focused on being really good at asset management and letting insurance companies be really good at insurance. and being a partner to them as opposed to a competitor with them, which is very consistent with our model. We are a capital solutions provider. We're the picks and shovels, right? We do that. We provide capital solutions to GPs themselves with our GP solutions business, help them grow their businesses. We provide capital solutions to corporate owners of real estate to help them grow their businesses. We provide financing solutions to to PE portfolio companies, and now with our blue-on strategic equity, we provide GP continuation capital. All of those are solutions to, for example, a private equity firm, not competition with the private equity firm. So I think we've got a very clear focus, and same thing in insurance. We are now, we are their partner, and we're here to help them grow and not try to take growth from them.

All right, moving forward to our next question from Christian Love from Piper Sandler. Your line is now open.

Thanks. Good morning. I appreciate you taking my question. You hit on this a little bit with a prior question, but just with the announced acquisition of Prima, you explained why you did the deal and how you do the credit work, but can you discuss what opportunities you're most interested in once the deal closes? Would you expect to be active in distressed areas such as deals in office or be active in multifamily or kind of other areas like CMBS? In addition to deals more related to your triple net lease product but on the debt side. Just curious your thoughts here and where you might add capital in this part of the business when the deal closes.

Sure. Well, let me start with this observation. On every acquisition we make, our mission is to have a best-of-class team as a part of that. And we have that with Prima, which also means first job is to make sure we only enhance. doing well, what they already do, we, once combined. And that's been true. Look at our Oak Street business. Now, the real estate business, that's a business that has thrived because they're great at what they do. Now we, but in this phrasing, I'm purposely trying to be intentional about this idea of not ever disrupting, only enhancing the investment process. So our first job is to continue to do a fantastic job for Prima LPs in the products they have. Now, with their capabilities and ours, there are opportunities for us to deliver great results to their existing or new LPs and do so well for our shareholders. When you think about where we'll go, remember we also have now brought on a world-class real estate finance professional, Jesse Hong. Jesse Hong, who's quite well-known in the world of real estate finance, having led this at GIC, will be joining us to lead this overall initiative. So Prima comes on board. We'll keep doing Prima really well. And then we will extend. To answer your question again, remember our DNA and our comfort. Our idea is to go into a market and find ways to take a risk out and earn really attractive, stable returns. So that would tend toward leaning our mindset, not toward opportunistic distress. Let's go find, you know, a messy office building. Rather, it's, hey, this is a dysfunctional market now. We can go in and do very high quality things that are much lower leverage, much lower. you know, let's deepen the cap stack and earn a very attractive return providing that capital. So I think that frame of reference is likely to be more where we live than, you know, all of a sudden trying to move out to the periphery of return seekers. That's not our mission. Our mission is to have sleep at night well money for our investors and deliver really good returns for it.

Thank you, Mark. Appreciate you taking my question. Of course. Thank you.

Our next question comes from Brian McKenna. Your line is now open.

Great, thanks. Good morning, everyone. Most questions have been asked, but just a quick one for me. So you've clearly been active on the M&A front, and you've also made a number of senior hires as well. So I think integration of all these businesses and people will be important to the longer-term growth and success of Blue Owl. So what are you doing today to make sure integration of all this is successful over time? And I guess what I'm getting at is how do you make sure – one plus one equals more than two.

That is exactly right and exactly what we focus on and exactly where I think we've developed now, you know, I'd say our muscles to do it well. We think integration is critical. And that is part of, again, the benefit here is don't disrupt anything about the strong investment performance and practices of businesses, but enhance them with the intellectual capital and capabilities that we have. Bring the backbone that we have operationally to each of these companies to help support them doing an even better job at the investment business. You know, I want to make sure we say this because we've talked a lot about M&A on here. The vast preponderance of our growth is organic. And the M&A is actually pretty moderate when you get down to number of people, impact on business. Remember I just talked about Prima. It's a wonderful business. It comes with a wonderful team. It does something very specific, though. It's not, you know, this isn't some grand, complex integration. Actually, it's pretty straightforward. And that's not to take it lightly. It's just to say we could distinguish between complicated integrations and acquisitions, not something that we pursue with any great vigor, and relatively simple ones like a primo. So, you know, an acquisition is not an acquisition in the generic sense. That said, I think we feel very, very good about our pathway. And let me just point back to real estate. So Oak Street, when we acquired Oak Street, now our real estate business, I believe it had about $70 million in FRE. And today, we're running at about $200 million of FRE. Triple. Triple that business. And Mark Czar and... his team, you know, and Jared and others have been phenomenally effective as an integrated part of this firm. Michael Ryder, who comes in as operational, integrates a lot of operations, you know, that has been an absolute case study for us in how we can do this. And so, you know, we learn our lessons. Again, we're not saying we're perfect by any measure, but I think we feel very, very good that we can handle these acquisitions, and we'll be very, very careful as we look, and we'll continue to look at organic and inorganic growth, but let's not lose track of the fact that most of our growth has been and likely will be organic growth up and to the right, the boring blue streak up and to the right.

Great. Thanks, Mark, and congrats with all the momentum.

Thank you. Thanks, Brian.

We don't have any questions at the moment. I'd now like to hand back over to Mark for final remarks.

Great. Thank you all very much. Really appreciate the time and your patience and your interest. And we're going to go away and eat credit animals and try to do some more boring quarters for you. But we do appreciate it very much. And back to it.