BLUE OWL CAPITAL INC. Q1 FY2025 earnings call

• Capped off a successful 2024 with record fundraising, totaling $27.5 billion in equity and over $47 billion including debt. Deployed $52 billion in credit gross, driving 26% FRE growth for the year.
• Business has grown FRE at least 25% annually since public listing, with management fees growing at over 35% annual rate. Approximately 90% of management fees come from permanent capital.
• In 2024, equity raise was $27.5 billion (75% higher than 2023), and total raise including debt was over $47 billion. First quarter 2025 raised over $6.5 billion, with $4 billion in credit, over $550 million in GP strategic capital, and $2.2 billion in real assets.
• Direct lending portfolio is well-positioned with first lien senior secured loans, focusing on larger borrowers, and has a 13 basis point average annual realized loss rate. Alternative credit has a defensive strategy with amortizing assets providing downside protection. GP stake strategy owns stakes in growing alternative asset managers, with managers' AUM growing at 17% average, 70% higher than industry growth.
• Real assets benefit from inflationary environment and higher rates, with net lease strategy having strong commitments and monetization, and digital infrastructure fund reaching hard cap.

For the quarter, in credit, gross origination in direct lending was nearly $13 billion, with $4.5 billion in the quarter. Direct lending portfolio gross returns were 3.1% in Q1 and 13.3% over 12 months. In GP strategic capital, over $550 million was raised during the quarter, with roughly $450 million attributable to the large cap stake strategy, bringing the latest vintage to $7.3 billion. In real assets, $2.2 billion was raised, primarily from ORENT, digital infrastructure, and co-investments. Subsequent to quarter end, Digital Infrastructure Fund 3 reached a $7 billion hard cap. Revenue contribution details weren't explicitly broken down by percentage in the transcript, but key segments like credit, GP strategic capital, and real assets were highlighted in terms of fundraising and performance.

• Announced an annual fixed dividend of $0.9 for 2025 or $0.225 per quarter, up 25% from prior year. Expect over the next five years about 20% growth in FRE per share. Anticipate institutional fundraising will step up in 2025 with next vintage launches and ongoing fundraising. Digital infrastructure fund 3 reached $7 billion hard cap, and expect to close private phase fundraise for alternative credit product this summer.

• Market volatility and uncertainty, including geopolitical events, rate volatility, and potential recession. Exposure to global trade changes and tariffs, which could impact the business. Uncertainty in inflation, economic growth, and consumer demand, which are outside the company's control and could affect investor behavior and market conditions.

Q: When we get down to the earnings per share, it's the growth rates aren't as big. How to bridge the gap from stable now to better earnings per share growth over next year or two to get into 20% growth?

A: With acquisitions rolling through, there's a small gap between FRE growth and FRE per share growth, which will narrow. Expect over next five years about 20% growth in FRE per share.

Q: Have you seen any evolution in the behavior of retail investors and how they allocate to alternatives during periods of volatility?

A: Addressable market for private wealth is gigantic with low penetration rising. During volatility, income-oriented, inflation protected, downside protected strategies resonate, and products performed well last quarter. New platforms rolling out products, like Edward Jones launching alternatives with Blue Owl.

Q: On GP stakes, management fees and GP stakes look a little light relative to AUM growth. Explain the decline and 2Q run rate?

A: Some small catch up fees in 4Q run rated last quarter, and GP Stakes Fund 4 had a fee step down end of October, so 1Q had a fee step down, but 2Q has a clean run rate with no real catch up fees.

Q: On spread and pricing dynamics in the market, what have you seen in private markets, returns on new origination, and competition vs BSL market?

A: Dislocated environments are good for business. Syndicated market is shut down. Spreads are expected to widen back out, with private credit being more durable and predictable. Private market spread reset takes time compared to public market. See more market share accruing to private credit as public market is on again off again.

Q: On retail, how is April shaping up relative to prior months, and thoughts on partnerships with traditional asset managers?

A: Tracking well against prior months, about 20% down from last month. On partnerships, traditional asset managers partnering with Alts firms are seedlings, with liquid solutions having some private, but Blue Owl working on meaningful private solutions for broader channels and engaged in partnership conversations.