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Blue Owl reported results this week after joining courses with Meta on Ai Data Centers. The firm reported a twenty one percent year over your jump in AUM as it continues to reinforce its long term growth pipeline joining us for mores. Mark Lipschual's Blue Owl Capital COCEEO Mark, wonderful
to have you on this morning. And look, I know whenever anyone asks about the equity price, you very soonly are like, we don't concentrate on the short term, but there was a decline after earning, so we have to address it. You had record fundraising, maybe a concentration on some of the flat fees. Why the disconnect between the two.
Yeah, the look, we had a great quarter.
We had continued extraordinary growth, twenty plus percent growth on the top line. I think there is there is, as you just noted, this disconnect, which is having acquired very successfully and very fortunately businesses like our digital infrastructure business IPI, you issue shares, but then you don't have a full year of their results.
So it's actually just math.
As you look at our run rate growth per share, it is continuing to accelerate and it continues to be incredibly robust. So yeah, there's a little bit of math, but it really is just simple math.
Businesses is really thriving.
I learned so much from watching Danny's interviews with people like you, So she.
Had to be clear, you're learning more from Mark than you are from Yes, I'm just.
Happy to be there, and from you know, z and from Henry McVay, and from John Gray. You were talking with him, Danny, and he was saying something about easing excess returns in private capital, and there's a market saturation, we see various tight spreads and generally lower yields or headed lower.
What do you think about that? What do you think about that idea?
So I would decompose the question of kind of yields returns into three components, right, one, of course is credit quality first and foremost. Look, at the end of the day, the most important thing is that you're making good loans and getting paid.
Back, no cockyages.
So we want a very healthy ecosystem, and we have a very healthy ecosystem, we really do, and we can certainly come back to that. So credit quality is excellent in our book, and that doesn't mean no defaults everyone's going to have defaults now. And then we all we said, multi trillion dollar industry, that's okay. You just can't have many and you have to get good recoveries. And that's exactly what we do. It blow out by the way, so to our peers.
And so to the banks. So the system is in a strong place.
Then of course there's base rates, and of course the direction of base rate travel.
Everyone obviously sees it having east from the peak.
But again, every time consensus bills to oh, it's obvious, you look at the FED commentary. Now it's not quite so obvious how fast rates are going.
To go down.
And then last is spread. And spreads are on the kinds of the lower side of where we operate, but over a ten year window, they ebb and they flow. And remember we're building portfolios have hundreds of names in them. Some are from a couple of years ago, some are current, and most importantly, our overall spread, the premium that we offer to the alternative the traditional marketplace has actually been stunningly steady and close to a couple hundred basis points.
So yeah, we don't live in a vacuum, and so spreads in the whole world are tight.
Of course ours are tighter. Equity markets are at all time highs.
Like we don't live in isolation, and in that world, spreads are a little bit tighter, But in total it continues to do. We continue to deliver really outstanding investor results, and that's why we had record fundraising results.
I'd say, I really like that point you made about Okay, if we're concerned about private credit, shouldn't we be concerned about equity markets too. They both are trading and reflect a large part of this economy. I would then love to get your take on Meta yesterday. I know you're not a public stock GUYE, but when they issued more debt, Meta shares fell, do you think that there are starting to creep into the market. Some concern with metav of
course is one of your partner. But the large hyperscale spending and the amount of financing and debt that they're taking on, is there any reason to be concerned because clearly the equity market is starting to show at least a little bit of nerves about it.
Well, there's been several earning reports this year this week from tech companies, and actually some of them performed extraordinarily well announcing big capital programs, right Amazon, and so I don't. I think it's hard to attribute it to one specific action.
In fact, the collective result is, of course tech is touching all time highs at the moment, where as of this week, people announced, you know what, We're actually going to spend a lot more on AI infrastructure than we thought, much more actually, right, this continuing curve, every time we look, it just keeps going up. And you listen to the commentary, and the commentary is we don't think we're spending enough.
Microsoft says we don't have actually enough capacity to even fuel both AI and kind of our core business.
So that gap, well, very expensive to cross.
That rubicon, of course, is what creates the opportunity for great partnerships, for us to bring that kind of capital in conjunction with these spectacular companies to build the backbone, which for us is the very safe way to participate build the backbone for this infrastructure, for the infrastructure for this AI future.
I was talking with z about the intel he gathers and you obviously are in the same sort of privileged position, right, You're talking to so many portfolio companies and CEOs and you have an incredible view of, for example, the labor market. So what are you seeing in your portfolio companies or what are you hearing people say about the economy in regards to the labor market. Are they going to be slowing hiring or even reducing jobs as they replace some of that productivity with AI.
So portfolio companies are let's start with very strong and healthy. We have four hundred or so in our portfolio and on average growth remains both revenue and earnings in the high single digit.
So it's a very healthy place now when.
Strong companies can strong companies can reduce head count absolutely so.
Now we have not seen any meaningful change in.
Labor practices, but it is certainly the case that technology itself is making a lot of activity already more productive, and we're at the very front edge so this all. It is certainly the case that when you build and invest this kind of capital, you do ultimately have to get a return on it, and some of that will
disrupt the traditional labor market. We are not hearing anything I would call systemic or traumatic at this point within the portfolio, and to the degree it's happening, it's really more about efficiency technology, it's not about concern about the economy today.
Blue Owl has also been on the forefront in moving into retail and offering wealth products to a wider swath of investors than traditionally had been. I just wonder mark because this has been appeared where it feels like people are laser focused with the magnifying glass. If I can mix all my metaphors on private credit with Jamie diamond saying cockroach here a concern about fraud there, has it
changed it all retail sentiment? Has it been harder to reach those people just in the volatility of headlines that have been come out.
So here's the really encouraging part about the wisdom of what you call retail investors individuals taken together. You know, I think there's a propensity to want to either sort of people say, oh, they don't understand. I actually think there's incredible wisdom in the individual investor world. And by the way, they're advised by really strong people, right the financial advisors at the Merrills and the Morgan Stanley's and the JP.
Morgans, the Goldmansacts.
I mean, all these Wells, Fargo, all these fabulous places are advising people on making these choices.
So here's what we're seeing.
Wealth flows are accelerating even now this month over last. We see this every day, so very data driven business for us. We are accelerating in wealth this month over last. So actually people are seeing through this noise, and it
is a lot of noise. And to your point about you know, sort of an item here, an item there, you know, I would suggest taking when we take a step back, because there's almost this kind of this mass hysteria taking hold about credit in general, private credit in particular, and it's just not anchored in any facts.
It's anchored by repeating.
A few anecdotes and then kind of just creating the well, hey, you never know. And some of that is intentional, some of it, I'm sure is quite sincere by people that just don't just aren't sure. But the truth is that our system, the private credits, not just bluall our peers are very good at what they do, the banks are very good at what they do, and in total, fortunately for the economy, we have a very healthy credit ecosystem. And to the earlier point, Danny, you repeat it, which
something is really important. Remember, you cannot believe that we have an unhealthy credit ecosystem and a healthy stock market.
Those are not compatible.
Ideas well, and I mean, as you point out, the concerns are belied by the fact that investors are still falling all over themselves to get access to funds like yours.
Mark great having on the program, Thank
You so much for joining US Market Schultz there of Blue Owl Capital,