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I'm standing by with Mark Libschaltz, who of course is the co CEO of Blue Owl. Focuses heavily on private markets, but of course you're a publicly traded firm and I've seen significant appreciation this year in the markets.
When you think about the path.
Forward, is it really going to be tried and true vanilla private credit that's driving the growth from blue Owl or is it going to be something else given that you've made so many acquisitions in spaces outside of traditional direct lending.
So for blue Owl and always a treat to be here with you For blue Owl, I think three words would I would focus on. There is scaling, there is innovation, and there's diversification.
And those three together.
I think are the kind of words I'd keep in mind when I think about the future of blue Owl. Take direct lending. It is a fantastic business. We're one of the market leaders. We've been able to deliver outstanding results for our investors are LPs, which ultimately is the customer base, and as a result, that's going to continue to be a great business. But that's about incumbents and leading with scale and we're fortunately one of those people.
That's a great business for us.
But when you look forward backward, that was a great place ten years ago.
We identified that opportunity.
Ten years ago we identified private wealth as a channel that's become a huge opportunity. People almost looked at us cross eyed when we started that ten years ago. So thankfully we've established great positions there. That's about continuing to scale diversification. As you said, we've added products organically and inorganically by acquisition. And then innovation to me is really the tag where the matters most, which is it's about
going where the markets are going next. Private credit, it's not that the story has been told, but we know what the story is. What's new and next and important for our shareholders and our investors is the alternative credit business.
That is to say, asset back credit.
It's data centers and the digital economy, digital infrastructure. That's where we're going next. That's where the innovation is really going to come from.
And the next leg of really I think very attractive growth.
You know, now that you are integrating these acquisitions, what are the numbers to support that growth? I know that you and I have talked about asset back to finance, for example, and that by definition the growth would be faster.
So what do these growth rates look like?
And these businesses outside of direct lending.
So while use this.
By kind of templar example, think about the real estate business. We acquired Oak Street market leader in triple net lease. Here's a business we're already we have since acquisition. Our latest fund doubled in scale from the prior one that's already largely committed. We'll be back in market next year
with the next vintage of that product. Oaks Street has tripled as a part out just in the last few years and very importantly, through a tumultuous time in the generic word real estate has delivered outstanding results and it is perfectly positioned for and less soot forward looking on shoring digital infrastructure again in sort of the form we've done today with people like Oracle, where we've been able to build data centers at a complexes and own that buildings the physical buildings like we.
Have done as market leader in Oak Street.
That's a perfect template for where we're going with things like the acquisition of Atalaya.
We've got it fully integrated.
We have a great integrated operation between now our asset back credit and our direct lending credit. And what that means is we can originate share ideas, share opportunities and do in now direct lend, do in asset back credit what we did over the last ten years in direct lending, which is, we believe become one of the market leaders in that case and probably a seven trillion dollar addressent market.
When you think about the private credit world right now, there's a new player in town in a much bigger way now with Blackrocks acquisition of HPS. What does that mean to you to have You know, HPS has been around, but Blackrock now also as a new competitor.
So I'm big on actions speak louder than words, and I have a ton of respect for Blackrocks.
So what do I take from it Blackrock has?
Likewise, I think I come to acknowledge, grasp the enthusiastic about the fact that private markets are a critical part of the future.
It's where the growth is going to be.
And again I always give back to the why is because the private market solutions for the end investor.
They work.
It doesn't mean every solution by every manager at every moment, but it means the right solutions done by the right managers deliver great risk return for the investor, and so I think Blackrock is by its actions as the biggest in the world saying hey, listen. The public market great, it will always be part of an important capital market ecosystem, but the private markets, written large, are the future.
Is there a point at which the space is too crowded?
I imagine, well, one can imagine such a such a moment, and I think we're actually seeing it in parts of the overall ecosystem. I think it's safe to say that there will be fewer private equity firms five years.
From now than there are today.
There's an over proliferation, but that's been forty years, fifty years in the making. So you know, when I look at markets still like direct lending, they're still very young by the measure of evolution of the opportunity market share innovation, and certainly places like asset back Finance are nacent hyperscale data centers IPI the market leader without a question in helping investors access this very very interesting infrastructure like way
to play the digital economy and AI. You know, those are new, so they're kind of the opposite of crowded, they're pioneering spaces and I get very excited about that. So I know, I actually don't think crowding is the is the concern of the time.
So what about the competition? We always talk about this banks versus the non banks. Right, you have seen leverage finance markets way open.
Now what does that.
Mean in terms of the m and a comeback that investors are expected and the role that you and your rivals have in it.
Yeah, the active role of the syndicated or liquid bank markets is a bit of a double edged sword, right, which is to say, look, in twenty twenty one, the markets were wide open and that was one of our busiest times. In twenty twenty two and twenty twenty three they were entirely closed, and that was a wonderful time for probably a different reason, right, which is there was kind of no alternative choice for someone to want to act.
You'll probably a bit like you know, the three three bears somewhere in between. It's pretty good actually, right.
We want there to be a vibrant market that catalyzes activity. The biggest negative if I think about what was a terrific here in twenty twenty four, but when I look at twenty twenty five and frankly I have even more optimism. The biggest missing piece was just volume of activity. People just weren't doing enough to many uncertainties on certainties around interest rates, on certainties around politics, a therefore or related.
To an inactive syndicated market.
We need those markets so people feel the confidence to go do them and eight or do the trans action. So I feel like the setup in twenty twenty five. We've always said this, We welcome a vibrant liquid market and in liquid market, and sure, when markets are fully closed, our spreads are a bit higher. When markets are fully open, our spreads are a bit lower. But our businesses deliver a meaningful premium and a great risk return in any of those markets, and that's working.
You know, you mentioned interest rates is part of the consideration here as well, and there's a lot of question about what they might look like in twenty twenty five, particularly in light of the tariff policies put forward by the President elect. Do those policies concern you at all? Do you think that inflation could be stickier than a lot of people are accounting for right now?
So you and I recall talked about this probably over the last year and a half.
You know, we have had a view that remains our view today that higher for longer is the path forward. And I say that partly just anchored in this historical reality. The rates we're talking about today are not a typical zero is atypical. No, I'm not predicting species a great path and I imagine they'll moderate some over time, but we've already experienced something. This time last year people were talking about seven rate cuts and we said, we don't
see it, we don't understand it. We don't see it because the inflationary pressures are still there, and frankly, in a strong economy, and I think we have the good prospects for a strong economy in twenty twenty five, and as you said, adding trade considerations and other geopolitical dynamics, there was a lot of reason to frankly think rates stay relatively speaking higher, candidly, no surprise, and a floating rate business.
You know, we're okay with that resultant.
And really quickly here we only have about like thirty seconds left. But if you had to call how many rate cuts? I never ask you this, but if you think rates are hired for longer. How many times do you think if I can cut through the end of next year.
So I have to acknowledge the beauty of my business. And perhaps it's my own ignorance, but I don't know verat cuts I'm confident. I don't know if I knew there'd be a lunch easier way to execute this business. We have a thousand people, so we can deliver the results we do. I knew the path of rates side of a better way, but I can tell you this being in a senior secure floating rate business, which we are, I'm there because I don't have to make tent determination.
Mark, we thank you so much for joining us here, of course, at the Gomezex Financial Services conference. That is Mark Glipschaltz. He's the co CEO of Blue Owl