WEBVTT - Blue Owl Co-CEO Marc Lipschultz Talks Private Markets; Interest Rates

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>I'm standing by with Mark Libschaltz, who of course is

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<v Speaker 2>the co CEO of Blue Owl. Focuses heavily on private markets,

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<v Speaker 2>but of course you're a publicly traded firm and I've

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<v Speaker 2>seen significant appreciation this year in the markets.

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<v Speaker 3>When you think about the path.

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<v Speaker 2>Forward, is it really going to be tried and true

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<v Speaker 2>vanilla private credit that's driving the growth from blue Owl

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<v Speaker 2>or is it going to be something else given that

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<v Speaker 2>you've made so many acquisitions in spaces outside of traditional

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<v Speaker 2>direct lending.

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<v Speaker 1>So for blue Owl and always a treat to be

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<v Speaker 1>here with you For blue Owl, I think three words

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<v Speaker 1>would I would focus on. There is scaling, there is innovation,

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<v Speaker 1>and there's diversification.

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<v Speaker 3>And those three together.

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<v Speaker 1>I think are the kind of words I'd keep in

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<v Speaker 1>mind when I think about the future of blue Owl.

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<v Speaker 1>Take direct lending. It is a fantastic business. We're one

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<v Speaker 1>of the market leaders. We've been able to deliver outstanding

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<v Speaker 1>results for our investors are LPs, which ultimately is the

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<v Speaker 1>customer base, and as a result, that's going to continue

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<v Speaker 1>to be a great business. But that's about incumbents and

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<v Speaker 1>leading with scale and we're fortunately one of those people.

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<v Speaker 3>That's a great business for us.

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<v Speaker 1>But when you look forward backward, that was a great

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<v Speaker 1>place ten years ago.

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<v Speaker 3>We identified that opportunity.

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<v Speaker 1>Ten years ago we identified private wealth as a channel

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<v Speaker 1>that's become a huge opportunity. People almost looked at us

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<v Speaker 1>cross eyed when we started that ten years ago. So

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<v Speaker 1>thankfully we've established great positions there. That's about continuing to

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<v Speaker 1>scale diversification. As you said, we've added products organically and

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<v Speaker 1>inorganically by acquisition. And then innovation to me is really

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<v Speaker 1>the tag where the matters most, which is it's about

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<v Speaker 1>going where the markets are going next. Private credit, it's

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<v Speaker 1>not that the story has been told, but we know

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<v Speaker 1>what the story is. What's new and next and important

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<v Speaker 1>for our shareholders and our investors is the alternative credit business.

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<v Speaker 3>That is to say, asset back credit.

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<v Speaker 1>It's data centers and the digital economy, digital infrastructure. That's

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<v Speaker 1>where we're going next. That's where the innovation is really

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<v Speaker 1>going to come from.

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<v Speaker 3>And the next leg of really I think very attractive growth.

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<v Speaker 2>You know, now that you are integrating these acquisitions, what

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<v Speaker 2>are the numbers to support that growth? I know that

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<v Speaker 2>you and I have talked about asset back to finance,

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<v Speaker 2>for example, and that by definition the growth would be faster.

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<v Speaker 3>So what do these growth rates look like?

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<v Speaker 2>And these businesses outside of direct lending.

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<v Speaker 3>So while use this.

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<v Speaker 1>By kind of templar example, think about the real estate business.

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<v Speaker 1>We acquired Oak Street market leader in triple net lease.

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<v Speaker 1>Here's a business we're already we have since acquisition. Our

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<v Speaker 1>latest fund doubled in scale from the prior one that's

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<v Speaker 1>already largely committed. We'll be back in market next year

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<v Speaker 1>with the next vintage of that product. Oaks Street has

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<v Speaker 1>tripled as a part out just in the last few

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<v Speaker 1>years and very importantly, through a tumultuous time in the

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<v Speaker 1>generic word real estate has delivered outstanding results and it

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<v Speaker 1>is perfectly positioned for and less soot forward looking on

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<v Speaker 1>shoring digital infrastructure again in sort of the form we've

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<v Speaker 1>done today with people like Oracle, where we've been able

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<v Speaker 1>to build data centers at a complexes and own that

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<v Speaker 1>buildings the physical buildings like we.

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<v Speaker 3>Have done as market leader in Oak Street.

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<v Speaker 1>That's a perfect template for where we're going with things

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<v Speaker 1>like the acquisition of Atalaya.

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<v Speaker 3>We've got it fully integrated.

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<v Speaker 1>We have a great integrated operation between now our asset

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<v Speaker 1>back credit and our direct lending credit. And what that

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<v Speaker 1>means is we can originate share ideas, share opportunities and

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<v Speaker 1>do in now direct lend, do in asset back credit

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<v Speaker 1>what we did over the last ten years in direct lending,

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<v Speaker 1>which is, we believe become one of the market leaders

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<v Speaker 1>in that case and probably a seven trillion dollar addressent market.

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<v Speaker 2>When you think about the private credit world right now,

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<v Speaker 2>there's a new player in town in a much bigger

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<v Speaker 2>way now with Blackrocks acquisition of HPS. What does that

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<v Speaker 2>mean to you to have You know, HPS has been around,

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<v Speaker 2>but Blackrock now also as a new competitor.

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<v Speaker 1>So I'm big on actions speak louder than words, and

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<v Speaker 1>I have a ton of respect for Blackrocks.

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<v Speaker 3>So what do I take from it Blackrock has?

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<v Speaker 1>Likewise, I think I come to acknowledge, grasp the enthusiastic

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<v Speaker 1>about the fact that private markets are a critical part

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<v Speaker 1>of the future.

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<v Speaker 3>It's where the growth is going to be.

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<v Speaker 1>And again I always give back to the why is

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<v Speaker 1>because the private market solutions for the end investor.

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<v Speaker 3>They work.

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<v Speaker 1>It doesn't mean every solution by every manager at every moment,

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<v Speaker 1>but it means the right solutions done by the right

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<v Speaker 1>managers deliver great risk return for the investor, and so

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<v Speaker 1>I think Blackrock is by its actions as the biggest

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<v Speaker 1>in the world saying hey, listen. The public market great,

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<v Speaker 1>it will always be part of an important capital market ecosystem,

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<v Speaker 1>but the private markets, written large, are the future.

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<v Speaker 2>Is there a point at which the space is too crowded?

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<v Speaker 1>I imagine, well, one can imagine such a such a moment,

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<v Speaker 1>and I think we're actually seeing it in parts of

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<v Speaker 1>the overall ecosystem. I think it's safe to say that

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<v Speaker 1>there will be fewer private equity firms five years.

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<v Speaker 3>From now than there are today.

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<v Speaker 1>There's an over proliferation, but that's been forty years, fifty

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<v Speaker 1>years in the making. So you know, when I look

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<v Speaker 1>at markets still like direct lending, they're still very young

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<v Speaker 1>by the measure of evolution of the opportunity market share innovation,

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<v Speaker 1>and certainly places like asset back Finance are nacent hyperscale

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<v Speaker 1>data centers IPI the market leader without a question in

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<v Speaker 1>helping investors access this very very interesting infrastructure like way

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<v Speaker 1>to play the digital economy and AI. You know, those

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<v Speaker 1>are new, so they're kind of the opposite of crowded,

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<v Speaker 1>they're pioneering spaces and I get very excited about that.

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<v Speaker 1>So I know, I actually don't think crowding is the

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<v Speaker 1>is the concern of the time.

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<v Speaker 2>So what about the competition? We always talk about this

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<v Speaker 2>banks versus the non banks. Right, you have seen leverage

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<v Speaker 2>finance markets way open.

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<v Speaker 3>Now what does that.

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<v Speaker 2>Mean in terms of the m and a comeback that

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<v Speaker 2>investors are expected and the role that you and your

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<v Speaker 2>rivals have in it.

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<v Speaker 1>Yeah, the active role of the syndicated or liquid bank

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<v Speaker 1>markets is a bit of a double edged sword, right,

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<v Speaker 1>which is to say, look, in twenty twenty one, the

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<v Speaker 1>markets were wide open and that was one of our

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<v Speaker 1>busiest times. In twenty twenty two and twenty twenty three

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<v Speaker 1>they were entirely closed, and that was a wonderful time

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<v Speaker 1>for probably a different reason, right, which is there was

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<v Speaker 1>kind of no alternative choice for someone to want to act.

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<v Speaker 3>You'll probably a bit like you know, the three three

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<v Speaker 3>bears somewhere in between. It's pretty good actually, right.

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<v Speaker 1>We want there to be a vibrant market that catalyzes activity.

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<v Speaker 1>The biggest negative if I think about what was a

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<v Speaker 1>terrific here in twenty twenty four, but when I look

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<v Speaker 1>at twenty twenty five and frankly I have even more optimism.

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<v Speaker 1>The biggest missing piece was just volume of activity. People

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<v Speaker 1>just weren't doing enough to many uncertainties on certainties around

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<v Speaker 1>interest rates, on certainties around politics, a therefore or related.

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<v Speaker 3>To an inactive syndicated market.

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<v Speaker 1>We need those markets so people feel the confidence to

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<v Speaker 1>go do them and eight or do the trans action.

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<v Speaker 1>So I feel like the setup in twenty twenty five.

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<v Speaker 1>We've always said this, We welcome a vibrant liquid market

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<v Speaker 1>and in liquid market, and sure, when markets are fully closed,

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<v Speaker 1>our spreads are a bit higher. When markets are fully open,

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<v Speaker 1>our spreads are a bit lower. But our businesses deliver

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<v Speaker 1>a meaningful premium and a great risk return in any

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<v Speaker 1>of those markets, and that's working.

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<v Speaker 2>You know, you mentioned interest rates is part of the

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<v Speaker 2>consideration here as well, and there's a lot of question

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<v Speaker 2>about what they might look like in twenty twenty five,

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<v Speaker 2>particularly in light of the tariff policies put forward by

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<v Speaker 2>the President elect. Do those policies concern you at all?

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<v Speaker 2>Do you think that inflation could be stickier than a

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<v Speaker 2>lot of people are accounting for right now?

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<v Speaker 3>So you and I recall talked about this probably over

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<v Speaker 3>the last year and a half.

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<v Speaker 1>You know, we have had a view that remains our

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<v Speaker 1>view today that higher for longer is the path forward.

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<v Speaker 1>And I say that partly just anchored in this historical reality.

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<v Speaker 1>The rates we're talking about today are not a typical

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<v Speaker 1>zero is atypical. No, I'm not predicting species a great

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<v Speaker 1>path and I imagine they'll moderate some over time, but

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<v Speaker 1>we've already experienced something. This time last year people were

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<v Speaker 1>talking about seven rate cuts and we said, we don't

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<v Speaker 1>see it, we don't understand it. We don't see it

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<v Speaker 1>because the inflationary pressures are still there, and frankly, in

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<v Speaker 1>a strong economy, and I think we have the good

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<v Speaker 1>prospects for a strong economy in twenty twenty five, and

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<v Speaker 1>as you said, adding trade considerations and other geopolitical dynamics,

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<v Speaker 1>there was a lot of reason to frankly think rates

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<v Speaker 1>stay relatively speaking higher, candidly, no surprise, and a floating

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<v Speaker 1>rate business.

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<v Speaker 3>You know, we're okay with that resultant.

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<v Speaker 2>And really quickly here we only have about like thirty

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<v Speaker 2>seconds left. But if you had to call how many

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<v Speaker 2>rate cuts? I never ask you this, but if you

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<v Speaker 2>think rates are hired for longer. How many times do

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<v Speaker 2>you think if I can cut through the end of

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<v Speaker 2>next year.

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<v Speaker 1>So I have to acknowledge the beauty of my business.

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<v Speaker 1>And perhaps it's my own ignorance, but I don't know

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<v Speaker 1>verat cuts I'm confident. I don't know if I knew

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<v Speaker 1>there'd be a lunch easier way to execute this business.

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<v Speaker 1>We have a thousand people, so we can deliver the

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<v Speaker 1>results we do. I knew the path of rates side

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<v Speaker 1>of a better way, but I can tell you this

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<v Speaker 1>being in a senior secure floating rate business, which we are,

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<v Speaker 1>I'm there because I don't have to make tent determination.

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<v Speaker 2>Mark, we thank you so much for joining us here,

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<v Speaker 2>of course, at the Gomezex Financial Services conference. That is

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<v Speaker 2>Mark Glipschaltz. He's the co CEO of Blue Owl