WEBVTT - Blue Owl Capital Co-CEO Marc Lipschultz Talks Earnings Matching Estimates

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

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<v Speaker 2>We're going to turn now to the world of private credit.

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<v Speaker 2>Blue Owl Capital reporting earnings this morning, matching estimates. We

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<v Speaker 2>are joined now by Blue Owls co CEO Mark Lipschaltz

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<v Speaker 2>for an exclusive interview. He was also just recently announced

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<v Speaker 2>as a future co owner of the Tampa Bay Lightning

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<v Speaker 2>NHL team. We are going to talk about that. To

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<v Speaker 2>sports is a big asset class right now. But first

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<v Speaker 2>with earnings. Private credit also a very big deal. Fourteen

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<v Speaker 2>quarters in a row of growth you guys have had.

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<v Speaker 2>You're sitting at records when it comes to few related

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<v Speaker 2>earnings and it was all born forward by that private

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<v Speaker 2>credit boom in a big way. What does this look

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<v Speaker 2>like moving forward, because when you talk to investors, there's

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<v Speaker 2>a lot of question about how things change under a

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<v Speaker 2>new interest rate scenario.

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<v Speaker 1>Well, thanks again for having me here today, and look,

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<v Speaker 1>it's been a very very good chapter for Blue Awl.

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<v Speaker 1>We have had fourteen consecutive quarters since we're in public.

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<v Speaker 1>We have grown our fee related revenues at thirty five percent,

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<v Speaker 1>We've grown our few related earnings at thirty two percent,

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<v Speaker 1>and are dividend close to a thirty percent rate, and

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<v Speaker 1>we're quite excited about the next chapter. You're absolutely right.

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<v Speaker 1>Our origin, our roots lie in this direct lending business

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<v Speaker 1>which continues to grow and evolve, and its next phase

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<v Speaker 1>ahead lies in places like asset back lending. There's new

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<v Speaker 1>areas emerging around our real estate business, like hyper scale

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<v Speaker 1>data centers. So actually the future is very very exciting

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<v Speaker 1>from where we sit. We offer something different from many.

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<v Speaker 1>We don't offer all products to all people, but we

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<v Speaker 1>offer what we believe are really the best of breeding products,

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<v Speaker 1>market leaders in a set of products that are about

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<v Speaker 1>downside protection, durability, and predictability. And that's what Blue All

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<v Speaker 1>itself is about.

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<v Speaker 2>You know, when it comes to products itself, You guys

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<v Speaker 2>have expanded very meaningfully through acquisition. You have made a

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<v Speaker 2>number of acquisitions this year in a very quick timeframe.

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<v Speaker 2>And I think when people look to the future, the

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<v Speaker 2>question is are you going to spend now time integrating

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<v Speaker 2>those assets or are you still looking to buy more.

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<v Speaker 1>Well, if the integration starts day one and befrankly long

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<v Speaker 1>before we close. If you think about businesses we've already acquired,

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<v Speaker 1>we've got full integration and ready to roll together as

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<v Speaker 1>a team, You know, the thing about our acquisitions has

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<v Speaker 1>been and I think we'll continue to be really marked

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<v Speaker 1>by the following. You can you can build a product

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<v Speaker 1>organic development, and we do that where we have a

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<v Speaker 1>unique distinctive capability that just doesn't exist in the world.

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<v Speaker 1>So Triplent Lease our real estate strategy in Europe. We're

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<v Speaker 1>already the market leader in the world in that business.

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<v Speaker 1>We'll take it to Europe. But where there are other

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<v Speaker 1>areas of opportunity that fit that DNA of downside protected

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<v Speaker 1>income oriented products, then we want to look and say

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<v Speaker 1>do you do you buy or do you build? And

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<v Speaker 1>I think we've landed in this spot. That's a little

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<v Speaker 1>bit of the hybrid between the two. We work with

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<v Speaker 1>and join forces with an incredible team, like in the

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<v Speaker 1>case of Adalaiah having the team join IPI.

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<v Speaker 2>The team is joining.

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<v Speaker 1>We're not buying their business, we're combining with the business,

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<v Speaker 1>and then together we're making that a bet better opportunity

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<v Speaker 1>for the investors in the funds and for all shareholders

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<v Speaker 1>by accelerating the growth.

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<v Speaker 2>You know, it's interesting you are a large private credit firm,

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<v Speaker 2>real estate firm, private assets, but you're publicly traded and

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<v Speaker 2>when you look at others in the industry. Apollo, for example,

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<v Speaker 2>there's this pitch that public and private are going to converge,

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<v Speaker 2>that private credit is something that can be more easily traded.

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<v Speaker 2>They're even building a trading desk to make that possible.

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<v Speaker 2>Do you think that that's true that all of a

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<v Speaker 2>sudden you're going to look up one day and you

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<v Speaker 2>can't tell the difference between public and private. Is it

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<v Speaker 2>possible to make these markets be more liquid?

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<v Speaker 1>So a couple observations, public and private I might prefer

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<v Speaker 1>the room are increasingly adjacent, which is to say, there

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<v Speaker 1>are certainly areas that are bringing them closer. Right, we

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<v Speaker 1>have this whole family of continuously offered so called products.

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<v Speaker 1>We're designed for individual access, customized, but the same investment

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<v Speaker 1>experience as institutions, and so I think there's definitely, listen,

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<v Speaker 1>increasing adjacency. But on the other hand, private markets are

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<v Speaker 1>private for a reason. Our whole value proposition to the

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<v Speaker 1>user of our capital is, Look, you're going to pay

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<v Speaker 1>us a premium, and you're going to sign up for

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<v Speaker 1>a much more restrictive loan document and we're going to

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<v Speaker 1>do deep diligence. But what we're going to give you

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<v Speaker 1>is a long term partnership. So I don't really think

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<v Speaker 1>we want to disable the sort of durable, long term

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<v Speaker 1>planning of private solutions. It's part of what makes them

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<v Speaker 1>a private solution. The other observation I would share is

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<v Speaker 1>this private solutions, if you want them in truly liquid form,

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<v Speaker 1>it already exists. It an't exists. We started this ten

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<v Speaker 1>years ago. We have a public BDC ORCC, and if

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<v Speaker 1>you want to be a participant in direct lending in

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<v Speaker 1>fully liquid form, you can buy that. So I'm not

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<v Speaker 1>sure I know what problem we're trying to solve by

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<v Speaker 1>creating a bunch of trading in a non traded underlying asset.

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<v Speaker 1>But I'm certainly true that they're getting more adjacent to

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<v Speaker 1>each other.

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<v Speaker 2>I think it's a fascinating thing to talk about because

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<v Speaker 2>you think about the large just trading desks on Wall Street.

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<v Speaker 2>JP Morgan trying to make this happen, Goldman Sachs trying

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<v Speaker 2>to make it happen. Do you think, especially if you're

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<v Speaker 2>saying that these markets maybe are private for you said

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<v Speaker 2>they're private for a reason, does that mean that those

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<v Speaker 2>banks just will not have the supply because firms like

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<v Speaker 2>you and aries won't offer it.

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<v Speaker 1>I mean, look where we are people that lend and

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<v Speaker 1>hold the capital, and as you said, I think Aris

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<v Speaker 1>and many others you'll follow similar strategies. Again, I don't

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<v Speaker 1>think it's not our mission to seek liquidity in the asset.

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<v Speaker 1>Our mission is to make really great long term loan

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<v Speaker 1>decisions or long term commitments to GPS in the case

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<v Speaker 1>of our GP stakes business, or to Amazon if we're

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<v Speaker 1>going to be their partner and developing a warehouse, and

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<v Speaker 1>so I don't really think that we're seeking liquidity. Our

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<v Speaker 1>job is to be their durable partner. We're in a

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<v Speaker 1>premium for that, our investors are in a premium for that.

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<v Speaker 1>So I think we're quite happy with the structure of

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<v Speaker 1>the market.

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<v Speaker 2>So another place you recently went into, I want to

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<v Speaker 2>get your thoughts on this because we're sitting in the

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<v Speaker 2>middle of big tech earnings, a lot of conversation about

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<v Speaker 2>CAPEC spending. You just bought a business to finance data centers.

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<v Speaker 2>How big is the pipeline there.

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<v Speaker 1>That's a really great place to start. So the demand

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<v Speaker 1>for data center capacity, physical digital infrastructure is measured in trillions,

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<v Speaker 1>right you just commenting? I know on Google and Google

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<v Speaker 1>amongst the other large tech companies. They're all on this

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<v Speaker 1>quest for the digital future, and that digital future is

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<v Speaker 1>for sure a high growth one and requires a lot

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<v Speaker 1>of compute power. Now, a data center is not a

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<v Speaker 1>data center, is not a data center. The reason that

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<v Speaker 1>we acquired IPI back to my earlier comment on best

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<v Speaker 1>of read capabilities, IPI has been doing hyper scale data

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<v Speaker 1>center focused funds and invest in for nearly ten years now,

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<v Speaker 1>long before the word hyperscale data center cross the mind

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<v Speaker 1>of most people. So it's a trendy topic. My guess

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<v Speaker 1>is that every person that talks this quarter will use

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<v Speaker 1>the word data centers. But here's the key. You have

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<v Speaker 1>to be able to earn the trust of that long

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<v Speaker 1>term private partnership with the important hyperscale developers, and that

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<v Speaker 1>for IPI is truly distinctive. We have an eight hundred

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<v Speaker 1>person operations group as an affiliate of IPI in order

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<v Speaker 1>to be able to do the power management, the development,

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<v Speaker 1>the condition. That's what the Microsofts and the Amazons and

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<v Speaker 1>the Googles and the Metas are looking for and that

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<v Speaker 1>marries perfectly with our triple net least business where today

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<v Speaker 1>we're a go to partner of choice for holding the

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<v Speaker 1>real assets, real estate assets of investment grade counterparties.

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<v Speaker 2>Mark, we have to leave it there. We didn't even

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<v Speaker 2>get to ask you about Tampa Bay. We'll have me

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<v Speaker 2>back those questions offline. Blue Level Capital, Coco, Mark Lipschaltz,