Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Blue Owl reported results this week after joining courses with
Speaker 2: Meta on Ai Data Centers. The firm reported a twenty
Speaker 2: one percent year over your jump in AUM as it
Speaker 2: continues to reinforce its long term growth pipeline joining us
Speaker 2: for mores. Mark Lipschual's Blue Owl Capital COCEEO Mark, wonderful
Speaker 2: to have you on this morning. And look, I know
Speaker 2: whenever anyone asks about the equity price, you very soonly
Speaker 2: are like, we don't concentrate on the short term, but
Speaker 2: there was a decline after earning, so we have to
Speaker 2: address it. You had record fundraising, maybe a concentration on
Speaker 2: some of the flat fees. Why the disconnect between the two.
Speaker 3: Yeah, the look, we had a great quarter.
Speaker 1: We had continued extraordinary growth, twenty plus percent growth on
Speaker 1: the top line. I think there is there is, as
Speaker 1: you just noted, this disconnect, which is having acquired very
Speaker 1: successfully and very fortunately businesses like our digital infrastructure business IPI,
Speaker 1: you issue shares, but then you don't have a full
Speaker 1: year of their results.
Speaker 3: So it's actually just math.
Speaker 1: As you look at our run rate growth per share,
Speaker 1: it is continuing to accelerate and it continues to be
Speaker 1: incredibly robust. So yeah, there's a little bit of math,
Speaker 1: but it really is just simple math.
Speaker 3: Businesses is really thriving.
Speaker 4: I learned so much from watching Danny's interviews with people
Speaker 4: like you, So she.
Speaker 2: Had to be clear, you're learning more from Mark than
Speaker 2: you are from Yes, I'm just.
Speaker 4: Happy to be there, and from you know, z and
Speaker 4: from Henry McVay, and from John Gray. You were talking
Speaker 4: with him, Danny, and he was saying something about easing
Speaker 4: excess returns in private capital, and there's a market saturation,
Speaker 4: we see various tight spreads and generally lower yields or
Speaker 4: headed lower.
Speaker 3: What do you think about that? What do you think
Speaker 3: about that idea?
Speaker 1: So I would decompose the question of kind of yields
Speaker 1: returns into three components, right, one, of course is credit
Speaker 1: quality first and foremost. Look, at the end of the day,
Speaker 1: the most important thing is that you're making good loans
Speaker 1: and getting paid.
Speaker 3: Back, no cockyages.
Speaker 1: So we want a very healthy ecosystem, and we have
Speaker 1: a very healthy ecosystem, we really do, and we can
Speaker 1: certainly come back to that. So credit quality is excellent
Speaker 1: in our book, and that doesn't mean no defaults everyone's
Speaker 1: going to have defaults now. And then we all we said,
Speaker 1: multi trillion dollar industry, that's okay. You just can't have
Speaker 1: many and you have to get good recoveries. And that's
Speaker 1: exactly what we do. It blow out by the way,
Speaker 1: so to our peers.
Speaker 3: And so to the banks. So the system is in
Speaker 3: a strong place.
Speaker 1: Then of course there's base rates, and of course the
Speaker 1: direction of base rate travel.
Speaker 3: Everyone obviously sees it having east from the peak.
Speaker 1: But again, every time consensus bills to oh, it's obvious,
Speaker 1: you look at the FED commentary. Now it's not quite
Speaker 1: so obvious how fast rates are going.
Speaker 3: To go down.
Speaker 1: And then last is spread. And spreads are on the
Speaker 1: kinds of the lower side of where we operate, but
Speaker 1: over a ten year window, they ebb and they flow.
Speaker 1: And remember we're building portfolios have hundreds of names in them.
Speaker 1: Some are from a couple of years ago, some are current,
Speaker 1: and most importantly, our overall spread, the premium that we
Speaker 1: offer to the alternative the traditional marketplace has actually been
Speaker 1: stunningly steady and close to a couple hundred basis points.
Speaker 1: So yeah, we don't live in a vacuum, and so
Speaker 1: spreads in the whole world are tight.
Speaker 3: Of course ours are tighter. Equity markets are at all
Speaker 3: time highs.
Speaker 1: Like we don't live in isolation, and in that world,
Speaker 1: spreads are a little bit tighter, But in total it
Speaker 1: continues to do. We continue to deliver really outstanding investor results,
Speaker 1: and that's why we had record fundraising results.
Speaker 2: I'd say, I really like that point you made about Okay,
Speaker 2: if we're concerned about private credit, shouldn't we be concerned
Speaker 2: about equity markets too. They both are trading and reflect
Speaker 2: a large part of this economy. I would then love
Speaker 2: to get your take on Meta yesterday. I know you're
Speaker 2: not a public stock GUYE, but when they issued more debt,
Speaker 2: Meta shares fell, do you think that there are starting
Speaker 2: to creep into the market. Some concern with metav of
Speaker 2: course is one of your partner. But the large hyperscale
Speaker 2: spending and the amount of financing and debt that they're
Speaker 2: taking on, is there any reason to be concerned because
Speaker 2: clearly the equity market is starting to show at least
Speaker 2: a little bit of nerves about it.
Speaker 1: Well, there's been several earning reports this year this week
Speaker 1: from tech companies, and actually some of them performed extraordinarily
Speaker 1: well announcing big capital programs, right Amazon, and so I don't.
Speaker 1: I think it's hard to attribute it to one specific action.
Speaker 1: In fact, the collective result is, of course tech is
Speaker 1: touching all time highs at the moment, where as of
Speaker 1: this week, people announced, you know what, We're actually going
Speaker 1: to spend a lot more on AI infrastructure than we thought,
Speaker 1: much more actually, right, this continuing curve, every time we look,
Speaker 1: it just keeps going up. And you listen to the commentary,
Speaker 1: and the commentary is we don't think we're spending enough.
Speaker 1: Microsoft says we don't have actually enough capacity to even
Speaker 1: fuel both AI and kind of our core business.
Speaker 3: So that gap, well, very expensive to cross.
Speaker 1: That rubicon, of course, is what creates the opportunity for
Speaker 1: great partnerships, for us to bring that kind of capital
Speaker 1: in conjunction with these spectacular companies to build the backbone,
Speaker 1: which for us is the very safe way to participate
Speaker 1: build the backbone for this infrastructure, for the infrastructure for
Speaker 1: this AI future.
Speaker 4: I was talking with z about the intel he gathers
Speaker 4: and you obviously are in the same sort of privileged position, right,
Speaker 4: You're talking to so many portfolio companies and CEOs and
Speaker 4: you have an incredible view of, for example, the labor market.
Speaker 4: So what are you seeing in your portfolio companies or
Speaker 4: what are you hearing people say about the economy in
Speaker 4: regards to the labor market. Are they going to be
Speaker 4: slowing hiring or even reducing jobs as they replace some
Speaker 4: of that productivity with AI.
Speaker 1: So portfolio companies are let's start with very strong and healthy.
Speaker 1: We have four hundred or so in our portfolio and
Speaker 1: on average growth remains both revenue and earnings in the
Speaker 1: high single digit.
Speaker 3: So it's a very healthy place now when.
Speaker 4: Strong companies can strong companies can reduce head count absolutely so.
Speaker 3: Now we have not seen any meaningful change in.
Speaker 1: Labor practices, but it is certainly the case that technology
Speaker 1: itself is making a lot of activity already more productive,
Speaker 1: and we're at the very front edge so this all.
Speaker 1: It is certainly the case that when you build and
Speaker 1: invest this kind of capital, you do ultimately have to
Speaker 1: get a return on it, and some of that will
Speaker 1: disrupt the traditional labor market. We are not hearing anything
Speaker 1: I would call systemic or traumatic at this point within
Speaker 1: the portfolio, and to the degree it's happening, it's really
Speaker 1: more about efficiency technology, it's not about concern about the
Speaker 1: economy today.
Speaker 2: Blue Owl has also been on the forefront in moving
Speaker 2: into retail and offering wealth products to a wider swath
Speaker 2: of investors than traditionally had been. I just wonder mark
Speaker 2: because this has been appeared where it feels like people
Speaker 2: are laser focused with the magnifying glass. If I can
Speaker 2: mix all my metaphors on private credit with Jamie diamond
Speaker 2: saying cockroach here a concern about fraud there, has it
Speaker 2: changed it all retail sentiment? Has it been harder to
Speaker 2: reach those people just in the volatility of headlines that
Speaker 2: have been come out.
Speaker 1: So here's the really encouraging part about the wisdom of
Speaker 1: what you call retail investors individuals taken together. You know,
Speaker 1: I think there's a propensity to want to either sort
Speaker 1: of people say, oh, they don't understand. I actually think
Speaker 1: there's incredible wisdom in the individual investor world. And by
Speaker 1: the way, they're advised by really strong people, right the
Speaker 1: financial advisors at the Merrills and the Morgan Stanley's and
Speaker 1: the JP.
Speaker 3: Morgans, the Goldmansacts.
Speaker 1: I mean, all these Wells, Fargo, all these fabulous places
Speaker 1: are advising people on making these choices.
Speaker 3: So here's what we're seeing.
Speaker 1: Wealth flows are accelerating even now this month over last.
Speaker 1: We see this every day, so very data driven business
Speaker 1: for us. We are accelerating in wealth this month over last.
Speaker 1: So actually people are seeing through this noise, and it
Speaker 1: is a lot of noise. And to your point about
Speaker 1: you know, sort of an item here, an item there,
Speaker 1: you know, I would suggest taking when we take a
Speaker 1: step back, because there's almost this kind of this mass
Speaker 1: hysteria taking hold about credit in general, private credit in particular,
Speaker 1: and it's just not anchored in any facts.
Speaker 3: It's anchored by repeating.
Speaker 1: A few anecdotes and then kind of just creating the well, hey,
Speaker 1: you never know. And some of that is intentional, some
Speaker 1: of it, I'm sure is quite sincere by people that
Speaker 1: just don't just aren't sure. But the truth is that
Speaker 1: our system, the private credits, not just bluall our peers
Speaker 1: are very good at what they do, the banks are
Speaker 1: very good at what they do, and in total, fortunately
Speaker 1: for the economy, we have a very healthy credit ecosystem.
Speaker 1: And to the earlier point, Danny, you repeat it, which
Speaker 1: something is really important. Remember, you cannot believe that we
Speaker 1: have an unhealthy credit ecosystem and a healthy stock market.
Speaker 3: Those are not compatible.
Speaker 4: Ideas well, and I mean, as you point out, the
Speaker 4: concerns are belied by the fact that investors are still
Speaker 4: falling all over themselves to get access to funds like yours.
Speaker 3: Mark great having on the program, Thank
Speaker 4: You so much for joining US Market Schultz there of
Speaker 4: Blue Owl Capital,