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

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Blue Owl reported results this week after joining courses with

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<v Speaker 2>Meta on Ai Data Centers. The firm reported a twenty

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<v Speaker 2>one percent year over your jump in AUM as it

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<v Speaker 2>continues to reinforce its long term growth pipeline joining us

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<v Speaker 2>for mores. Mark Lipschual's Blue Owl Capital COCEEO Mark, wonderful

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<v Speaker 2>to have you on this morning. And look, I know

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<v Speaker 2>whenever anyone asks about the equity price, you very soonly

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<v Speaker 2>are like, we don't concentrate on the short term, but

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<v Speaker 2>there was a decline after earning, so we have to

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<v Speaker 2>address it. You had record fundraising, maybe a concentration on

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<v Speaker 2>some of the flat fees. Why the disconnect between the two.

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<v Speaker 3>Yeah, the look, we had a great quarter.

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<v Speaker 1>We had continued extraordinary growth, twenty plus percent growth on

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<v Speaker 1>the top line. I think there is there is, as

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<v Speaker 1>you just noted, this disconnect, which is having acquired very

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<v Speaker 1>successfully and very fortunately businesses like our digital infrastructure business IPI,

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<v Speaker 1>you issue shares, but then you don't have a full

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<v Speaker 1>year of their results.

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<v Speaker 3>So it's actually just math.

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<v Speaker 1>As you look at our run rate growth per share,

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<v Speaker 1>it is continuing to accelerate and it continues to be

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<v Speaker 1>incredibly robust. So yeah, there's a little bit of math,

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<v Speaker 1>but it really is just simple math.

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<v Speaker 3>Businesses is really thriving.

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<v Speaker 4>I learned so much from watching Danny's interviews with people

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<v Speaker 4>like you, So she.

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<v Speaker 2>Had to be clear, you're learning more from Mark than

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<v Speaker 2>you are from Yes, I'm just.

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<v Speaker 4>Happy to be there, and from you know, z and

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<v Speaker 4>from Henry McVay, and from John Gray. You were talking

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<v Speaker 4>with him, Danny, and he was saying something about easing

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<v Speaker 4>excess returns in private capital, and there's a market saturation,

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<v Speaker 4>we see various tight spreads and generally lower yields or

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<v Speaker 4>headed lower.

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<v Speaker 3>What do you think about that? What do you think

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<v Speaker 3>about that idea?

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<v Speaker 1>So I would decompose the question of kind of yields

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<v Speaker 1>returns into three components, right, one, of course is credit

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<v Speaker 1>quality first and foremost. Look, at the end of the day,

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<v Speaker 1>the most important thing is that you're making good loans

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<v Speaker 1>and getting paid.

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<v Speaker 3>Back, no cockyages.

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<v Speaker 1>So we want a very healthy ecosystem, and we have

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<v Speaker 1>a very healthy ecosystem, we really do, and we can

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<v Speaker 1>certainly come back to that. So credit quality is excellent

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<v Speaker 1>in our book, and that doesn't mean no defaults everyone's

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<v Speaker 1>going to have defaults now. And then we all we said,

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<v Speaker 1>multi trillion dollar industry, that's okay. You just can't have

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<v Speaker 1>many and you have to get good recoveries. And that's

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<v Speaker 1>exactly what we do. It blow out by the way,

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<v Speaker 1>so to our peers.

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<v Speaker 3>And so to the banks. So the system is in

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<v Speaker 3>a strong place.

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<v Speaker 1>Then of course there's base rates, and of course the

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<v Speaker 1>direction of base rate travel.

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<v Speaker 3>Everyone obviously sees it having east from the peak.

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<v Speaker 1>But again, every time consensus bills to oh, it's obvious,

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<v Speaker 1>you look at the FED commentary. Now it's not quite

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<v Speaker 1>so obvious how fast rates are going.

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<v Speaker 3>To go down.

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<v Speaker 1>And then last is spread. And spreads are on the

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<v Speaker 1>kinds of the lower side of where we operate, but

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<v Speaker 1>over a ten year window, they ebb and they flow.

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<v Speaker 1>And remember we're building portfolios have hundreds of names in them.

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<v Speaker 1>Some are from a couple of years ago, some are current,

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<v Speaker 1>and most importantly, our overall spread, the premium that we

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<v Speaker 1>offer to the alternative the traditional marketplace has actually been

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<v Speaker 1>stunningly steady and close to a couple hundred basis points.

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<v Speaker 1>So yeah, we don't live in a vacuum, and so

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<v Speaker 1>spreads in the whole world are tight.

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<v Speaker 3>Of course ours are tighter. Equity markets are at all

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<v Speaker 3>time highs.

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<v Speaker 1>Like we don't live in isolation, and in that world,

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<v Speaker 1>spreads are a little bit tighter, But in total it

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<v Speaker 1>continues to do. We continue to deliver really outstanding investor results,

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<v Speaker 1>and that's why we had record fundraising results.

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<v Speaker 2>I'd say, I really like that point you made about Okay,

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<v Speaker 2>if we're concerned about private credit, shouldn't we be concerned

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<v Speaker 2>about equity markets too. They both are trading and reflect

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<v Speaker 2>a large part of this economy. I would then love

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<v Speaker 2>to get your take on Meta yesterday. I know you're

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<v Speaker 2>not a public stock GUYE, but when they issued more debt,

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<v Speaker 2>Meta shares fell, do you think that there are starting

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<v Speaker 2>to creep into the market. Some concern with metav of

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<v Speaker 2>course is one of your partner. But the large hyperscale

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<v Speaker 2>spending and the amount of financing and debt that they're

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<v Speaker 2>taking on, is there any reason to be concerned because

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<v Speaker 2>clearly the equity market is starting to show at least

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<v Speaker 2>a little bit of nerves about it.

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<v Speaker 1>Well, there's been several earning reports this year this week

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<v Speaker 1>from tech companies, and actually some of them performed extraordinarily

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<v Speaker 1>well announcing big capital programs, right Amazon, and so I don't.

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<v Speaker 1>I think it's hard to attribute it to one specific action.

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<v Speaker 1>In fact, the collective result is, of course tech is

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<v Speaker 1>touching all time highs at the moment, where as of

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<v Speaker 1>this week, people announced, you know what, We're actually going

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<v Speaker 1>to spend a lot more on AI infrastructure than we thought,

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<v Speaker 1>much more actually, right, this continuing curve, every time we look,

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<v Speaker 1>it just keeps going up. And you listen to the commentary,

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<v Speaker 1>and the commentary is we don't think we're spending enough.

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<v Speaker 1>Microsoft says we don't have actually enough capacity to even

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<v Speaker 1>fuel both AI and kind of our core business.

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<v Speaker 3>So that gap, well, very expensive to cross.

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<v Speaker 1>That rubicon, of course, is what creates the opportunity for

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<v Speaker 1>great partnerships, for us to bring that kind of capital

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<v Speaker 1>in conjunction with these spectacular companies to build the backbone,

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<v Speaker 1>which for us is the very safe way to participate

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<v Speaker 1>build the backbone for this infrastructure, for the infrastructure for

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<v Speaker 1>this AI future.

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<v Speaker 4>I was talking with z about the intel he gathers

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<v Speaker 4>and you obviously are in the same sort of privileged position, right,

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<v Speaker 4>You're talking to so many portfolio companies and CEOs and

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<v Speaker 4>you have an incredible view of, for example, the labor market.

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<v Speaker 4>So what are you seeing in your portfolio companies or

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<v Speaker 4>what are you hearing people say about the economy in

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<v Speaker 4>regards to the labor market. Are they going to be

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<v Speaker 4>slowing hiring or even reducing jobs as they replace some

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<v Speaker 4>of that productivity with AI.

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<v Speaker 1>So portfolio companies are let's start with very strong and healthy.

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<v Speaker 1>We have four hundred or so in our portfolio and

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<v Speaker 1>on average growth remains both revenue and earnings in the

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<v Speaker 1>high single digit.

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<v Speaker 3>So it's a very healthy place now when.

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<v Speaker 4>Strong companies can strong companies can reduce head count absolutely so.

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<v Speaker 3>Now we have not seen any meaningful change in.

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<v Speaker 1>Labor practices, but it is certainly the case that technology

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<v Speaker 1>itself is making a lot of activity already more productive,

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<v Speaker 1>and we're at the very front edge so this all.

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<v Speaker 1>It is certainly the case that when you build and

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<v Speaker 1>invest this kind of capital, you do ultimately have to

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<v Speaker 1>get a return on it, and some of that will

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<v Speaker 1>disrupt the traditional labor market. We are not hearing anything

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<v Speaker 1>I would call systemic or traumatic at this point within

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<v Speaker 1>the portfolio, and to the degree it's happening, it's really

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<v Speaker 1>more about efficiency technology, it's not about concern about the

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<v Speaker 1>economy today.

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<v Speaker 2>Blue Owl has also been on the forefront in moving

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<v Speaker 2>into retail and offering wealth products to a wider swath

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<v Speaker 2>of investors than traditionally had been. I just wonder mark

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<v Speaker 2>because this has been appeared where it feels like people

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<v Speaker 2>are laser focused with the magnifying glass. If I can

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<v Speaker 2>mix all my metaphors on private credit with Jamie diamond

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<v Speaker 2>saying cockroach here a concern about fraud there, has it

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<v Speaker 2>changed it all retail sentiment? Has it been harder to

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<v Speaker 2>reach those people just in the volatility of headlines that

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<v Speaker 2>have been come out.

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<v Speaker 1>So here's the really encouraging part about the wisdom of

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<v Speaker 1>what you call retail investors individuals taken together. You know,

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<v Speaker 1>I think there's a propensity to want to either sort

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<v Speaker 1>of people say, oh, they don't understand. I actually think

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<v Speaker 1>there's incredible wisdom in the individual investor world. And by

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<v Speaker 1>the way, they're advised by really strong people, right the

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<v Speaker 1>financial advisors at the Merrills and the Morgan Stanley's and

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<v Speaker 1>the JP.

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<v Speaker 3>Morgans, the Goldmansacts.

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<v Speaker 1>I mean, all these Wells, Fargo, all these fabulous places

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<v Speaker 1>are advising people on making these choices.

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<v Speaker 3>So here's what we're seeing.

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<v Speaker 1>Wealth flows are accelerating even now this month over last.

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<v Speaker 1>We see this every day, so very data driven business

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<v Speaker 1>for us. We are accelerating in wealth this month over last.

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<v Speaker 1>So actually people are seeing through this noise, and it

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<v Speaker 1>is a lot of noise. And to your point about

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<v Speaker 1>you know, sort of an item here, an item there,

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<v Speaker 1>you know, I would suggest taking when we take a

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<v Speaker 1>step back, because there's almost this kind of this mass

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<v Speaker 1>hysteria taking hold about credit in general, private credit in particular,

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<v Speaker 1>and it's just not anchored in any facts.

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<v Speaker 3>It's anchored by repeating.

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<v Speaker 1>A few anecdotes and then kind of just creating the well, hey,

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<v Speaker 1>you never know. And some of that is intentional, some

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<v Speaker 1>of it, I'm sure is quite sincere by people that

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<v Speaker 1>just don't just aren't sure. But the truth is that

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<v Speaker 1>our system, the private credits, not just bluall our peers

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<v Speaker 1>are very good at what they do, the banks are

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<v Speaker 1>very good at what they do, and in total, fortunately

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<v Speaker 1>for the economy, we have a very healthy credit ecosystem.

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<v Speaker 1>And to the earlier point, Danny, you repeat it, which

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<v Speaker 1>something is really important. Remember, you cannot believe that we

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<v Speaker 1>have an unhealthy credit ecosystem and a healthy stock market.

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<v Speaker 3>Those are not compatible.

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<v Speaker 4>Ideas well, and I mean, as you point out, the

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<v Speaker 4>concerns are belied by the fact that investors are still

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<v Speaker 4>falling all over themselves to get access to funds like yours.

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<v Speaker 3>Mark great having on the program, Thank

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<v Speaker 4>You so much for joining US Market Schultz there of

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<v Speaker 4>Blue Owl Capital,