Blue Owl pushes aggressively into retail, reaches more than $70bn in AUM

The asset manager reported a record $8.8bn in originations for direct lending in the third quarter.

Alternative asset manager Blue Owl Capital reported a robust third quarter in its earnings call this week.

The New York-based fund manager has reached $70.5 billion in assets under management this quarter, an increase of 13 percent since last quarter and 32 percent since the end of 2020.

The gain was driven by strong deployment activity in direct lending, portfolio appreciation in GP capital solutions and new capital commitments across its platform, according to its earnings presentation.

Its adjusted fee-related earnings were $141.9 million, or $0.11 per adjusted share, for the third quarter – up from $130.1 million in the second quarter and an increase of 9 percent, according to its financial report.

“Across the industry we are seeing accelerated use of direct lending as a solution for private equity sponsors and corporations as they continue to see the benefits of working with one lender,” Marc Lipschultz, co-founder and president of Owl Rock, said in the earnings call.

“Through that one relationship, borrowers find greater predictability, privacy and partnership,” Lipschultz said further. These are “the ‘three Ps’ that make private credit a very attractive alternative to broadly syndicated markets”.

The asset manager’s direct lending business received a record $8.8 billion in originations for the third quarter, soaring past the $5.1 billion in the second quarter and $2.1 billion the first quarter of this year.

During the earnings call, Blue Owl also highlighted the drive for retail accelerating during the third quarter. The asset manager raised $1.1 billion of retail capital during the third quarter, with $500 million in direct lending and $600 million in GP capital solutions.

“From day one when we built our business, we built it to be retail ready,” Doug Ostrover, co-founder and chief executive officer at Blue Owl, said on the call. “We really wanted to be a pioneer in bringing alts to retail.”

In a research report, Goldman Sachs analysts noted Blue Owl’s drive into the retail space. “While still early days, we think OWL’s build-out in retail can push the firm to become the second-largest fundraising business among retail-focused perpetually raising products [after Blackstone],” the research group said, “with the largest potential revenue contribution from private markets retail products in the space”.

“Retail is a very large opportunity,” Ostrover said further. “It’s as large if not larger than the institutional market but with much lower adoption rates.”

Last month, Blue Owl announced the launch of Owl Rock First Lien Fund II, which will target the corporate senior debt market with a defensive, income-oriented investment approach. The fund has a target size of $2 billion, according to PDI research.

In July, the firm closed its inaugural Owl Rock Opportunistic Fund at $2 billion. The fund focuses on leading directly originated investments across a broad range of debt and equity instruments such as rescue financings, recapitalisations, wedge capital, DIP loans and broken syndications, according to a news release.

Blue Owl launched in May after alternative asset managers Owl Rock Capital Group and Neuberger Berman’s Dyal Capital Partners merged with Altimar Acquisition Corporation, a special purpose acquisition company. The firm focuses on direct lending and capital solutions in the alternatives industry. It trades as OWL on the New York Stock Exchange.