Blue Owl Capital reported first-quarter adjusted distributable earnings per share of 19 cents, beating analyst estimates of 18 cents, as the alternative asset manager emphasized growth across its businesses beyond direct lending. Assets under management jumped 15% to $314.9 billion, driven by the company’s real assets business, which invests in real estate, including data centers and other infrastructure. The results come against a backdrop of heightened scrutiny on private credit and direct lending, where Blue Owl has faced meaningful investor redemptions and market pressure after deciding late last year to merge two of its private credit funds — a merger it subsequently abandoned after its shares fell sharply.
Co-CEO Marc Lipschultz sought to reframe the narrative on the earnings call, noting that nearly three-quarters of the equity capital the firm raised over the last 12 months came from outside direct lending, and that growth in the real assets business was a key driver of the overall AUM increase. TD Cowen analysts responded positively, saying the earnings suggested that contagion risk beyond elevated direct lending redemptions was not spilling into other asset classes. Oppenheimer analysts said the results did not reflect what they called the doomsday scenarios widely anticipated by some observers, and that they expected funds to cap investor withdrawals at 5% of holdings per quarter going forward.
Within the credit platform, repayments from existing borrowers outpaced loan origination, dragging net deployment down by approximately $500 million. Growth in the segment that Blue Owl earns fees to manage came in 2% short of market expectations, according to Barclays analysts, and the direct lending strategy suffered a net loss of 1.1% in the quarter compared with gains of 5% in the twelve months to March 31. Chief Financial Officer Alan Kirshenbaum said the company is actively working down its exposure to the software sector, given market uncertainty, though that exposure has not changed significantly from the 8% of total assets it reported in February.
Blue Owl’s shares surged 11% on the news, boosted by Lipschultz’s disclosure that the firm made roughly 10 times on a 2021 equity investment in SpaceX — the kind of equity win he said can offset credit losses in the portfolio. The New York-based firm, which was formed from a 2021 merger between Owl Rock Partners and the Dyal Capital division of Neuberger Berman, traditionally raises around 40% of the money it manages from wealthy individuals, a notably high share by industry standards, with the balance coming from institutions. Private wealth added $2.9 billion in equity in the quarter, compared with $6.1 billion from institutions.
KEY QUOTES:
“Nearly 3/4 of equity capital we’ve raised over the last 12 months have been outside of direct lending.”
Marc Lipschultz, Co-CEO, Blue Owl Capital
