Key Takeaways
- • Blue Owl reported adjusted first-quarter profit of 19 cents per share, beating analyst estimates of 18 cents according to LSEG data, while shares rose as much as 11%.
- • Assets under management grew 15% to $314.9 billion, driven by the real assets business, which invests in real estate including data centers and infrastructure.
- • The direct lending strategy posted a net loss of 1.1% in the quarter, versus 5% gains in the 12 months to March 31, underscoring pressure in the private credit segment.
- • Co-CEO Marc Lipschultz said nearly three-quarters of equity capital raised over the last 12 months came from outside direct lending.
- • CFO Alan Kirshenbaum said the firm is "working down" its software sector exposure, which has not changed significantly from 8% of total assets reported in February.
Summary
Blue Owl Capital reported adjusted first-quarter profit of 19 cents per share on Thursday, ahead of the 18 cents analysts expected according to data compiled by LSEG, as executives emphasized growth in businesses beyond direct lending. The results came as private credit funds for retail investors have faced historic outflows amid concerns about lending standards and fears that artificial intelligence could pose an existential threat to the software sector, where many lenders were heavily exposed, according to Reuters.
Assets under management rose 15% to $314.9 billion, led by the real assets business. The New York-based firm traditionally raises around 40% of its capital from wealthy individuals, a high share by industry standards, with the remainder coming from institutions. Adjusted fee-related earnings per share rose to 25 cents from 22 cents a year earlier. Private wealth contributed $2.9 billion in equity, compared with $6.1 billion from institutions.
The direct lending strategy, which provides loans outside the traditional banking system to finance buyouts, growth and refinancing, posted a net loss of 1.1% in the quarter. In the credit platform, repayments from existing borrowers exceeded new originations, reducing net deployment by about $500 million. Barclays analysts noted that fee-earning growth came in 2% short of market expectations. TD Cowen analysts said the earnings suggested "contagion risk beyond elevated (direct lending) redemptions are not spilling into other asset classes."
On software exposure, CFO Alan Kirshenbaum said the company is "working down" its holdings given market uncertainty and reported no material negative developments across its portfolios. A person familiar with the matter said exposure had not changed significantly from the 8% of total assets reported in February. Shares extended early gains after co-CEO Marc Lipschultz said Blue Owl made roughly 10 times its money on a 2021 equity investment in SpaceX, a gain he said can offset credit losses. Oppenheimer analysts said the results were in line with expectations and "didn't at all reflect the doomsday scenarios that were so widely propounded." The firm also expects funds to limit retail withdrawals to 5% of holdings per quarter, a cap Blue Owl imposed on two funds earlier in April after historic redemption requests.
Blue Owl was formed from a 2021 merger between Owl Rock Partners and the Dyal Capital division of Neuberger Berman. Its planned merger of two private credit funds late last year was later abandoned after its shares tumbled, and the company has become emblematic of the broader private credit selloff.
Assets under management rose 15% to $314.9 billion, led by the real assets business. The New York-based firm traditionally raises around 40% of its capital from wealthy individuals, a high share by industry standards, with the remainder coming from institutions. Adjusted fee-related earnings per share rose to 25 cents from 22 cents a year earlier. Private wealth contributed $2.9 billion in equity, compared with $6.1 billion from institutions.
The direct lending strategy, which provides loans outside the traditional banking system to finance buyouts, growth and refinancing, posted a net loss of 1.1% in the quarter. In the credit platform, repayments from existing borrowers exceeded new originations, reducing net deployment by about $500 million. Barclays analysts noted that fee-earning growth came in 2% short of market expectations. TD Cowen analysts said the earnings suggested "contagion risk beyond elevated (direct lending) redemptions are not spilling into other asset classes."
On software exposure, CFO Alan Kirshenbaum said the company is "working down" its holdings given market uncertainty and reported no material negative developments across its portfolios. A person familiar with the matter said exposure had not changed significantly from the 8% of total assets reported in February. Shares extended early gains after co-CEO Marc Lipschultz said Blue Owl made roughly 10 times its money on a 2021 equity investment in SpaceX, a gain he said can offset credit losses. Oppenheimer analysts said the results were in line with expectations and "didn't at all reflect the doomsday scenarios that were so widely propounded." The firm also expects funds to limit retail withdrawals to 5% of holdings per quarter, a cap Blue Owl imposed on two funds earlier in April after historic redemption requests.
Blue Owl was formed from a 2021 merger between Owl Rock Partners and the Dyal Capital division of Neuberger Berman. Its planned merger of two private credit funds late last year was later abandoned after its shares tumbled, and the company has become emblematic of the broader private credit selloff.
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