Summary of Blue Owl Capital Conference Call Company Overview - **Company**: Blue Owl Capital (NYSE: OWL) - **Industry**: Alternative Asset Management - **Assets Under Management**: Nearly $300 billion - **Specialization**: Private credit, GP solutions, and real assets Key Priorities and Strategic Focus - **2026 Priorities**: Focus on execution after a year of integration and diversification in 2025 [4][43] - **Margin Improvement**: Aim for gradual increase in margins and focus on FRE (Fee-Related Earnings) per share [4][43] - **Fundraising Initiatives**: Actively fundraising for flagship funds, including a $7.5 billion real estate fund and a digital infrastructure fund expected to be larger than the previous $7 billion [5][6] Fund Performance and Market Dynamics - **Private Credit Performance**: Underlying portfolio companies show strong performance with average EBITDA of $275 million and low loan-to-value ratios (39% for corporate credit, 30% for software loans) [13][14] - **Revenue and EBITDA Growth**: Recent growth rates have slowed slightly to 7.5%-8% from 8%-9%, but remain robust [15] - **Default Rates**: Very few defaults observed, with no new names added to the watch list [15] Wealth Management Channel - **Growth in Wealth Channel**: $16 billion of inflows over the last 12 months, with a focus on expanding product offerings and geographical reach [22][25] - **Market Positioning**: Transitioned from an advisor-sub-advisor model to an in-house fundraising model, resulting in a team of over 200 people [24][25] Market Challenges and Outlook - **M&A Environment**: Deployment rates have been below expectations, but there is cautious optimism for improvement in the M&A environment [10][11] - **Concerns from Advisors**: Financial advisors express concerns about market conditions, but there is still optimism about the long-term potential of private credit [29][31] New Product Launches - **Digital Infrastructure Fund**: Recently launched with significant initial capital, expected to scale rapidly [34][36] - **Alternative Credit**: Less competition than direct lending, with higher expected returns [40][42] Financial Metrics and Future Guidance - **FRE Margins**: Commitment to improving FRE margins, aiming for around 60% in the future [43][45] - **Long-term Growth Target**: Targeting $3 billion in FRE, with confidence in achieving this goal [46] Conclusion - **Focus on Organic Growth**: Current strategy emphasizes growing existing products and managing recent acquisitions rather than pursuing new M&A opportunities [47][48]

Financial Data and Key Metrics Changes - The company reported fee-related earnings (FRE) of $0.24 per share and distributable earnings (DE) of $0.22 per share for Q3 2025, with a dividend declared at $0.225 per share [4][21] - Management fees increased by 29% over the last 12 months, with 86% coming from permanent capital vehicles [22] - FRE was up 19%, and DE was up 15% year-over-year [22] Business Line Data and Key Metrics Changes - In direct lending, gross origination in Q3 was approximately $11 billion, with net deployment increasing to $3 billion, bringing last 12-month gross and net originations to $47 billion and $12 billion, respectively [10][25] - The alternative credit strategy demonstrated scale benefits, deploying approximately $5 billion over the last 12 months, primarily focused on small business equipment leasing, aviation, and consumer transactions [10][11] - The company raised over $14 billion in new capital commitments during the quarter, achieving a record $57 billion in capital raised over the last 12 months [9][22] Market Data and Key Metrics Changes - The company noted a shift in investor focus towards credit and digital infrastructure, which are gaining market share from legacy categories [6] - The health of the private credit markets remains strong, with an average annual realized loss of just 13 basis points and no signs of meaningful stress in direct lending [7][8] Company Strategy and Development Direction - The company is strategically positioned to benefit from ongoing investments in institutional and private wealth distribution channels and new product expansion [5][6] - A substantial strategic partnership was announced with Qatar Investment Authority to scale and expand the digital infrastructure business [17] - The company aims for continued growth in management fees and earnings, with expectations of 20% growth in FRE per share by 2026 and 2027 [36][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of their credit portfolios and the ongoing health of underlying borrowers [8][32] - The company anticipates continued growth in Part 1 fees in 2026, despite recent rate cuts [26] - Management emphasized the importance of performance and duration of capital in achieving positive investment outcomes over time [19][20] Other Important Information - The company has an installed base of over 160,000 individual investors and is adding new products in digital infrastructure and alternative credit [18] - The company completed its largest strip sale to date, selling about 18% of the assets in Fund 4 for proceeds of over $2.5 billion, delivering a 3.2x gross return [18] Q&A Session Summary Question: Summary of growth investments and future metrics - Management expects margin expansion and meaningful acceleration in FRE and DE per share growth as they move into 2026 and 2027 [34][35] Question: Impact of credit volatility on retail flows - Management reported strong flows and continued momentum in wealth-focused products, indicating resilience in the channel [46][47] Question: Understanding stock price perceptions - Management is focused on execution and communication to address market misunderstandings and believes the current valuations do not reflect the underlying business strength [52][55] Question: Digital infrastructure business and lease structures - Management clarified that leases are designed for long durations with built-in flexibility, ensuring strong returns even in case of early termination [61][62] Question: Absorption of recent fundraising and fund performance - Management noted that while there was short-term noise in fund performance, the underlying projects are strong, and they expect to absorb new capital quickly [68][70]

Financial Data and Key Metrics Changes - The company reported Fee-Related Earnings (FRE) of $0.24 per share and Distributable Earnings (DE) of $0.22 per share for Q3 2025, with a declared dividend of $0.225 per share [4][22] - Management fees increased by 29% over the last 12 months, with 86% coming from permanent capital vehicles [21][22] - FRE was up 19% and DE was up 15% year-over-year [22] Business Line Data and Key Metrics Changes - In direct lending, gross origination was approximately $11 billion in Q3, with net deployment increasing to $3 billion [10][25] - The alternative credit strategy demonstrated scale benefits, deploying approximately $5 billion over the last 12 months [10][25] - The company raised $5.6 billion in credit during Q3, with $3 billion from direct lending [22][24] Market Data and Key Metrics Changes - The company raised over $1 billion in the Digital Infrastructure Fund, reflecting strong investor interest [16][17] - The installed base of individual investors in Blue Owl products exceeded 160,000, with significant growth in private wealth fundraising [17][18] Company Strategy and Development Direction - The company is strategically positioned to benefit from the shift towards credit and digital infrastructure, capitalizing on ongoing investments across institutional and private wealth distribution channels [5][6] - Blue Owl aims to continue expanding its digital infrastructure business, highlighted by a substantial partnership with QIA [17][19] - The focus remains on delivering exceptional returns per unit of risk while maintaining a vigilant approach to market changes [20][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the health of the credit portfolios, with an average annual realized loss of just 13 basis points [7][8] - The company anticipates continued growth in FRE and DE per share, aiming for 20% growth in management fees and revenues by 2026 [36][37] - Management emphasized the importance of execution and communication to address market perceptions and enhance stock performance [55][56] Other Important Information - The company has a growing base of AUM Not Yet Paying Fees, amounting to $28 billion, which is expected to drive over $360 million in management fees upon deployment [9] - The company has closed on two investments in GP stakes during Q3, with a significant focus on delivering liquidity to investors [18][19] Q&A Session Summary Question: Summary of growth investments and future metrics - Management expects margin expansion and meaningful acceleration in FRE and DE per share growth from 2026 onwards, aligning with their long-term goals [34][35] Question: Impact of credit volatility on retail flows - Management reported strong flows and continued momentum in wealth-focused products, indicating resilience despite market volatility [46][47] Question: Understanding stock performance relative to fundamentals - Management acknowledged the disconnect between strong fundamentals and stock performance, emphasizing execution and communication as key strategies to address this [52][55] Question: Digital infrastructure business and lease structures - Management clarified that leases are designed for long durations with built-in flexibility, ensuring strong returns regardless of early termination scenarios [61][62] Question: Fund performance and absorption of recent fundraising - Management noted that recent performance fluctuations are short-term noise, with strong underlying performance expected to continue [68][69]

Financial Data and Key Metrics Changes - The company reported fee-related earnings (FRE) of $0.24 per share and distributable earnings (DE) of $0.22 per share for Q3 2025, with a declared dividend of $0.225 per share [3][22] - Management fees increased by 29% over the last 12 months, with 86% coming from permanent capital vehicles [22] - FRE was up 19% and DE was up 15% year-over-year [22] Business Line Data and Key Metrics Changes - The company raised over $14 billion in new capital commitments during the quarter, reaching a record $57 billion in the last 12 months, equivalent to 24% of assets under management a year ago [9] - In direct lending, gross origination was approximately $11 billion, with net deployment increasing to $3 billion [10] - In alternative credit, the company deployed approximately $5 billion over the last 12 months, focusing on small business equipment leasing, aviation, and consumer transactions [10] Market Data and Key Metrics Changes - The company noted a shift in investor focus towards credit and digital infrastructure, gaining market share from legacy categories [5] - The average annual realized loss in credit portfolios remains low at just 13 basis points, indicating strong health in the corporate and asset-backed credit markets [6][8] Company Strategy and Development Direction - The company is strategically positioned to benefit from the ongoing structural evolution in private markets, focusing on credit and digital infrastructure [5] - A substantial strategic partnership was announced with Qatar Investment Authority to scale and expand the digital infrastructure business [18] - The company aims to continue delivering exceptional returns while maintaining a focus on innovation and being ahead of market trends [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the health of credit portfolios and the resilience of consumer credit, despite recent headlines about credit issues [6][8] - The company anticipates continued growth in FRE and DE per share, with expectations of 20% growth in management fees and revenues by 2026 [37][38] - Management emphasized the importance of execution and communication to address market perceptions and drive stock prices higher [52] Other Important Information - The company has an installed base of over 160,000 individual investors and is adding new products in digital infrastructure and alternative credit [19] - The company completed its largest strip sale to date, generating over $2.5 billion in proceeds [19] Q&A Session Summary Question: What is the expected growth in FRE and margins for 2026 and 2027? - Management expects meaningful acceleration in FRE per share and margin expansion as they move into 2026 and 2027, aligning with their long-term growth goals [37][38] Question: How have retail flows been impacted by recent credit volatility? - Management reported strong flows and continued momentum in retail products, indicating resilience despite market volatility [46][47] Question: What is being done to change market perceptions about the company's stock? - The company is focused on executing well and communicating effectively with shareholders to address any misunderstandings about its business [52] Question: Can you elaborate on the digital infrastructure business and its pipeline? - Management highlighted a vast pipeline of opportunities in digital infrastructure, with significant capital commitments and strong demand for their services [84][86]

Core Viewpoint - DigitalBridge Group, Inc. (NYSE:DBRG) is highlighted as a top stock recommendation amid concerns over the growing AI bubble, with a focus on its exposure to AI and infrastructure investments [1]. Group 1: Investment Potential - DigitalBridge is currently raising its third flagship digital infrastructure fund, which, if successful, could make its stock price appear undervalued at current levels [3]. - The company has significant embedded gains from its technology investments and has been actively raising capital from both institutional and individual investors [2]. - There is speculation that DigitalBridge may become an attractive acquisition target for other asset managers due to its expertise in identifying technology investment opportunities [2]. Group 2: Strategic Acquisitions - DigitalBridge's acquisition of Switch, a leading operator of AI data centers, at an approximate valuation of $11 billion, is seen as a strategic move, with potential for Switch to go public at a valuation of $40 billion [3]. - The anticipated IPO of Switch could enhance DigitalBridge's fundraising efforts and overall investment appeal [3]. Group 3: Market Position - DigitalBridge is recognized as one of the best small-cap AI stocks to buy, although some analysts believe other AI stocks may offer higher returns with limited downside risk [3].