Blue Owl's Trifecta of Market Worries

Watch Blue Owl's Trifecta of Market Worries - Bloomberg on Dailymotion

Transcript

00:00There's a reason that investors are shorting this stock so much lately.

00:03It represents all the fears they have in markets right now about AI, about private credit and

00:09about the flightiness of wealthy individual investors. The company is called Blue Owl and

00:13it's one of the leading private asset managers. Almost all Wall Street analysts have the stock

00:18rated as a buy. But there's a reason, well several actually, why it's underperformed peers this year.

00:24First, more than half of its assets under management are in private credit. Now it's true that

00:29private credit defaults and losses and in fact for lending to companies and people broadly

00:34remain quite low. At Blue Owl, average annual realized loss rates are just 0.13% of total loans.

00:41But the problem with private credit is in the name. It's private. With little transparency,

00:46investors have nothing to reassure them when they get spooked. And several times this year,

00:50private credit funded businesses have gone from being apparently healthy, according to their

00:54lenders to bankrupt in weeks. And then there is the money that Blue Owl is pouring into AI data

01:00centers. There are huge questions whether chatbots and generative AI are ever going to bring in the

01:05kind of revenues that are needed to justify all of these chips and data centers being built. Also,

01:12many of the chips probably have way shorter useful lives than the 15 to 20 year leases that are being

01:18signed for these data centers. Last but not least, Blue Owl has pushed hard into wealth markets,

01:24where individual investors can demand their money back more quickly than the classic institutional

01:30pension funds and endowments that usually fund private asset managers. Of course, the company's

01:35CEO says all of these concerns are just a delusion. But these investors' fears are real to them,

01:42and Blue Owl is right in the middle of them.