00:00Yes, so Blue Owl is an alternative asset manager. It's a relatively new kid on the block and in
00:06alternative credit and in private capital. Primarily focused on credit, but it's got a
00:14varied ecosystem. Credit is about half the business. They're also involved in real estate
00:19and general partner stakes business. And the principles of Blue Owl have been on the street
00:29a long time. They're very well known and the principles have terrific reputations.
00:35They have good reputations, but the company itself has kind of become a poster child for
00:40all the private credit concerns that have been hitting this market. How much of that is fair?
00:46Yes, so I think that there is a buildup of, for lack of a better term, fumes in the private
00:53credit
00:53world. Maybe it started off with a couple of high profile bankruptcies last year. Jamie Dimon
00:58talking about cockroaches in the direct lending private credit world, which is somewhat ironic
01:04because many of these cockroaches happen to be on bank balance sheets rather than alternative
01:09asset management balance sheets, but cockroaches nonetheless. And then it just sort of continued
01:15to build. Then you had fear over AI's impact on software. Firms like Blue Owl tend to have a
01:21significant presence there. And it all, the spark that sort of lit things on fire here
01:27was Blue Owl back in January was attempting to merge two of its entities together. That deal was
01:33scuttled. And in the process, they ended up selling some assets near par that they used to help redeem
01:40some of the capital for investors that wanted out. And that just sort of set off a bit of a
01:45firestorm.
01:45Doug Ostrover, the co-founder. I know that guy from first Boston back in that day. Wow. Good for him.
01:50Yeah. So what's this company, what's this stock to do? Is this just a company that's just got to put
01:55its head down, put up three or four quarters of solid earnings, and then kind of earn its way back
02:01into the marketplace? Yeah, I think it's telling that in the first quarter, despite all the sort of
02:06hand-wringing that went on, they managed to draw $11 billion of new capital in to support their funds.
02:13They had double-digit growth on a year-over-year basis. And I think that basically what they need
02:19to do is just go about their knitting, their asset managers. And if they can continue to put up good
02:24numbers, which they've been doing, generally double-digit returns in their funds above benchmark
02:28levels, then I think that investors will probably stay with them. I think that what we saw in the first
02:34quarter is maybe some of the hotter money, some of the investors, particularly in private BDCs
02:44that may not have read their offering circulars.
02:48It's right on the front page. Or read it and don't care.
02:50Yeah. Or were texting while the risks were being explained. I think that they hit the panic button.
02:57By and large, most investors stuck with them.
02:59Who are these investors who were seeking redemptions beyond the 5% that they're allowed to? I mean,
03:05what do we know about how sophisticated these investors are? Or were they just
03:09putting in the request just to see if they could get it?
03:11I think it's probably a fairly wide net. If you sort of think in terms of the gatekeepers,
03:18the gatekeepers here might be the financial advisors. They tend to be a little bit more sober.
03:23Some of the investors, which includes an international cadre of holders, I think may have
03:29been the first ones to sort of push the eject button here. But it's a wide range of generally
03:35high net worth individuals that are investing in non-publicly traded business development companies.
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