Blue Owl Capital Inc at RBC Capital Markets Global Financial Institutions Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : So we've seen various economic cycles. We've seen changes to regulatory backdrop, changes to market structure. It'd be good to get your take on what were some of the key drivers that help led to the explosive growth in the alternative space. Douglas Ostrover - Blue Owl Capital Inc - Chairman of the Board, Co-Chief Executive Officer, Co-Founder I'll let my friend kick it off. Well, it's like golf.

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : So the -- a lot to unpack there. So the -- thinking about the word alternative, you had mentioned when you first joined Apollo. Apollo is basically a private equity firm. Obviously, today, that's a very small component of the overall AUM. Has the word become sort of too broad? Is it unique enough like it was back 15 years ago?

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : So we talk about it at a high level, regulatory has clearly had an impact on the opportunity set, right? It's probably driven in a part some component, the growth of your respective businesses in the overall market. Now when you consider just the scale of your businesses, the scale of the sector, the fact that you talked about the democratization of finance and the retail investors coming in, how do you see the regulatory environment? Are there changes to the regulatory environment just to look after the retail investor and start coming back in and more regulation by virtue of just the ultimate scale and the impact on the financial system?

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : So you touched on scale. You guys both hosted Investor Days within the last several months and talked about multiyear plans to double AUM. And talk to us about the benefits that you're seeing from the scale that you guys enjoy.

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : How about the other side of the equation for scale, the challenge that scale brings. You've got an incredible amount of capital that you've got coming into each of your respective firms. The -- it feels like the real challenge is not -- has never really been about these days about getting the capital in and it's about deploying the capital and good investments. Do you feel -- is the pressure out there to deploy the capital? How do you remain disciplined? And then you guys remaining disciplined, do you worry about the folks out there that might not have all the infrastructure in place to do the same? Douglas Ostrover - Blue Owl Capital Inc - Chairman of the Board, Co-Chief Executive Officer, Co-Founder Well, I'll kick that one off. I -- first of all, we have a loan book. I think it's $130 billion. And we tell people that and everybody is like, "oh my God, you have to invest $130 billion." We don't. It's invested. So what are we investing every year? It's new capital that's coming in, and it depends on the structure. Some of it we have to get working more quickly. Others, we have 5 years to get it to work. And then the stuff that gets refinanced out. So just to give you an idea, look, we have a massive team, and I'll just again comment on our biggest business, which is the lending piece. It's all about having a very big deal funnel. And if you can run the business very lean and depend on others to generate deal flow or you can go out and generate it all yourself. Apollo has a really big funnel. I think in corporate credit, we have one of the biggest. But to give you an idea, we are doing less than 5% of the deals that come in-house, doesn't mean they're bad deals. But for one reason or another, they don't meet the criteria that we need. It might be an industry, for example, we don't have anything against energy, for example. But we don't want to do anything -- any loans that are based on a commodity. So oil, commodity chemical, just doesn't fit us. It could be -- it could be the industry. It could be covenants, it could be pricing. But we do a little under 5% of what we see. And so we're evaluating, I think, about 1,600, 1,700 deals a year. And just based on what comes in and what gets refinanced, it hasn't been an issue. I also think that no offense against the press and not to sound like Donald Trump. This is not a political statement, but you were commenting on the credit -- private credit bubble, and nobody talks about the high-yield market. By the way, if there's a private credit bubble, you know what there is. There's a PE bubble because they're junior to us. They get wiped out. And so I would tell you, just circling back to your question, not losing a lot of sleep about deployment. There are always going to be people who make bad investments, has a bunch of money come into the market without a doubt. But it's -- this is not like something we haven't seen over the last 20 years. I mean if I just took you back when I launched the firm in 2015, '16, rates went to basically 0 and everybody wanted to get some incremental spreads. So there was huge inflows. And I remember I went -- we were just launching. I went to see the CIO of big state plan, and this is 10 years ago. And he showed me he's like, why would I invest with you all these incumbents we've invested with. And he said -- and he might have been exaggerating a little, but not by a lot. He said, "I got 100 books on my desk of people trying to get in the market." So my point is it's a competitive marketplace. It's no different than your business. And what we've seen is the good firms have been able to attract capital and attract the best deals. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 5:20PM, OWL.N - Blue Owl Capital Inc at RBC Capital Markets Global Financial Institutions Conference

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : You guys are important partners to us, so I echo the sentiment. Let's pivot a little bit and talk about the public and private markets, the line between the 2 markets. Is there a distinct line today? Why don't I turn it over to you.

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : So Doug, you and your partners have gone on record saying you have no intention on building a marketplace. In fact, I wrote the quote that our version of private credit is indeed private. Is that -- are you hearing that from your investors? Like do you think that's going to be a key differentiator of Blue Owl going forward? Douglas Ostrover - Blue Owl Capital Inc - Chairman of the Board, Co-Chief Executive Officer, Co-Founder Well, first of all, I was hoping Jim would do it in the below investment-grade space. So we didn't have to do anything. We trade on his system. But no, listen, we started our business with this idea, we're going to go, we're going to raise a pool of capital. We're going to build a portfolio, and we're going to list it. We're going to allow you to have daily liquidity. And at the time, that was a product that was mostly in wealth channels. There had been virtually no big institutional pool. I went to the institutions and I said, I think this makes sense for you. And they all said the same thing, what if you trade below NAV? I said,well, if we trade below NAV, you're super sophisticated. You'll come in, you'll evaluate the loans. And if you think this is cheap, it's trading below intrinsic value, why would you go allocate to a pure private fund, just buy the public. And what happened was there was a lot of volatility, especially as rates were moving and people didn't like the volatility. And in fact, there was a time where we traded down to, I don't know, low 80s of NAV. Today, we're above NAV, but then low 80s. And big institutions were like, I can't take the volatility I'm selling. And I call CIOs, I say counterintuitive this behavior. And they said, no, my Board doesn't like to ball. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 5:20PM, OWL.N - Blue Owl Capital Inc at RBC Capital Markets Global Financial Institutions Conference So to answer your question, it was a pretty valuable lesson. We're still in that space. We love that space. But we realize that people like -- part of what they like about this asset class is it always trades in and around NAV. So we're going to let Jim and Marc Rowan go and test the waters and then figure it out.

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : The -- I want to hit a couple of other themes here. We talked about this -- the democratization of finance, and there's obviously expected to be -- continue to be some real shifts going between institutional and retail. I'd be curious how you each see that playing out over the next 5, 10 years. And also, as you market to that retail investor, what are they looking for? How do you differentiate your product to get their attention? Douglas Ostrover - Blue Owl Capital Inc - Chairman of the Board, Co-Chief Executive Officer, Co-Founder Well, look, I think we're both really bullish on the wealth channel. So if I took you back to when I was leaving Blackstone, I was trying to figure out what could we do with this new firm that could be different than the biggest firms in the market. Believe it or not, just 10 years ago, all the big firms were outsourcing distribution. There was something called the adviser sub-adviser model, where the adviser would go out and raise the money and then firms like Blackstone, KKR, Carlyle would manage the money. And there was a lot of tension and it didn't work that well. And I was a big believer in wealth. So we decided to build it 10 years ago and bring everything in-house, and the market has moved that way. So why are people so excited about both? Well, one, it's expected that there will be $300 trillion of savings, wealth savings by 2028, '29, $300 trillion. The penetration of alts at that point is expected to be in and around 3%. The institutional market is over 25%. So just indulge me for a second and assume this wealth channel over time with more and more products coming in the market could go from 3%, just to make the math simple, it grows by 20 points to 23% on a $300 trillion market. That's $60 trillion that could flow into our marketplace. And so we're -- we obviously all see that. There's -- we have different estimates of what will come in, the size of the market. But there's a belief as we continue to offer good products, products that work. What we're trying to bring to the market is not where I was describing that left side of alts, but more the right side. And that is good current income, downside protected with a chance in some of the products for meaningful capital gains. And we've been able to attract -- just to give you an idea, we're about $275 billion of assets close to 40% of our capital comes from wealth, 60% institutional. Last year, it was 50-50, and I think it will stay like that for some time. So REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 5:20PM, OWL.N - Blue Owl Capital Inc at RBC Capital Markets Global Financial Institutions Conference I think it's a big opportunity. I think we're in the really early innings and working with firms like yours and others. And with education, I don't know if we get to that 23%, 25% penetration, but I think it's possible.

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : The -- so I want to be mindful of time here just to wrap up. 5 years, you guys are invited to come back. My sense is you may tell me it's your successors at that point. But when we sit down 5 years from now, what are some of the key themes that you expect us to be talking about? Consolidation, one of them?

Question: Matthew Stopnik - Head of Global Investment Banking - Analyst : I have -- I was always told to bring a present when you get invited somewhere. So I have hats for both of you, make IG liquid again. So I want to give it to both of you for the following quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 5:20PM, OWL.N - Blue Owl Capital Inc at RBC Capital Markets Global Financial Institutions Conference