Blue OWL Capital (OWL) Q3 2026 earnings call transcript

Thanks, operator, and good morning to everyone. Joining me today are Mark Lipshultz, our co-chief executive officer, and Alan Kirschenbaum, our chief financial officer. I'd like to remind our listeners that remarks made during the call may contain forward-looking statements, which are not a guarantee of future performance or results, and involve a number of risks and uncertainties that are outside the company's control.

Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described from time to time in Blue Owl Capital filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements. We'd also like to remind everyone that we'll refer to non-gap measures on the call, which are reconciled to gap figures in our earnings presentation, available on the Shareholder section of our website at Blue Owl. com.

Please note that nothing on this call constitutes an offer to sell, or a solicitation of an offer to purchase an interest in any Blue Owl fund. This morning, we issued our financial results for the third quarter of 2026, reporting fee-related earnings or FRE of 27 cents per share, and distributable earnings or DE of 24 cents per share.

We declared a dividend of 23 cents per share for the third quarter, payable on November 23rd to holders of record as of November 10th. During the call today, we'll be referring to the earnings presentation, which we posted to our website this morning. So please have that on hand to follow along.

With that, I'd like to turn the call over to Mark.

Thank you so much, Anne. This morning, we reported our financial results for the third quarter of 2026, highlighting 15% FRE growth and 14% DE growth over the last 12 months. Our growth was supported by accelerated management fee growth on a sequential basis and ongoing strength in fundraising, including a record institutional capital raising quarter. This fundraising came from a diversified set of strategies, investors and geographies, driving AUM growth of 12% year over year to $330 billion.

We have continued to demonstrate our central position as one of the most scale providers of capital across the credit, real assets and GP States markets, which has made us an invaluable partner to businesses across public and private markets, including some of the largest companies in the world. Over the last 12 months, we have deployed a substantial amount of capital with more investment grade counterparties than ever before.

This activity has been supported by robust fundraising from an increasingly global set of investors, with $49 billion of new capital raised across Blue Owl over the last 12 months. And our AUM, not yet earning fees continues to grow, with more than $36 billion of AUM, nearly 30% higher than the same time last year, that will drive an incremental $400 million of fees as deployed.

We've also distributed in your record amount to investors, with more than $20 billion return to investors over the last 12 months. The attractive income streams being generated by our funds are a key component of the continued strong performance across our strategies, both on an app's loot basis and relative to public benchmarks.

Most importantly, we've maintained our investment discipline and rigorous underwriting standards across a widely fluctuating set of rate and economic backdrops, leaning into markets where we see outsized return per unit of risk and remaining cautious when we don't see appropriate returns or terms. Fundamentally, we apply a capital preservation mindset to everything we do, which means we look to protect the downside for our investors, and we believe the strong performance of our products through a myriad of market backdrops reflects this focus.

We started in 2026 with the market anticipating two or more additional rate cuts by the Fed this year, and of course, 10 months later, that perspective has shifted dramatically, with one rate hike announced in September and additional hikes anticipated over the next six months. The significant moves in rate expectations and yields have created opportunities in key portions of the market we feel well positioned to lean into.

In direct lending, our loan portfolio is floating rate, meaning that not only are we evaluating new deal flow of higher base rates and a wider spread environment than six months ago, but our existing loan book re-prices as the sofa curve moves. This dynamic directly benefits investors in our BDCs and funds through higher net interest income and subsequently benefits blow out through part one fees.

Similarly, in alternative credit, we are seeing occasions to invest attractively in floating rate loans and we're buying fixed rate assets at better terms. For insurance clients, we are seeing opportunities to generate higher excess spread across investment grade credit as market volatility creates dislocations. And our real estate credit team is seeing more demand than ever across loans and various bridge financing structures with more favorable terms than we have seen in some time.

You're seeing a lot to like as far as investment opportunities in the current market and that enthusiasm is echoed by the strong investor demand we continue to see across blue all business, which I will highlight in greater detail shortly.

Outside of rates, a dominant theme in market activity remains the significant capital needed to fund the expansion of compute across cloud and AI and blue all occupies a central role in this ecosystem. Although AI is understandably focused today as a reminder, much of our digital infrastructure footprint is tied to cloud, which continues to grow in excess of 20% annually at hyperscalers.

In keeping with our philosophy across the firm but focusing on income generating downside protected investing, our digital infrastructure strategy nearly entirely faces strong investment grade tenants. We own the physical infrastructure that is critical to the digital economy to grow and we typically lease it out for 15 to 20 years with annual rent escalators, creating a highly predictable and growing stream of rental income for our investors.

The role we are taking in this digital economy is to be an important and reliable partner to the hyperscalers, while limiting our risk on short-term release in construction timing, site energization or token pricing. Our investors look to us to be their predictable allocation to the AI and compute opportunity, while generating very strong returns for investment grade exposure.

We are one of the largest players in this arena, both in terms of our digital infrastructure footprint and the amount of capital we have raised to address this generational opportunity.

Our approach to digital infrastructure builds on the foundation established by our leading triple net lease strategy. Across 17 years and more than 6,000 properties, our core expertise has been in owning mission critical properties, leasing them to investment grade companies and generating attractive returns for our investors. And we think we have done that quite well. It's been about a year since the narrative storm around private credit started.

And we now have a lot of information available to address the questions that were posed at that time. There have been broad speculation that the industry was going to go through a stress test. And I think the data has proven out in our favor in terms of credit quality. In fact, our direct lending strategy has been over the top performers over the past year as far as portfolio health, non-accruals and loss rates.

We think we have proven that these achievements resulted from our investment discipline and a rigorous investor-focused mindset that continues to resonate with investors.

Finally, as it relates to fund rates, the $49 billion of total capital we've raised over the last 12 months reflects continued investor confidence in our strategies and our capabilities as a discipline manager. Our investors recognize that we have generated tremendous value on an absolute and relative return basis. And as a result, they have continued to commit more capital to our strategies.

And what is becoming more obvious over time is that our business is far more diversified than many have perceived it to be. With growth coming from an increasingly broad set of strategies, investors and geographies.

Institutional and insurance investors have driven about 70% of our last 12-month equity capital raised. And these investors committed approximately 20% more to our funds than this time last year and over 150% more than the same period two years ago. Notably, credit was nearly 45% of our equity capital raised over the last 12 months and 55% in the third quarter, reflecting continued investor engagement contrary to popular narratives.

Our credit platform raised over 20% more equity capital from institutional and insurance investors over the last 12 months than the prior year. And real assets equity capital raised over the last 12 months grew by 45%. Year to date, approximately 1 third of institutional investor activity was driven by REOPS by 1 third was driven by new investors and about 1 third was driven by the cross cell of existing investors into new products and strategies, highlighting strong underlying expansion of our client base.

Blue Owl's global reach and strong standing with investors was recognized earlier this month by PEI, who published their inaugural private markets ranking and named Blue Owl as one of the top 10 global fund managers on the basis of capital raised from institutional investors over the last five years. In wealth, we raised $11 billion equity capital over the last 12 months, despite the headline environment and have seen recovery and gross inflows from May levels while redemption requests continued to decline.

Our distribution partners remain very supportive and engaged with 20 new platform launches so far this year and a similar level of launch is expected over the next handful of quarters.

Net flows for the last 12 months remain positive and performance in these products remains very strong on an absolute basis and increasingly differentiated on a relative basis. As a reminder, rates are rising and spreads are widening and the world feels more uncertain. That is an environment when credit tends to outperform. Looking back at 2022, the last time the market saw such rate hikes, direct lenders were some of the best performers and OCIC was the best performer among the five largest non-traded BDCs in the market.

We continue to emphasize a performance first, education focused approach, highlighting the outperformance of our funds to pure products and public market equivalents. Over time, we expect that strong fundamental results will outweigh the narratives that were prominent during the fires half of 2026.

In closing, what we've seen and continue to see across our business is durability, resilience, and excellent investment results. We think the proof is evident in the robust fundraising, the reflection investor support and conviction around what we are doing. Our business is growing across all facets and we remain very optimistic about what is ahead for blowout.

With that, let me turn it down to discuss our financial results.

Thank you, Mark. Good morning, everyone. As we highlighted in this morning's earnings presentation, Blue Owl grew FRE by 15% and DE by 14% over the last 12 months, with management fee growth of 11%, excluding the impact of management fee offsets.

Our FRE margin for the nine months year to date is 58.6%, slightly above our outlook for the year. AUM not yet paying fees increased to $36 billion, representing approximately $400 million of expected annual management fees once deployed. This is equivalent to approximately 16% embedded growth from our 2025 management fees. As this capital is drawn down and put to work, it converts into fee paying AUM and will continue to support management fee growth across our platforms.

We raised $12.6 billion of total capital during the quarter, bringing our last 12 month total capital raise to $49 billion, the equivalent of 16% of our total AUM at this time last year. 45% of our total fundraising over the last 12 months was to our credit platform. And we have seen broad based interest across direct lending, alternative credit, investment grade credit, GP led secondaries, and cross asset mandates as our platform capabilities continue to expand.

During the third quarter, we raised $5.6 billion in credit across a number of strategies, including 2.3 billion in investment grade, 1.8 billion in direct lending, and 1.1 billion in all credit. And included in these totals, a billion dollar insurance mandate from Voya that further strengthens the partnership we announced in 2025.

Fundraising has been particularly strong in our real asset platform, which has seen an increase of 37% in total capital raised over the last 12 months. During the third quarter, we held a final close of our European net lease fund at $1.8 billion above the previous hard cap of approximately $1.7 billion. And we are up to $8.2 billion raised for the seventh vintage of our net lease drawdown product above the fund's previous hard cap of $7.5 billion, and inclusive of co-invest have raised over $10 billion.

We had a record institutional quarter, and over the last 12 months, institutional and insurance investors comprised almost three quarters of equity capital raised.

In private wealth, third quarter inflows were 14% higher sequentially. We continue to see bifurcation and flow trends between the non-traded BBC products and our other wealth-focused products. For OCIC, redemption requests declined for the second quarter in a row, and we continue to see limited new participation in the redemption queue. With over 90% of OCIC's 90,000 shareholders remaining fully invested.

For O-Rent, O-Rent, and LLCX, there was no initial uptick in redemption requests to begin with, and we saw a stronger recovery to inflows from second quarter levels as the secondary impact from headline noise faded. The percent of redemption requests that O-Rent have actually declined five quarters in a row, and the low level of redemption requests this quarter represents a nine quarter low.

And as it relates to O-Rent inflows, we continue to see momentum building here. We're very encouraged by the most recent fundraising trends, which includes increasing contributions from a tax-motivated audience with year-to-date inflows from 1031 exchange structures tripling from this time last year. An early progress for our newer wealth-focused products has been good despite more limited distribution footprints. With our Digital Infrastructure Fund audit reaching over four and a half billion of AUM in less than a year, and our Alternative Credit Interval Fund, LLCX, approaching three billion of AUM, making it one of the largest interval funds in the market after having launched just over a year ago.

So to summarize our fundraising efforts here for a moment, this was a record institutional fundraise quarter for Blue Owl. This was a record institutional fundraise quarter for our credit platform. In year-to-date, 2026, we've already raised about as much as our fund raised total for the full year 2024 and 70% more than the full year 2023.

Moving on to business performance across our platforms, in credit, last 12-month gross returns were 9.3% for direct lending and 10.3% for alternative credit, comparing favorably to relevant public credit benchmarks over the same period. We continue to see widening dispersion of outcomes across managers with Blue Owl's performance a positive standout. Portfolio health remains robust with no meaningful changes to our direct lending watch list, portfolio growth trends, or our Realize Loss Rate, which sits at a low 12 basis points per annum for the total direct lending portfolio and at a net gain for our technology lending book.

Revenue and EBITDA growth across the portfolio remains in the mid to high single digits range. We are seeing similarly strong fundamentals in our alternative credit portfolio and have been able to lean into opportunities created by market volatility and scarcity of liquidity. In real assets, last 12-month gross returns were 12.3% for net lease, 13.4% for digital infrastructure, and 6.4% for real estate credit.

Our pipeline for deployment remains among the highest we've seen with over $140 billion of near-term opportunities across net lease and digital infrastructure. While in real estate credit, we leaned into the more volatile rate environment to deploy capital opportunistically at higher rates and wider spreads. Despite the higher rate environment, we continue to monetize at attractive spreads in net lease with realizations of $1.4 billion in the third quarter at a 100 basis point lower cap rate than entry levels on average.

Averaging an 18% net IRR and one and a half times more on the sales made during the quarter. In GP's strategic capital, we have reached $11 billion raised for the latest vintage of our flagship large cap strategy inclusive of co-invest. Adding this to the capital raise from the strip sales we've completed, we've raised over $15 billion in total.

DPI for the strategy remained top quartile with gross IRRs for funds three, four, and five at 28%, 47%, and 19% since inception.

Looking at it the rest of the year, there are a few items I'd like to call out. On management fee offsets, remember the amortization related to our interval funds goes to zero next quarter for credit and remains where it is for real assets. On stock based compensation for business combination grants, remember that goes to zero starting next quarter.

And we remain on track for approximately $365 million of stock based comp other for the year. This sets us up for total stock based compensation in 2027 to be lower than 2026. And we expect stock based comp other to grow slower than revenue growth in 2027. On transaction and other fees, we have been methodically building a capital markets function that blew out. And this quarter we saw some early successes translate into fees across a number of transactions in our real assets platform.

While we would not run rate this third quarter amount, we're pleased with the early results we've seen, which include $85 million in credit and $68 million in real assets over the last 12 months.

For the full year 2026, we remain confident on our ability to beat a dollar two of FRE per share and 89 cents of DE per share as we noted on our last earnings call. Last quarter, we also said that we expected the growth rate for management fees to be higher in 2027 than in 2026. And that continues to be our expectation.

Finally, our DE per share of 24 cents for the third quarter surpassed our dividend of 23 cents. And we expect to over earn our dividend again in the fourth quarter. This is important to note as we have crossed the threshold to now over earning our dividend. And we expect to continue this for the year 2027 and forward.

Wrapping it all up, this quarter we continue to demonstrate the diversification, strong investment performance, and core growth trends that we outlined last quarter. An inflection point we see in our business results. We're looking forward to wrapping up 2026 on strong footing and accelerating business momentum into 2027.

With that, why don't we jump into Q&A? Thank you very much for joining us this morning. Operator, can we please open the line for questions?

Morning, Bill, thanks for the question. Yeah, this is something that we've been focused on for some time now. We continue to build out the capabilities of what we can do. You've seen this year, 1Q and 2Q, elevated transaction fees when you compare it to last year. And this quarter, we did see a series of early successes that certainly contributed to this quarter's outperformance.

We booked about 12 capital markets transactions in 3Q, which is up from 2 in the first quarter. There's no doubt I would expect 4Q to be a little quieter. I would look that back to 1Q and 2Q levels. But as we think about, as we go here into 2027, we do expect the direction of travel to be up.

And going forward, as we get into 27, we do see growth and the ability for us to continue to build out our capabilities. It cuts across capital markets fees, transaction fees, structuring fees. We've always had strong structuring fees in the credit business, and you're going to see that have been flow a little driven by gross originations. But we continue to do interesting things there and without a doubt in real assets. That's where we've seen real growth this year and in particular this quarter. So we do expect the direction of travel there to be up and to the right as we get into next year.

Thank you.

And it's certainly a focal topic. And let me start with the premise, predicate. These data centers stabilized with these very high-quality counterparties are really special assets. And over the course of time, we think are going to prove to be even more kind of notably special because of the ability to develop, which we have pretty distinctively in partnership and really attractive rates for us. And then, as you said, once stabilized, they have a very substantial potential upside.

So we absolutely see opportunities both in growing businesses we operate. And as you said, there's both public and private approaches to that. It also, of course, speaks to the opportunity most importantly for the people that have already invested in those funds or in future funds that we do. This is yet another way for them to get significant upside. You've seen it in the performance, for example, of overtime or triple net lease business. And let's remember, you know, these are a very, very large and a more technically complex version of triple net lease the way we do it. And I think it's an important observation more generally.

What we're really doing is something that has been done from our legacy business and today for 17 years, which is work with corporations and a really trusted partner, generate therefore attractive entry points for assets. And over time, one can earn attractive yields. And there's capital upside. You saw Alan noted in our comments, even in this environment, even with rates where they were going, the activity in rates, we sold assets from triple net in this last quarter at 100 basis, one compression to even where we entered them and generated an 18% return.

So you're on to a very important theme, which we think is going to be really beneficial for investors in our products, where there's exposure to data centers, whether those are development or frankly even just taking assets and attractive prices from people's balance sheets.

And over time will allow us to establish additional businesses and pools of capital that are the homes for those pretty special assets.

It's very hard. Thanks for taking my question.

Absolutely. It is an important area of growth. And most importantly it's an important opportunity for RLP's. I think we all appreciate the challenges that the real estate asset class writ large is facing in light of a lot of financials and purchases that were made in zero rate environments. We sit in a pretty fortunate place, which is that's not the business that we've been in. So we don't have those assets in the same fashion where you've got releasing going on and you have to then do refinancings. So let's just start with the predicate that in many cases people are going to be on the other side of this, which is they're the one seeking the need for refinancing.

We, on the other hand, of course, as you know, have a deep long history and strategies generally that are about downside protection and, of course, credit in particular. And we have both participated in, if you think about our Prima business, that single asset single borrower business, and now increasingly our own dedicated real estate credit products that are more general, kind of called more opportunistic, we see a tremendous opportunity to participate by inserting ourselves into the kind of the most interesting part in these capital structures. This refinancing wave in real estate is, it's here, it's coming, and that's going to create an opportunity for us to deploy. We're seeing a very significant backlog of opportunities, a very significant pipeline.

We absolutely like the risk reward on what we're seeing. I would kind of call it a, you know, for lack of a better term, frankly, it's a buyer's market, given the nature of the supply, that the need for capital versus what's available. So we're pretty pleased with where that opportunity stands. And we've already started to create dedicated pools of capital for that purpose. And I think that's going to be another one of those areas of meaningful growth for us over time.

Okay, great. Great.

Sure. Why don't I take a first shot at that, Glen? Thank you for the question. We just pulled the lens back a little. We've raised about $11 billion in the flagship and co-invest dollars. And about $4.5 billion of that, in addition, $4.5 billion in strip sales. So in total, we've raised over $15 billion in this area. The $4.5 billion of strip sales has helped us to give and distribute out the $4.5 billion to LP is across our GP stake spendages over the past two, two plus years.

So we continue to see interest from the LP community. We will look to wrap up fundraising end of this year. Some may slip into early next year in one queue, but we continue to have good dialogues with LP's. We continue to raise dollars each quarter as we go here, and we're coming up to the final stretch in terms of fundraising.

You know, I think also this is one of the strengths of the GP Stakes platform we have, which is we have a wide portfolio of market leading businesses, and they're exposed to different sectors. But a couple things you'll worth observing. One that we all can observe in this market, and not just this current market. I mean, the overall trend is the big get bigger.

And our focus within the Stakes products are the bigger funds and bigger platforms. So, well, pacing for any and anybody's funds might indeed be slower than it would have been expect there hoped for a few years ago. So, at the end of the day, the big ones are prevailing, and that's who our partners are. More specifically, this is, I think, an important note also.

We have significant exposure to GPs, for example, that are in energy, that are in tech growth. They're thriving. So, it's a little bit, and I think this will apply to a lot of things we all talk about, especially in businesses where you're talking about protecting your downside and earning a really attractive return. The diversification and the nature of the assets who buy energy businesses and tech growth businesses are having great success fundraising and great success with monetizations.

In fact, in energy, I've been along since we've seen that kind of activity in those sectors. So, those are real bright spots. So, when we put that all together into a set of leading firms like we have, it leads to a very attractive aggregate result. And remember, one of the great attributes of GP Stakes, which we have demonstrated over many, many years, is the ability to generate current income, cash flow, and return, even separate from principal return.

And DPI is particularly where our products stand out. DPI is particularly what's missing in the market today. So, we actually offer something pretty special in this, let's call it, broadly defined arena of private equity.

Maybe just a quick.

We certainly are seeing some of that come back into our existing funds, Glenn, into our fund raise totals.

Craig, thanks for the question. On last quarter's call, we certainly talked about having dialogues with large institutions across the number of areas, but in particular on credit. We had talked about making good progress there. Certainly over the years we've talked about, it takes time to execute on some of these large institutional partnerships. It could take months. It could take quarters. It could take years with some of these. We're not focused on the timing to get them closed. We need to get them right. We follow the pace that the institution wants to set.

You'll definitely see this have been flow over time. Two interesting statistics maybe to share. Then I'll get into why we're seeing such strong support from institutions. On a year to date basis, nine months ended versus year to date, nine months ended last year, we're at 90% where we were last year, which considering the narratives that we've kind of walked through this year, that's pretty good. That's pretty interesting. On an LTM basis year over year, so LTM ended September 30, 26. We're basically flat.

This past LTM through September 30, 26, we raised almost $39 billion, and the previous LTM was 39 and a half. Why do we continue to see strong support from institutions? It continues to be a recognition, we think, of two important trends that we've been seeing in the institutional market.

First, we continue to see an increasing desire for institutions to identify a handful of managers to build large-scale partnerships. More and more of these institutions recognize that larger partnerships offer better economies of scale, obviously. They offer the ability to access key opportunities across private asset classes with one firm and to navigate different investment environments collaboratively and successfully as partners rather than just passive investors and funds. That's what we offer to our institutional investors.

Blue Owl is one of a few managers that has capabilities across the entire private markets universe. Second, all asset classes, including private markets, are facing a tougher macroeconomic backdrop. We're seeing institutions are definitely seeing the performance dispersion, and they're anticipating that dispersion is going to continue to grow over time. We think they recognize that certain strategies and sectors in the market will certainly better withstand a rising rate in a higher inflationary environment, and so they're prioritizing capital towards investment strategies that focus on capital preservation and income generation rather than purely capital appreciation.

These have been the cornerstone of all of our products, capital preservation and income generation. It matches really well with the current environment and the future investment as we see going forward. At the beginning and end of the day, it always starts and stops with investment performance, and our investment performance continues to deliver stronger terms for our LPs.

I do want to amplify that last point. Job one is always to deliver the best results for the people who trusted their capital to us, and this has been something that wherever the narratives have gone over time, we've always kept a vigil and eye on the thing that we really need to deliver to folks. And it's showing, if you take a look, direct lending appreciation, this is the score of 3.9%, all credit, 2.9%. At least 3%, digital infrastructure, 5.6%, and that's leading to following that same list.

For LTF, 9%, 10%, 12%, 13%, roughly. So these are really good results in an environment that Alan just said that we can all conclude is a place where it looks pretty different from what people thought a year ago. Rates are higher. Generally speaking, from what we do, spreads are higher. Performance remains very strong in things like credit, but there are clouds on the horizon, there are uncertainties.

And I think institutions are saying, hey, look, that's a really interesting time to do what Blue All does kind of across its entire platform, which is present those sorts of strategies that Alan talked about that focus on risk management, downside protection with strong risk-adjusted returns. So the institutions, I think, or if you will, voting with their feet, it also reflects a lot of time invested in over years now, and we're seeing the benefits now and referred to kind of the inflection some of this drives, a very, very broad and robust institutional fundraising platform, a broad and robust wealth fundraising platform, and actually a young but growing insurance platform.

So we feel very fortunate that people have entrusted us with that capital, and I think seeing the flow as an institution this year, this quarter, you know, we see that as an indication, you know, more of evolution and development of the platform, not something won off.

Thank you, Craig.

Absolutely. I'm going to let me cover it. Let me unpack it, and then Alan's going to provide a couple of numbers to go with it. I think like many things, actually, we have to kind of decompose, so to your point about net deployment, you know, net deployment was modestly negative this quarter. But there's two components to deployment, right? There is how much we invest out, and we're never going to push that beyond what we see as great opportunities with great risk reward.

And then there's what gets paid back. And actually, in this case, both grew quite substantially. And Alan will give you those numbers in a moment. But I think it's quite important to unpack that. We actually saw significant growth in gross originations. Gross originations went to $5.2 billion this quarter. But importantly, we ended up with repayments. $4.7 billion. I might know repayments happen at $0.00 on the dollar.

So actually, this was a very, very healthy quarter. We actually increased our deployments immediately. Just people keep paying us back successfully on our prior loans at $0.00. Which, by the way, allows it to get redeployed into a higher spread environment. And one where you're deploying new loans with all the information we have today about the economy and businesses and AI. So I would actually look at that. Well, you know, that it may not have moved the deployment needle. What it really did, though, is meaningfully change the continued complexion by bringing repayments of prior loans and meaningful increase in deployments of new loans.

Until there's a more robust M&A environment, you know, I don't think one would logically expect there to be rapid net deployment. But you have an environment that will come. You know, we've said this for all year. We've been cautious about anticipating that return. We're not really sure, you know, what indications people would have. They would lead them to think it's right around the corner. But it is somewhere around the corner. And when that happens, then probably both those numbers are going to accelerate. But in particular, the gross originations will probably accelerate more rapidly. So I think we actually really like what we saw this quarter pretty darn healthy for the portfolio. And actually indicates there's even more to do despite the absence of a meaningful M&A environment.

We actually had a meaningful step up in gross originations.

I'll pull the lines back a little more than that. Seeing, as Mark pointed out, about a 45% increase in gross deployment in direct lending, we're seeing ongoing strong opportunities for deployment in alternative credit, IG credit. We certainly have a huge pipeline of opportunities in net lease and digital infrastructure.

And focusing in on net lease for a moment, I talked a little bit about that last quarter as it related to capital calls and management fee growth.

We see coming up for net lease six and the current vintage that we're fundraising for between now really end of this quarter and into the first quarter. We could see line of sight to two to two and a half billion dollars of capital calls across those two products by the time we get to the end of one queue. That would bring fund six fully deployed and the current vintage to approaching 25% drawn and deployed. So continue to see really active pipeline and projects moving along well.

No, sorry, Patrick, apologies for that. I was pointing to we were calling out last quarter that we had been working on a series of large institutions, some for a little bit of time, some for a long time. And a lot came together in three queue to come up with the raise that we did.

So, well, there's always more to come without a doubt where we continue these strong support from institutions. Last quarter, I made the comment that we think the second half of the year could be a little stronger than the first half of the year, and we still continue to see that playing out. You should not expect a similar quarter in four queue, but we're really encouraged by all the discussions we're having across the institutional landscape and are excited to get into 27 and have another strong year.

Of course.

Sure. Thanks, Crispin. Maybe to start with where we are today, we manage about over 40 billion of AUM for our insurance clients. Year to date this year, we've raised over seven billion of new commitments from our insurance clients across investment strategies. So we continue to see a really strong pipeline of organic growth coming through our insurance solutions world.

Reminder, we're an independent platform. We don't run or manage an insurance business. And our insurance clients and prospective clients, they like that. We know insurance companies value assets with steady levels of high cash flow that are capital efficient. And that's where we're seeing the highest demand from insurers. Blue Owl is very well built for insurance clients. We have strategies that cut across each platform that are very interesting to insurers, from direct lending, all credit, high G credit, over to real assets, net lease, digital infrastructure, real estate credit, including GP stakes, a lot of insurance support from the strip sales that we've been doing there.

And all of these strategies are income-producing. That produces high cash flow for insurers. And that's what they're really looking for. And we have the deal flow that is very interesting to them. So we do think over the next few years we can grow a lot here.

You know, I'll just add to kind of set the stage there. What Doug was really driving at is, well, it's been a successful part of our business. Clearly, we are kind of under market share on that opportunity.

And I say that for a couple of reasons. One, we can just make the comparative observation. But more to the point, we originate vast amounts of opportunities that in many cases today we don't have the home for. So we're kind of long the issue, long the opportunity that most people are seeking. And so pairing that with the right, both pools of capital and partners is a mutual opportunity. So just take, for example, the SpaceX chip financing.

We're part of that. We have a wonderful, long relationship with SpaceX. We love doing business with them. But today we don't have the scale of pools of capital large enough or frankly put another way. We could meet a lot more demand for that opportunity as we develop these partnerships. So I think Doug's point also was, look, we do see a real, there's obviously a logical convergence. And we've all seen it between insurance and private asset management.

But there's still a lot of room for evolution of that business model. There's one version which is client and provider. There's one version where an asset manager absorbs an insurance company and really an insurance company is sort of a feeder to the business. And then there's ways to align the best of the insurance business. People are really good at a very complex business with people that are really good at the right kinds of private assets.

That area three is where we see real opportunity ahead.

Let me start off and then I think Allen can add some additional color. So the digital infrastructure opportunity, we talked about this a little bit earlier, is really both in scale and kind of nature the risk reward the way we come at it, very compelling. And institutions have certainly long figured that out and I think the results demonstrate those are good choices.

Now we have a platform which by the way, and now when we get into this, it's quite scaled for something that's a pretty young product. However, we are in the early stages. We have a wide, we have certainly very focused on the broadening of that distribution. And also I think there's a little bit of a conflation that requires some clarification because today, unfortunately, people have somehow turned the word data center generically into a question mark as opposed to the tremendous opportunity done right that it presents.

And this is not a quote, data center fund. It's a digital infrastructure fund working with extremely high quality counterparties and I recall the earlier question about the opportunity for stabilized data centers. Well, there's a tremendous need to form the pools of capital for stabilized data centers. And frankly, it already is one of those pools of capital. So we see this as one of the big opportunities. You just think about what has to be built to support just cloud compute. Let's not even get into the world of AI and debates about the cutting edge of that question.

Cloud compute is growing rapidly and the majority of the data centers, for example, that we have do cloud compute, but it's with the same wonderful high quality customers. So I think we all see this is a huge growing market power. I mean, there's another set of assets that can live very comfortably inside of a digital infrastructure platform.

Fiber, we've done work in fiber that's all part of that digital infrastructure platform. So audit, we see as one of those really interesting products going forward. You've seen the interest in the wealth channel in infrastructure. Well, this is a very interesting and especially position kind of infrastructure.

And the only thing I would add there is audit is $4.6 billion. We've only been up and running a year. So we are seeing good success there. We definitely want to broaden the platforms we're on and that's all been underway and continues to move along.

So I'll take that, Mike. Good morning. On the last point from a deployment perspective, we have a huge pipeline. So we're really excited on the pipeline side. And look, there's obviously been a lot of attention on data centers recently. So just to start with, we have some very unique capabilities in this area as we've talked about over the last number of calls. We have over 130 data centers that are operational or under construction.

And that represents almost 14 gigawatts of least the known capacity. We have a 21 gigawatt pipeline. So to go back to that pipeline, we have a very, very robust pipeline there.

And the level said, I think one, there's two important things. One, the amount of compute that people utilize is not going down. In our view, and I think everyone shares that view. And Mark touched on this a minute ago, but I'll do a little more directly. We're not making a bet on AI when we invest in data centers. What we're doing is very simple. We're buying, we're building buildings for investment grade tenants and signing long-term leases, period.

We're taking Microsoft Amazon meta credit risk. Now rolling into where we are for our next vintage, we're doing no pun intended. We're doing rolling closes for our first close, so through the end of one queue. And that provides flexibility for our institutional investors to either use their 26 allocation to invest, or they can use their 2027 allocation.

And not dissimilar to other fundraises, this will be an 18 to 24 month fundraise, likely through call it mid-2028. We're very excited about what we can do here. And in particular, as I just commented, we're excited about the investment opportunities we're seeing in the market for our LPs.

Ten billion continues to be the overall fundraise goal here.

So I think I just want to also amplify something here, which is back to this earlier comment. The term data centers, it gets used either too generically or too monolithically. There's a lot of different kinds of data centers. And we focus on, and frankly are one of the core go-tos in a very particular kind, which is very large scale data centers for the largest hyperscalers in the world, under long-term leases. That's where we thrive.

We have, as you know, a specialized group in fact and Biel, where we have well over a thousand people in order to be able to implement what are these very, very large complex projects. That makes us a very specially positioned firm, which is why we're one of the largest landlords to many of those hyperscalers. But that partnership has real value. There's not many people that can do that.

And so origination at its heart, married with capital, is where we're able to create these very special opportunities, which I think over the course of time, we're going to look that much more special. So I think it's important to keep unpacking this question. One thing to think of data center that's got unleashed capacity, or in five years is going to have to release.

That may be a perfectly fine strategy, but it's not what we do. And when we think about capital formation, actually our backlog is between our triple, not lease and digital infrastructure, it's as large as we've ever had. So this question of demand and supply, there's no doubt in our minds that demand is really substantial. I'm not so sure about the predicate, this notion that there's a lot of supply of capital. In fact, a lot of the behavior recently has probably spooked some of the capital in terms of its involvement.

So I'm not so sure that the capital base, in fact I'd say safe to say when you get the scale of what has to be invested, we've all seen this over just the last handful of weeks. Scale of capital that's being needed and coming out of now the private markets seems to be expanding rapidly, not the other direction. So I think we feel really, really good about this business and for the foreseeable future. I think we're in the right place with a very distinctive capability.

So thank you for the question. And I mean, as obviously observed, we can't comment on stories in the market. But I think we can't all observe. And this goes back again to a couple of stitching together, a couple of the questions already. The demand for high-quality, stabilized assets is really substantial.

And I would dare say for good reason, because the nature of these assets, where do you get 20-year kinds of assets with rent escalators, with companies that have, in many cases, the biggest companies in the world, that's a very valuable, and at the end of the day, scarce asset. And so your question, I think, anchors to an important point, which is there is a significant opportunity, we believe, for monetization, and in some cases, monetization at compelling, very compelling prices. So we think of all that as the right tail, but the beauty of the strategy is, things like that, if they were to prove true, would be tremendous upsides.

But you don't need those upsides to end up earning a really, really attractive return. That's the hallmark of a blue owl strategy.

Yeah, they're bigger and chunkier. I mean, of course, I know you know what to say. It's not a PE fund. This is an infrastructure product, or a real estate product, or whatever you want to think about it, but under very long term leases. So it's not about the different measure of diversification. You're having 20 different projects. It isn't really the key question. It's getting a good mix of different projects and different timelines with, there's a handful of great companies that pay their bills.

So no, the checks are larger. Of course, it does also lead to interesting co-investment opportunities. It also leads to, again, the earlier question, the opportunity for things like it, because all of these projects are way beyond, as you're talking about, the scale of anything people have normally contemplated in the land of private equity. I mean, just think about any given project, a single gigawatt is probably just, this is to suggest the digital infrastructure part, not the chip part, is probably depending on where you're building it, and the exact facts is probably $15 billion.

And frankly, if anything today, the debt markets are probably, you know, softening on leverage level. So that increases the equity demand. And to the degree that we see debt costs for things like digital infrastructure rise, then we expect fully that the equity returns will rise in proportion with them. So there's a lot to like about the dynamic.

If you occupy, you want to have a few special places where you have the proven ability to deliver. Capital loan isn't an answer here. Capital married with skills and access. And by the way, people mentioned earlier, the political issues, it's very complex. There's a very, very local issue. That takes a local ground game, again, something that people need in partnership with someone like us. It isn't just a check.

Absolutely. Great question. And indeed, a very attractive area, very different. So back to the point about, you know, when we talk about AI, or we talk about, you know, digital infrastructure, you know, I think we have to keep on packing it just the way you did. A chip financing is very, very different from a data center financing.

Data centers are extremely long-lived assets. The way we're doing them, right, is that infrastructure surround physical asset with very long lives. I mean, anecdotally, you know, we still own a data center that was originally an AOL data center, and it's still occupied, leased, and pain-rent. So, you know, these assets have a very different lifespan. Chips have a lot of technology risk.

Chips, therefore, have a very much, much, well, by definition, a much shorter lifespan, and they require a very different kind of structuring, different duration. So, you know, one ought not conflate the two. There are very different kinds of risk-return profiles. That said, it's an enormous opportunity, and even there, we have to parse apart. There's IG solutions, like what we've done, you know, with SpaceX.

By the way, we had done that originally with XAI and rolled into SpaceX. We actually have done chips a couple of times in the SpaceX complex. We did it this quarter, as you saw, though, on the other hand, it's like an IRED. Fantastic company. It takes technical structuring, but you can structure these things very intelligently, and you can create very, very good risk management, something we're very skilled at. But we ought not confuse the two.

And that, for example, is a great kind of financing for our credit business. So, I think all these things, again, tend to lump them into one word. For us, it's unpacking it, getting the risk reward right, and finding the right matching home, and we have homes for all these different types of financing. But you got to look at financing for chips in a very different lens from the lens you look at, something like a triple net lease real estate asset. That's our job. Obviously, it's what we do, but I think even when people think about asset allocation and think about the opportunity set, you know, chip financing is probably, oftentimes, a three-year financing, right, versus a real estate asset, triple net lease asset, probably starts at, you know, oftentimes close to 20 years, and then there's extensions.

So, very, very different ways to participate in the digital transformation. But both very compelling.

Thank you, Elma. Thank you.

I'd also just note, I think it's interesting and kind of constructive that I'm circling up on this topic at the very end of the call. It's a change in focus here.

I made the same mental note, actually. I agree, Dan.

I'll take a good question. And glad to see it towards the back of the queue, which is really in line with what we're seeing here. So we are definitely encouraging signs that point to increase growth in 27. So I'm going to break this down in a couple of different ways. One, and again, I said this earlier, it starts and stops with this. We're seeing really strong performance for all of our flagship wealth funds, right? So through the end of September on a year to date annualized basis, we're running at 7 to 12% net returns. Remember, our products are typically touched on this earlier, typically fixed income replacement, and the Ag bond index is down year to date.

I think it's down about 4% through yesterday. And so product like CIC annualized, year to date, 7%. LCX, O-Rant, both 10%. Audit, we had a question earlier on, audit, 12% year to date annualized returns. And so on these signs that we're seeing of re-acceleration in the wealth business, we're seeing sales are modestly up in 3Q, which is typically a slower time of the year given the summer holidays.

We're seeing leading indicators that are positive. They're pointing up. And so what we're seeing in hearing specifically there increased activity with home offices around product launches. And there's an emphasis in these product launches on expanding from direct lending into ABF and real assets. We're sent to Minish Stronger, especially outside the U. S. We're seeing an increase in both new producing FAs in 3Q, which is up about 13% from 2Q.

And FA cross-selling, I touched on this stat last quarter in Q&A, similar, same numbers last quarter, FAs that invested in OWL products during 3Q, 74% of them are in more than one OWL product. So all of that combined with seeing increased activity in terms of client engagement, meetings, conferences, pickups and kit orders, indications of interest. We have a strong pipeline of new initiatives and products for 27, particularly around things like models, multi-asset solutions, tax-aware solutions like the 1031 product we have. We've seen enormous success in that 1031 product as part of Orent and equity-oriented products. And don't forget, we raise a lot of wealth dollars across our closed-end funds and other vehicles. So think about the net lease franchises, the digital infrastructure, the GP Stakes franchises.

We raise a lot of wealth dollars across those closed-end vehicles as well. So really anchoring back to what we're designed to do, which would provide consistent income, protect nav and compound wealth. Remember, we have a scale team with embedded global relationships. Only a few firms have invested in that kind of capability, and it's the foundation that we can build off as we get into 2027. And so at the end of the day, our suite of products are delivering across the board from a performance perspective. And the market's showing more and more dispersion in returns. We touched on that earlier as well. So all of this really does give us a lot of confidence in a re-exceleration of flows in the wealth business and continued declines of redemption requests.

Of course, thanks, Dan.

Sure, Ben, I appreciate it. Thank you for the question. I'm going to unpack that a couple of ways. One on FRA margins.

Year to date, we're at 58.6. It's above the guide of 58.5. We could experience a little more margin expansion than the guide that I've given of 58.5. And frankly, we're expecting that. It's our new base case.

So we would expect a modest spike in 4Q in margins again this year. And we would expect modest margin expansion in 27 as well. So what's underpinning all that? I commented on the prepared remarks about management fee growth in 27 being higher than 26. So we are seeing an acceleration into 27 for management fees. We're seeing it for revenues. We're seeing it for FRA per share. We're seeing it for DE per share.

We certainly, and I think everyone has seen this certainly today and over the last number of quarters, we have more diversified management fee and revenue streams than we've ever had heading into 2027. We're seeing tailwinds for part one fees. With rates higher, the management fee offset and credit is gone in 27. That was $20 million of offsets in 2026. So that's gone in 27 for credit, not for real assets, but certainly for credit.

I just commented trends in non-traded BDCs are getting better. We've raised a lot of capital in 26. And just the annualization of that will drive some growth.

We touched on the $36 billion of AUM, not yet earning fees. And that's a backlog of $400 million in management fees. So we're excited about all those things, and we're really excited about the products that we have in market. So both now and coming in 27. I'm going to break that out with first products that we have existing strategies for Bose.

So we're excited to get out next year with the second vintage of our Bose product. We raised $3 billion for that strategy. It's our GP-led secondary strategy. Very strong track record there that we've built, and we're excited to bring that second vintage to market next year.

We just closed, final closed, this quarter on European net lease, first fund. Over expectations, a billion eight in U. S. dollar raised there. We're expecting to bring vintage too to the market next year. We're expecting to build on the success of the first vintage, and we'll be out in market next year with that. Mark touched on earlier, real estate credit, data center credit, continued to track, hitting or exceeding fundraising goals there.

Opportunistic all credit. So a lot happening in alternative credit. Very strong growth rates there, 30 plus percent management fee growth on an LTM basis. Very successful ASOP 9 fundraised, exceeded our fundraising goals. We commented, I think in one queue we wrapped up fundraising there. We expect to be in market with the next vintage for our opportunistic alt credit product.

And then wrapping up credit, healthcare, royalties and life sciences credit. We're focused on raising about a billion dollars by the end of this year. We're about halfway through that goal and have line of sight to the finish line. So excited about getting out with that. There's some new launches that we've talked a little bit about on prior calls. So credit secondaries certainly has been on the list. We've been out talking to folks, prospective LPs, looking to do a first close, the first half of 2027.

And then we've talked about diversified direct lending, having a closed end product there. We have a very strong track record. And we're excited about bringing something out to market with a product like that as well.

Wealth dedicated products, we certainly look, are going to look to add to our lineup of wealth dedicated products in 27. And so, you know, we've talked about our focus in the past on meaningfully increasing the number of flagship funds we have in market. And that in a few years we should have double, maybe more, the amount of large fund raises in the market.

And so all of these things, just pulling the lens back, everything I just talked to really gives us a lot of confidence in accelerating growth into 27 and frankly beyond.

Thanks, Ben. Appreciate it.

Great. Just going to offer a kind of pullback and summary here, because there's a lot, obviously, that we've covered and a lot going on in the marketplace. You know, fund managers talk a lot about DPI, which in industry terms, you know, is the return of principal and gains to fund investors. It's a measure of how your fund is doing from a cash flow perspective.

Our funds do very well on that measure, and it's really important to our LPs, so we definitely talk about it. But we also talk about DPI at the Blue Owl level, and that's in two ways.

First, we have a very high return of capital to our shareholders, as measured by the attractive dividend we pay. And that's been a big part of total return over the past couple of years as well. But secondly, we think there's another DPI acronym that really encapsulates what we talked about today and what we're really seeing in the business. And that's diversification, performance, and inflection.

Diversification, the business is far more diversified than perhaps people perceived certainly than it was if we go back a few years. And in fact, we just listened to Alan's comment, that list of different strategies, all of which live very comfortably in the Blue Owl DNA, all places where we have the ability and have been able to deliver successfully for people. It gives us a lot of different ways to continue to meet the needs of our LPs and grow Blue Owl successfully on an ever more accelerated basis.

Performance, look, this is ultimately the key to our success, and our strategies continue to perform well. We talked about that on the call, and that drives the flywheel. Investors are seeing the results, and not only industry results, which are good, but we're also seeing differentiation that's thankfully showing in our favor in many cases. So performance will always be the heart and soul, and there we're showing and shining brightly.

And then inflection, look, we're putting the first part of the year in the rear view mirror and demonstrating an acceleration of growth in the second half, and we see that continuing into 2027. So DPI, put that way, diversification, performance, inflections, probably our hallmark and our calling card, and we'll keep talking about it with you. Thank you.