Executive Summary / Key Takeaways

• Durable, Fee-Centric Model: Blue Owl Capital's core strength lies in its management-fee-centric business model, with approximately 87% of Fee-Related Earnings (FRE) derived from a substantial permanent capital base. This structure provides exceptional revenue predictability and resilience, enabling consistent growth even amidst market volatility.
• Strategic Growth Through Diversification: The company is executing a "buy and build" strategy, expanding into high-growth alternative asset classes like digital infrastructure and alternative credit through accretive acquisitions. These initiatives are driving significant Assets Under Management (AUM) growth and diversifying revenue streams.
• Technological Leadership in Digital Infrastructure: Blue Owl's acquisition of IPI Partners has established it as a leading player in hyperscale data center development and operations, with 3.8 gigawatts of leased capacity. This technological and operational expertise positions the firm to capitalize on the multi-trillion-dollar demand for AI infrastructure.
• Robust Financial Performance & Outlook: Blue Owl reported strong Q2 2025 results, with total revenues of $703.1 million and FRE of $358.3 million. Last twelve months (LTM) management fees grew 32%, FRE by 23%, and Distributable Earnings (DE) by 20%. The company has $28.6 billion in AUM not yet paying fees, representing an embedded $379 million in annualized management fees upon deployment.
• Compelling Long-Term Value: With clear guidance for continued FRE and revenue growth, a fixed and growing dividend ($0.90 target for FY2025), and a strategic focus on high-barrier-to-entry markets, Blue Owl offers a differentiated investment proposition with significant upside potential in the evolving alternative asset landscape.

The Unconventional Power of Permanent Capital

Blue Owl Capital Inc. (NYSE:OWL) stands as a distinctive force in the alternative asset management industry, distinguished by its unwavering commitment to a permanent capital base and a management-fee-centric business model. This foundational strategy, honed since its inception and solidified by its public listing in May 2021, underpins its remarkable stability and predictable earnings profile. Unlike many peers heavily reliant on volatile performance fees or capital markets activity, Blue Owl's revenue streams are highly resilient, with nearly 90% of its management fees stemming from long-dated or permanent capital vehicles. This structural advantage allows the firm to consistently generate robust Fee-Related Earnings (FRE) and Distributable Earnings (DE), even through periods of significant macroeconomic turbulence, including the COVID-19 pandemic, persistent inflation, and geopolitical tensions.

The company's historical journey is a testament to its strategic foresight and disciplined execution. From the early days of its GP Stakes I fund (incepted 2011) and direct lending vehicles like Blue Owl Capital Corporation (OBDC, 2016), Blue Owl has systematically expanded its capabilities. Key acquisitions, such as Oak Street Real Estate Capital in 2021, demonstrated the power of integrating specialized expertise with Blue Owl's platform, tripling the acquired business's AUM and revenues in under three years. This "buy and build" approach has been a consistent theme, allowing Blue Owl to strategically enter and scale in high-growth alternative asset classes.

Technological Edge: Building the Digital Backbone

Blue Owl's strategic positioning is deeply intertwined with its technological differentiation, particularly evident in its Real Assets platform. The acquisition of IPI Partners, LLC on January 3, 2025, marked a pivotal moment, significantly bolstering Blue Owl's presence in the digital infrastructure ecosystem. IPI, now fully integrated, is a recognized leader in developing, owning, and operating hyperscale data centers, a market experiencing explosive demand driven by data storage needs and the proliferation of generative AI tools. This is not merely a financial play; it's an investment in the physical and operational backbone of the digital economy.

The core technological and operational differentiator lies in IPI's deep expertise and proprietary operational team, STACK, comprising 800 experts in power management, cooling, redundancy systems, siting, and development. This specialized skill set is crucial for successfully sourcing, developing, and operating mission-critical data centers for the world's largest hyperscalers and AI companies. Blue Owl's digital infrastructure funds currently boast a leased capacity of 3.8 gigawatts, representing approximately 5% of the current global leased capacity, making it one of the leading players in this rapidly evolving landscape. The tenants in these funds are exceptional counterparties, with an average credit rating of AA, providing highly predictable and stable income streams.

The "so what" for investors is clear: Blue Owl is providing the "picks and shovels" for the AI revolution. While others may speculate on the volatile valuations of AI software companies, Blue Owl is financing the essential, physical infrastructure that underpins this growth. The company's net lease strategy is even financing the largest data center project in the U.S., demonstrating the cross-platform synergies and scale. This strategy offers a compelling risk-reward setup, combining income generation and downside protection with exposure to a generational growth opportunity.

A Diversified Growth Engine: Beyond Digital Infrastructure

Beyond its digital infrastructure prowess, Blue Owl's growth narrative is fueled by a diversified portfolio of high-performing strategies across its Credit and GP Strategic Capital platforms. The Credit platform, encompassing direct lending, alternative credit, investment grade credit, and liquid credit, continues to demonstrate remarkable resilience. Direct lending, the largest component, focuses on providing private credit solutions to upper-middle-market companies, with a philosophical preference for larger, domestically focused, services-oriented businesses. This disciplined underwriting has resulted in an impressive average annual realized loss rate of just 13 basis points, with weighted average Loan-to-Value (LTVs) remaining in the high 30s across direct lending and low 30s in its software lending portfolio.

The alternative credit strategy, significantly enhanced by the Atalaya acquisition, targets markets underserved by traditional lenders. This segment is proving to be a highly complementary addition to fixed income portfolios, offering diversified collateral and attractive current income. Blue Owl has already renewed and upsized a forward flow agreement with LendingClub (LC) for up to $3.4 billion and upsized a transaction with a U.K.-based small business lender, Capital on Tap, showcasing the expanding role of private lenders. The launch of a new interval fund, which secured $850 million in its private offering, further expands access to this strategy for private wealth investors.

The GP Strategic Capital platform focuses on acquiring minority stakes and providing debt financing to large, multi-product private equity and private credit firms. This strategy capitalizes on the ongoing consolidation within the alternatives industry, where larger, scaled managers are increasingly favored by allocators. Over the past decade, Blue Owl's partner managers have grown their AUM by approximately 17% annually on average, significantly outpacing the broader industry's 10% growth. Notably, this strategy has demonstrated its ability to generate return of capital, distributing over $2.9 billion to GP Strategic Capital flagship funds investors over the past year, a period when liquidity was scarce in the broader market. The GP-led secondaries (BOSE) strategy, a new initiative, has already raised $1.7 billion, positioning Blue Owl to be a market leader in this nascent but high-potential area.

Financial Fortitude: Consistent Growth in a Volatile World

Blue Owl's financial performance consistently reflects the strength and predictability of its business model. For the three months ended June 30, 2025, the company reported total revenues of $703.1 million, a substantial increase from $549.8 million in the prior year period. Fee-Related Earnings (FRE) for the quarter stood at $358.3 million, up from $296.5 million, while Distributable Earnings (DE) reached $323.0 million, compared to $273.0 million in Q2 2024. On a last twelve months (LTM) basis, management fees increased by 32%, FRE by 23%, and DE by 20%, demonstrating robust, double-digit growth across key profitability metrics.

As of June 30, 2025, Blue Owl's total Assets Under Management (AUM) reached $284.1 billion, with Fee-Paying AUM (FPAUM) at $177.5 billion. A significant indicator of future revenue growth is the $28.6 billion in AUM not yet paying fees, which is expected to generate an additional $379 million in annualized management fees once fully deployed. This figure alone represents over a 15% increase from the company's current LTM management fees, providing strong visibility into future earnings. The company's FRE margin stood at 57% in Q2 2025, with guidance for 57-58% for the full year, reflecting efficient operations despite ongoing investments in growth.

Liquidity remains robust, with $117.6 million in cash and cash equivalents and approximately $0.9 billion available under its Revolving Credit Facility as of June 30, 2025. The company's fixed quarterly dividend for FY2025 is set at $0.90 per Class A Share ($0.23 quarterly), with an intention to increase it annually in line with expected DE growth. This dividend policy, coupled with a conservative approach to account for interest rate volatility, underscores management's commitment to shareholder returns while retaining flexibility for strategic investments.

Strategic Initiatives & Outlook: The Road Ahead

Blue Owl's strategic roadmap is characterized by a relentless pursuit of scale, diversification, and product innovation. The successful integration of recent acquisitions, including IPI, Atalaya, KAM, and Prima, is already yielding tangible benefits. The merger of Blue Owl Technology Finance Corp. (OTF) and OTF II, completed in March 2025, created the largest software-focused BDC by total assets, which subsequently listed on the NYSE in June 2025. This listing alone is expected to generate approximately $135 million in incremental annual management fees.

The company is actively expanding its reach into new distribution channels, notably through a strategic partnership with Voya (VOYA) to deliver private market strategies to defined contribution retirement plans. This initiative targets the vast $12 trillion 401(k) market, leveraging Blue Owl's income-oriented, downside-protected products. Furthermore, the firm's net lease strategy held the first close for its seventh vintage, raising $2.1 billion (plus $1 billion in co-invest) less than 15 months after the prior fund's final close, demonstrating accelerated fundraising capabilities. The digital infrastructure platform's third flagship fund closed at its $7 billion hard cap in April 2025 and has already soft-circled over half its capital for investments, signaling strong deployment opportunities.

Management has articulated ambitious long-term goals, aiming to grow FRE management fees to over $5 billion and FRE to over $3 billion. They express strong confidence in achieving these targets, citing the embedded earnings from undeployed AUM, the incremental fees from BDC listings, and continued robust fundraising across institutional and private wealth channels. The outlook for 2025 anticipates FRE revenue growth in the upper 20% range or more, and FRE growth in the mid-to-upper 20% range, with per-share FRE growth around 20%.

Competitive Moat: Scale, Specialization, and Stability

Blue Owl operates within a highly competitive alternative asset management landscape, facing formidable rivals such as Blackstone Inc. , KKR & Co. Inc. , Ares Management Corporation (ARES), and Apollo Global Management Inc. (APO). While these larger, more diversified firms boast greater overall AUM and broader product suites, Blue Owl distinguishes itself through a unique combination of specialized focus, a permanent capital advantage, and a highly predictable revenue model.

Blue Owl's permanent capital base provides a significant competitive moat, offering unparalleled stability and long-term focus that translates into stronger customer loyalty and superior margins from recurring fees. This contrasts with peers who may rely more heavily on volatile performance fees or capital markets-driven income. For instance, while Blackstone (BX) and KKR (KKR) offer broader private equity and real estate platforms, Blue Owl's specialized offerings in GP solutions and digital infrastructure allow for tailored services and potentially greater efficiency in execution within these niches. Blue Owl's GP Strategic Capital flagship funds, for example, have demonstrated top-quartile performance in returning capital to investors, a critical differentiator in a market where liquidity has been scarce.

In direct lending, Blue Owl leverages its scale and incumbency to be a "partner of choice," consistently finding high-quality deployment opportunities even amidst a lackluster M&A backdrop. Its U.S.-centric, non-cyclical, and services-oriented portfolio focus provides a defensive posture against global trade disruptions and economic uncertainties, a characteristic that stands out against more globally diversified or cyclically exposed competitors. The company's ability to attract new capital, with half of its Q1 2025 institutional investors being new to the firm, underscores its growing brand recognition and trust, even as it may have lower overall brand recognition compared to industry giants. Blue Owl's strategic acquisitions are not merely about AUM growth but about acquiring "best of breed" teams with high barriers to entry, such as Atalaya's 20-year track record in alternative credit or IPI's operational expertise in data centers. This "buy and build" approach allows Blue Owl to rapidly gain market leadership in specialized, high-growth areas, enhancing its competitive standing without diluting its core strengths.

Risks and Resilience

Despite its robust positioning, Blue Owl faces inherent risks common to the financial services sector and alternative asset management. Macroeconomic factors, including global equity and debt market volatility, tariffs, and potential economic slowdowns, can impact fundraising, deployment, and investment valuations. A sustained period of lackluster M&A activity could temper direct lending deployment, while interest rate fluctuations, particularly in SOFR, can affect Part I fees, as acknowledged by management's conservative dividend setting. The company also carries earnout liabilities from acquisitions and obligations under the Tax Receivable Agreement (TRA), which could require substantial future payments.

However, Blue Owl's business model is purpose-built for resilience against these challenges. The high proportion of permanent capital minimizes redemption risk and provides a stable revenue base. Its U.S.-centric portfolio, focused on defensive and non-cyclical industries, offers insulation from global trade shocks. Disciplined underwriting standards, evidenced by low realized loss rates in direct lending, mitigate credit quality concerns. Furthermore, the company's strategic flexibility to pursue both organic growth and accretive acquisitions, coupled with its expanding distribution channels, provides multiple avenues for growth and diversification, reinforcing its ability to thrive in dynamic market environments.

Conclusion

Blue Owl Capital has meticulously crafted a compelling investment narrative, rooted in its unique permanent capital structure and a strategic vision that anticipates and capitalizes on the evolving landscape of alternative assets. The company's consistent financial performance, marked by robust growth in management fees, FRE, and DE, underscores the durability of its fee-centric model. Its technological leadership in digital infrastructure, combined with diversified strengths in direct lending, alternative credit, and GP strategic capital, positions Blue Owl at the forefront of high-growth, high-barrier-to-entry markets.

For discerning investors, Blue Owl offers a rare combination of predictable income, downside protection, and exposure to secular growth trends. The company's proactive approach to strategic acquisitions and product innovation, coupled with its disciplined risk management, creates a powerful engine for long-term value creation. As the alternative asset management industry continues to consolidate and demand for specialized, stable capital solutions grows, Blue Owl Capital stands poised to extend its market leadership, making it a compelling consideration for those seeking consistent returns in an uncertain world.