Executive Summary / Key Takeaways

• Blue Owl Capital (NYSE:OWL) is a rapidly expanding alternative asset manager, distinguished by its permanent capital base and fee-related earnings (FRE) driven model, which has delivered 18 consecutive quarters of management fee and FRE growth.
• The firm is strategically positioned at the forefront of secular shifts towards private credit and digital infrastructure, leveraging recent acquisitions and organic initiatives to capture significant market share and meet surging demand for specialized capital solutions.
• A substantial $28.40 billion in AUM not yet paying fees, coupled with an anticipated $135 million in incremental annual management fees from the OTF listing, provides strong visibility into over $360 million in embedded annual management fee growth.
• Blue Owl's disciplined approach to credit quality, evidenced by a 13 basis point average annual realized loss rate in direct lending, and its innovative product structures, such as alternative credit interval funds and digital infrastructure semi-liquid products, enhance investor confidence and drive robust fundraising across institutional and private wealth channels.
• Management projects continued strong financial performance, targeting over 20% growth for management fees, revenues, and FRE per share, with FRE margins expected to remain between 57% and 58% in 2025 and expand further, underscoring the firm's commitment to long-term value creation.

The Enduring Power of Permanent Capital in a Shifting Landscape

Blue Owl Capital Inc. (NYSE:OWL) stands as a prominent and rapidly evolving force in the alternative asset management industry, distinguished by its foundational commitment to permanent capital and a fee-related earnings (FRE) centric business model. This strategic bedrock has not only underpinned 18 consecutive quarters of management fee and FRE growth since its public listing but also positions the firm uniquely amidst a global financial landscape undergoing profound structural shifts. Blue Owl's core business revolves around deploying private capital across three robust platforms: Credit, Real Assets, and GP Strategic Capital, offering holistic solutions to middle-market companies, large alternative asset managers, and corporate real estate owners and tenants.

The broader industry is witnessing a comprehensive shift in how assets are financed, with private markets increasingly recognized by borrowers as a compelling solution offering certainty, scale, and tailored terms. Investors, in turn, are reallocating capital towards credit and digital infrastructure, categories that are steadily gaining market share from traditional asset classes. Blue Owl has strategically aligned itself to be a primary beneficiary of these trends, proactively "skating to where the puck is going" to capitalize on these generational opportunities.

In this competitive arena, Blue Owl operates alongside formidable rivals such as Blackstone Inc. (BX), KKR & Co. Inc. (KKR), Ares Management Corporation (ARES), and Apollo Global Management Inc. (APO). While these larger, more diversified firms command extensive global networks and broader asset bases, Blue Owl carves out its competitive niche through specialized execution, a client-centric approach, and the inherent stability offered by its permanent capital vehicles. This model provides a distinct advantage in stable financing, potentially enhancing pricing power and fostering deeper, more enduring client relationships.

A critical differentiator for Blue Owl lies in its operational and technological expertise, particularly evident in its digital infrastructure business. The firm's integrated approach, exemplified by its STACK operations group, involves approximately 1,000 professionals dedicated to the design, build, and operation of data centers. This deep technical capability allows Blue Owl to engage in complex, large-scale projects, from developing data centers in partnership with specialized companies like Crusoe to acting as the developer itself, or simply providing capital solutions for hyperscalers like Meta and Oracle who manage their own development. This bespoke solutioning, backed by proprietary operational know-how, enables Blue Owl to secure long-dated leases (often 20+ years) with rent escalators, generating highly predictable income streams. The firm has built and managed 85 different data centers, with a current capacity of 10 gigawatts built or under construction, equivalent to the power consumption of 10 sizable American cities. This technological and operational moat is a significant barrier to entry for competitors, allowing Blue Owl to command superior risk-adjusted returns in a market with "mind-bending" capital demand.

A History of Strategic Expansion and Consistent Growth

Blue Owl Capital's journey from the founding of Owl Rock in 2016 to its current stature is a testament to strategic foresight and disciplined execution. The firm's public listing in May 2021, following the acquisition of Dyal Capital Partners, marked a pivotal moment, initiating a period of sustained growth. Subsequent strategic acquisitions, including Oak Street Real Estate Capital, Wellfleet Credit Partners, Prima Capital Advisors Holdings, Kuvare Asset Management (KAM), Atalaya Capital Management, and IPI Partners, LLC, have been instrumental in diversifying Blue Owl's capabilities across its core platforms. These integrations have not merely added assets but have expanded the firm's product offerings into high-growth areas like alternative credit, digital infrastructure, insurance solutions, and real estate credit.

The year 2024 was particularly transformative, with Blue Owl achieving a record $27.5 billion in equity raises and deploying $52 billion in credit, contributing to a 26% FRE growth. By the end of 2024, AUM reached $0.25 trillion, growing to $265 billion pro forma for the IPI acquisition, which closed in January 2025. The firm also streamlined its BDC offerings, merging OBDC and OBDE to create the second-largest publicly traded BDC, and completing the merger of OTF and OTF II in March 2025, positioning OTF as the largest technology-focused BDC in the public market. These actions underscore Blue Owl's commitment to scale and efficiency, leveraging its integrated platforms to drive synergistic benefits.

Segment Performance and Operational Excellence

Blue Owl's three core platforms—Credit, Real Assets, and GP Strategic Capital—each demonstrate robust performance and strategic alignment with market trends.

Credit Platform: Resilience and Growth in Private Lending

The Credit platform, with $152.10 billion in AUM and $97.30 billion in FPAUM as of September 30, 2025, remains a cornerstone of Blue Owl's business. Management fees from this segment increased by $239.70 million for the nine months ended September 30, 2025, driven by continued fundraising and deployment in direct lending, and significant contributions from the Atalaya and KAM acquisitions in alternative and investment-grade credit. The direct lending strategy reported gross returns of approximately 3% in Q3 2025 and 13% over the last 12 months, with an impressive average annual realized loss rate of just 13 basis points. This reflects rigorous underwriting and a focus on larger, domestically-focused, services-oriented companies with resilient business models.

In alternative credit, Blue Owl is rapidly expanding its footprint. The firm announced a forward flow agreement with PayPal (PYPL) to purchase approximately $7 billion of "Pay in 4" loans over two years, a partnership structured with dynamic monitoring, originator alignment (first-loss risk), and short-duration, self-amortizing assets (typically two years or less) to mitigate risk. This strategy, also seen in renewed agreements with LendingClub (LC) for up to $3.4 billion, allows Blue Owl to provide essential financing at opportune times, particularly as traditional securitization markets face volatility. The successful launch of the Blue Owl Alternative Credit Fund (OWLCX) interval fund, securing $850 million in commitments, further solidifies this segment's growth trajectory. Management anticipates continued growth in Part I fees in 2026, even with expected rate declines, due to strong fundraising and deployment in direct lending.

Real Assets Platform: Capitalizing on Digital Infrastructure Demand

The Real Assets platform, with $74.70 billion in AUM and $46.30 billion in FPAUM as of September 30, 2025, is experiencing significant momentum, particularly in digital infrastructure. Management fees increased by $139.80 million for the nine months ended September 30, 2025, largely due to the IPI acquisition. Blue Owl has taken a leadership role in all three of the largest data center financings, including a $30 billion capital investment with Meta (META) and over $20 billion with Oracle (ORCL), underscoring its unique ability to provide scale and deep sector expertise. The firm's Net Lease strategy also benefits from this demand, with Net Lease Fund VI nearly 90% committed and 50% deployed through September 30, 2025, with the remainder expected to be deployed over the next 12-18 months. Gross returns in Net Lease were approximately 4% in Q3 2025 and 10% over the last 12 months.

While Q3 2025 saw some mark-to-market impacts on swaps related to debt, management emphasized that these were "short-term noise" and that the underlying performance of data centers remains strong, with IRRs in the high teens across its digital infrastructure funds. The firm launched a digital infrastructure semi-liquid product ahead of schedule, anticipating a first close in December 2025, further expanding access for investors. Management anticipates a meaningful acceleration in management fee growth for real assets, with mid-single-digit quarter-over-quarter growth expected for Q4 2025, annualizing to about 20% growth, and further acceleration into 2026.

GP Strategic Capital: Fueling Growth and Providing Liquidity

The GP Strategic Capital platform, with $68.80 billion in AUM and $40.20 billion in FPAUM as of September 30, 2025, continues to provide growth capital to the alternatives industry. Management fees increased by $23.90 million for the nine months ended September 30, 2025, driven by fundraising in the sixth vintage GP minority stakes product. The platform has deployed over $5 billion of equity year-to-date out of its latest flagship vintage, which is over 35% invested towards its $13 billion target. Performance remains strong, with net IRRs of 22% for Fund III, 34% for Fund IV, and 13% for Fund V.

Blue Owl has also demonstrated its ability to generate liquidity for investors through innovative transactions. The firm completed its largest strip sales to date in Q3 2025, totaling over $2.50 billion and delivering a 3.2x gross return on assets sold. In total, GP Strategic Capital flagship funds have distributed more than $5.5 billion over the last 18 months, positioning them within the top quartile on distributions to paid in. This provides valuable liquidity in a market where return of capital has often been scarce. A fee step-down for Fund II, impacting annual management fees by approximately $22 million, occurred at the end of October 2025.

Financial Strength and Outlook

Blue Owl's financial performance reflects its durable business model. For the nine months ended September 30, 2025, the firm reported total revenues of $2.11 billion, net income attributable to Blue Owl Capital Inc. of $31.17 million, Fee-Related Earnings (FRE) of $1.08 billion, and Distributable Earnings (DE) of $926.53 million. The FRE margin stood at a healthy 57%. The firm's management fee growth of approximately 30% over the last twelve months, driven by fundraising, deployment, and strategic acquisitions, underscores its robust expansion.

A significant portion of Blue Owl's future growth is already embedded. As of September 30, 2025, the firm had $28.40 billion in AUM not yet paying fees, which is expected to generate approximately $361 million in annualized management fees once deployed. This, combined with an anticipated $135 million in incremental annual management fees from the listing of the technology-focused BDC (OTF), provides substantial visibility into future revenue streams. Management targets over 20% growth for management fees, revenues, and FRE per share, aligning with its "North Star" Investor Day goals. FRE margins are expected to remain between 57% and 58% in 2025, with further expansion anticipated in 2026 and 2027, reflecting a strategic balance between investing for growth and maintaining profitability.

Liquidity remains strong, with $137.30 million in cash and cash equivalents and approximately $1.60 billion available under its Revolving Credit Facility as of September 30, 2025. The firm's dividend policy, which includes a fixed annual dividend of $0.90 per Class A Share for fiscal year 2025 (a 25% increase from the prior year), is supported by its predictable cash flows. The effective tax rate for 2025 is projected to be in the mid-to-high single digits, with a higher rate in Q1 due to Tax Receivable Agreement (TRA) payments, normalizing to lower rates in subsequent quarters.

Risks and Competitive Dynamics

Despite its strong position, Blue Owl faces inherent risks. Macroeconomic factors, including inflation, interest rate volatility, and geopolitical events, can impact financial markets and the firm's business. While Blue Owl's credit portfolio has demonstrated exceptional health with low loss rates, management remains vigilant, particularly regarding idiosyncratic credit issues and potential fraud risks. The firm employs robust diligence, data-intensive monitoring, and partnerships with best-in-class originators to mitigate these risks. The distinction between "PIK by design" (strategic for strong, growth-oriented credits like software) and "PIK not by design" (a sign of distress) is crucial for understanding portfolio health. Blue Owl's direct lending portfolio has limited exposure to tariffs, with only a mid-single-digit percentage of companies having material manufacturing capacity outside the U.S.

In the competitive landscape, Blue Owl's permanent capital model and specialized focus provide a distinct advantage. Unlike many peers who rely heavily on carried interest or capital markets fees, Blue Owl's FRE-driven model offers superior predictability. Its leadership in digital infrastructure, particularly in financing hyperscale data centers, positions it ahead of many competitors who lack the same depth of technical expertise and scale of capital. In the net lease market, Blue Owl is an "unquestioned market leader," with its pipeline growing and leadership accelerating. While other firms are entering the alternative credit space, Blue Owl's long-standing expertise through acquisitions like Atalaya and its established private wealth distribution channels give it a significant head start. The firm's strategic partnerships, such as with the Qatar Investment Authority for digital infrastructure and Voya (VOYA) for 401(k) retirement plans, further expand its reach and solidify its competitive standing.

Conclusion

Blue Owl Capital is a compelling investment thesis built on a foundation of durable, predictable growth, underpinned by its permanent capital structure and a strategic focus on high-growth alternative asset classes. The firm's consistent financial performance, marked by 18 consecutive quarters of management fee and FRE growth, demonstrates its resilience in volatile markets. Blue Owl's strategic acquisitions and organic initiatives have successfully diversified its capabilities, particularly in the burgeoning private credit and digital infrastructure sectors, where its operational expertise and scale provide a significant competitive moat.

With substantial embedded earnings from undeployed capital and a clear roadmap for continued expansion across institutional and private wealth channels, Blue Owl is well-positioned to achieve its ambitious long-term growth targets. The firm's disciplined risk management, innovative product development, and strategic partnerships reinforce its leadership in key segments. For discerning investors seeking exposure to the secular growth of alternative assets with a focus on stability, income generation, and downside protection, Blue Owl Capital offers a robust and differentiated opportunity.