Q3 2023 Blue Owl Capital Inc Earnings Call

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Ladies and gentlemen.

Speaker 2: Ladies and gentlemen, thank you for standing by.

Thank you for standing by.

My name is Bob I shouldn't I'll be your conference I'll point it today.

Speaker 2: At this time, I would like to welcome everyone to the Blue L Q3 2023 Comm-

This time I would like to welcome everyone to the Blue Al Q3, 2023 Conference School.

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All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session. If.

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Speaker 2: Now, poke down the call over to Andy, head of the Vestor Relations. He may begin...

I would now like to hand, the call over to Ann Dai <unk> head of Investor Relations you May begin your conference.

Thank you operator, and good morning to everyone. Joining me today are Doug October and Marc Lipschultz Co Chief Executive Officer, and Alan Kirshenbaum, Our Chief Financial Officer.

Speaker 3: Thanks operator and good morning to everyone. Joining me today are Doug Ostover and Mark Lipcholk, co-chief executive officer and Alan Churchinbaum, our chief financial officer.

Speaker 3: I'd like to remind our listeners that remarks made during the call may contain boards 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 boards looking statements as a result of a number of factors, including those described from time to time in blue owl capital, four you should think that one and another should have a number of conversations that are

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.

Reading those described from time to time and glue, our capital filings with the Securities and Exchange Commission.

Speaker 3: The company assumes no obligation to update any board looking state.

The company assumes no obligation to update any forward looking statements. We would also like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our earnings presentation available on the Investor resources section of our website at <unk> Dot com.

Speaker 3: We'd also like to remind everyone that we're referred to non- GAAP measures on the call with our reconciled gap figures in our earnings presence.

Speaker 3: Available on the Investor Resources section of our website at blueild.com.

Speaker 3: Please note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in any due L fund.

Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any fund.

Speaker 3: This morning we issued our financial results for the third quarter of 2023, reporting fee-related earnings or FRE of 17 cents per share, and distributable earnings or DE of 16 cents per share.

This morning, we issued our financial results for the third quarter of 2023, according fee related.

<unk> earnings or FRE of <unk> 17 per share and distributable earnings or <unk> 16 per share.

Speaker 3: We declared dividend of 14 cents per share for the third quarter, payable on November 30th to holders of record as of November 20th.

We declared a dividend of <unk> 14 per share for the third quarter payable on November 30 to holders of record as of November 20 <unk>.

Speaker 4: 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 Doug. Thank you, Ann, and good morning, everyone.

During the call today, we will 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 Doug.

Thank you Anne and good morning, everyone.

Want to thank all of you for joining us today.

Speaker 4: It's been a pleasure to spend the last two years on these earnings calls with our shareholders and analysts.

It's been a pleasure to spend the last two years on these earnings calls with our shareholders and analysts.

Speaker 4: As we move through the transition of the COCEO structure that we announced earlier this year.

As we move through the transition of the co CEO structure that we announced earlier this year, we've decided to take a divide and conquer approach to allow each member of the management team to leverage their time more efficiently.

Speaker 4: We've decided to take a dividing conquer approach to allow each member of the management team to leverage.

Speaker 4: And so going forward, you'll be hearing from Mark and Alan on our quarterly earnings.

So going forward, you'll be hearing from Mark and Alan on our quarterly earnings calls, while Michael and I will be taking a step back from this aspect of the business to be clear I'm not going anywhere.

Speaker 4: While Michael and I will be taking a step back from this aspect of the

Speaker 4: to be clear, I'm not going anywhere, how continue to be very available and accessible. And I look forward to seeing many of you at upcoming conferences and meetings.

<unk> to be very available and accessible and I look forward to seeing many of you at upcoming conferences and meetings.

Speaker 4: That said, given the rapid growth that we've had at Blue Al and what now feels like a pretty well oil learnings process, it feels like the right time for me to focus my attention more fully on the many strategic growth initiatives we have.

That said given the rapid growth that we've had at blue al and what now feels like a pretty well oiled the earnings process. It feels like the right time for me to focus my attention more fully on the many strategic growth initiatives, we have in the works right now.

So with that let me hand things over to Mark.

Thanks, so much Doug.

Speaker 4: Today, we again demonstrated the steady and resilient growth that we believe sets blow apart in the alternative asset management space. With our 10th straight quarter as a public company, also being our 10th straight quarter of generating FRE growth. When we think about what's happened.

Today, we again demonstrated the steady and resilient growth that we believe sets <unk> apart in the alternative asset management space with our 10th straight quarter as a public company also begin our 10th straight quarter of generating FRE growth.

When we think about what's happened to the world over that time period.

Speaker 5: This time in 2021, 10 year tragedies were around 1.5% and a year ago, they just crossed four.

This time in 2021, 10 year treasuries were around one 5% and a year ago.

<unk>, 4% with the expectation by the end of 2023, we'll be talking about rate cuts, obviously, those expectations have shifted meaningfully over the past year.

Speaker 5: with the expectation by the end of 2023, we'd be talking about rates.

Speaker 5: Obviously those expectations have shifted meaningfully over the past

Speaker 5: in the first three quarters of 2022, yes, and P500 corrected 25% as interest rates marked upwards, only to reverse and rally 20% over the next year despite elevated rates and ongoing geopolitical.

In the first three quarters of 2022, yes, NP 500 correctly, 25% as interest rates marched upwards only to reverse and rally 20% over the next year, despite elevated rates and ongoing geopolitical risks.

Speaker 5: Capital markets and M&A have been installed for the better part of a year. And in March, we witnessed a handful of bank failures that took the markets completely off.

Our capital markets and M&A have been installed for the better part of the year and in March we witnessed a handful bank failures that took the market's completely off guard.

Speaker 5: All of this is to say, the only thing that's been clear over the past couple of years is the lack of clarity into the short-term path of rates, the longer-term impact of those rates on economic growth, and how liquid markets will react to the information we have.

All of this is to say the only thing thats been clear over the past couple of years is the lack of clarity into the short term path of rates the longer term impact of those rates on that kind of growth and how liquid markets will react to the information we have on hand.

Speaker 5: In contrast, we've been able to demonstrate how Blue Island permanent capital at FRE-centric model by design creates a differentiated and more predictable earnings profile.

In contrast, we have been able to demonstrate how blue all permanent capital at FRE centric model by design creates a differentiated and more predictable earnings profile.

Speaker 5: And on the last 12 months basis, we have grown DE by 28% and FRE by 26% in

On a last 12 month basis, we have grown day by 28% and FRE by 26% in spite of these market headwinds since we've been public management fee growth has been over 40% per year.

Speaker 5: Since we've been public, management fee growth has been over 40% per year. That's not to say that this growth...

That's not to say that this growth has come easily.

One advantage we have structural is that very few assets leave our system because our AUM is mostly permanent capital. So the capital. We're raising is generally adequate instead of replacing assets that are being returned to investors on top of that our business is positively levered to many of the ongoing secular tailwind within alternatives.

Speaker 5: that very few assets leave our system because our AUM is mostly permanent capital. So the capital we're raising is generally additive instead of replacing assets that are being returned.

Speaker 5: On top of that, our business is positively leveraged to many of the ongoing secular tailwinds within alternatives, including the continued growth of direct lending, larger managers benefiting from ongoing consolidation across all, and private wealth incremental adoption of alternatives as a core component of an investor portfolio.

Including the continued growth of our direct lending.

Larger managers benefiting from ongoing consolidation across all <unk> and private wealth incremental adoption of alternatives as a core component of an investor portfolio.

Speaker 5: these reasons, we feel confident that the blue all will remain a differentiated story with differentiated growth.

For these reasons, we feel confident that <unk> will remain a differentiated story with differentiated growth trajectory.

Speaker 5: As relates to the fundraising landscape, we continue to see very positive indications for demand across our strategies, which are generally inconvenient and downside protection folks.

As it relates to the fund raising landscape, we continue to see very positive indications for demand across our strategies, which are generally income oriented and downside protection focused.

Speaker 5: Across our perpetually offered products and wealth, we raised $1.5 billion in the third quarter, a nearly 20% step up from the prior quarter. Over the last 12 months, we have been the top fundraiser in the industry in both credit and real estate when looking at net flows. And on a gross basis, we have been the second best fundraiser over that period.

Across our perpetually offered products and well, we raised $1 $5 billion in the third quarter.

20% step up from the prior quarter.

Over the last 12 months, we have been the top fundraiser in the industry in both credit and real estate when looking at net flows and on a gross basis, we have been the second best fundraiser over that period.

Speaker 5: both of these are extraordinary statistics and I think testament to the many years that we've been building our platform and relationships in this space.

Both of these are extraordinary statistics, and I think testaments to the many years that we've been building our platform and relationships in this space.

Speaker 5: Now a lot of firms are trying to catch up to where we are and given the size of the opportunity, this is not a zero sum game.

No a lot of firms are trying to catch up to where we are and given the size of the opportunity. This is not a zero sum game.

Speaker 5: We and others can do well at the same time. And there will be a lot of growth ahead across.

We and others can do well at the same time and there will be a lot of growth ahead across the industry, but I wanted to take a moment to recognize what we've been able to accomplish so far.

Speaker 5: But I wanted to take a moment to recognize what we've been able to accomplish so far. I think we are exceeding expectations in the face of headwinds, and I'm very enthused about what lies ahead for this.

We are exceeding expectations in the face of headwinds and I'm very enthused about what lies ahead for this business.

On the institutional side of our business, we announced a $1 billion mandate from a leading sovereign wealth funds, reflecting continued progress in the strategic and geographic expansion of our LP base.

Speaker 5: On the institutional side of our business, we announced a billion dollar mandate from a leading sovereign wealth fund, reflecting continued progress in the strategic and geographic expansion of our LPB.

Speaker 5: We have improving visibility into the end of year flows as we launch fundraising for handful of strategies, including GP states, for which we anticipate a small close for our six fund before the end of this year. We are very excited about the potential for cross sell for this fund with our credit and real estate investment.

We are improving visibility into the end of your flows as we launched fundraising for a handful of strategies, including GP Stakes.

Which we anticipate a small closed four or six fund before the end of this year.

We are very excited about the potential for cross sell for this fund with our credit and real estate investors and we've seen strong demand to bring the GP stake strategy to a number of new wealth platforms as well.

Speaker 5: seem strong demand to bring the GP stake strategy to a number of new wealth platform.

Speaker 5: In real estate, we remain very well positioned despite the substantial headwinds in this space. Having already reached our $4 billion target for this latest vintage of our flagship fund, getting to the $5 billion hard cap, which we expect to hit, will represent a doubling in the size from the prior vintage, a challenging feat even in strong markets and reflective of the distinctive and attractive attributes of our net lease strategy.

In real estate, we remain very well positioned despite the substantial headwinds in this space, having already reached our $4 billion target for this latest vintage of flagship funds getting to the 5 billion hard cap, which we expect to hit will represent a doubling in the size from the prior vintage a challenging feat even in strong markets and reflective.

As a distinctive and attractive attributes of our <unk> strategy.

Speaker 5: And as I mentioned earlier, in the Wealth Channel, we are outselling competitors by a wide margin, and we continue to build out that.

And as I mentioned earlier in the wealth channel, we are outselling competitors by a wide margin and we continue to build out that syndicate.

Speaker 5: And we remain engaged in a number of institutional investor dialogues regarding separate accounts and upcoming launches, some of which may close during the fourth quarter.

And we remain engaged in a number of institutional investor dialogues regarding separate accounts and upcoming launches some of which may close during the fourth quarter.

Moving on to the business performance in credit, we saw improving trends in deployment with Blue I'll take a lead role in some of the largest deals and refinancing announced or closed across the market, including <unk> and <unk>.

Speaker 5: In credit, we saw improving trends in deployment with blue-alalt taking lead roles on some of the largest deals and refinancing announced or closed across the market, including a finastra and bet.

Speaker 5: And payments during the quarter were elevated relative to level seen earlier in the year, providing additional opportunities to redeploy capital at even more attractive levels.

Repayments during the quarter elevated relative to levels seen earlier in the year, providing additional opportunities to redeploy capital out even more attractive levels.

Speaker 5: Overall, we continue to see our direct lending business expand as we meet the capital needs of an evolving market.

Overall, we continue to see our direct lending business expand as we meet the capital needs of an evolving marketplace.

Speaker 5: And the risk reward opportunity presented by private credit today remains one of the best we've seen in our 10 years as investment professionals, a sentiment that we often hear.

And the risk reward opportunity presented by private credit today remains one of the best we've seen in our 10 years of investment professionals, a sentiment that we often hear echoed backed by our investors.

And our GP Stakes business, we continue to witness the resilience of larger cap GPS with these managers being the beneficiaries of market share gains during more challenging fundraising environments.

Speaker 5: In our GP stakes business, we continue to witness the resilience of larger cap GPs with these managers being the beneficiaries of market share gains during more challenging fundraising environment.

Speaker 5: In real estate, we've been active in deploying capital at attractive cap rates with fund 6, about 20% committed or deployed, and have continued to monetize at meaningful spreads for our...

In real estate, we've been active in deploying capital at attractive cap rates with fund six about 20% committed or deployed and have continued to monetize at meaningful spreads for our entry points, bringing.

Speaker 5: Bringing all this together, we think of our business as Alternative Asset Manager 3.0, meaning our business offers the steady stream of management fee-driven earnings that investors have been asking for in conjunction with the robust growth that they expect. And we have a greater ability to keep assets in our system due to our permanent

Bringing all this together, we think of our business as alternative asset manager three point out meaning our business offers the steady stream of management fee driven earnings that investors have been asking for in conjunction with the robust growth that they expect and we have a greater ability to keep assets in our system due to our permanent capital.

Our financial profile is very simple and durable and doesn't depend on realizations or capital market fees to drive earnings growth.

Speaker 5: Our financial profile is very simple and durable and doesn't depend on realizations or capital market fees to drive earnings growth.

Speaker 5: As a premier solutions provider to a large and growing market, we think we offer a very attractive proposition of strong earnings and dividend growth underpinned by a core asset base that is exceptionally stable. And we look forward to continuing to prove this model out to all types of market conditions at. With that, let me turn it over to you.

As a premier solutions provider to a large and growing market. We think we offer a very attractive proposition of strong earnings and dividend growth underpinned by our core asset base that is exceptionally stable and we look forward to continuing to prove this model out to all types of market conditions add.

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

Speaker 6: Thank you, Mark. Good morning, everyone. Thanks for joining us today. To start off, we are pleased with our third quarter and LGM.

Thank you Mark good morning, everyone. Thanks for joining us today to start off we are pleased with our third quarter and LTM results.

Speaker 6: Mark mentioned this, but I want to reiterate that this is our 10th consecutive quarter. It's actually been every quarter since becoming a public company of both management and FRE sequential growth. The only alternative asset manager that has demonstrated this over the past two and a half. The only alternative asset manager that has demonstrated this over the past two and a half.

Mark mentioned this but I want to reiterate that this is our 10th consecutive quarter, it's actually been every quarter since becoming a public company.

Management fee and FRE sequential growth the only alternative asset manager that has demonstrated this over the past two and a half years.

Speaker 6: And as Mark also referred to earlier, as you can see on slide five, our management of the use of grown at a 42% keg or since we became a public.

And as Mark also referred to earlier as you can see on slide five our management fees have grown at a 42% CAGR since we became a public company.

Speaker 6: We're talking not just very good growth, but steady, consistent, resilient growth through what has obviously been a very challenging and volatile market in-

We're talking not just very good growth, but steady consistent resilient growth through what has obviously been a very challenging and volatile market environment.

Speaker 6: So let's go through some of the key highlights of our LTM results through September .

Let's go through some of the key highlights of our LTM results through September 30.

Speaker 6: Management fees are up 32% for the LTM period versus your rig.

Management fees are up 32% for the LTM period versus a year ago and 93% of these management fees are from permanent capital vehicles.

Speaker 6: 93% of these management fees are from permanent capital.

Speaker 6: FRE is up 26% for the LTM Periodverse Eurus.

<unk> is up 26% for the LTM period versus a year ago, and our FRE margin is right on top of our 60% target, which we continue to expect to be the target for the next few years and <unk> is up 28% for the LTM period versus a year ago.

Speaker 6: and our FRE margin is right on top of our 60% target, which we continue to expect to be the target for the next few years.

Speaker 6: and DE is up 28% for the LTM period first year ago.

Now I'd like to spend a moment on our fund raising efforts as you can see on slide 12, we raised $2 9 billion in the third quarter and over the last 12 months, we raised $14 5 billion.

Speaker 6: As you can see on slide 12, we raised 2.9 billion in the third quarter, and over the last 12 months, we raised 14.5 billion. I'll break down the third quarter numbers across our strategies and products.

I'll break down the third quarter numbers across our strategies and products in credit we raised over $2 1 billion.

Speaker 6: 1.2 billion was raised in our diversified and firstly in lending strategies, including over 900 million raised in our well-distributed credit income BDC, OCIC, returning to a pace we haven't seen since the first half of 2022. And approximately one billion was raised.

$1 2 billion was raised in our diversified and first lien lending strategies, including over $900 million raised in our wealth distributed credit income BDC <unk>.

Returning to our pace, we haven't seen since the first half of 2022 and.

And approximately $1 billion was raised in our tech lending strategies, including approximately $300 million raised in our wealth distributed tech lending BDC oti's.

Speaker 6: including approximately 300 million raised in our wealth-distributed tech lending BDC, OTIC.

And GP strategic capital, we raised approximately $100 million during the third quarter and in October we closed on approximately 400 million for GP Stakes co investment vehicle with a long standing and valued partner, which will invest side by side with our fifth and sixth GP Stakes funds.

Speaker 6: In GP strategic capital, we raise approximately $100 million during the third quarter. In October , we close on approximately $400 million for a GP stakes co-investment.

Speaker 6: with a long-standing and valued partner, which will invest side-by-side with our 5th and 6th GP Stakes funds.

In real estate, we raised approximately $700 million.

Speaker 6: approximately half of that in our sixth vintage of our real estate strategy. And the other half in our wealth distributed non-traded REITs, Oren. We have now raised over two billion of equity in Oren since it's launched a year ago, primarily through just one wirehouse and during what has been an exceptionally challenging environment for real estate.

Approximately half of that in our six to vintage of our real estate strategy and the other half in our wealth distributed non traded REIT or and we have now raised over $2 billion of equity in <unk> since its launch a year ago, primarily through just one wire house and during what has been an exceptionally challenging environment for real estate.

So we're pleased with those results and since May we have launched <unk> on a few additional platforms and have some meaningful launches ahead for the fourth quarter and into 2024.

Speaker 6: And since May we have launched O-Rent on a few additional platforms and have some meaningful launches ahead for the fourth quarter and into 2012.

Speaker 6: As Mark alluded to earlier, we continue to see strong institutional interest in our products, and we are expecting a strong finish to the year in the.

As Mark alluded to earlier, we continue to see strong institutional interest in our products and we are expecting a strong finish to the year in the institutional channel as we have discussed throughout the year overall as we head into the end of 2023, we continue to see fund raising tilting institutional for the year.

Speaker 6: As we have discussed throughout the year, overall, as we head into the end of 2023, we continue to see fundraising tilting institutional for the

Speaker 6: In the wealth channel, we have continued to see solid interest on our strategies with steady increases again in our fundraising levels quarter of

In the wealth channel, we have continued to see solid interest in our strategies with steady increases again in our fund raising levels quarter over quarter.

Speaker 6: And we believe that will continue to build on itself through the end of this year and into next year. We are very excited.

We believe that will continue to build on itself through the end of this year and into next year. We are very excited about where we can be next year.

Speaker 6: All in all, we've raised over 36 billion of fee paying AUM since January 1st, 2020.

And all we've raised over 36 billion of fee paying AUM since January one 2022.

Speaker 6: When I think about fundraising overall, we've always talked about how permanent capital different.

When I think about fund raising overall, we've always talked about how permanent capital differentiates us because assets not leaving the system means that we have higher growth for the same amount of fund raising said another way, we keep more of the capital we raised in our peers, putting some numbers around that for approximately every $5 of fee paying.

Speaker 6: because assets not leading the system means that we have higher growth for the same amount of fun.

Speaker 6: Said another way, we keep more of the capital we raise than.

Speaker 6: putting some numbers around that. For approximately every $5 a fee paying AUM inflows we bring in. We see just one dollar going out in the form of distributions or

AUM inflows, we bring in we see just $1 going out in the form of distributions or redemptions.

Speaker 6: For our peers on average, every $2 raise is met with $1 leaving their

For our peers on average every $2 raised is met with $1, leaving their system, meaning half of their fundraising covers assets that are being paid out to investors in one form or another that's a huge difference it's a big advantage for us.

Speaker 6: half of their fundraising covers assets that are being paid out to investors in one form or another. That's a huge difference.

Speaker 6: In addition to the same power of existing AUM and the benefit of ongoing fundraising, we have substantial embedded earnings that we will unlock over.

In addition to the staying power of existing AUM and the benefit of ongoing fundraising we have substantial embedded earnings that we will unlock overtime.

Speaker 6: AUM not yet paying fees with 12.6 billion has to have

AUM not yet paying fees was $12 6 billion at September 30.

Speaker 6: This AUM corresponds to an expected increase in annual management fees, totaling over $175 million once...

This AUM corresponds to an expected increase in annual management fees totaling over $175 million once deployed.

Speaker 6: And as many of you will recall, we have over 200 million dollars of management fees in aggregate that will turn on upon the listing of our private BDCs.

And as many of you will recall, we have over $200 million of management fees in aggregate that will turn on upon the listing of our private bdcs overtime. We believe in part because of these things and in part because of our permanent capital we have a higher quality of earnings.

Speaker 6: We believe in part because of these things and in part because of our permanent capital, we have a higher quality.

Speaker 6: Moving on to our credit platform, we had gross originations of 4.4 billion for the quarter and net funded deployment of 2.1.

Moving on to our credit platform, we had gross originations of $4 4 billion for the quarter and net funded deployment of $2 1 billion. This brings our gross originations for the last 12 months to $13 billion with $7 4 billion of net funded deployment.

Speaker 6: This brings our gross originations for the last 12 months to 13 billion with 7.4 billion of net funded

Speaker 6: So as it relates to the 9.3 billion of value, I'm not yet paying fees and credit, it would take us a little over one year to fully deploy this capital based on our average net funded deployment pace over the last-

As it relates to the $9 3 billion of AUM, not yet paying fees and credit it would take us a little over one year to fully deploy this capital based on our average net funded deployment pace over the last 12 months with that said as Mark commented earlier, we have been seeing a considerable uptick in pipeline activity and our direct lending platform.

Speaker 6: With that said, as Mark commented earlier, we have been seeing a considerable uptick in pipeline activity in our direct lending pot.

Speaker 6: believe the fourth quarter could be a much bigger quarter for deployment than pre-gust quarter

And believe the fourth quarter could be a much bigger quarter for deployment than previous quarters. This year.

Speaker 6: Although the impact of management fees in 2023 will be nominal, it's a great place to start.

Although the impact of management fees in 2023 will be nominal it's a great place to start 2024.

Our credit portfolio returned four 1% in the third quarter and 17, 4% over the LTM, while annualized realized losses remain approximately six basis points on a gross basis and have been fully offset by realized gains.

Speaker 6: Our credit portfolio returned 4.1% in the third quarter and 17.4% over the LTM, while annualized losses remain approximately six basis points on a growth basis.

Speaker 6: Weighted average LTVs remain in the low 40s across direct lending, and in the low 30s specifically in our tech lending port.

Weighted average ltvs remained in the low forties across direct lending and in the low 30, specifically in our tech lending portfolio.

Speaker 6: for our GP Strategic Capital Platform, total invested commitments for our 5th GP Stakes Fund, including Agreements In Principle, or approximately 11 billion of capital, with line of sight into about two billion of up.

For our GP strategic capital platform total invested commitments for our fifth GP Stakes funds, including agreements in principle for approximately $11 billion of capital with line of sight into about $2 billion of opportunities, which if all signs would bring us through the remaining capital available and fund five.

Speaker 6: which if all signs would bring us through the remaining capital available in fun

Speaker 6: And performance across these funds remains strong, with a net IRR of 23% for fund-3, 46% for fund-4, and 21% for fund-

And performance across these funds remained strong with a net IRR of 23% for fund III, 46% for fund four and 21% for fund five all of which compare favorably to the median returns for private equity funds of the same vintages.

Speaker 6: All of which compare favorably to the meeting returns for private equity funds of the same

Speaker 6: And in our real estate platform, deployment activity remains robust, with over $1 billion deployed during...

And in our real estate platform deployment activity remains robust with over $1 billion deployed during the quarter and our pipeline of opportunities remains strong with over $4 billion of transaction volume under letter of intent or contract to close with regards to performance. We achieved gross returns across our real estate portfolio.

Speaker 6: And our pipeline of opportunities remains strong with over 4 billion of transaction volume under letter of intent for contracts.

Speaker 6: In regards to performance, we achieved growth returns across our real estate portfolio of 2.4% for the third quarter and 13.8% for the last quarter.

Two 4% for the third quarter and 13, 8% for the last 12 months.

Speaker 6: Okay, let's wrap up here with one closing thought. Divident.

Okay, let's wrap up here with one closing thought dividend growth. This year, we will have posted dividend growth of 22% over last year and since becoming a public company. We have achieved a 28% CAGR for our dividend the highest in the public alternative asset manager space and we feel this is truly reflective.

Speaker 6: This year we will have posted dividend growth of 22% over last year. And since becoming a public company, we have achieved a 28% Kager for our dividend. The highest in the public alternative asset.

Speaker 6: we feel this is truly reflective of how we have grown our business.

Of how we have grown our business dividend growth as our north star. It reflects our pace of growth, but also informs about the quality of the earnings underlying that growth and the confidence we have in the staying power of those earnings. It's a metric that captures all aspects of our business, including fundraising deployment revenue growth embedded <unk>.

Speaker 6: reflects our pace of growth, but also informs about the quality of the earnings underlying that growth. And the confidence we have in

Speaker 6: the metric that captures all aspects of our business, including fundraising, deployment, revenue growth, embedded future earnings.

<unk> earnings and so on and for that reason, it's one of the metrics that we think investors should be most focused on for us.

Speaker 6: And for that reason, it's one of the metrics that we think investors should be most focused.

Speaker 6: Thank you again to everyone who has joined us on the call today. With that operator, can we please open the line?

Thank you again to everyone, who has joined US on the call today with that operator can we please open the line for questions.

Speaker 2: Thank you. At this time, I would like to remind our teleconference participants in order to ask a teleconference question, please press the star followed by the number one on your telephone keypad. We'll pause for just a moment.

Thank you.

This time I would like to remind our teleconference participants in order to ask a teleconference question. Please press the star followed by the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Thank you. Our first question comes from the line of Craig Siegenthaler from Bank of America. Please go ahead with your question.

Speaker 2: Our first question comes from the line of Craig Seagunthala from Bank of America. Please go ahead with your question.

Good morning, Doug gallon hope everyone's doing well.

Following alan's comments around a strong finish to 2023 in the institutional channel.

We wanted to get your perspective on the quarterly inflows of $1 billion and how we should think about the level of institutional fund raising over the next few quarters.

Actually, especially with a first close in GP stake six by December 31 expect.

Speaker 5: i hate crag this is mark uh... thank you for the question uh... look at this this quarter is uh... for the four is expected to be a strong one from a fundraising point of view across wealth and institutional we're seeing terrific strength in in wealth

Hey, Craig This is mark Thank you for the question.

This quarter is quarter four is expected to be a strong one from a fund raising point of view across wealth and institutional we're seeing terrific strength and well continue to grow there as you know we've been the number one net fundraiser in the market.

Speaker 5: continue to grow there as you know we've been the number one net fundraisers in the market and we continue to see substantial growth as we had into this month in this quarter. And then institutional as well with GP stake 6 we do expect to do our first close in the fourth quarter. And so I guess it leads probably to a broader point which is...

Continue to see substantial growth.

As we head into this the smartphone this quarter.

And then institutional as well with GP stake six we do expect to do our first close.

In the fourth quarter, and so I guess it leaves us probably to a broader point, which is.

Speaker 5: to call it what it is, look what we expect fourth quarter to be very strong. This quarter, the timing between when things close for us is a little less predictable. We just don't run as many funds.

To call it what it is what we expect fourth quarter to be very strong this quarter the timing between when things close for US is a little less predictable, we just don't run as many funds.

Speaker 5: So, you know, we don't like to either over excited about a particularly strong quarter or under, you know, or overly concerned about a quarter that's a little bit lighter. We look for long-term strong, predictable dividend growth. We just don't run as many funds as you know. And we don't expect we will. Today, we have the highest fee rate in the industry. We run products where we are going to deliver superior risk returns.

Yes, we don't like to either over excited about a particularly strong quarter or under.

Overly concerned about a quarter, that's a little bit lighter, we look toward long term strong predictable dividend growth. We just don't run as many funds as you know.

And we don't expect we will today, we have the highest fee rate in the industry.

We run products, where we are going to deliver superior risk returns.

Speaker 5: And where we can build true scale as you know and really just about everything we do we're a market leader If not the singular market leader and that's going to continue to be our center of gravity You know what we want to do is grow FRE and grow dividends

And where we can build true scale as you know and really just about everything we do we're a market leader if not the singular market leader and Thats going to continue to be our center of gravity. What we want to do is grow FRE and grow dividends and of course did that again this quarter and we plan to do it again next quarter.

Speaker 7: And of course did that again, this quarter and we plan to do it again next quarter and keep on keeping on in that regard. So between wealth institutional and having a flagship product back in the marketing queue for, we do anticipate it being strong. Thank you.

And keep on keeping on in that regard.

Between wealth institutional and having a flagship product back in the market in Q4.

We do we do anticipate it being being strong.

Thanks Mark.

Just for core thank you.

We were looking for an update on <unk> Trust as fund raising trajectory.

Wondering if you could share how many large retail platforms. It's on today.

And if you have line of sight into more platform additions over the near term and any other comments around its net flow potential would be helpful. Too. Thank you.

Speaker 6: Sure, thanks, Greg. We are currently live on three platforms, three large platforms. We added one currently in the fourth quarter, and we anticipate coming on one or more additional large platforms in one queue.

Sure. Thanks, Craig.

We are currently live on three platforms three large platforms. We added one currently in the fourth quarter and we anticipate coming on.

One or more additional large platforms in <unk>.

Speaker 6: the trajectory continues to look strong. Again, in the face of incredible headwinds in the world of real estate, and certainly relatively speaking, very, very strong flows that we've seen to date. If you recall, we've raised, you know, about $2 billion, primarily from really one wirehouse platform, in the face of a number of things that have happened over this past year, and in the face of strong headwinds, as I said, in real estate writ large.

The trajectory continues to look strong again in the face of incredible headwinds in the world of real estate and certainly relatively speaking very very strong flows that we've seen to date.

If you recall we've raised.

$2 billion, primarily from really one wire house platform in the face of a number of things that have happened over this past year.

And in the face of strong headwinds as I said in real estate writ large so we continue to be cautiously very optimistic about continued trends up into the right and what we can do.

Speaker 8: So we continue to be cautiously very optimistic about continued trends up into the right in what we can do with our O-Rent product in particular in 2024 and forward. You know, I'll just add something to that.

With our <unk> product in particular in 2024 and forward.

Just add something to that.

Speaker 8: linking kind of the two comments, my comment, the Nallans comment, together. You know, Oren's a great example of a truly distinctive product in the real estate space.

Linking the two comments my comments analysis comment together all rents are great example of a truly distinctive products and the real estate space.

Speaker 8: And one where we see really substantial long-term potential in growth.

And one where we see really substantial long term potential and growth. It is a far more durable product. We continue to generate extremely attractive positive returns in all rent during markets, where people are maybe a little less discerning about risks the almost distinctions don't appear significant.

Speaker 8: It is a far more durable product. We continue to generate extremely attractive positive returns.

Speaker 8: In all rent, during markets where people are maybe a little less discerning about risk.

Speaker 8: You'll lose distinctions, don't appear significant, then you get into a world of uncertainty and products that are really built for durability, which is the hallmark of what we do at Blue Isle, really sing. And that is in no small part why, you'll O-Rent is by far the number one net fund raiser in the market. And we are continuing to grow at a time when the word real estate's out of favor, and that's exactly what makes the opportunity for O-Rent to grow so substantial, because we're delivering excellent returns in that market. And frankly originating at really attractive.

Then you get into a world of uncertainty and products that are really built for durability, which is the hallmark of what we do at Blue Owl rock.

We're really saying and that is in no small part why all rent is by far the number one net fund raiser in the market and we are continuing to grow at a time when the world of real estate is out of favor and that's exactly what makes the opportunity for all rents have Russ so substantial because we're delivering excellent returns in that market.

Frankly originating at a really attractive cap rates with outstanding Counterparties. So that is an area, where I think youll continue to see us when we look forward. We think it's one of the most exciting areas. We have we see it on the institutional side frankly, as well we've already closed $4 billion for fund six.

Speaker 8: cap rates without standing counterparty so you know that is an area where i think you'll continue to see us and we look for we think it's one of the most exciting areas we have we see it on the institutional side frankly as well you know we have already closed four billion dollars for fun sick

Speaker 8: which was our target will hit our hard cap of five billion dollars and that'll be double the size of our last fund and a market again where everyone else in real estate going the other way

Which was our target will hit our hard cap of $5 billion and that'll be double the size of our last spot and a market again, where everyone else in real estate is going the other way.

Speaker 8: That's that kind of durability, predictability, and product differentiation that's going to continue to be our hallmark. And I do think O-Rans in particular will be an extraordinarily attractive growth engine for us. It produces a great yield with great predictability and stability.

So that kind of durability predictability and product differentiation, that's going to continue to be our hallmark and I do think all rents in particular will be an extraordinarily attractive growth engine for us it produces a great healed with great predictability and stability.

Mark Allen Thank you.

Thank you Craig Thank you.

Okay.

Speaker 2: Thank you and next question comes on the line of Alex Blosteem from Goldman Sachs. Please go ahead.

Thank you. Our next question comes from the line of Alex <unk> from Goldman Sachs. Please go ahead with your question.

Hey, good morning. Thanks for the question actually a question for Doug maybe going back to the first point you made at the beginning of the call around some of the changes in our leadership priorities and how you guys are going to be spending your time, so maybe help us frame kind of what your strategic growth initiatives are that you expect to focus on over the near term.

Speaker 9: Hi, good morning. Thanks for the question. Actually, a question for Doug, maybe going back to the first point you made in the beginning to call around some of the changes in sort of leadership, priorities and how you guys are going to be spending your time. So maybe help us frame kind of what your strategic growth initiatives are that you expect to focus on over the near term. And really, which one of these are you expecting to be most sort of needle moving in terms of revenue growth into 2024?

And really which one of these or are you expecting to be more sort of needle moving in terms of revenue growth into 2024.

Sure.

Speaker 4: I'm so happy I get a question. I was sitting here dying to speak.

I'm, so happy I get a question I was sitting here dying to speak today.

Yeah.

Speaker 4: First of all, let me just say I'm not going anywhere and for better or worse, you're gonna be stuck with me for a long time. I'm incredibly proud of what we've built and I think we're in the early innings of taking this business to a whole other level and we've always wanted to create and I think we're executing on becoming like one of the most unique alternative asset managers.

Hi, first of all let me just say.

I'm not going anywhere and for better or worse, you are going to be stuck with me for a long time I'm incredibly proud of what we've built.

And I think we're in the early innings of.

Taking this business to a whole another level and we've always wanted to create and I think we're executing on becoming like one of the most unique alternative asset managers.

Speaker 4: And just, you know, for everybody listening, I've really planned on just spending as much time as possible, you know, with our stakeholders, our LPs and shareholders. Look, we have a number of initiatives, I, you know, and I'm happy to offline to go into a lot of them. But let me just give you one that I think will resonate. I'm...

And just.

For everybody listening I really plan on just spending as much time as possible with our stakeholders, our Lps and shareholders look we have a number of initiatives.

And I'm happy to offline to go into a lot of them.

But let me just give you one that I think will resonate.

<unk>.

Speaker 4: You know about six and a half years ago, we saw really interesting opportunity in the Swarthwares space.

About six five years ago, we saw a really interesting opportunity in the software space.

Speaker 4: It was a growing sector. There were no dedicated pools of capital there. We launched our first dedicated software lending product. And today we have about $20 billion of capital focused on that sector.

It was a growing sector there were no dedicated pools of capital there.

We launched our first dedicated software lending product and today, we have about $20 billion of capital focused on that sector.

Speaker 4: If you look what we've done in healthcare today, we've spent a lot of time working with bi-out firms. We've done, I think, almost $14 billion of deals in the space and have a great track record. We've added expertise in royalty pharma. We've now, you know, we just made a small acquisition to have life sciences expertise. And we're spending a lot of time thinking about could a dedicated healthcare product

If you look what we've done in healthcare today, we've spent a lot of time working with buyout firms. We've done I think almost $14 billion of deals in the space and have a great track record. We've added expertise in royalty pharma. We've now you know we just made a small acquisition to add life Sciences.

Expertise.

And we're spending a lot of time thinking about could.

<unk> dedicated healthcare product be comparable or the Tam is certainly bigger than the software space. So that's the kind of thing we're working on in <unk>.

Speaker 4: be comparable or the tam is certainly bigger than the software space. So that's the kind of thing we're working on and you know where I plan to spend the bulk of my time.

<unk> planned to spend the bulk of my time.

Speaker 9: All right, awesome. And we definitely look forward to still speaking with you. So my second question, maybe a less strategic and a little bit more micro. So, Alan, I think this one's for you. I think in your preparatory marks, you suggested that FR remargin will hover around 60% for the next several years. I guess I'm just better trying to understand, why is it there more operating leverage in the business that's grown revenue set of pace that you guys have been able to put up and are likely to continue to put up over the next few years. Thank you.

Alright.

We definitely look forward to still speaking with you.

So my second question, maybe less strategic and a little bit more micro so John I think this one is for you I think in your prepared remarks, you suggested that FRE margins will hover around 60% for the next several years.

I'm just better trying to understand why isn't there more operating leverage in the business that has grown revenue set a pace that you guys have been able to put up and are likely to continue to put up over the next few years.

Sure. Thanks, Alex.

So we've talked about FRE margins, we think operating at a 60% FRE margin is a very strong margins, obviously, among the best or the best in the industry and as we continue to grow it Doug just talked about some new product launches as we continue to grow our business, we're going to continue to win.

Speaker 6: So we've talked about FRE margins. We think operating at a 60% FRE margin is a very strong margin. It's obviously among the best or the best in the industry. And as we continue to grow, Doug just talked about some new product launches. As we continue to grow our business, we're going to continue to invest in that business, whether it's people, whether it's real estate, whether it's placement costs.

Invested in that business, whether it's people, whether it's real estate, whether it's placement costs.

Speaker 6: whether it's comp. And so I would expect a high growth rate.

Whether it's comp and so I would expect a high growth rate for our expense line no different than for our revenue line, obviously ideally our revenue line outpaces the expenses, but as we continue to reinvest in the business.

Speaker 6: For our expense line, no different than for our revenue line. Obviously, ideally, our revenue line outpaces the expenses, but as we continue to reinvest in the business, I...

I continue to think of 60% FRE margin is the right place for our business to operate for the next few years.

Speaker 6: I continue to think of 50% FRE margin is the right place for our business to operate for the next-

Yes.

Speaker 8: You know, I buy Alice lived there. There is would be natural.

Alex look there there.

Is would be natural.

Speaker 8: scale economies to your point, but we

The scale economies to your point, but we continue to be very focused not just measured in quarters or even a couple of years, but many many years on continuing to deliver really strong FRE and dividend growth and so we do want to continue to put some capital.

Speaker 8: Continue to be very focused, not just measured in.

Speaker 8: quarters or even a couple of years, but many, many years on continuing to deliver really strong FRE and dividend growth and so we do want to continue to put some capital and some of our available revenue into

I'll add some some of our available revenue into starting new products. We've done a lot very successfully organically and we continue to want to do that we want to continue to invest in building the infrastructure World class infrastructure.

Speaker 8: Starting new products, we've done a lot very successfully organic.

Speaker 8: and we continue to want to do that. We want to continue to invest.

Speaker 8: in building the infrastructure, world class infrastructure in our organization to be, you know, the best in the areas we're in. So, you know, I think we're at already the highest margin in the industry. It's not particularly a priority to see how to make that higher relative to making sure we continue to grow revenue at an extremely attractive rate and therefore convert that into FRE and into dividends. When you think about what we're investing...

Our organization to be the best in the areas we're in so.

We already have the highest margin in the industry, it's not particularly a priority to see how to make that higher relative to making sure. We continue to grow revenue at an extremely attractive rates and therefore.

Therefore convert that into <unk>.

Sorry, Adnan as evidenced when you think about what we're investing in Alex. Please think about healthcare as Doug just mentioned in terms of organic product launches, we think about our strategic equity products.

Speaker 6: We think about healthcare as Doug just mentioned, in terms of organic product launches, we think about our strategic equity product that we're in the process of launching these raw organic that we're building from scratch internally here, where that we've been building from scratch. Think about continued investment in our institutional fundraising platform, continued investment in our wealth.

That we are in the process of launching these are all <unk>.

Organic that we're building from scratch internally here.

Where that we've been building from scratch thinking about continued investment in our institutional fund raising platform continued investment in our wealth fund raising platform. These are all things that are critical to that revenue growth that we continue to talk about in <unk>.

Speaker 6: Fundraising platform, these are all things that are critical to that revenue growth that we continue to talk about and

Speaker 6: You know, you pull the lens back and you think about, you know, how simple our business is.

You pull the lens back when you think about how simple or businesses.

Speaker 10: We take in a FR revenue growth number times 60 percent. FR margin that's our FR growth and that translates to very high continued dividend growth year after year. Yeah. All right. Thank you all very much. Thank you.

Ken a FRE revenue growth number times, 60% FRE margin, that's our FRE growth and that translates to very high continued dividend growth year after year.

Alright, Thank you all very much.

Thank you.

Thank you. Our next question comes from line of Patrick Davitt from Autonomous Research. Please go ahead with your question.

Hey, good morning, everyone.

Speaker 11: My first one is on deployment. You know, Crick Packer was super bullish on deployment on your most recent update call. And indeed, the gross and net originations were up 30% sequentially, but both FPA, UM and Flow and Transaction fees were down sequentially. So could you help us better frame how to model the ins and outs of the movement of those line items against, you know, activity levels, which were obviously much better?

My first one is on the <unk>.

Appointment.

Craig Packer was super bullish on deployment on your most recent update call and indeed, the gross and net originations were up 30% sequentially, but both.

AUM inflow and transaction fees were down sequentially. So could you help us better frame how to model the ins and outs of the movements of those line items against <unk>.

Activity levels, which were obviously much better.

Speaker 8: Sure, why don't I? Well, I'll tell you what, let's do this. Let me start on kind of what we're seeing in total in the marketplace, originations, you're obviously driven from that, and then Alan will connect in with somebody to kind of the specific question, how do you model it, so to speak? So your observation, of course, absolutely spawned on the...

Sure why don't I.

Let's do this let me start on kind of what we're seeing in total in the marketplace originations you, obviously driven from that and then Allen will connect in with some way to kind of the specific question of how do you how do you model it so to speak.

So your observation of course, absolutely spot on the the originations were up and measured in percentage terms up quite substantially at 30% and that's not that's pretty meaningful in the context of our business that said, we're still a levels, obviously below originations, where they were a year ago.

Speaker 8: The originations were up and measured in percentage terms up quite substantially at 30%. That's not, that's pretty meaningful in the context of our business. That's sad. We're still at levels obviously below originations where they were a year ago, you know, when times were much, much more active in the M&A market. So a couple of observations that remain true today.

When times were much much more active in the M&A market. So a couple of observations that remains true today.

Speaker 8: First and foremost, the direct lending role in the financing markets remains extremely substantial. And if you'll like to use the word market share, I'm not a big fan of the word market share because it suggests that we in the banks are competing for the same financing will really not. We're offering a completely different value proposition and we're a holder or not an intermediary of debt. But in any case, the...

First and foremost the direct lending role in the financing markets remains extremely substantial.

I don't know if you'd like to use the word market share I'm not a big fan of the word market share because it suggests that the banks are competing for the same financings will really not we're offering a completely different value proposition and were a holder or not an intermediary of debt, but in any case.

Speaker 8: use that word from moment as a shorthand, the share for direct lending is extremely high, and Blue Alas' role remains leading. We continue to be absolutely a key driving force in many of the very biggest finance ins for the very best companies and biggest sponsors. So all of that is very positive and reflected in the 30% growth.

To use that word for a moment as a shorthand the share for direct lending is extremely high and blue hours roll remains leading we continue to be absolutely a key driving force.

Many of the very biggest financings for the very best companies and Big sponsors. So all of that is very positive.

Reflected in the 30% growth.

Speaker 8: On the other hand, it is a statement of the obvious that M&A remains low in total. And we can...

On the other hand, it is a statement of the obvious that M&A remains low in total and we can we can only have we can have as full of share as we all collectively want unless there is M&A activity.

Speaker 8: We can only have, you know, we can have us full of shares we all collectively want and luster is that money activity. It can only translate into so many dollars. And sitting here today, we continue to see good activity levels in terms of inflows. Certainly seems to be more convergence between buyers and sellers in converging on prices.

It really translate into so many dollars and sitting here today, we continue to see good activity levels in terms of inflows certainly seems to be more convergence between buyers and sellers in converging on prices quality of assets is excellent. The things we are seeing the things we are originating the quality is our.

Speaker 8: Quality of assets is excellent. The things we are seeing, the things we are originating, the quality is outstanding. Now that may reflect our own origination and our own very very select

And then now that may reflect our own origination and our own very very selective financing choices. We've looked at 8400 loans to make the 500 or so we have.

Speaker 5: you know, financing choices, we've looked at 8,400 loans to make the 500 or so we have. But I think it also reflects the reality of the marketplace today, which is higher quality companies or what can be sold.

It also reflects the reality of the marketplace today, which is higher quality companies are what can be sold at.

Speaker 8: and higher quality companies are ones that can be financed, certainly by us. We focus on very high quality companies. And so I think in total, you know, what we're seeing is a very, very strong position in a kind of tapet M&A market. It'll return.

Higher quality companies are ones that can be financed certainly by us.

Focus on very high quality companies.

And so I think in total what we're seeing is a very very strong position.

<unk> kind of tepid M&A market. It will return one might have thought a few weeks old return even sooner sitting here now with the geopolitical world. We're in I don't know you all have as good a purchase any but we.

Speaker 8: one might have thought you know a few weeks ago to return even sooner sitting here now with the geopolitical world we're in but i don't know you all have as good a purchase any but we have had a continued to have a very nice pipeline of certainly very high quality product and with that in terms of a count up think about the flows the ins and outs and we can turn it down a little bit on that one great thank you marcia

We continue to have a very nice pipeline of certainly very high quality product and with that in terms of like how to think about the flows the ins and outs, maybe let me turn it to Alan a little bit on that one.

Great. Thank you Mark.

Speaker 6: So Patrick, when we think about, there's a number of different factors that all drive through what you're referring to or what your question is. When we have fundraise, obviously fundraise raises, RAUM and fee paying AUM, generally speaking, we'll have some fee-free capital that we'll raise from time to time.

So Patrick when we think about there is a number of different factors that all drive through what your what you are referring to or what your question is when we have fund raise obviously fundraise raises.

AUM and fee paying AUM generally speaking, we will have some fee free capital that will raise from time to time.

Speaker 6: like what we closed a little bit of in 3Q that goes to AUM, but obviously doesn't accrete to fee-paying AUM. We'll have AUM going up for fair value increases. That also doesn't accrete to fee-paying AUM.

Like what we closed a little bit of in <unk> that goes to AUM, but obviously doesn't accrete to fee paying AUM will have AUM going up for fair value increases that also doesn't accrete to fee paying AUM gross deployment will sometimes we'll have paydowns during the quarter on loans that we originate that are paid.

Speaker 6: Gross deployment will sometimes will have pay downs during the quarter on loans that we originate that are paid back. That doesn't leave the system. That just needs to sit until it gets redeployed.

That doesn't leave the system that just needs to sit until it gets redeployed.

Speaker 6: And so you have different things moving different, different of those ratios up and down. And then you also have debt. So for us, there's a number of our products.

So you have different things moving different different of those ratios up and down and then you also have debt. So for us there's a number of our products, where we earn a management fee on that on total assets, so equity plus leverage and when we raised debt in those products that goes to fee paying AUM.

Speaker 6: where we earn a management fee on debt, on total assets, so equity plus leverage. And when we raise debt in those products, that goes to fee paying AUM. So they won't always move in sync, but generally speaking, you should see all of them increase over time.

Not always.

Move in sync, but generally speaking you should see all of them increase over time.

Speaker 11: Okay, thanks. And any update on thoughts about expanding or into more kind of closed-ins on rappers, like some of the other large.

Okay. Thanks.

And any update on thoughts about expanding into.

Into more kind of closed end fund wrappers like some of the other large direct lending players do.

Other.

Speaker 8: Other, what would you? Other Cobts and Bun Rappers you and

Other closed end fund wrappers, meaning.

You mean like a more institutional kind of drawdown type fund structure.

Speaker 5: Oh, gotcha. Look, we have, yes. We.

Gotcha.

Yes.

We.

Speaker 8: Have a strategy of being, as you know, the market leader in large cap high quality financing solutions.

Have a strategy of being the market leader in the large cap high quality financing solutions, we have a model that's distinctive which is anything we originate gets shared between the handful of funds that we manage we have a much much simpler business Paul to understand.

Speaker 8: we have a model that's distinctive which is anything we originate get shared between the handful of funds that we manage we have a much much simpler this

Speaker 8: both understand, to manage infrastructure, as you know, than our peers. And fewer different vehicles as noted. However, in answer to your question, yes, we continue to look at ways to meet the market where they want us. That is to say to meet structures that serve different constituents needs. So.

To manage for infrastructure as you know than our than our peers and fewer different vehicles. As noted however, and the answer to your question. Yes. We continue to look at ways to meet the market, where they want us to say to meet structures that serve different constituents needs.

So.

Speaker 8: Yes, we have continued to expand the types of offerings we have to your point about other types of closed-end funds that may look like more traditional funds. Absolutely. We're pursuing putting those in place as well.

Yes, we have continued to expand the types of offerings. We have to your point about other types of closed end funds that may look like more traditional funds absolutely we're pursuing putting those in place as well, we're all about creating the on ramps that meet the needs of our investors. So that is designed for them and then delivering to all of them.

Speaker 8: We're all about creating the on ramps that meet the needs of our investors, so that's designed for them, and then delivering to all of them, a common high quality experience, by being able to share in every loan that we make that's appropriate to a strategy.

A common high quality experience by being able to share in every loan that we make that's appropriate to our strategy. So that itself. As you know is pretty distinctive. So we will continue to add those on ramps into our product suites, yes, I think I would just add here Patrick we generally speaking we have a wrapper.

Speaker 12: So that itself, as you know, is pretty distinctive. So we will continue to add those on ramps into our product suite, yes. I think I would just add here Patrick, we generally speaking, we have a wrapper for each type of distribution channel for each of our strategies. A lot of them.

For each type of distribution channel for each of our strategies a lot of those wrappers.

Speaker 12: We'll take both institutional and wealth clients and investors, but we do have GPLP structures that meet the needs for each of our strategies. Some of them are just not as scaled as let's say our BDC platform. And so they don't drive the numbers as much, so you don't hear about them as much on these earnings calls, but we do have products.

We will take both institutional and wealth clients and investors, but we do have.

GP LP structures that meet the needs for each of our strategies. Some of them are just not as scaled as let's say, our BDC platform and.

So they don't drive the numbers as much. So you don't you don't hear about them as much on these earnings calls, but we do have products that suit those needs and I realize this isn't the question that you asked exactly but I just wanted to add one other thought.

Speaker 8: And I realized this isn't the question that you asked exactly but I just want to add one other thought.

Speaker 8: but it is not our intention though to proliferate products

It is not our intention now to proliferate products. So that we can just gather assets. We've said this before we are keenly interested in growing FRE and dividends.

Speaker 8: gather assets who said this before we are keenly interested in growing FRE and dividends we are not keenly interested in growing AUM for the sake of growing AUM There's a lot of very low margin AUM that's available, right? And so gathering assets, launching vehicles, we're just not going to pursue having dozens and dozens of vehicles just so we can Get a dollar. You know, what we wanted to do is get very high quality dollars

Or are not keenly interested in growing AUM for the sake of growing.

There's a lot of very low margin.

Available right.

So gathering assets launching vehicles.

We're just not going to pursue having dozens and dozens of vehicles. Just so we can get a dollar.

We wanted to just get very high quality.

Speaker 5: our fee rate is the highest in the industry and that reflects the quality of what we deliver to investors and the kinds of assets we rate.

Our fee rate is the highest in the industry and that reflects the quality of what we deliver to investors and the kinds of assets we raise.

Speaker 8: And that I think will continue to be very important to us. We're not in the AUM gathering business. We're in the outstanding results and market leadership business.

That I think will continue to be very important to us.

Not in the gathering business, where in the outstanding results and market leadership business.

Thank you.

Yes.

Thanks, Patrick.

Yes.

Speaker 2: Thank you and next question comes to the line of Steven Schubert from Booth Research. Please go ahead with your question.

Thank you. Our next question comes from the line of Steven <unk> from Wolfe Research. Please go ahead with your question.

Hi, good morning, Thanks for taking my questions.

So I wanted to start off with a question just on your European expansion plans. There has been some press article is suggesting you're exploring a deal for a direct lender in Europe I don't expect you to comment on that specific deal maybe just speak to your broader preference to build versus buy to expand your footprint in the region.

Speaker 4: So, we're longer to start off with a question just on your European expansion plans. There's been some press articles suggesting you're exploring a deal for a direct lender in Europe . I don't expect you to comment on that specific deal. Maybe to speak to your broader preference to build versus buy to expand your footprint in the region. And whether recent speculation that peers are looking to launch, no-carry credit funds in Europe informs your appetite to grow.

And where their recent speculation that peers are looking to launch no carry credit funds in Europe informs your appetite to grow.

Speaker 5: Great, thank you. So I noted and appreciated obviously, it won't come up in any particular speculation in terms of M&A, but to say this, look, we as a firm, I've put in order three priorities when we think about how we grow our business.

Great. Thank you.

So as noted and I appreciate it obviously, we had comments on any particular speculation in terms of M&A.

But but to say this look we as a firm.

Put in order three kind of priorities and when we think about how we grow our business.

Speaker 5: Well, both of all of the course is to liberate outstanding risk-adjusting returns at all moments, right? Our LP experience is monumentally important, ultimately to us. It actually doesn't impact our financials, as you know, because we are a fee-based business. So our business is distinctively predictable. We don't have performance fees, but to us.

Above all of it of course is delivering outstanding risk adjusted returns at all moments radar LP experience is monumentally important ultimately to us it actually doesn't impact our financials as you know because we are a fee based business. So our business is distinctively predictable we don't have.

Ms fees, but to us delivering outstanding results will always be lifeblood from our point of view now with that said there are three ways for us to grow the business all three of which we have done and will continue to look at but in this order. It is organic growth of our base product business based products again, we have.

Speaker 5: Delivering outstanding results will always be your lifeblood from our point of view. Now with that said, there's three ways for us to grow the business, all three of which we have done and we'll continue to look at. But in this order.

Speaker 8: It is organic growth of our base product business, base product.

Speaker 8: Again, we have market leading positions, decidedly the market leading position and triple nut lease for high quality, high credit quality counter parties. Decidedly the market leading position in GP strategic capital. And one of, don't want to overstate it, one of the market leading positions in direct lending.

Our market leading positions decidedly the market leading position in triple net lease for high quality high credit quality counterparties decidedly the market, leading position and GP strategic capital and one off going on.

Overstate it one of the market leading positions in direct lending and continuing to lead those markets is going to be our focus continue to have scaled products, which lead to very strong margins and strong fee rates, because we are a great value proposition for those investors.

Speaker 5: and continuing to lead those markets is going to be our focus. Can you do you have scaled products, which lead to very strong margins and strong B rates, because we have a great value proposition for those investors, is going to continue to be where we will focus first and foremost. And remember, because our capital is permanent, 93% of our revenues are based on permanent capital. So that growth, every time we bring in a dollar, we're keeping those dollars.

To continue to be where we will focus first and foremost and remember because our capital is permanent 93% of our revenues are based on permanent capital. So.

That growth every time, we bring in a dollar we're keeping those dollars where layer cake not the spinning wheel and as <unk>.

Speaker 8: spinning wheel and as you heard us say, you know, we'll take in for every dollar.

<unk> heard US say, we'll take yes for every dollar for every $1 that leaves our system by virtue of say a realization or a return we have $5 coming in our average competitor has two that is a huge difference in growth impact and that organic base. So that's going to be priority one price.

Speaker 8: For every $1 that leaves our system by virtue of say, I quote, realization or return.

Speaker 5: We have $5 coming in. Our average competitor has two. That is a huge difference in growth impact in that organic phase. So that's going to be priority one. Priority two is adding products where we can ultimately become the market leader, a market leader, but most importantly, deliver a really strong experience. Take our blue-alostered GGECQE product. GP leds.

<unk> two is adding products, where we can ultimately become the market leader a market leader, but most importantly to deliver a really strong experienced take our blue all strategic equity product GP led secondaries huge market opportunity. That's a place where we will do our first close in Q4, we have a <unk>.

Speaker 8: huge market opportunity. That's a place where we will do our first close in Q4. We have a really distinctive solution. We think that could be a very large addressable market. And we have a capability to originate, underwrite, and make investment decisions that is truly distinctive. And we think we'll allow us to deliver outstanding results.

Really distinctive solution, we think that could be a very large addressable market and we have a capability to originate underwrite and make investment decisions that is truly distinctive and we think will allow us to deliver outstanding results. So far to build new organic products, Doug just talked about health care, we can do in healthcare.

Speaker 5: So part two, build new organic products. Doug just talked about healthcare. We can do it healthcare. What we've done in software and technology. We have the capabilities. We've built out you saw our acquisition of the common health business. Finishes around and out extremely deep intellectual capital and relationships to do that. Three, and I is actually...

What we've done in software and technology, we have the capabilities. We've built out you saw our acquisition of the Cowen health business finishes rounding out extremely deep intellectual capital and relationships to do that three.

Is acquisitions, when we can find a business as fantastic as Oak Street, we're going to want to buy it and add it because it is incredibly accretive and additive in every <unk>.

Speaker 5: When we combine the business as fantastic as Oak Street, we're going to want to buy it and add it because it's incredibly accretive and additive and every set, Mark Zarr, is a brilliant investor and senior leader for this firm. And so that's an addition, along with obviously terrific growth. It's been our highest growth business.

<unk> is a brilliant investor add senior leader for this firm and so that's an addition, along with obviously terrific growth, it's been our highest growth business.

Speaker 5: so when we find that cultural fit strategic fit we're going to do it so i appreciate that was all all all all all all all but i i do want to really talk about how we build our business going forward as for therefore say european dreadland

When we can find that cultural fit strategic fit we're going to do it. So I appreciate that was all a lot, but I do want to really talk about how we build our business going forward as for therefore say European direct lending.

Speaker 5: Well, strategically, it's a perfectly coherent place for us to be, right? We are the market leader in U.S. direct lending. Now, we like the U.S. market a lot. The risk return is very compelling in the U.S. market. Being in the European direct lending makes perfect sense.

Strategically, it's a perfectly coherent place for us to be right. We are the market leader in the U S. Direct lending we like the U S market a lot the risk return is very compelling in the U S market.

Being in European direct lending makes perfect sense is it necessary no. It is not necessary. If we can find the right platform, whether that would be organic or inorganic I'd say in Europe, it's more logically in inorganic acquired given the scale and complexity of the marketplace.

Speaker 5: Is it necessary? No, it's not necessary. If we can find the right platform, whether that would be inorganic, I'd say in Europe , it's more logically inorganic acquired, given the scale and complexity of the marketplace. But it could be either over time. We'll look at both.

But it could be either overtime, we will look at both <unk> and.

Speaker 5: And getting that market is something that would be very logical and certainly something we're serious about.

And given that that market is something that would be very logical and certainly something we're serious about but we don't have to do it we're only going to do it if we can do it really really well.

Speaker 5: But we don't have to do it. We're only going to do it if we can do it really, really well. And when we do it, we're going to deliver a great results doing so. And we're going to be disciplined about it. So.

And when we do it we're going to deliver great results doing cell and we're going to be disciplined about it. So that's kind of the framework. When we think about European direct lending good business good business for us to be on the right basis.

Speaker 8: That kind of the framework when we think about European direct learning. Good business, good business for us to be in on the right basis.

Speaker 5: It doesn't make our US business better, it doesn't make Boulal better, unless we can be a market leader, and that's what we're focused on.

Make our U S business is better it doesn't make lull better unless we can be a market leader and that's what we're focused on.

Speaker 8: With that, Stan, and last question you raised about people on the kind of fee structure in Europe , look...

With that said and last question you raised about people.

The kind of fee structure.

In Europe.

Speaker 8: Our fees are the highest fee rate in the industry for a reason because we deliver great returns. And people are willing to and should be willing to pay for that. It's a net result that will matter for our investors.

Our fees are the highest fee rate in the industry for a reason because we deliver great returns and people are willing to and should be willing to pay for that as a net result of a matter for our investors.

Speaker 8: I can't comment anybody else's specific strategy, but look, when you're trying to get into a market like Directly On In, where we're a leader, sometimes people can try to attack on price. I don't, it's not part of the way we see the world, it's not part of the way we operate, but looking in every market where someone wants to get in or is trying to catch up, sometimes he'll may try price as a level.

I can't comment on anybody else's specific strategy, but look when you are trying to get into a market like direct lending where we're a leader.

Sometimes people can try to attack on price.

I don't it's not part of the way we see the world is not part of the way we operate.

But look it in every market where someone wants to give dan or is trying to catch up.

Sometimes you'll may try price as a lever.

No. Thanks for the Fulsome response, there and maybe just for my follow up on credit performance. The credit backdrop has been benign for the last decade plus.

Speaker 7: Now thanks for the full sum response there. I may be just for my follow up on credit performance. Now the credit backdrop's been benign for the last decade plus.

Speaker 7: We're storing the cease-dummed evidence of default rising with higher for longer rates.

Starting to see some evidence defaults rising with higher for longer rates.

Speaker 7: Not a surprising development, but one variable that we've been paying closer attention to is recovery rate.

Surprising development, but one variable that we've been paying closer attention to as recovery rates.

Speaker 7: That's been steadily declining for two decades plus mind you. I know you spoke about LTVs in the low 40s, provide significant loss cushion, but just want to get your thoughts on where recovery rates could settle out this cycle, especially given your heavier exposure to growth of your sectors, such as software and healthcare. Thank you.

Steadily declining for two decades, plus my view I know you spoke about ltvs in the low forties provides significant last question, but just wanted to get your thoughts on where recovery rates could settle out this cycle, especially given your heavier exposure to growth of your sectors, such as software and health care.

Well, let's start with.

Speaker 8: I would say how many years has it been that people said, oh, the credit problems are coming, the credit problems are coming.

Yes.

I would say how many years has it been people set off the credit problems are commenting the credit problems are coming we just don't know on direct lending these sort of very amorphous and I'm, not saying you're saying.

Speaker 5: we just don't know and direct land in the new the the sort of very amorphous and i think you're saying this these uh... you've got amorphous spooky founding questions which are i i think we can guess that sometimes with the people are that advocate that story

Kind of a more of a spooky sounding questions with C. R.

I think we can guess at sometimes who the people are that advocate that story.

Speaker 8: Let's just start with a few facts. The fact of the matter is we haven't seen any uptick in defaults. Any uptick in losses in point of fact, we're still running it at a six basis point.

Just start with a few facts the facts of the matter is we haven't seen any uptick in defaults any uptick in losses in point of fact, we're still running at a six basis point annualized loss rate since inception, all of which has been offset by realized gains add a bit more than that.

Speaker 8: annualized loss rate since inception all of which has been offset by realized gains and a bit more than that

Speaker 8: now i appreciate and agree it's been a you know generally benign and uh... environment economically but i mean we did we did have a pandemic we have had war you create we have had rates rise dramatically we've had many peers experience a lot more credit problems than we have i'm not saying that was complacency or arrogance or anything like it but the end of the day there are differences in the way we operate credits we pick how we pick

No I appreciate and agree it's been a generally benign environment.

Economically I mean, we did we did have a pandemic we have had.

Award in Ukraine, we have had rates rise dramatically.

And we've had many peers experience a lot more credit problems, then we have I'm, not saying that with complacency or arrogance or anything like it but at the end of the day. There are differences in the way we operate the credits we pick how we picked up <unk>.

Speaker 8: You noted the most important part from our point of view, which is loan to value. Having lots of cushions, both in percentage and absolute terms. Remember, when we're lucky enough to partner with Toma Bravo and lead a financing for Santa Ana Plan, not only is it a 70% equity check, it's a $7 billion equity check. Both of those matter in this calculus, percentage and scale, and that's why we focus where we do.

You noted the most important part from our point of view, which is a loan to value having lots of cushions, both in percentage and absolute terms remember when we're lucky enough to partner with Thoma Bravo and lead a financing for Santa Ana plan not only is it a 70% equity check it's a $7 billion equity check both of.

Those matter in this calculus percentage in scale and Thats, why we focus where we do.

Speaker 5: So with regard to default rates, let me just observe that the signs that will presage that will come ahead of a meaningful change in default rates, those are not in any manner flashing yellow yet. That's not to suggest that there can't won't be a recession at some point. In fact, as credit people, it'd be crazy for us not to contemplate and plan for that. But today our portfolio right now, Revenue and Iba Dawn on average across the portfolio grew 10%.

So with regard to default rates, let me just observe that the the signs that will presage that'll come ahead of a meaningful change in default rates those are not in any manner flashing yellow yet that's not to suggest that there can't won't be a recession at some point in fact as credit people it would be crazy for us.

To contemplate and plan for that but today our portfolio right now.

Our revenue and EBITDA on average across the portfolio grew 10% quarter over quarter, but that is pretty robust that's partly the favorable selection of the kinds of businesses, we underwrite, but pretty favorable we arent seeing any meaningful change and request for out of the ordinary course amendments, we arent seeing any meaningful change in quest for pick we are.

Speaker 5: And that is pretty robust. Now that's partly the favorable selection of the kinds of businesses we underwrite.

Speaker 8: But pretty favorable. We aren't seeing any meaningful change in requests for out of the ordinary course amendments. We aren't seeing any meaningful change in requests for pick. We aren't seeing meaningful changes and running out of liquidity. So I say all of that to say that we don't see any of those, not just warning signs, they sort of are checkpoints. It has to happen before you get to meaningful defaults. Then it gets recoveries to your point, which we couldn't agree more. In some regards, is the critical item.

<unk> seen meaningful changes in running out of liquidity. So I say all of that to say that we don't see any of those not just warning signs. They sort of are checkpoints that has to happen before you get to meaningful default then it gets recoveries to your point, which we couldnt agree more in some regards it as a critical item because the default in and of itself isn't a problem now we're better off.

Speaker 8: because the default in and of itself is no problem. Now we're better off to avoid them and we can count the number of defaults we've had, you know, literally on things like fingers. So, you know, keeping defaults really low remains the most important thing we can do and we'll do. But when we've taken the companies, our recovery has been extremely strong and keeping loaned of value is the way to ensure that. When you're running at 40%,

To avoid them and we can count the number of defaults, we've had literally on things like fingers.

No.

Keeping default really low remains the most important thing we can do and will do but when we've taken the companies our recoveries have been extremely strong.

And keeping the loan to value is the way to ensure that when youre running at 40% of our purchase price alone a fire sale still get to your money back and that is really important that's why we like these big durable strategic assets. We've said this from inception through lots of questions along the way as we lead the market towards.

Speaker 8: of a purchase price in a loan, a fire sale still gets you your money back.

Speaker 5: And that is really important. That's why we like these big durable strategic assets. We've said this from inception.

Speaker 8: Lots of questions on the way as we lead the market toward this direction of lender of first choice, going to the biggest credits, the best credits, you know, why? Lots of talk about, oh, there's more opportunities in the small market. There's not.

Directional lender of first choice going to the biggest credits the best credits why lots of talk about all of this is more opportunities in the small market. There's not the opportunity is to be in the big credits, where you have that durability because they are strategic assets that someone will buy even if they stumble even if they get in trouble and that.

Speaker 8: The opportunity is to be in the big credits where you have that durability because there are strategic assets that someone will buy, even if they stumble, even if they get in trouble. And that to your point, we couldn't agree more, is all about maximizing recovery.

To your point, which we Couldnt agree more is all about maximizing recoveries last part you said was in these growth of your business is software businesses.

Speaker 5: Last part you said was in these growthier businesses, software businesses.

Speaker 8: Actually the reason we like those businesses is because the recoveries will actually be the highest in our view those business

Actually the reason, we like those businesses is because the recoveries will actually be the highest in our view those businesses, if and when they have a problem. They still have enormous amounts of gross margin right and his company as long as we finance and the ones that are bought have extremely high let's set aside even the growth rate assume that.

Speaker 5: if and when they have a problem they still have enormous amounts of gross margin right these companies the ones we finance and the ones that are bought have extremely high let's say the size of the growth rate assume that somehow has to get tempered if we're going to have one of these problems that you're talking about but these are still businesses that have hundreds of millions of dollars of customers that are really front-end superposes dependent on the use of a piece of software with 80 to 90% gross margin.

I'll ask to get tempered if we're going to have one of these problems that you are talking about but these are still business is to have hundreds of millions of dollars.

<unk> customers that are really for all intents and purposes dependent on the use of a piece of SaaS software with 80% to 90% gross margins, taking that and consolidated it with another strategic owner of our software business is exactly the kind of way out that we're talking about someone wants that business that is a valuable.

Speaker 5: Taking that and consolidating it with another strategic owner of a software business is exactly the kind of way out that we're talking about. Someone wants that business. That is a valuable cash flow stream, unlike a traditional industrial business, where let's suppose you're out in a deep cycle and nobody wants the capacity, who wants a factory that doesn't have any use for its capacity.

Cash flow stream, unlike a traditional industrial business, where let's suppose you're out in a deep cycle and nobody wants the capacity who wants a factory that doesn't have any use for its capacity. That's just not what you have in these software businesses. So it's exactly why we like it. It's why in point of fact, we have still not ever had a default software business let alone.

Speaker 10: That's just not what you have in these software businesses. So exactly why we like it, it's why in point of fact, we have still not ever had a default in a software business let alone, you know, a problem with recovery. What recovery.

The problem with the recovery.

Okay.

Those are great insights. Thanks, so much for taking my questions.

Thank you.

Thank you. Our next question comes from Brian <unk> from JMP Securities. Please go ahead with your question.

Speaker 2: Thank you and next question concerns on a Brian McKenna from JMP Securities. Please go ahead.

Speaker 13: Thanks, good morning everyone. So you've been clear about your expectations for growth in 2023, and then you also have the dollar dividend target out there for 2025. So first, are you still comfortable with the dollar dividend target at this point? And then how should we think about the underlying trajectory of growth in 2024? This year, FRE growth will total in the low to mid-20s, so is that a good starting point?

Thanks, Good morning, everyone. So you've been clear about your expectations for growth in 2023, and then you also have the dollar dividend target out there for 2025. So first are you still comfortable with the dollar dividend target at this point and then how should we think about the underlying trajectory of growth in 2024. This year FRE growth with total in the low to mid twenties.

So is that a good starting point for next year.

Thanks, Brian I'll take the last part of that question. When you. When you when you do go out to the dollar a share dividend based on our Investor Day, you could certainly see both revenue growth and FRE growth for the next two years in the approaching 30 or 30 plus percent range.

Speaker 12: Thanks, Ryan. I'll take the last part of that question. When you do go out to the Dollar Shared dividend based on our investor day, you could certainly see both revenue growth and FRE growth for the next two years in the approaching 30 or 30 plus percent range. I'll leave it to Mark to touch on the Dollar Shared dividend and how we feel about that goal.

<unk> I'll leave it to mark to touch on the $1 share dividend, how we feel about that goal.

Look the dollar a share dividend remains our north star that I just talked about this numerous times, we are about durability predictability.

Speaker 10: look the dollar is shared dividend remains are north star that it just talked with us numerous times we are about durability predictability fr e growth in dividend growth and the dollar remains

FRE growth and dividend growth.

The dollar remains are our target.

Speaker 10: There's no doubt it'd be silly not to observe we're in a more volatile world. Have been during the course of this year and now in the last few weeks, it's gonna be the kind of wild eye not to say we're in an ever more volatile world given what's happening geopolitically. So does that create incremental risk to that dollar? Sure, it creates some incremental risks, some incremental variability. But remember because we're a permanent capitalist.

There is no there is no doubt would be silly not to observe where in a more volatile world have been during the course of this year and now in the last few weeks.

B B kind of wildlife not to say, we're in an ever more volatile world given what's happening geopolitically. So does that create incremental risk to that dollar short create some incremental risks some incremental variability, but remember because were a permanent capital business and because we have <unk>.

Speaker 10: And because we have very predictable B rates and because we have all this capital that's already in the system that's being deployed.

<unk> predictable fee rates and because we have all of this capital that's already in the system that's being deployed.

Speaker 10: You are model is extremely durable so the band around say the dollar is a tight band. We don't have performance fees and things that are going to drive meaningful variations. So you know, is there a little more risk to it? Sure, there's a little more risk to it. But that risk is very banded and it continues to be our North Star is driving our way to that dollar.

Our model is extremely durable so the band around say the dollar is a tight band we don't have performance fees and things that are going to drive meaningful variation. So is there a little more risk to it for sure. There is a little more risk to it but that risk is very band it and it continues to be our north star is <unk> <unk>.

<unk> on our way to that dollar.

Speaker 13: helpful thanks. And then, Alan, I believe you noted that real estate fund 6 is 20% funditor committed. Clearly, the deployment environment is very constructive right now. And you noted a healthy pipeline of potential deals. So how should we think about the quarterly pace of deployment for this fund kind of moving into next year? And then can you remind us of what level of funditor committed you typically start raising for the success?

Helpful. Thanks, and then Alan I believe you noted that real estate fund six is 20% funded or committed clear.

Clearly the deployment environment as very constructive right now and you noted a healthy pipeline of potential deals. So how should we think about the quarterly pace of deployment for this find kind of moving into next year and then can you remind us at what level of funded or committed you typically start raising for the successor fund.

Speaker 10: So on the real estate front, we're very active. This is a good time for the triple net lease real estate business for a couple of reasons. One is look in a world with much less functional capital markets. The use of a real estate asset as part of a financing plan is more interesting to every kind of user. Remember our partners in that business are people like Amazon and Walgreens.

So on the real estate front were very active this is a good time for the triple net lease real estate business.

For a couple of reasons.

One is look in a world with much less functional capital markets. The use of our real estate assets as part of our financing plan is more interesting to every kind of user remember are our are our partners in that business are people like Amazon and Walgreens and Starbucks I mean, it's not as if these are people that have.

Speaker 10: Starbucks means not as if these are people that have financial challenges, but

<unk> financial challenges, but using real estate versus where the world was a couple of years ago, we're issuing.

Speaker 10: using real estate versus where the world was a couple of years ago, we're issuing nearly free IG borrowings. That's changed, right? So it creates more interest in these types of novel solutions. We are originating today at incredibly compelling cap rates, close to 8% kinds of cap rates for IG cap rates.

Nearly free IGF borrowings.

Thats change right. So creates more interest in these types of novel solutions. We are originating today at incredibly compelling cap rates close to 8% kinds of cap rates for IAG Counterparties. So we love what we're getting the pipeline is very very active as a <unk>.

Speaker 10: So we love what we're getting. The pipeline is very, very active as a result. We've already now deployed about 20% of fun sticks. And as I said, we're...

We've already now deployed about 20% of fund six and as I said, we're doing great on fund raising for fund six perhaps no surprise given that we've been able to continue to generate really outstanding returns in an asset class that many people have found the struggle with now so.

Speaker 12: doing great on fundraising for fun six prep perhaps no surprise given that we've been able to continue to generate really outstanding returns in an asset class that many people have found the struggle with now so inter the exact case of deployment again like anything it will vary quarter quarter but i would call our pipeline in real estate extremely strong so we expect that to continue to be a pretty robust deployment arena for us will typically look to the industry entry level 75 percent

In terms of the exact pace of deployment again like anything it will vary quarter to quarter, but I would call our pipeline in real estate extremely strong. So we expect that to continue to be a pretty robust deployment arena for us and we will typically look to the industry the industry level of 75% to.

Speaker 12: to start thinking about the next follow-on fund.

To start thinking about the next follow on funds.

Great. Thank you guys.

Thank you thank you Brian.

Speaker 2: Thank you. Our next question comes to the line of bread and hooking from UBS. Please go ahead with your question.

Thank you. Our next question comes from the line of Brennan Hawken from UBS. Please go ahead with your question.

Good morning, Thanks for taking my questions.

Speaker 14: You guys had an acquisition here, this quarter, small one, with Part Four. Could you let us know what the impact was for revenue from that deal, what we should expect in the fourth quarter? And then more broadly, this is not the first COO manager. You've bought, should we continue to expect you to roll up some more of these COO managers and build out the business and the scale?

You guys had an acquisition here this quarter small one.

With <unk>.

<unk> four.

Could you.

Let us know what the impact was for revenue from that deal what we should expect in the fourth quarter and then.

You know more broadly.

This is not the first CLO manager you bought should we continue to expect you to roll up some more of these CLO managers and build out the business and the scale in that business for yourselves.

Speaker 8: So with regard to par 4 and then the more general question.

So with regard to par four and then the more general question.

Speaker 10: you know i would i at per the framework i described we will always look at acquisitions where they are additive and where or strategic if you want to use that term and par four is a really great example of this

I would buy it for the framework I described look we will always look at acquisitions, where they are additive and wear or strategic if you want to use that term and PA. Four is a really great example of this.

Speaker 10: you know build versus buy organic and i i also think maybe gets sometimes not not lost but i think it's worth calling back out in the context of things like

Build versus buy organic and I also think maybe gets sometimes it's not loss, but I think it's worth calling back out in the context of things like growth add.

Speaker 8: Growth and your fundraising, the verse A.U.M.

Fund raising versus.

Speaker 10: At the end of the day, we can launch CLOs and we can like every other firm use a bit of capital to do that, or maybe even in some cases firms a lot of capital.

The at the end of the day weekend large CLO OS and we can like every other firm use a bit of capital to do that or maybe even some cases firms a lot of capital to do that and that would lead to raising $1 6 billion and that will sharpen our fundraiser in calm, but instead, we say look we can.

Speaker 10: to do that and that would lead to raising $1.6 billion and that would shop on our fundraising column. But instead, we say, look, we can for what turned out to be really de minimis consideration.

For what turned out to be really de Minimis consideration acquire these contracts and instead of building them in that case by them and that actually is another $1 six a fee paying AUM the <unk> system.

Speaker 8: acquire these contracts and instead of building them, in that case, buy them.

Speaker 10: And that actually is another billion six, a fee paying AUM, the jointer system. Not, I, I, I don't want to get over focused on, on AUM, but I do want to point out that in our system, we're constantly going to look at what is the best way to get those assets the most effective way to do it.

Yes, I don't want to get over focused on an AUM, but I do want to point out that in our system. We're constantly going to look at what is the best way to get those assets most effective way to do it that is accretive for the continued growth and dividends of our business. So <unk> is a great example of substituting I'd say at acquisition.

Speaker 10: that is a creative for the continued growth and dividends of our business. So, Par4 is a great example of substituting, I would say, an acquisition for very little investment in place of an organic build of the very same CLOs that we could have undertaken.

For very little investment in place of an organic build of the various am's CLO that we could have undertaken so.

Speaker 10: That's there. Will we continue to add to that? Sure opportunistically we're happy to add to it. CLOs are a much lower margin business. Our specialty without question is in the world of private capital solutions. So you should not expect us to become a large liquid manager at a very different lower margin business. Our products are much more distinctive in the world of private capital. They focused on what we're really really good at.

That's what we continue to add to that sure Opportunistically, we're happy to add to it cielo is a much lower margin business. Our specialty without question is in the world of private capital solutions.

You should not expect us to become a large liquid manager at very different lower margin business. Our products are much more distinctive in the world of privates, we stay focused on what we are really really good at.

Speaker 14: So, but yes, it's an area we can continue to add to. It's not an imperative for us to become particularly large in CLOs. Thanks, and the impact of...

But yes, it's an area. We can continue to add to it is not an imperative for us to become a particularly large in CLO.

Okay.

And the impact to revenue for the quarter, what we should expect for <unk>.

Brendan we haven't disclosed that.

Okay.

Speaker 14: Okay. Then one last one, more of a housekeeping item. Now that member senior management are going to be paid in all stock, should we expect that adjustment, the equity-based comp adjustment to ramp a little bit here from here? What kind of impact should we expect there?

Then.

One last one.

More of a sort of housekeeping item.

Now that members of senior management are going to be paid in stock.

Should we expect that adjustment the equity based comp adjustment to sort of ramp a little bit here from here.

What kind of impact should we expect there.

Sure so.

Speaker 12: All of our senior members of the management team, Doug Mark, Michael, Marks are, others have been taking, .comp, entirely for the last two plus years, almost since we've been a public company. So that continues as tremendous alignment with our shareholders, and you shouldn't expect a meaningful increase due to that. We may list the boat.

All of our senior members of the management team, Doug, Doug Marc Michael marks or others have been taking stock comp.

Entirely for the last two plus years almost since we've been a public company. So that continues its tremendous alignment.

<unk>.

With our shareholders and you Shouldnt expect a meaningful increase due to that.

Excellent thanks for taking my questions.

Thank you Brandon.

Thank you. Our next question comes from the line of Kenneth <unk> from JP Morgan. Please go ahead with your question.

Speaker 2: Thank you. Our next question comes on line with Kenneth Grovenfield from JB Morgan. Please go ahead with your question.

Hi, This is Alex on for Ken. Thank you so much for taking our questions. Two questions. Please the first one can you double click on the real estate segment again, you posted positive returns, which is definitely a nice difference versus what we've seen in some other parts of the market could you. Please speak about what's sort of driving that and maybe some of the differentiation that <unk>.

Speaker 15: Hi, this is Alex on for Ken. Thank you so much for taking our questions. Two questions.

Speaker 15: The first one, can you double click on the Real Estate Second? Again, you posted positive returns, which is definitely a nice difference versus what we've seen in some other parts of the market. Could you please speak about what's sort of driving that and maybe some of the differentiation that you're seeing relative to other players? And then the second question is, notice that just about the the Cowan Healthcare acquisition, if you can talk about that one as well, that'd be great.

We're seeing relative to other players and then the second question is.

Noticed that just about the Cowen health care acquisition, if you could talk about that one as well that'd be great. Thanks, so much.

Speaker 10: Great, yes, I'm happy to comment on both. Let me start with the Conwan healthcare question.

Great, Yes, happy to comment on but let me start with the <unk>.

Cowen Healthcare question, So Cowen healthcare another Great example of being able by virtue of our platform to grow both capability and add to our earnings simultaneously as Doug commented health care has been a very very significant focus for us.

Speaker 10: So, Cowan Healthcare, another great example of being able by virtue of our platform to grow both capability and add to our earnings simultaneous.

Speaker 10: As Doug Comott, it healthcare has been a very, very significant focus for us. We've deployed significant capital in healthcare lending, royalties, structured solutions. And now, by virtue of adding the common business, are adding an even greater depth on the of pharmaceutical education more attractives ???? a

We've deployed significant capital in healthcare lending royalties structured solutions and now by virtue of adding the Cowen business are adding an even greater depth on the pharma side and in the pharma side of the business of course, there is technical skills involved there or knowledge that the.

Speaker 8: And in the pharmacist of the business, of course, there's technical skills involved. There are knowledge that the County Healthcare team has in spades. This is a, they've made investments in 60 different companies over time, Pharma Central Company.

Cowen Healthcare team has in spades. This is they've made investments in 60 different companies over time farmer centric companies. So by adding that capability. We now have added to a full spectrum of abilities within health care that will allow us to really take that business forward in life Sciences over the next 20 years.

Speaker 10: So by adding that capability, we now have added to a full spectrum.

Speaker 10: of abilities within healthcare that will allow us to really take that business forward in life sciences over the next 20 years.

Speaker 8: You know, in our humble view is going to be an area of enormous opportunity, much like info services was the last 20 years, probably not a coincidence that we've been able to build the market leading position in software lending and looking ahead and see an opportunity in healthcare with some similarities. So that is kind of on a trace.

In our humble view is going to be an area of enormous opportunity much like info services. While the last 20 years is probably not a coincidence. So we've been able to build the market leading position in software, London, and looking ahead and see an opportunity in healthcare with some similarities.

So that is kind of on its face the strategic reasons.

Speaker 10: But, done the way we have, by adding blue, I'll make it blue, I'll platform the people want to join. We have a team that said, look, this is where we want to bring our platform.

<unk> done the way, we have by adding blue all of them, making blow a platform that people want to join we are a team that said look this is where we want to bring our platform.

Speaker 10: The consideration was very, very minor for that business because it was really about the team coming to finding a home.

Incineration was very very minor for that business because it was really about the team coming to finding a home. So while we have managed to do in that case is add to our capabilities terrific people and add $1 billion of assets and add earnings as a result, so it wasn't it or we didn't have to go.

Speaker 10: So what we managed to do in that case is add to our capabilities, terrific people and add a billion dollars of assets and add earnings as a result. So it wasn't an or. We didn't have to go pay some huge price in order to get admission. Quite the opposite. We have a great team join us, get a team and asset to nerds. So that was really what's behind the column business. Very excited about Kevin and his team.

Paying some huge price in order to get admission quite the opposite we have a great team join us get a team and assets and earnings. So that was really what's behind the calling business very excited about Kevin and his team.

Speaker 8: with regard to real estate. So on the real estate side, we've been able to continue to post attractive returns because we have a very, very distinctive proposition. We don't do in real estate what other people do. We don't own things that have to be released. We don't own things that have vacancies. We don't own things where this inflationary environment and the expenses flow through to us. So if a vacancy, now you also have the expense.

With regard to real estate.

So on the real estate side, we've been able to continue to post attractive returns because we have a very very distinctive proposition. We don't do in real estate. What other people do we don't own things that have to be re leased we don't own things that have vacancies, we don't own things, where this inflationary environment and the expenses.

Flow through to our save a vacancy now you're also the expenses.

Speaker 10: We have tripled that leases, the expenses, the inflation that has obviously been occurring in the world. That's the responsibility of our tenant. Our tenants sign up with us for 20 years at a time.

We have triple net leases the expensive inflation that has obviously been occurring in the world. That's the responsibility of our tenant or tenants sign up with us for 20 years at a time. If you look at for example in Q3 just to give you a sense of the power of this model and because again, we offer a value proposition to our investors we pardon.

Speaker 10: If you look at, for example, in Q3, just to give you a sense of the power of this model, because again, we offer a value proposition to our investors. We partner with the law greeners of the world. We're not just out in the market buying for brokers, but I've heard before I can...

<unk> with the Walgreens of the World, we're not just out in the market buying from brokers, but I've heard before I can recall being a deciding where we're one of the leaders one of the biggest brokers in the country. So you know we never sell anything to <unk>, because they originate at rates way higher way more attractive than we sell at and you can see that in our practice. So if you.

Speaker 10: call being in a satin where one of the leaders one of the biggest brokers the country's a new we never sell anything to blue out because they originate at rates way higher way more attractive than we sell

Speaker 10: and you can see that in our practice. So if you looked during 3Q for example, we purchased 71 different properties.

During Q for example.

We purchased 71 different properties for over $1 billion.

Speaker 10: and an average cap rate of 7.9% with a 16-year average lease. I don't mean to just spew numbers, but just think about that for a minute. Roughly 8% cap rate, 16-year average lease triple net.

At an average cap rate of seven 9% with a 16 year average lease I don't mean to just a few numbers, but just think about that for a minute roughly 8% cap rate 16 per year average lease triple net.

Speaker 10: So we are not taking risks in fact we made basically the equivalent of loans to mostly IG companies and real estate as a backup in the case that we needed it.

So we are not taking risks in fact, we've made basically the equivalent of loans to mostly IAG companies and real estate as a backup in the case that we needed it.

Speaker 10: At the same time, during the same period, we sold 16 properties for over a quarter million, 267 million to be precise, and an average cap rate of 5.4.

At the same time during the same period, we sold 16 properties for over a quarter billion 267 million to be precise at an average cap rate of five four.

So we're buying at eight.

Speaker 10: selling to 5.4, generating on average a 31% net IRR and a nearly two-time net equity model.

Selling a five four generating on average a 31% net IRR and a nearly two time net equity multiple.

So why do I say that what I'm, saying is our business and the role we play as a strategic partner to large corporates allows them to conduct what amounts to a wholesale transactions to get dollars that matter to them.

Speaker 10: So why do I say that? What I'm saying is our business and the role we play as a strategic partner to a large corporates allows them to conduct what amounts to wholesale transactions.

Speaker 10: to get dollars that matter to them. I'm gonna sell it a store, doesn't do any good. Sell it all warehouse has limited impact. How many true partnership with someone that has billions of dollars to offer them, that has value so we can buy a wholesale. And then at times we will go ahead and sell those properties and we consistently have at prices meaningfully matter than the prices we acquire at. So you'll hear even in a very disrupted market, rising rates, real estate is disrupted. After a bit.

Selling a store doesn't do any good solid all warehouse has limited impact having a true partnership with someone that has billions of dollars to offer them that has value. So we can buy at wholesale and then at times. We will go ahead and sell those properties and we consistently have at prices meaningfully better than the prices we acquire app. So.

You'll hear even in a very disrupted market rising rates real estate is disrupted.

Speaker 10: not that it's hard to describe a worse environment for real estate, but this is a pretty choppy one. We were buying it at 8 and selling at 5.4.

It's not as hard to describe a worse environment for real estate, but this is a pretty choppy one we were buying it at eight and selling at five four.

Very helpful. Thank you so much.

Thank you.

Yeah.

Thank you. Our next question comes from the line of Mark Brown from K B W. Please go ahead with your question.

Speaker 2: Thank you. Our next question comes to the line of my brown from KVW. Please go ahead.

Okay, great. Thanks for taking my questions.

Speaker 16: Okay, great, thanks for taking my questions. I'm a fundraising for it. It looks like all three business segments could see a better year in 2024 versus the challenge 2023. Can you just maybe help me summarize the building blocks for next year? So in GP Solutions, you'll have the Alpha-N-6 in direct lending, you'll have both from CDC's SMAs.

On the fundraising front it looks like.

Looks like all three business segments could see a better year in 2024 versus the kind of challenge 2023 can you just maybe help me summarize that the building blocks for next year. So in GP solutions, you'll have the Alf on six indirect lending growth from Bdcs, Sma's and perhaps yellows and then in the real estate.

Speaker 16: brought to field lows. And then in the real estate side, fun sticks should be done. So I guess mostly contributions could actually be from O-Rant. Is that correct? Am I summarizing those pieces correctly? And I guess if you just summed it all up, it would be kind of the most...

That should be done so I guess most of the contributions could actually be from Oh rent is that correct am I summarizing those pieces correctly and I guess you could just sum that all up it would be kind of the most important fundraising campaigns.

Yes, you summed it up correctly Mike.

Speaker 12: Yes, you summed it up correctly, Mike. BDCs, SMAs on the credit side, CLOs, GP stakes.

Bdcs SMA is on the credit side close.

<unk> Stakes fund six.

Speaker 12: And O-Rent and you're right, Fund 6 will be largely wrapped up by then. There are new product launches that we talked about earlier that Doug and Mark hit on whether it's healthcare. We have an interesting new real estate product or products coming out to the market. In 2024 that we think we could raise some good dollars on. And some other strategies we haven't talked about today that we think could be interesting in 2024. Okay, so what we're going to do now now is a bit more.

And rents and Youre right front fund six will be largely wrapped up by then.

There are new product launches that we talked about earlier that Doug and Mark hit on.

It is healthcare.

An interesting new real estate product or products coming out to the market in 2024 that we think we could raise some good dollars on.

And some others other strategies, we haven't talked about to date that we think could be interesting in 2024.

Okay, great. So I guess more to come on those.

And then maybe just a quick follow up on the dollar dividend commentary.

Speaker 16: really delivered exceptional growth on the dividend thus far and your payout has consistently been in that kind of mid to high 80% range relative to...

<unk> delivered exceptional growth on the dividend, thus far and your payout has consistently been in that kind of mid to high 80% range relative to keay.

Speaker 16: Is that payout still the right way to think about that dollar dividend as well in 2025 or is there kind of like an evolution in the business?

Is that payout still the right way to think about that dollar dividend as well in 2025 or is there kind of like an evolution of the business.

Speaker 16: or change in the balance sheet that would allow you to maybe increase that payout closer to 100 percent or even if they even if you were to do so somewhat temporarily.

Or a change in the balance sheet that would allow you to maybe increase that payout closer to 100%.

Or even if even if you were to Houston somewhat temporarily.

Yes.

Speaker 12: Yeah, I don't think it's a great question Mike. I don't think there's an evolution in the business. I have commented on previous calls that that number 10 moves up and down. We've seen it as low as mid 80s percent. I think this quarter is about 88%. You can see that certainly rise in some quarters in some years. I think I framed it as, you know, it could be as low as an 80s percent. Maybe a little lower could be as high as 90 or 95.

Yes, I don't think its a great question, Mike I don't think there is an evolution in the business I have commented on previous calls that.

That number can move up and down.

We've seen it as low as mid 80 percents I think this quarter is about 88% you could see that.

Certainly rise in some quarters and some years I think I framed it as it could be as low as 80 ish percent, maybe a little lower it could be as high as 90% 95%.

Speaker 12: So we're going to continue to focus on dividend growth. We've got a 28% cager on our dividend growth since becoming a public company. It's the highest out there. And we're all very aligned. We own 25% of the outstanding shares. So we sit right there with our shareholders and we'll continue to focus on strong FRE management fee growth, FRE growth, and without a doubt, of course, dividend growth.

So we're going to continue to focus on dividend growth, we've got a 28% CAGR on our dividend growth since becoming a public company, it's the highest out there.

And we're all very aligned we owned 25% of the outstanding shares. So we sit right there with our shareholders and we will continue to focus on strong FRE management fee growth FRE growth and without a doubt of course dividend growth.

Okay, great. Thank you.

Thank you Mike.

Thank you. Our final question today comes from Patrick Davitt from Autonomous Research. Please proceed with your question.

Speaker 2: Thank you. Our final question of the day comes from Patrick David from Autonomous Research. Please proceed with your...

Speaker 11: Hey, thanks for the follow up. I'm going to take a flyer on this one. Would you be willing to give any early read on the November 1st blows for the three flagship retail product?

Hey, thanks for the follow up.

To take a flyer on this one would you be willing to give.

Any early read on the November 1st flows for the three flagship retail products.

Speaker 12: I think Patrick, we may have to decline commenting. Those are SEC registrants and they have not filed yet. I think you heard earlier in the call, we feel like we have very good momentum in the wealth channels, quarter over quarter increasing. And we think we have very good prospects, if not very strong prospects, for what we're gonna see in the wealth channels in 2024.????irall.

I think.

Patrick we may have to decline, commenting our SEC registrants and they have not filed yet.

I think you I think you heard earlier in the call. We feel like we have very good momentum in the wealth channels quarter over quarter increasing.

And we think we have very good prospects, if not very strong prospects for what we're going to see in the wealth channels in 2024.

Thank you.

Thank you Patrick.

Well. Thank you all very much we really appreciate the time and we're going to continue to focus on strong predictable.

Speaker 8: Well, thank you all very much. We really appreciate the time and we're gonna continue to focus on strong predictable high growth and delivering those dividends to all of you. Thank you.

High growth and delivering those dividends to all of you.

Sure.

Thank you. Thank you everyone have a good day.

Thank you, ladies and gentlemen that does conclude today's conference call. Thank you for participating you may now disconnect.

Speaker 2: Thank you ladies and gentlemen, that does conclude today's conference call. Thank you for participating. You may now.

Please wait the conference will begin shortly.

Speaker 1: Please wait, the conference will begin shortly.

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