By Isla Binnie and Manya Saini
NEW YORK, April 30 (Reuters) – Alternative asset manager Blue Owl beat Wall Street estimates for first-quarter profit on Thursday, boosted by fee-related earnings and rising assets, although its private credit funds showed some strain.
Assets under management jumped 15% to $314.9 billion. Blue Owl traditionally raises around 40% of the money it manages from retail investors, a high share by industry standards. This quarter, private wealth added $2.9 billion in equity, compared with $6.1 billion from institutions.
The increase in AUM was driven by the real assets business which invests in real estate including data centers and other infrastructure.
The direct lending strategy, which includes the retail-focused funds that have faced high withdrawal requests, suffered a net loss of 1.1% versus 5% returns in the 12 months to March 31.
The forecast-beating earnings could help ease concerns about the industry, which has been roiled by worries about retail investors fleeing and over-exposure to software, as steady fee-related earnings and AUM growth suggest some sources of demand and income remain intact despite outflows from some funds.
Its shares rose 5% before the bell. Shares of alternative asset managers have suffered over the past year even as inflows rose in several cases.
“We believe that the current market landscape tends to favor firms with patient capital and longer duration, such as Blue Owl,” Co-CEOs Doug Ostrover and Marc Lipschultz said in a statement.
The multi-trillion-dollar private credit sector has been shaken by concerns that AI could disrupt the software companies it lends to.
Earlier this month, Blue Owl told investors it is limiting withdrawals from two of its funds after a historic level of redemption requests came in for the first quarter.
Investors have remained on edge despite attempts by top executives in the industry to allay concerns that software investments are part of a broader diversified portfolio and that credit events are benign, not systemic.
On an adjusted basis, Blue Owl’s fee-related earnings per share rose to 25 cents in the quarter, compared with 22 cents, a year-ago. Blue Owl raised $11 billion in new capital commitments in the quarter.
Alternative asset managers invest in assets such as private credit, real estate and infrastructure, offering institutional and wealthy clients higher returns and diversification beyond public markets.
Adjusted distributable earnings per share rose to 19 cents in the three months ended March 31. That compares with analysts’ views of 18 cents, according to data compiled by LSEG.
PRIVATE CREDIT JITTERS
Blue Owl, which was formed from a 2021 merger between Owl Rock Partners and the Dyal Capital division of Neuberger Berman, has become emblematic of the Wall Street private credit selloff that intensified after it decided to merge two of its private credit funds late last year.
The merger was later abandoned after its shares tumbled.
Within its credit platform, direct lending originations came in at $6.8 billion, while net deployment fell about $500 million. AUM of the overall credit platform grew 14% to $159.2 billion.
Direct lending, a core part of private credit that is currently facing investor scrutiny, involves asset managers providing loans directly to companies outside traditional banks to finance buyouts, growth or refinancing, and is a key driver of returns.
Despite recent concerns, private lenders report that borrowers are still seeking their tailored financing arrangements as conditions tighten in traditional loan markets.
Private credit managers have argued that market jitters are overblown and that investor outflows from funds, particularly among retail investors, reflect negative headlines rather than fundamental weakness in the asset class.
Last week, Blackstone executives backed the appeal of private credit after the world’s largest alternative investment manager reported strong inflows that pushed its total assets under management past $1.3 trillion.
(Reporting by Manya Saini in Bengaluru and Isla Binnie in New York; Editing by Arun Koyyur)
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