Blue Owl Capital (NYSE:OWL) said private credit redemption pressures are easing and highlighted growing diversification beyond direct lending, even as fundraising in its credit business slowed to a three-year low and wealthy investor inflows weakened.
The company reported $7.6 billion of new capital raised in the second quarter, down from $12.1 billion in the year-ago period. Credit assets under management edged lower to $158.1 billion from $159.2 billion at the end of March as withdrawals offset fundraising, Reuters reported.
Blue Owl posted adjusted distributable earnings of 22 cents a share, matching estimates compiled by LSEG. Total assets under management rose 12% during the quarter to $319 billion.
Private wealth inflows slowed to $1.7 billion versus $4.4 billion a year earlier, while institutional clients committed $5.9 billion compared with $7.6 billion a year ago. CFO Alan Kirshenbaum said he expects institutional activity to pick up in the back half of the year.
Kirshenbaum also told investors, "we think we’ve troughed by way of inflows" from wealthy clients, and said withdrawal pressure has been concentrated in private credit vehicles. "We haven’t seen increases in redemptions across our other wealth dedicated products over the past few quarters," he added.
Co-CEO Mark Lipschultz said the firm has diversified its business away from private credit, which accounted for roughly half of its assets two years ago. While the firm remains optimistic about direct lending, Lipschultz noted that it now represents 35% of assets, with the products facing the most scrutiny accounting for just 11% of prepaid assets, primarily tied to wealth-focused direct lending products.
"Across our direct lending strategy, credit health remains strong and we have seen no meaningful change to our watchlist compared to a year ago."
Earlier this month, the firm kept a 5% quarterly withdrawal cap for two private credit funds as redemption requests stayed elevated even after easing somewhat in the second quarter.
"While we are not calling for a V-shaped recovery in sentiment around private credit, we do think that the strong fundamental performance of our products has played a role in the decline of redemption requests for the non-traded BDCs, which we continue to view as more sentiment-driven and led by individual clients as opposed to financial advisors or distribution partners," Kirshenbaum said.
"For the second quarter in a row, we continued to see 90% of our OCIC fund investors not request a single dollar of redemptions. The small shareholder base that did put in for redemption requests remained largely unchanged from last quarter, with very limited new participation," he added.
Shares of Blue Owl’s stock rose 6.11% today following the investor call.
Photo: T. Schneider via Shutterstock
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