Blue Owl Capital's Q3 2025: Contradictions Emerge on Fundraising, FRE Growth, Retail Flows, and GP Stakes Timeline

Date of Call: October 30, 2025

Financials Results

• Gross Margin: 57%+ this quarter (management said 'margin this quarter at 57% plus'); no direct prior-period comparison provided

Guidance:

• Expect continued growth in Part 1 fees in 2026 given the forward SOFR curve (~100 bps average decline).
• Anticipate mid-single-digit QoQ management fee growth in Real Assets for Q4 (~20% annualized) with further acceleration into 2026.
• Expect meaningful acceleration in FRE and DE per share in 2026–27, targeting 20%+ growth metrics consistent with Investor Day 'North Star' goals.
• Digital infrastructure semi-liquid product first close anticipated Dec 1; Fund IV (digital infra) planned for 2026.
• Ongoing fundraising momentum; Q4 GP Stakes fundraising expected similar to Q2/Q3 for that vintage.

Business Commentary:

• Diversified Revenue Growth:
• Blue Owl reported management fees up 18% and FRE up 19%, with DE increasing 15% over the prior year.

• This growth was driven by strong performance across direct lending, alternative credit, and digital infrastructure strategies.

• Capital Raising and Fundraising Success:

• The company raised over $11 billion of equity in Q3, reflecting a 60% increase from the prior year.

• This was supported by robust institutional and private wealth client interest in their offerings, particularly in credit and digital infrastructure.

• Growth in Fund Deployments and Originations:

• Direct lending gross originations were approximately $11 billion and net deployments increased to $3 billion.

• This growth was attributed to a strong deal pipeline and strategic partnerships in direct lending and alternative credit sectors.

• Digital Infrastructure Expansion:

• Blue Owl executed significant data center financing deals, including two transactions totaling over $50 billion with Meta and Oracle.
• This expansion is driven by strong demand from hyperscalers for cloud and AI innovations, positioning Blue Owl as a preferred partner in this arena.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly described the quarter as strong ('great quarter', 'very pleased with the results'), highlighted record fundraising and AUM momentum, and stated they are 'on track' to hit Investor Day targets including '20-plus percent growth' and accelerating FRE/DE per share in 2026–27.

Q&A:

• Question from Glenn Schorr (Evercore ISI): Big-picture — for 2026 and 2027 are you back on track to see 20%+ FRE growth and FRE per share growth and margin stabilization/improvement?
  Response: Yes — management expects 20%+ growth in management fees and FRE per share across 2026–27 with margin expansion toward their Investor Day targets.

• Question from Patrick Davitt (Autonomous Research): How has recent credit/market volatility affected retail/wealth flows (October/November 1 subscriptions)?
  Response: Retail/wealth flows remain strong and resilient; momentum continued in October with record activity in ORENT and OCIC and ORENT on track to a $1bn/quarter run rate by year-end.

• Question from Brian McKenna (Citizens): What is misunderstood about your business given the stock discounts, and what are you doing to change perceptions (and will insiders buy)?
  Response: Management's approach is to continue executing and proactively communicating results; they believe fundamentals and long-term execution will correct market misperception rather than immediate insider buying.

• Question from Craig Siegenthaler (Bank of America): Under what scenarios can Meta terminate long leases early and what compensation would funds receive; how would IRR be affected?
  Response: Leases are structured for 20+ years with bespoke flexibility, and early termination carries a mathematical make‑whole that preserves debt repayment and delivers strong equity returns under any permitted termination.

• Question from William Katz (TD Cowen): How quickly can you absorb flagship digital infra fundraising given pipeline, and why have fund returns looked weak two quarters (will it hinder growth)?
  Response: Short‑term mark‑to‑market on swaps produced accounting noise; underlying digital‑infra IRRs are strong (high teens) and demand far exceeds available capital, so absorption should be rapid as capital is raised.

• Question from Benjamin Budish (Barclays): Why aren't FRE margins higher this quarter (~57%), and how should we think about operating leverage and margin expansion?
  Response: There is medium‑term operating leverage, but management prioritizes reinvesting incremental margin into growth initiatives rather than squeezing short‑term margin gains.

• Question from Crispin Love (Piper Sandler): Size and structure of upcoming data‑center pipeline, can you quantify dollars and will structures evolve (why JV with Meta)?
  Response: Pipeline is vast (management cited >$100bn addressable); multiple structures are used (owner-with-developer, developer-owner via STACK, JV with hyperscalers) and Blue Owl can execute all three depending on partner needs — Meta JV fit their preferred structure.

• Question from Brennan Hawken (BMO): Were fundraising expectations (Q4 ~ Q2/Q3) firm‑wide or GP Stakes specific; will Real Assets fee step‑down recover?
  Response: The Q4 comment referred narrowly to GP Stakes vintage VI; the Real Assets fee step‑down was a modest mix shift (Fund VI step down) and management expects accelerating fee growth and expansion thereafter.

• Question from Steven Chubak (Wolfe Research): On forward‑flow agreements — underlying credit quality, subordination, typical volume and appetite for more partnerships?
  Response: Forward‑flows target prime originators, typically include partner parallel or subordinated retained exposure, feature daily data controls and short asset duration with deployment spread over time, and Blue Owl expects to pursue more such partnerships.

• Question from Alexander Blostein (Goldman Sachs): Given recent fraud‑related headlines elsewhere, how are you addressing fraud risk across the platform — extra diligence or incremental spend?
  Response: Credit quality remains strong; Blue Owl relies on careful originator selection, third‑party servicers, field checks and data‑science monitoring, reviewed recent incidents and found no systemic changes required but remain vigilant.

• Question from Christoph Kotowski (Oppenheimer): For Hyperion reports (e.g., $2.5–3bn equity vs $27bn debt) — is AUM the equity amount, which funds speak to it, and does it remain fee‑paying to 2049 or are there step‑downs?
  Response: Meta equity commitment is roughly $3bn deployed across multiple vehicles (digital infra, net lease, wealth channels); fee‑paying AUM and timing depend on vehicle structure and drawdown patterns — assets are long‑dated but fund economics and potential sales affect fee profile over time.

• Question from Brian Bedell (Deutsche Bank): How will you fundraise to match vast digital infra deployment over 1–3 years — new funds, retail channels, other strategies?
  Response: Blue Owl has four scaled entry points (drawdown real estate, drawdown digital infra, continuously offered ORENT, semi‑liquid ODIT) and will scale fundraising across those channels (including retail/wealth) to match deployment, with strategic anchors like QIA supporting continuity.

Contradiction Point 1

Fundraising and Capital Deployment

It involves the company's strategy and timeline for capital deployment, which directly impacts investor expectations and the company's financial performance.

How quickly can you absorb the recent fundraising given the current pipeline, and what macro factors are affecting fund performance? - William Katz (TD Cowen)

2025Q3: The current fundraising pace will enable absorption of Fund III before launching Fund IV. - Alan Kirshenbaum(CFO)

Can you discuss digital infrastructure opportunities and the timing for the next fundraising? - Steven Chubak (Wolfe Research)

2025Q2: We expect to be back in the market next year for fundraising for a new vehicle. - Marc S. Lipschultz(CEO)

Contradiction Point 2

FRE Growth and Margin Stabilization

It pertains to the company's growth strategy and financial projections, which are crucial for investor confidence and market valuation.

When will growth investments offset lower rates and legacy business maturation? Is 20%+ FRE, FRE per share, and margin stabilization back on track? - Glenn Schorr (Evercore ISI)

2025Q3: Expected that FRE growth, FRE per share growth, and margin stabilization will return as the current acquisitions mature. - Alan Kirshenbaum(CFO)

Could you clarify the modeling assumptions for transaction fees and FRE margins for the remainder of the year? - Benjamin Budish (Barclays)

2025Q2: We believe we will be able to meet our cost targets, but gross margins will fluctuate as we achieve scale across our growing business. - Alan Kirshenbaum(CFO)

Contradiction Point 3

Retail Flows and Market Volatility

It involves the company's stance on retail flows and market volatility, which are important for assessing investor behavior and business resilience.

How have recent credit volatility and news affected retail inflows, specifically for November 1 subscriptions? - Patrick Davitt(Autonomous Research)

2025Q3: Strong flows in October, with record months in specific products like ORENT. Continues to see resilience in retail flows despite the volatility in August. - Alan Kirshenbaum(CFO)

How are retail flows holding up, and what role do partnerships with traditional managers play in the alternative channel? - Alexander Blostein(Goldman Sachs)

2025Q1: Retail flows are down 20% from prior levels but remain stable. We're optimistic due to strong product performance. - Alan Kirshenbaum(CFO)

Contradiction Point 4

GP Stakes Fundraising Timeline

It involves the company's fundraising timeline for GP Stakes, which is crucial for revenue projections and investor confidence.

What are the fundraising expectations for GP Stakes in Q4, and does the fee rate reduction impact future growth? - Brennan Hawken(BMO)

2025Q3: 4Q fundraising expected to be similar to 2Q and 3Q. Fee rate step down in GP Stakes will not hinder future growth acceleration. - Alan Kirshenbaum(CFO)

What is the outlook for FRE margins and the GP Stakes fundraising timeline? - Chris Kotowski(Oppenheimer)

2025Q1: GP Stakes is back-end loaded, with a total closure expected in early 2026. - Alan Kirshenbaum(CFO)