Private Credit's Resilience: Why Blue Owl Capital is Poised to Thrive in a Volatile Market

The private credit market is at an inflection point. With central banks maintaining high rates, geopolitical tensions flaring, and traditional banks scaling back lending, investors are seeking alternatives to navigate uncertainty. Amid this environment, Blue Owl Capital (OWL) emerges as a standout player, leveraging its underwriting discipline, scale, and diversified platforms to capitalize on structural growth opportunities. Here's why private credit—and Blue Owl—deserve a closer look.

The Case for Private Credit: Structural Tailwinds Amid Challenges

Private credit has become a cornerstone of leveraged finance, particularly as banks retreat from riskier lending. A record 80% of 2024 leveraged buyouts (LBOs) relied on private credit, a figure expected to rise as regulatory pressures and capital constraints limit banks' appetite for corporate loans.

Three secular tailwinds are fueling demand:
1. Wealth Channel Reallocation: Institutional investors and ultra-high-net-worth individuals are shifting allocations from volatile public markets to private credit, which offers steady returns and lower correlation to equities.
2. Infrastructure Financing Surge: Governments and corporations are pouring capital into critical sectors like digital infrastructure, renewable energy, and logistics—areas where private credit's flexible structures shine.
3. Bank Encroachment Mitigation: While banks are indeed expanding into private credit, Blue Owl's scale and specialized expertise in sectors like direct lending and real assets create a durable moat.

Blue Owl's Edge: Underwriting Discipline Meets Scale

Blue Owl's Q2 2025 results (to be announced July 31) will likely underscore its defensive portfolio construction, a strategy built on rigorous credit analysis and sector specialization.

1. Low-Loss, High-Quality Portfolios

The firm's private credit segment boasts a 13 basis point annual realized loss rate, one of the lowest in the industry. This is no accident: Blue Owl focuses on U.S.-centric businesses with recurring revenue models and strong customer retention, shielding portfolios from tariff-driven volatility.

2. Asset-Based Financing Mastery

In an era of reduced bank lending, Blue Owl's alternative credit team has secured prime deals like a $99.2 million loan for a beverage warehouse facility—pre-leased to an investment-grade tenant with a 15-year covenant-heavy lease. Such transactions, insulated from macro downturns, exemplify the firm's ability to generate stable cash flows.

3. Scale as a Competitive Weapon

With $273 billion in AUM (as of March 2025), Blue Owl wields the capital and relationships to anchor large, complex deals. Its $27.5 billion equity fundraising haul (a 75% year-over-year jump) and $47 billion total capital raised in 2025 further underscore its access to permanent capital, which fuels fee growth.

Strategic Initiatives: Diversification and Global Expansion

Blue Owl's three-pronged platform—Credit, GP Strategic Capital, and Real Assets—creates a mosaic of growth opportunities:

1. Credit Platform: Direct lending and real estate credit strategies are capturing dislocations in sectors like healthcare and software.
2. GP Strategic Capital: Stakes in top-tier GPs (with $2.4 trillion in managed assets) provide steady management fees and exposure to outperforming AUM growth (17% vs. 10% industry average).
3. Real Assets: The $15 billion data center partnership with Oracle in Texas (Project Stargate) and the $27 billion digital infrastructure pipeline highlight Blue Owl's leadership in sectors critical to AI and cloud adoption.

Outlook: Navigating Volatility with a Defensive Model

Despite macro risks—rising defaults, geopolitical flare-ups, or a recession—Blue Owl's strategy is designed to thrive in stress:
- Amortizing Assets: Over 70% of its credit portfolio features amortizing structures, reducing refinancing risk.
- Geographic Diversification: European real estate and infrastructure opportunities, like the €10.7 trillion sale-leaseback market, offer low-competition growth avenues.
- Fee-Related Earnings (FRE) Growth: Management targets 20% annual FRE growth per share over five years, achievable via its $40 billion real estate pipeline and GP stake accretion.

Investment Takeaway: Allocating to Blue Owl's Resilience

While private credit faces headwinds from bank competition and macro uncertainty, its low correlation to public markets and high income potential make it a must-have allocation. Blue Owl's combination of disciplined underwriting, scale-driven deal flow, and diversified platforms positions it to outperform peers.

Investors should:
- Watch the July 31 Earnings: Confirm Q2 origination trends, FRE growth, and pipeline updates. Historically, earnings releases have been followed by positive stock performance, with a 78.57% win rate over 30 days since 2022. In some cases, the stock achieved a maximum return of 2.13% on day 50 after an earnings release, according to backtesting data.

- Consider the Valuation: Blue Owl trades at a discount to peers, with its dividend yield (2.4%) offering a cushion against volatility.
- Look Beyond the Short Term: Blue Owl's focus on income-driven sectors like net lease real estate and digital infrastructure aligns with long-term secular trends.

In a world where public markets are prone to whiplash, Blue Owl's private credit expertise offers a rare blend of defensiveness and growth. For investors willing to look past the noise, this is a call to build a position now.

Risk Note: Private credit carries illiquidity risks, and Blue Owl's performance is tied to macroeconomic conditions. Investors should conduct thorough due diligence.