How are cap rates trending in data centers given increased competition, and what is the underlying tenant credit quality?

Cap rates are not seeing compression, and rising interest rates may even escalate them. Blue Owl's distinct approach of building in partnership with hyperscalers allows it to deliver on time and budget at scale. The business is primarily investment-grade (IG), with single-digit percentage exposure to non-IG tenants, making non-IG credit essentially inconsequential. “our business is an IG business, non-IG is essentially inconsequential to what we do”

Has the turmoil in nontraded BDCs reshaped the approach to expanding retail distribution abroad, and can 'hot money' be isolated from stickier core U.S. retail?

The firm feels good about the wealth channel, with inflows troughing and redemptions down. Performance across wealth products is strong, with O-rent being a top-performing nontraded REIT. They are expanding distribution, launching on 13 new platforms this year and 21 more. International exposure, particularly in Asia, is minimal. The channel has shown durability and discernment, with investors differentiating between asset categories and redemption behavior concentrated among a small subset. “We have very minimal exposure across our wealth products to Asia.”

Given the strong institutional relationships, why the hesitancy to launch a big traditional drawdown fund, and would the firm consider it to offset retail capital loss?

Performance in retail direct lending remains strong, and the firm expects the channel to recover. Institutional engagement has seen a meaningful uptick, with large mandates in advanced stages. Blue Owl has no hesitation to launch a drawdown product and expects to do so, as it aims to meet investors where they want to be. This is less about offsetting retail and more about expanding options for institutional investors, especially in the current rising rate environment which favors direct lending. “It seems quite logical that we would actually launch the right drawdown -- traditional draw-down structure.”

OWL

Blue Owl Capital (OWL) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Jul 30, 2026

Source: earnings call transcript

Executive summary

Blue Owl Capital Q2 FY26 — Strong Diversification and Earnings Growth Amidst Market Crosswinds

Blue Owl Capital delivered robust Q2 FY26 results, demonstrating strong earnings growth and the resilience of its diversified platform amidst market volatility. The firm's strategic focus on expanding real assets and alternative credit strategies has significantly broadened its revenue base, reducing reliance on direct lending. Management expressed cautious optimism for continued growth in the second half of the year, driven by strong institutional fundraising and the conversion of AUM not yet paying fees, despite ongoing moderate M&A activity and a gradual recovery in wealth channel inflows.

Highlights

Distributable Earnings (DE) grew 9% year-over-year to $0.22 per share.
Real Assets AUM grew 25% year-over-year and revenues grew 27% year-over-year, now constituting nearly 30% of total AUM.
Raised $16.5 billion of equity capital in H1 2026, representing over 40% of last 12-month total capital raising.
AUM not yet paying fees increased to $31 billion, representing $380 million of expected annual management fees.
Alternative credit interval fund surpassed $2.7 billion in size, outperforming the leveraged loan index by over 600 basis points.

Concerns

Direct lending now approximately 35% of AUM, down from nearly half 2 years ago, reflecting diversification away from this segment.
Evergreen inflows, while showing improvement, are still below historical levels.
Nontraded BDC redemption requests, though modestly reduced, remain a focus, with 90% of OCIC fund investors not requesting redemptions, indicating concentration among a small shareholder base.
Moderate sponsor-driven M&A activity continues to impact direct lending deployment.
The M&A market on the PE side remains a tepid environment.

Guidance & targets

Category	Target	Timeline	Confidence
Stock-based compensation (equity-based compensation other)	$365 million medium materiality	FY26	High
FRE per share	Beat $1.02 high materiality	FY26	High
DE per share	Beat $0.89 high materiality	FY26	High
FRE margin	58.5% medium materiality	FY26	High
Institutional fundraising	Remain strong medium materiality	H2 FY26	High
Net lease current vintage capital raising	Finish up capital raising this year medium materiality	FY26	High
Digital infrastructure flagship fund first close	Later this year medium materiality	FY26	High
Digital infrastructure flagship fund fundraising	Through 2027 into early 2028 medium materiality	FY27-FY28	High
Digital infrastructure flagship fund goal	$10 billion medium materiality	Multi-year	High
FRE margin	Modest increases medium materiality	Next few years	Medium
Fundraising for H2 FY26	Could be better than H1 medium materiality	H2 FY26	Medium
Management fee growth rate	Higher medium materiality	FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Real Assets Strong growth driven by net lease and digital infrastructure strategies, with significant industry recognition. AUM: ~30% of total AUMAUM growth YoY: 25%	—	27%	—	—
Credit - Direct Lending Diversification efforts have reduced direct lending's proportion of total AUM. Credit health remains strong with low loss rates. AUM: ~35% of total AUM (compared to nearly half 2 years ago)	—	—	—	—
Credit - Alternative Credit Experienced outsized growth, with the interval fund surpassing $2.7 billion and outperforming benchmarks. AUM: Approaching 10% of credit AUMAUM growth YoY: 35%	—	—	—	—
GP Strategic Capital Maintains a market-leading position, with strong fundraising for its flagship large-cap strategy and successful strip sale transactions. Raised over last year: ~$5.5 billion (across comingled fund, co-invest, and strip sales structures)	—	—	—	—

Risks & headwinds

Private credit concerns and challenging global fundraising environment Ongoing

Opportunistic fund raised 1.6x more than prior vintage against this backdrop

Mitigation:Diversification of strategies and strong investment performance to attract capital.

Headline noise and elevated redemptions for nontraded BDCs Ongoing, but showing signs of improvement

Modest reduction in redemption requests in Q2; 90% of OCIC fund investors did not request redemptions

Mitigation:Strong fundamental performance of products, ongoing education across stakeholder groups, transparency with financial advisors, and diversification into other wealth products.

Moderate sponsor-driven M&A activity Ongoing

Direct lending deployment consistent with this environment

Mitigation:Focus on growth from alternative credit, investment-grade credit, and other newer strategies; $31 billion of AUM not yet paying fees to be deployed.

Geopolitical uncertainty Ongoing

Mentioned as a factor during H1 2026 capital raising

Mitigation:Diversification of business and resilience of investment performance across various market environments.

Normalization of loss rates from very low levels Future

Currently 12 bps average annual realized loss rate; prepared for normalization

Mitigation:Vigilance on credit health, strong underwriting, and credit selection, particularly in the upper middle market.

Tepid M&A market on the PE side Ongoing

Directional

Mitigation:Growth is not predicated on a rapid recovery in sponsor activity, relying on other growing strategies and AUM conversion.

What to watch in Q3 FY26

Net lease Fund VI capital calls

by year-end

Current 65% drawn at Q2 end, 77% drawn next month

Target Virtually fully called

Why it matters

Indicates the pace of capital deployment and conversion of AUM into fee-paying AUM for a key real assets fund.

And I mentioned earlier, we have line of sight to effectively fully called with that -- with Fund VI by the end of the year.

Find out whether OWL delivers this. Inve re-checks your case every morning.

Q&A highlights

Which line items will drive the expected beat on the visible alpha consensus estimates for 2026?

Management expects management fee growth from GP stakes, net lease (Fund VI fully called by year-end, current vintage 40% committed), and digital infrastructure (first close later this year, charging on committed capital). Direct lending is expected to be a push, but the $31 billion AUM not yet paying fees will convert over time.

“We have visibility into the next quarter or 2, where we do see management fee growth building each of the next 2 quarters.”

asked by Glenn Schorr · answered by Alan Kirshenbaum

2 min read 5 chapters

Detailed narrative

Platform Diversification and Growth

Blue Owl has significantly diversified its platform, with Real Assets now comprising nearly 30% of AUM, growing 25% year-over-year. Direct lending has reduced its share to approximately 35% of AUM, down from nearly half two years ago, while alternative credit has grown 35% over the past year.

The firm has successfully introduced de novo strategies like data center credit and real estate credit, raising over $1 billion towards a $1.5 billion goal, further enhancing product suite diversity and resilience across various market environments.

Investment Performance and Credit Health

The company continues to achieve strong investment outcomes across its strategies, with no meaningful change in direct lending performance. The underlying portfolio companies maintain mid-to-high single-digit growth, supporting senior secured positions. The average annual realized loss rate in direct lending is 12 basis points, with a net gain in the technology lending book.

Nontraded BDC OCIC Class I shares returned over 9% since inception, outperforming public credit benchmarks, and the net lease strategy generated a 13.6% total return over the past 12 months.

Fundraising and Capital Deployment

Blue Owl raised $7.8 billion in total capital during Q2, bringing the LTM total to $50.5 billion. Institutional and insurance investors comprised about three-quarters of Q2 equity capital raised, with institutional flows up over 30% year-over-year. The firm has $31 billion of AUM not yet paying fees, representing $380 million in expected annual management fees.

Deployment is robust in alternative credit and investment-grade credit, with alternative credit deploying nearly $7 billion over the last 12 months, more than double the prior period.

Wealth Channel Dynamics and Outlook

The company observes a trough in Evergreen inflows, with a greater than 50% increase in July 1 inflows compared to May 1. Redemption requests for nontraded BDCs saw a modest reduction in Q2, with 90% of OCIC fund investors not requesting redemptions.

Management believes the wealth channel is more durable and discerning than recent narratives suggest, with investors differentiating between asset categories. Blue Owl is expanding its wealth platform, launching on 13 new platforms this year and planning 21 more, and seeing increased cross-selling opportunities among financial advisors.

Digital Infrastructure and Real Estate Opportunities

Digital infrastructure remains a significant growth area, with a footprint spanning over 140 data centers and 15.3 gigawatts of leased and owned capacity. The firm is exploring further opportunities in areas like fiber and power solutions adjacent to data centers.

In net lease, there are nearly $160 billion of near-term opportunities, with Fund VI expected to be virtually fully called by year-end. The next net lease vintage has already exceeded its $7.5 billion hard cap, with capital raising expected to conclude this year.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.