Blue Owl Capital Inc. Q3 FY2021 Earnings Call

Good day, and thank you for standing by. Welcome to Blue Owl Capital Third Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Ann Dai, Head of Investor Relations. Please go ahead.

Thanks, operator, and good morning, everyone. Joining me today are Doug Ostrover, our Chief Executive Officer; Marc Lipschultz and Michael Rees, our Co-Presidents; and Alan Kirshenbaum, our Chief Financial Officer. I'd like to remind our listeners that remarks made during the call may contain forward-looking statements, which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described from time to time in Blue Owl Capital's filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements. We would also like to remind everyone that we will refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our press release, available on the Investor Resource section of our website at blueowl.com. This morning, we issued our financial results for the third quarter of 2021 and reported fee-related earnings or FRE and distributable earnings or DE of $0.11 per share. We also declared a dividend of $0.09 per share, payable on September 30 to shareholders of record as of November 22. During the call today, we'll be referring to the earnings presentation which we posted to our website this morning, so please have that on hand to follow along. With that, I'd like to turn the call over to Doug.

Thank you, Ann, and good morning, everyone. It's been a busy few months for Blue Owl, so we're excited to provide all of you with an update on what we've been doing to move our strategic initiatives forward. Before I talk about this quarter, though, I'd like to take a moment to call out the tailwinds that have been present across alternatives, which have obviously benefited not just us, but our peers as well. M&A activity has been near record levels, driving elevated lending activity across public and private markets. Accommodating equity markets have allowed for sponsors to exit investments and return capital to investors who, in turn, are putting money back into alternatives. GPs are raising larger funds more quickly and are broadening their investment capabilities to be more relevant to their investors, which drives capital needs across their businesses. The beauty of Blue Owl is that our growth does not take away from the growth of other alternative asset managers, but in fact supports it. We grow with our peers as we lend to their portfolio companies and provide growth equity to the GPs. And we plan to continue expanding our market share, indirect lending, and investing in additional premier franchises in GP solutions. Turning to the third quarter, Blue Owl’s strong results reflect continued robust growth for the firm, as gross originations reached a record $8.8 billion across direct lending. And we raised capital across fundraising channels and investment strategies. AUM grew 13% to over $70 billion quarter-over-quarter, reflecting ongoing fundraising across the platform and appreciation in GP solutions. A few weeks ago, we announced the acquisition of Oak Street, adding another market-leading scaled, yield-oriented capability to the Blue Owl platform. Pro forma for Oak Street, our September 30 assets under management would be $83 billion. I'll touch on the compelling opportunities we see with Oak Street in a minute. Our distributable earnings grew 32% from the prior quarter, as a result of the new capital commitments, significant capital deployment firm-wide, and a tax benefit that Alan will discuss in greater detail. Our distributable earnings are anchored by the high level of permanent capital across the business, with 97% of our management fees coming from permanent capital. This means shareholders have significant visibility into our existing earnings power, and we continue to layer on incremental earnings through fundraising and deployment. We think this aspect of the Blue Owl story is powerful. None of our peers look like us with respect to our permanent capital profile, and it allows us to grow faster than our peers. Our focus remains on growing earnings, not AUM. And we will always prioritize profitability and scalability over asset gathering. Last quarter for our inaugural earnings call, we presented the history of the Owl Rock and Dyal businesses, the type of differentiated investment capabilities that each platform offers investors, and how they grew into the businesses they are today. We talked about the unifying aspects of the firm as they came together under the Blue Owl banner, including one, their positioning as market leaders in their respective spaces. Two, the commitment to creating differentiated yield solutions for investors. Three, the focus on long-dated and permanent capital streams. Four, the notable synergies that we anticipate, as we leverage the power of the combined Owl Rock and Dyal ecosystems. Five, the culture of respect and collaboration that permeates through our interactions with each other, our investors, and our counterparts in the market. We expect to demonstrate that combining these businesses under one roof will result in greater value creation than each would have on a standalone basis. Said another way, the benefits of the Blue Owl ecosystem should be measurably positive. The steps we are taking today, in building out our investment capabilities, investing in our corporate infrastructure, and creating a cross collaboration framework across business lines are creating the runway for continued and meaningful growth ahead. Let me highlight a few things that I think will be important areas of focus for the firm over the coming quarters and years, and then I'll turn it over to Mark and Michael to discuss direct lending and GP Solutions in greater detail. First, I want to spend a minute on our technology lending BDC, which has reached nearly $7 billion of assets under management and has generated a gross IRR of 23%, and a net IRR of 18% since inception, a strong result for a BDC that focuses on senior secured lending. When we went to market with the strategy in 2018, we were the first tech-focused BDC of its size in the space. It was tough to raise that equity. Tech lending sounded risky to people, and they couldn't imagine our vision, which was a fund focused on making top-of-the-capital-structure, senior secured loans to well-established upper middle market technology companies, with mission-critical products and a recurring revenue base. We have been able to construct the portfolio with significant downside protection. Our track record in this product has been terrific, with no losses since inception and no loans on non-accrual. We think the industry is in the very early innings of the adoption of private credit solutions to technology firms. And we are a leader due to our scale, domain expertise, and broad relationships, which we have been developing for many years. For many of the tech companies to which we lend, we're providing growth capital at an attractive cost relative to raising another equity round. We can provide bespoke solutions to fit their specific needs. The growth of this tech lending strategy could be very meaningful for Blue Owl over time, and we look forward to providing more updates in future quarters. The next area I'd like to highlight is retail, which has been a primary focus for the Owl Rock team since we founded the business. While retail flows to alternative assets have really begun to accelerate in recent years, we believe retail allocations to alternatives have a lot of room to expand and expect Blue Owl to be among the meaningful beneficiaries of this trend. We're still in the very early days of rolling out direct lending, GP Solutions, and down the line net lease products to retail, particularly in the wirehouse channels. The early feedback on our products has been very positive, with retail investors appreciating the yield profile we provide for a senior secured product, as well as the fact that they are invested in the same loans as our institutional investors. Our BDCs are compelling alternatives to traditional fixed income products. For the third quarter, we raised over $1.1 billion of equity capital across retail, with approximately $500 million of that coming from direct lending, and $600 million coming from GP Solutions. Pro forma for Oak Street, our retail fundraising for the third quarter would have been over $1.6 billion, as Oak Street raised more than $500 million from retail during the quarter. We don't want to get ahead of ourselves on the potential opportunity in retail. But clearly, large amounts of capital can be raised in this channel. We intend to be fully in the mix with a number of differentiated products. Finally, as I mentioned earlier, I'd like to spend a moment on our acquisition of Oak Street, a leading real estate private equity firm focused on the triple net lease market with over $12 billion of AUM as of September 30. We're very excited to have the Oak Street team join Blue Owl. They've built a great business with a market-leading position in net lease, and we expect it to be complementary to Blue Owl’s platform in many ways. This transaction fits the parameters we've been looking for, namely one, an ability for Blue Owl to take a strong industry-leading franchise and leverage our scale and infrastructure to accelerate its already robust runway for growth. Two, a product set that can translate well to both institutional and retail investors and lends itself to long-dated and permanent capital structures, which net lease certainly does. Three, an investment focus that does not compete with our existing Blue Owl investment capabilities but rather is complementary and has a big addressable market. Lastly, we wanted to have the ability to create synergies for our stakeholders in the following ways. This transaction offers our LPs, who may not have known Oak Street or invested in net lease previously, exposure to a world-class investment platform, now supported by the scale of Blue Owl’s infrastructure. We also believe Oak Street's net lease expertise can be very beneficial to the sponsors that we work with, in direct lending and our partner managers in GP Solutions. From a retail perspective, we welcome the opportunity to leverage Blue Owl’s broad distribution platform to further expand Oak Street's retail presence across existing and new strategies. Lastly, for our public shareholders, we expect that the Oak Street transaction will be 5% to 7% accretive to distributable earnings per share, starting in 2022, based on Oak Street's existing growth trajectory. However, the benefit to Blue Owl’s shareholders could exceed that over time. I also like to add that our team has known Marc Zahr, the CEO and Founder of Oak Street for a number of years now, and we have a lot of admiration for the business he's built, and importantly, the culture he's created at Oak Street, which we think is very similar to what we have at Blue Owl. We're excited to share more about the business once the transaction is closed, and to introduce Marc to our Blue Owl stakeholders. Marc will be joining Blue Owl’s Board of Directors and Executive committee, and will play an integral role in the strategic initiatives we have planned. With that, I'd like to turn the call over to Marc Lipschultz, to give you an update on our direct lending business. Mark?

Great. Thanks, Doug. Across the industry, we are seeing accelerating use of direct lending as a solution for private equity sponsors and corporations, as they continue to see the benefits of working with one lender. Through that one relationship, borrowers find greater predictability, privacy, and partnership, the three P's that make private credit a very attractive alternative to broadly syndicated markets. So zooming in a bit, we really like our market positioning of lending to upper middle-market companies at scale, and believe that Blue Owl will continue to take market share over time. Turning to the third quarter specifically, as you can see on Slide 15 of our presentation, our direct lending business saw record originations of $8.8 billion, surpassing the prior record of $5.1 billion from the second quarter of 2021. Market conditions remained very supportive of M&A activity during the quarter, and this favorable environment has sustained through the first part of the fourth quarter. Although it has been just six months since the merger between Dyal and Owl Rock, we've seen concrete and positive impacts to our deal flow as a result. Direct lending ended the quarter with $34.6 billion of AUM, reflecting 11% growth from the prior quarter as a result of strong origination activity. If you go back about five years, I don't think there had been a single direct lending solution of $1 billion or greater. Year-to-date, we have signed or closed on 17 deals with facility sizes in excess of $1 billion. This clearly demonstrates how the addressable market for direct lending continues to expand, as private equity sponsors and private companies value our ability to provide bespoke and flexible solutions and certainty of execution. Performance remains very strong, with a gross IRR of 12% and a net IRR of 9% since inception at the end of the third quarter for ORCC, our publicly traded diversified lending BDC, and a gross IRR of 23% and net IRR of 18% since inception at the end of the third quarter for ORTF, our tech lending BDC. We've continued to focus on downside protection, with a weighted average loan to value in the mid-40s in our diversified lending strategy, and a weighted average loan to value of less than 30% in our tech lending strategy as of September 30. Our credit performance remains strong, with annualized net realized losses of approximately 5 basis points since inception. As Doug mentioned, retail fundraising within direct lending was roughly $500 million for the third quarter. We gained even more traction in October, with nearly $350 million raised in this month alone. We continue to broaden our distribution and evaluate new products for retail. Between retail expansion, new product development, and the strength of our existing platforms, we're very optimistic about the growth ahead for our direct lending business, and look forward to providing updates on new exciting products in the coming quarters. With that, let me turn it to my partner, Michael Rees, to discuss GP Solutions in more detail.

Thank you, Mark. We continue to see investor interest in our GP solution strategy, which provides a balance of current income and appreciation potential tied to the continued growth of the industry. From an investment standpoint, the pipeline remains very strong as firms in the space continue to scale and require substantial growth capital to do so. In the third quarter, we continued to form strong partnerships with top private managers including CVC. We are extremely pleased to be establishing this relationship with CVC, the culmination of six years of productive dialogue and relationship building. As of today, we have invested, committed, or have agreements in principle to commit approximately 65% of what we expect to raise for our GP minority equity strategy in our fifth fund. Our value proposition of providing passive equity capital to premier managers through minority stakes has continued to resonate in the market. Even in the early days of Blue Owl and the merger between Owl Rock and Dyal, we've created significant touch points that can drive incremental opportunities down the road. Our GP solutions business ended the quarter at $35.9 billion of AUM, reflecting new capital raised and appreciation across the portfolio. Performance remains very strong, with Fund Three marked at a gross IRR of 33% and net IRR of 25% since inception, and Fund Four marked at a gross IRR of 140% and net IRR of 86% since inception. What people may not realize about these IRRs is that in addition to the capital appreciation over time, investors are getting cash on cash returns on a regular basis, meaning our LPs are receiving significant amounts of income while their underlying investments appreciate. For example, as of September 30, Fund Three was closed only in 2016, has already returned approximately 75% of the capital contributed by the LPs in the fund, and we continue to hold the majority of our positions in each of those 10 underlying firms. We think our funds stand out in this respect, marrying potential for private equity returns with ongoing income generation. We raised $1.6 billion of new capital during the quarter, primarily in our GP minority equity strategy. We remain confident in our prior capital raising expectations for this strategy. We anticipate fundraising will continue through the balance of 2021 and into early 2022. As a reminder, the revenue generation for this strategy does not depend on when the funds close, as we earn catch-up fees back to October 2020. Looking ahead, we're working on a number of interesting new products and look forward to discussing in more detail on future calls. With that, I will turn things over to Alan, to discuss the financial results.

Thank you, Michael. Good morning, everyone. I'm going to start off by walking through the numbers for this quarter, and then I'll touch on a few other items. I'll be making references to pages in our earnings presentation, as Ann mentioned, so please feel free to have that available to follow along. As a reminder, the key drivers of our short and intermediate-term growth include one, deployment of capital that we've already raised as we generally earn management fees on the total assets of our funds for direct lending. Two, some of the products moving to full fees after their initial fee discount period. Three, raising new equity capital in direct lending and GP solutions. And remember, for GP solutions, we generally earn management fees on committed capital. So let's get into the quarterly results. Our third quarter reflected a continued strong deployment pace and fundraising across direct lending and GP solutions, resulting in robust AUM and earnings growth. Our adjusted revenues of $236 million were up 12%, FRE of $142 million was up 9% and DE of $143 million was up 32%, all compared to the prior quarter. Our third quarter was impacted by a significant tax benefit from a revenue share buyout with one of our large strategic investors that we announced in September. We expect the tax benefits to offset taxable earnings for the rest of the year. So you should not expect to see any material tax expense included in our DE results for the fourth quarter either. We announced a dividend of $0.09 per share for the third quarter. This represents approximately 85% of DE, which continues to be our dividend target. Since the transaction closed on an adjusted basis, our FRE margin was 61%, and we continue to target a range of 65% to 70%. Our compensation expense as a percentage of total revenue was 29%, in line with our expected target of 25% to 30%. We reported AUM of $70.5 billion, fee paying AUM of $47 billion, and total permanent capital of $64.4 billion. AUM not yet paying fees was $9 billion as of September 30. As Doug mentioned, inclusive of the Oak Street acquisition, our AUM would be $83 billion. AUM grew 13% to $70.5 billion quarter-over-quarter, driven primarily by deployment of capital and direct lending, capital raising across the platform, and portfolio appreciation in GP solutions. Fee-paying AUM grew 10% to $47 billion quarter-over-quarter, driven primarily by deployment in direct lending and capital raising across the platform. AUM not yet paying fees reached $9 billion including $6.4 billion in direct lending and $2.6 billion in GP solutions. This AUM corresponds to an expected increase in annual management fees, totaling approximately $140 million, primarily upon deployment for direct lending and upon the conclusion of the fee holiday for GP solutions. If our tech BDC were to go public, we expect that could be another incremental $65 million of annualized management fees. These two factors alone could drive $205 million of annualized management fees, largely from permanent capital. As Mark highlighted earlier, we had another record quarter of deployment in direct lending, with gross originations of $8.8 billion. That makes our gross originations for the last 12 months $19.7 billion with $9.2 billion of net funded deployments. In relation to the $6.4 billion of AUM not yet paying fees in direct lending, it would take us a little less than three quarters to fully deploy this, based on our average net funded deployment pace over the last 12 months. Now I'll move on to some comments around announcements we've made during or subsequent to the third quarter, starting with the Oak Street acquisition. We expect the acquisition to close in the fourth quarter, and the financial impact of Oak Street will largely be felt in 2022 and beyond. As we highlighted in our presentation when we announced the acquisition, our base case expectation of accretion is 5% to 7% for 2022, with the potential for incremental value creation over time. This base case incorporates only Oak Street's existing business, and we are optimistic that we can potentially deliver greater accretion through the benefits of the combination that Doug highlighted earlier, including new product development and cross-selling opportunities. Next, I'll touch briefly on the revenue share buyout I mentioned earlier, which we announced in September. One of our large strategic investors had revenue share economics across some of our Dyal funds. When we bought out this revenue share arrangement it created the tax benefit I described earlier. We view transactions like this as strategically important and accretive to Blue Owl’s shareholders, and we'll continue to further assess opportunities in this regard. Turning to our balance sheet, we continue to be in a very strong capital position. We currently have almost $1 billion of liquidity with a long-dated capital structure that is composed of $700 million of 10-year unsecured debt, $350 million of 30-year unsecured debt which we issued subsequent to quarter-end, and an undrawn $150 million revolver with almost three years of maturity remaining. We continue to monitor the debt capital markets, as we see this as a source of flexible, cost-efficient capital to fund our strategic initiatives. Also, subsequent to quarter-end, we instituted a dividend reinvestment program as an option for our shareholders. Details of that program can be found on our Investor Resources website. Now, before we get into Q&A, we are very pleased with the progress we've made in the short time since our merger closed in May. We have some very exciting growth plans ahead of us, and feel we are well-positioned to execute on them. We look forward to updating everyone on these in February next year. Thank you again to everyone who has joined us on the call today. With that operator, can we please open the line for questions?

Thank you. Your first question comes from Alex Blostein with Goldman Sachs. Your line is open.

Hey, good morning, everybody. Thanks for the update. Maybe we could start with the retail discussion, obviously, big number in terms of fundraising in a quarter. I think I heard you guys say $500 million direct lending. Not too long ago, I think it was running at about $100 million a month, so quite a step up. So maybe just take us through what happened in the last couple of months, to drive the increase sounds like October is off to a pretty strong start as well. Is that largely coming through the open-ended fund? I think it's ORCIC. How does the fee structure work on this incremental capital that's coming in? Is it based on NAV or deployed capital?

Okay. Good morning, and thanks for the question. This is Doug. I want to start from the beginning. When we built our business, we built it to be retail-ready. We really wanted to be a pioneer in bringing alternatives to retail. We've been in the retail market for over six years and created a strong brand. We've got broad distribution; we can handle meaningful volume. Our view is today we are becoming one of the top alternative players within retail. We've got a very big distribution network. We work with some of the largest wirehouses, independent broker-dealers, RIAs, and family offices. I don't know the exact number of FAs that we're touching, but I think it's over 100,000 today and growing. We've got a large team that covers those advisors, lots of salespeople and support functions. We expect to grow that team modestly in the U.S. as we talk more about this in future calls, but you'll see us ramp up the team in Asia and Europe as well. As was mentioned, we raised over $1.1 billion of equity across retail, which breaks out to $500 million from our direct lending and $600 million through GP Solutions. Pro forma for Oak Street, for the third quarter, we would have been at $1.6 billion, as Oak Street raised $500 million. Most of the $500 million that we raised in direct lending came from what we call our core income fund, which is perpetually offered. We were in one wirehouse partway through the third quarter, and we've added another wirehouse subsequent to quarter-end. We're continuing to see good traction. Our sales are stepping up from $500 million in the third quarter to a strong $350 million in October. We believe we can expand upon that and are very optimistic about what we can achieve over time. We have believed since day one that retail is a very large opportunity, if not larger than the institutional market, but with lower adoption rates. We think our products are competitive, and our performance has been strong. One unique aspect of our platform is we built our firm to serve our institutional and retail investors in the same way, which we believe makes a big difference in terms of the retail experience. We're optimistic about retail and while we're not ready to make big predictions at this point, we see our potential in this channel. One last thing we haven't talked much about is that we are excited about our opportunities with both Dyal and the Oak Street strategies in the retail markets. October was strong, and we're going to continue to execute there.

And Alex, for our core income product ORCIC, we charge management fees on NAV.

Got it. Perfect. That was great. Thank you very much. Second question, maybe a little bit more technical in nature, but clearly the technicals around the stock continue to be focused on the lockup. So maybe, it'd be helpful to just outline the important dates investors should be mindful of when it comes to any shares unlocking post the deal closing in May? I think it's in the middle of November. Also, a framework in terms of how many shares get unlocked, and if any offering does happen, what that could look like?

Thanks, Alex. Good question. So as a reminder, we have a lockup expiration coming up next Friday, November 19. Although about 55% of our outstanding shares are coming off lockup at that time, the overwhelming majority of those shares are still sitting in private units in our structure. I'm going to run through a breakdown of our shares as of September 30 to map this out. We have a total of 1.4 billion outstanding shares. Of this amount, about 365 million shares are public shares, which we call the Class A common shares. These shares are either in the market currently or available for trading on November 19. More specifically, 170 million of the 365 million are rolling off lockup on November 19. The rest of the shares within this 365 million are already in the market. The remaining outstanding shares, a little over a billion shares, are in private units in our structure, which we call the common units. Every quarter, our private unit holders have the ability to exchange their private units for public shares. Our management team holds about 300 million shares and is subject to a two-year lockup, so we will not be part of any share sales for the foreseeable future. Approximately half of these private units, or about 500 million shares, can be exchanged at any time and become immediately available for sale. Certain of our large shareholders have registration rights. It's possible that one or more holders may seek to do an underwritten secondary offering following the expiration of the lockup. We expect that any offering will obviously be subject to market conditions and other factors. We're continuing to engage with our larger shareholders to help facilitate any sales in an orderly manner.

Great. Very helpful for that. A lot more we can cover, but I'll jump back in the queue for now. Thanks.

And your next question comes from the line of Robert Lee with KBW. Your line is open.

Great. Thanks. Everyone, thanks for the full update and for taking our questions. I guess, maybe I'd like to ask on Oak Street a bit. They had a pretty nice jump in AUM, obviously, from the end of June to the end of October. I know there's a limit to where you can say you gave some color on their inflows. But can you provide anything in terms of what's their current dry powder and how we should think about the built-in earnings growth that's already on the platform once they close?

Sure. So maybe I could just start out, this is Marc, talking about the Oak Street acquisition and where we are and some of their progress, and then we can jump into a couple of numbers. We're seeing what we want in wanting to combine with Oak Street, which is really an exceptionally strong franchise with a great set of products that meet the compelling moments of the risk-return spectrum. This product is the reason we acquired Oak Street. We are not interested in growing AUM just for the sake of it. We've talked about this. AUM is part of our business but not an end state for us. We want to grow the earnings power of this business. We found in Oak Street an industry-leading scale franchise in an asset class with a large addressable market. We want to lead in the products that we're in. The second aspect is a strategy that lends itself well to permanent capital and long-dated capital. You'll see that reflected in part with retail flows involving that business. High margin businesses are attractive to us, again that's Oak Street. They have a complementary investment strategy to what we already have. Moreover, a strong cultural fit is imperative as we build a business that harmonizes with our goals for the long term. That’s what we saw in Oak Street, and we want to help accelerate its growth through our Blue Owl platform. With regard to their growth composition, I will turn it over to Alan for a moment.

Thank you, Marc. Thank you, Robert. So the Oak Street business is $12.4 billion of AUM. We saw about a 15% growth quarter-over-quarter. Of the $12.4 billion, a little more than a third of that is permanent capital, and about half of the $12.4 billion is fee-paying AUM. They use leverage on their products and charge on NAV, which accounts for the difference between fee-paying and overall AUM.

Great. That's helpful. And then, maybe real quickly just also on GP stakes and fund five. Can you update us on where that is currently? I know you're still fundraising, but how we should think of that flowing into fee-paying in future closes, and any insights on how we should consider that for modeling as we get late into 2022 or 2023?

Thank you, Robert. This is Michael. We had a really good quarter in GP solutions. We deployed significant capital with our CVC transaction and continued steady progress towards our target overall fundraise for fund five. We will continue that through the back half of this year and into early next year, as many clients are looking at investing out of their 2022 calendar. The fees get paid back all the way to the original closing in October of last year, so the timing of the dollars coming in is less relevant for this fund. We’re about two-thirds deployed on fund five. That’s the real measure for when the next fundraise will start. We always want to have dry powder and continue our position as the market leader in this space. We will keep you updated on future deployments through Q4 and early next year, which should give some sense for when fund six will come.

Great. Thank you so much for taking my questions.

Thank you.

All right. We have a follow-up question from Alex Blostein with Goldman Sachs. Your line is open.

Hey, thanks for taking the follow-up. I wanted to go back to Marc’s comments around origination. The numbers definitely stood out this quarter; you guys did almost $9 billion of gross origination versus $5 billion last quarter. We tend to think of origination volume as a binding constraint for growth for you guys, just given the fact everybody's chasing yield. So, impressive growth, so maybe take a step back and walk us through the sources of acceleration sequentially, and it sounds like Q4, you're running at a similar pace. Is it tech? Is it the traditional BDC direct lending products? Just a little more color there, and an overview of the opportunity set would be great.

Yes. We're seeing very robust growth in demand for the direct lending products, and candidly, we expect this will continue. To be specific, we see that demand side of the equation as exceptional. It reflects the continued adoption by the private equity community of private solutions, along with the growing private equity funds themselves. There's about $1.4 trillion of dry powder in the hands of private equity firms, with $400 billion raised in the second half alone. This growth fuels structural demand for financings, where we see a consistent increase in the addressable market. Performance-wise, we continue to excel by providing bespoke, larger lending solutions. We’re continuing to grow along with a few of our peers. We've participated in 17 billion-dollar plus financings this year. We're certainly feeling optimistic about the durability of this demand for financing.

Great. Very helpful. Thanks. Last one, I promise. This one's for Alan, the revenue share stuff. You mentioned there are more revenue shares that could be renegotiated. Are there any other impacts on pre-tax DE we should think about when doing that?

Great question, Alex. We have a few small revenue shares remaining in one of the Dyal funds. we purchased revenue share economics across some of our Dyal funds, we view transactions like this as strategically important and as being accretive to Blue Owl’s shareholders. We'll continue to assess these opportunities. We just completed a buyout of our tech seed investors, which closed yesterday. You'll see that reflected in our Q4 report. That arrangement was already fully consolidated into our results.

Got it. Thanks again for all your time.

All right. We also have a follow-up question from Robert Lee with KBW. Your line is open.

Great. Thanks for taking my follow-up. There was a lot of conversation about products and new product development. I'm curious where things stand. I know you talked in the past about co-investing, strategic capital, and GP secondaries once the firms were married together. Any update on how you're thinking about that as we look into 2022 and beyond? Are you close to launching some of those products?

Thank you, Robert. This is Michael. We're strongly focused on co-investing and secondaries as the industry changes. We see real structural growth opportunities within these markets and we will be announcing our developments soon. Our ecosystem across the Blue Owl platform emphasizes our capability to provide capital from GP solutions to portfolio company loans, indicating our intent on filling product gaps as we evolve.

Great. Thank you for taking my question.

Thank you, Robert.

All right. There are no further questions at this time. I'll hand the call back to Doug Ostrover for any closing remarks.

Well, thank you. I want to thank everybody again for joining. I know I speak on behalf of everyone at Blue Owl, when I say we're grateful for the partnership and support. We look forward to speaking with all of you next quarter. Thank you again.

Thank you. And that concludes the Blue Owl third quarter 2021 conference call. You may now disconnect.