Alan Kirshenbaum: Sure. Thanks, Alex. So we’ve talked about FRE margins. We think operating at a 60% FRE margin is a very strong margin. It’s obviously among the best or the best in the industry. And as we continue to grow, Doug just talked about, some new product launches. As we continue to grow our business, we’re going to continue to invest in that business, whether it’s people, whether it’s real estate, whether it’s placement costs, whether it’s comp. And so I would expect a high growth rate for our expense line, no different than for our revenue line. Obviously, ideally, our revenue line outpaces the expenses. But as we continue to reinvest in the business, I continue to think a 60% FRE margin is the right place for our business to operate for the next few years.
Doug Ostrover: Yeah. I — Alex, look, there is would be natural scale economies, to your point. But we continue to be very focused, not just measured in quarters or even a couple years, but many, many years on continuing to deliver really strong FRE and dividend growth and so we do want to continue to put some capital and some of our available revenue into starting new products. We’ve done a lot very successfully organically and we continue to want to do that. We want to continue to invest in building the infrastructure, world-class infrastructure, in our organization to be the best in the areas we’re in. So, I think at already the highest margin in the industry, it’s not particularly a priority to see how to make that higher relative to making sure we continue to grow revenue at an extremely attractive rate and therefore convert that into FRE and into dividends.
Alan Kirshenbaum: When you think about what we’re investing in, Alex, we think about healthcare, as Doug just mentioned, in terms of organic product launches. We think about our strategic equity product that we’re in the process of launching. These are all organic that we’re building from scratch internally here or that we have been building from scratch. Think about continued investment in our institutional fundraising platform, continuing investment in our wealth fundraising platform. These are all things that are critical to that revenue growth that we continue to talk about. And you pull the lens back and you think about how simple our business is. We’ve taken an FRE revenue growth number times 60%. FRE margin, that’s our FRE growth and that translates to very high continued dividend growth year-after-year.
Alex Blostein: Yeah. All right. Thank you all very much.
Marc Lipschultz: Thank you.
Operator: Thank you. Our next question comes from Patrick Davitt from Autonomous Research. Please go ahead with your question.
Patrick Davitt: Hey. Good morning, everyone. My first one is on deployment. Craig Packer was super bullish on deployment on your most recent update call and indeed the gross net originations were up 30% sequentially, but both FPAUM inflow and transaction fees were down sequentially. So could you help us better frame how to model the ins and outs of the movements of those line items against activity levels, which were obviously much better?
Alan Kirshenbaum: Sure. Why don’t I…
Marc Lipschultz: Well, I’ll tell you what, let’s do this. Let me start on kind of what we’re seeing in total in the marketplace originations, you’re obviously driven from that and then Alan will connect in with some to kind of a specific question of how do you model it, so to speak. So your observation, of course, is absolutely spot on. The originations were up and measured in percentage terms up quite substantially at 30%. That’s not — that’s pretty meaningful in the context of our business. That said, we’re still at levels obviously below originations where they were a year ago, when times were much, much more active in the M&A market. So a couple of observations that remain true today. First and foremost, the direct lending role in the financing markets remains extremely substantial.
And I don’t know if you like to use the word market share. I’m not a big fan of the word market share because it suggests that, we and the banks are competing for the same financings. We’re really not. We’re offering a completely different value proposition and we’re a holder, not an intermediary of debt. But in any case, just to use that word for a moment as a shorthand, the share for direct lending is extremely high and Blue Owl’s role remains leading. We continue to be absolutely a key driving force in many of the very biggest financings for the very best companies and biggest sponsors. So all of that is very positive and in part reflected in the 30% growth. On the other hand, it is a statement of the obvious that M&A remains low in total and we can only have — we can have as full a share as we all collectively want and Lester’s M&A activity, it can only translate into so many dollars.
And sitting here today, we continue to see good activity levels in terms of inflows. Certainly seems to be more convergence between buyers and sellers in converging on prices. Quality of assets is excellent. The things we are seeing, the things we are originating, the quality is outstanding. Now that may reflect our own origination and our own very, very selective financing choices. We’ve looked at 8,400 loans to make the 500 or so we have. But I think it also reflects the reality of the marketplace today, which is higher quality companies are what can be sold and higher quality companies are ones that can be financed, certainly by us. We focus on very high quality companies. And so I think in total, what we’re seeing is a very, very strong position in a kind of tepid M&A market.
It will return. One might have thought, a few weeks ago it would return even sooner sitting here now with the geopolitical world we’re in. I don’t know. You all have as good a perch as any. But we have had a — continue to have a very nice pipeline of certainly very high quality product. And with that in terms of how to think about the flows the ins and outs. Maybe we turn it to Alan a little bit on that one.
Alan Kirshenbaum: Great. Thank you, Marc. So, Patrick, when we think about — there’s a number of different factors that all drive through what you’re referring to, what your question is. When we have fundraise, obviously fundraise raises are AUM and fee-paying AUM. Generally speaking, we’ll have some fee-free capital that we’ll raise from time-to-time, like what we closed a little bit of in 3Q that goes to AUM but obviously doesn’t accrue to fee-paying AUM. We’ll have AUM going up for fair value increases that also doesn’t accrue to fee-paying AUM. Gross deployment will. Sometimes we’ll have paydowns during the quarter on loans that we originate that are paid back. That doesn’t leave the system. That just needs to sit until it gets redeployed.
