And so you have different things moving different of those ratios up and down. And then you also have debt. So for us, there’s a number of our products where we earn a management fee on debt, on total assets, so equity plus leverage. And when we raise debt in those products, that goes to fee-paying AUM. So they won’t always move in sync, but generally speaking, you should see all of them increase over time.
Patrick Davitt: Okay. Thanks. And any update on thoughts about expanding into more kind of closed-end fund wrappers like some of the other large direct lending players do?
Marc Lipschultz: Other — when you — other closed-end fund wrappers meaning?
Patrick Davitt: Meaning like a more institutional kind of drawdown type fund structure.
Marc Lipschultz: Oh! Got you. Look, we have — yes, we have a strategy of being, as you know, the market leader in large cap, high quality financing solutions. We have a model that’s distinctive, which is anything we originate gets shared between the handful of funds that we manage. We have a much, much simpler business, both to understand, to manage, for infrastructure, as you know, than our peers and fewer different vehicles, as noted. However, in answer to your question, yes, we continue to look at ways to meet the market where they want us. That is to say, to meet structures that serve different constituents’ needs. So, yes, we have continued to expand the types of offerings we have, to your point about other types of closed-end funds that may look like more traditional funds.
Absolutely. We’re pursuing putting those in place as well. We’re all about creating the on-ramps that meet the needs of our investors so that that’s designed for them and then delivering to all of them a common, high quality experience by being able to share in every loan that we make that’s appropriate to a strategy. So that itself, as you know, is pretty distinctive. So we will continue to add those on-ramps into our product suites. Yes.
Doug Ostrover: I think I would just add here, Patrick, generally speaking, we have a wrapper for each type of distribution channel for each of our strategies. A lot of those wrappers will take both institutional and wealth clients and investors, but we do have GP LP structures that meet the needs for each of our strategies. Some of them are just not as scaled as, let’s say, our BDC platform and so they don’t drive the numbers as much, so you don’t hear about them as much on these earnings calls. But we do have products that suit those needs.
Marc Lipschultz: I realize this isn’t the question that you asked exactly, but I just want to add one other thought. Look, it is not our intention, though, to proliferate products so that we can just gather assets. We’ve said this before, we are keenly interested in growing FRE and dividends. We are not keenly interested in growing AUM for the sake of growing AUM. There’s a lot of very low-margin AUM that’s available, right? And so gathering assets, launching vehicles, we’re just not going to pursue having dozens and dozens of vehicles just so we can get a dollar. What we want to do is get very high-quality dollars. Our fee rate is the highest in the industry and that reflects the quality of what we deliver to investors and the kinds of assets we raise and that, I think, will continue to be very important to us. We’re not in the AUM gathering business. We’re in the outstanding results and market leadership business.
Patrick Davitt: Thank you.
Alan Kirshenbaum: Thanks, Patrick.
Operator: Thank you. Our next question comes from the line of Steven Chubak from Wolfe Research. Please go ahead with your question.
Steven Chubak: Hi. Good morning. Thanks for taking my questions.
Marc Lipschultz: Thanks, Steven.
Doug Ostrover: Good morning.
Steven Chubak: So I wanted to start off with a question just on your European expansion plans. There’s been some press articles suggesting you’re exploring a deal for a direct lender in Europe. I don’t expect you to comment on that specific deal. Maybe just speak to your broader preference to build versus buy to expand your footprint in the region and whether recent speculation that peers are looking to launch no-carry credit funds in Europe informs your appetite to grow.
Marc Lipschultz: Great. Thank you. So as noted and appreciated, obviously, we won’t comment on any particular speculation in terms of M&A. But to say this, look, we as a firm, I would put in order three kind of priorities when we think about how we grow our business. Well, above all of it, of course, is delivering outstanding risk-adjusted returns at all moments, right? Our LP experience is monumentally important ultimately to us. It actually doesn’t impact our financials, as you know, because we are a fee-based business. So our business is distinctively predictable. We don’t have performance fees. But to us, delivering outstanding results will always be, lifeblood from our point of view. Now, with that said, there’s three ways for us to grow the business, all three of which we have done and will continue to look at.
But in this order, it is organic growth of our base product business, base products. Again, we have market-leading positions, decidedly the market-leading position in triple net lease for high quality — high credit-quality counterparties, decidedly the market-leading position in GP strategic capital. And one of, don’t want to overstate it, one of the market-leading positions in direct lending. And continuing to lead those markets is going to be our focus, continuing to have scaled products, which lead to very strong margins and strong fee rates because we have a great value proposition for those investors, is going to continue to be where we will focus first and foremost. And remember, because our capital is permanent, 93% of our revenues are based on permanent capital.
So that growth, every time we bring in a dollar, we’re keeping those dollars, we’re a layer cake, not the spinning wheel, and as you heard us say, we’ll take in, for every dollar, for every $1 that leaves our system by virtue of say a quote realization or a return, we have $5 coming in. Our average competitor has $2. That is a huge difference in growth impact in that organic phase. So that’s going to be priority one. Priority two is add in products where we can ultimately become the market leader, a market leader, but most importantly, deliver a really strong experience. Take our Blue Owl strategic equity product. GP-led secondaries. Huge market opportunity. That’s a place where we’ll do our first close in Q4. We have a really distinctive solution.
