Operator: The next question is from Patrick Davitt with Autonomous Research. Your line is open.
Patrick Davitt: Good morning. Thank you. Just trying to think about what wealth flows could look like this year, and I understand it can be a volatile group of investors. Could you maybe update us on how the gross sales and redemption requests look so far in 1Q? And then secondly, how is the — what is the visible pipeline for adding new platforms? And what’s your best guess for the cadence of those coming online for each of the three big retail products?
Alan Kirshenbaum: Sure. Thank you, Patrick. I’ll cover the redemption side and then Doug will talk to pulling the lens back what are we seeing and how are we building our syndicates. So on the redemption side, we are seeing much lighter redemptions than others in the space. We have the similar 5% per quarter levels in our docks, and we’re seeing about half of that come through by way of redemptions. And that’s actually been pretty consistent the last three or so quarters in a row. And more importantly, on the net flow side, we are still seeing very positive strong net flows. So the net flows coming in, the gross flows are significantly above the redemption levels in each of our products. Doug, do you want?
Doug Ostrover: Sure. Thanks, Patrick. So look, we really weren’t that surprised to see wealth flows slow down during ’22. The markets were incredibly volatile. And I — when we got into this seven, eight years ago, we never thought it was going to be a straight line up to the right. And I can tell you, as an institution, we’re still really excited about the opportunity. We still believe that over time, I can’t tell you the exact amount of time, but over time, trillions of dollars are going to go from the wealth channel into the alternative space. And I think we are uniquely positioned to capture more than our fair share of that money flowing in. I think Alan commented during his comments, across our platform in the fourth quarter, we had $2.2 billion of inflows from the wealth channel, and we only had $186 million of redemptions.
Let me say that one more time, $2.2 billion of inflows, $186 million of redemptions. We think that’s pretty good. And as you think about the markets going forward, if they were to remain choppy or volatile, it’s probably a good starting point for us. No guarantees, but I think what we’ve done is a couple of things. One, with the market pulling back, it’s given everybody a chance to just catch their breath. And so we have been out, we’ve met with all the wire houses, RIAs, other distributors, spending a lot of time on education, and I think that’s helped minimize redemptions. But we’ve also gotten a sense of what are the products they think they want to bring later this year, early next year? And I can tell you that, two things I feel pretty good about.
One, over the next 12, maximum 18 months, you will see us introduce into the wealth space, a number of differentiated products. And two, and I can’t give you exact numbers and timing, you will see us significantly increase the syndicate for our products that are currently in the market. So net-net, we are still unbelievably bullish, and we’re pleased with how we’re performing in this difficult market.
Patrick Davitt: Thank you.
Operator: The next question is from Brian McKenna with JMP Securities. Your line is open.
Brian McKenna: Great, thanks. So I appreciate the color around the dividend and payout ratio. So if I assume an 80% payout ratio on your 2025 dividend of $1, that implies $1.25 of EPS or about 35% EPS growth annually in 2024 and 2025? So could you maybe just talk about some of the underlying drivers that will ultimately get you to these figures?
Alan Kirshenbaum: Sure, Brian. Thank you. I appreciate the question. Look, we spent a lot of time going through. As I mentioned earlier, the forecast, in particular, for 2023, but we certainly refreshed on 2025, I wouldn’t lock in an 80% distribution rate. We — I expect that we will move around over time up and down from the 85% level that we were at in 2022. So this year, we’re going to do a little lower 80%. You could certainly see us going higher from 85% to 90%-plus in future years. It really depends on capital allocation, how much we want to hold back depending on things we’re talking about at the management table, so that’s one. And look, we have a lot of exciting products that Doug and Marc and Michael have talked about on this call and on previous calls, something like GP Stakes Fund VI.
We’re doing a lot in the Real Estate business right now, both for Real Estate Fund VI and the new REIT that we just launched later last year. And then in the Direct Lending business, we have a number of new product rollouts as well. So we would continue to expect to grow our business year-over-year at pretty substantial growth rates and be able to put up that dollar share dividend that we’ve all talked about in 2025.
Brian McKenna: Helpful. Thanks, Alan.
Alan Kirshenbaum: Of course. Thank you, Brian.
Operator: The next question is from Adam Beatty with UBS. Your line is open.
Adam Beatty: Thank you and good morning. Just wanted to ask about some of the underlying performance in the Direct Lending book. A lot of the questions and concerns we have from investors is around sort of credit quality and recognize that you guys have had really de minimis loss rates over the years, offset by gains, et cetera. But just in terms of the underlying portfolio, whether it’s maybe nonaccrual rates or EBITDA growth of the portfolio companies or anything else you could give just to give some color and support around the performance of the portfolio? Thanks.
Marc Lipschultz: More than happy to. Credit quality has always been and will be the central focus for the Blue Owl credit strategies, that’s really what we live and breathe. Look, that matters a tremendous amount to us. We focus on it intensely. And tank fluid vanilla to deliver world-class results in it. I do want to say before I jump into the answers to your question, for a Blue Owl shareholder, it doesn’t actually matter. Remember, you get paid fees, we have a feed-only business, and fee-only business from permanent capital. Now again, it matters a lot to us because this is what we live and breathe and how we deliver for our LPs. But I just want to remind us, depending on exactly where you sit — and in this case as Blue Owl shareholder, it doesn’t actually impact you.
With that said, our credit quality remains very strong. We continue to see very strong portfolio performance. That is to say, if we look at revenue and EBITDA growth year-over-year, it continues to be very strong across the portfolio on average. We have not seen any material increase in amendment request. We have not seen a material increase in amendment request. We continue to monitor the portfolio, but it continues to perform on average very well. Look, of course, it’s an uncertain environment. So I don’t say that as if we’re not sitting here spending every day thinking about what happens if what happens if, because that’s indeed where we spend our time and where we should spend our time. But we are not seeing it in the underlying performance of the companies or the portfolio today.
I think we only have three companies total on non-accrual across our very large platform. So I think we all continue to feel very good about the underwriting that got us here in the first place and the performance of the portfolio from there. And just to pull back up and cap it off on the numbers, look, if you look sitting here today, we’ve originated about $73 billion in loans since inception. And we continue, as we sit here, to run at an average annualized loss rate of less than 5 basis points. And in fact, when you take into account gains in those portfolios as well, we actually have a net realized gain of 3 basis points. So really continues to be our strength, and we’ll continue to be vigilant, and we’ll continue to plan for darker days, but we’re in a good place as we head into that.
Adam Beatty: Excellent. Thank you, Marc for the detail and the context. Appreciate it.
Marc Lipschultz: Thank you.
Alan Kirshenbaum: Thanks, Adam.
Operator: The next question is from Ken Worthington with JPMorgan. Your line is open.
Ken Worthington: Hi, good morning. One of the stats you gave is that you closed on — or you’ve closed on 5% of deals that you’ve looked at since inception. I guess, how did that statistic look in, say, the second half of 2022? And how did it vary between more general lending versus tech lending? And then along the same lines, what are you seeing from the banks in terms of reengagement in Direct Lending as we start the year? And is the 5% close what you’d expect to see for 2023?
Marc Lipschultz: It’s generally been steady. I mean, look, there’s certainly variances quarter-to-quarter, year-to-year, but no pattern narrow of note that we’ve observed recently. I would say statistic, we obviously pay a lot of attention to. I would say this, listen, we’d be perfectly happy if the mix of deals was so great, but the number was higher. Look, we’re always going to do it, maybe days will be lower, maybe days will be higher. The key is to see a tremendous amount of investment opportunity and be extremely selective. And so whatever that lands to mathematically is more, of course, output than an input. And we continue to really like what we’re seeing. There’s no doubt that M&A volume, of course, when I said this earlier in my earlier comments, obviously, M&A volume is down.
PE activity is down, and we’re not going to defy that. And obviously, our originations therefore — in Q4, originations as we enter this new year are lower than they were if you look at comparable times a year ago. So we don’t live in a vacuum, but the quality of what we’re seeing and the sort of selectivity we can still apply by having 100 people that spend every day out originating and looking at and underwriting and having built these relationships. We have credits that now we’ve known are in our system. They’re likely to stay in our system even when those companies get sold. There’s just — there’s a lot of forces at work that benefit us as an incumbent and someone that’s proven to be a really reliable partner to so many great firms and great companies.
So that’s all kind of the context, I’d say, to selectivity. The — what was the second part of the question?
Ken Worthington: On the banks?
