Chris Kotowski: Yes, good morning. Thanks for taking my question. A question for Michael, and I guess, I just would love some — a bit more color on the dynamics of the handoff of one fund from another. I mean those of us who are used to looking at the front tables from a normal private equity fund. We watch it get to like 60% invested and then they will start raising the next one. And then when it’s 80% or 90%, it swaps over. But when I look at the fund tables in your most recent 10-Q, Funds IV and V — excuse me, III and IV were only about 60% invested. And presumably, the rest of that money is spoken for, but not drawn. And Fund V is only about 11% invested. But you’re already talking about — so how should we exactly expect that — how does the drawdowns and the dynamics of the handoff from one fund to the next work?
Michael Rees: Yes. Thanks for the question, Chris. The — what you really should focus on is the date that we quote turn on the fund. And that’s when economics start to be paid to the management company. And we will then be out in the market raising capital for that given fund. And that can span a reasonable amount of time, upwards of a year or even two, but the fees are all the payable once the commitments come in. So I wouldn’t focus as much on the amount of capital that’s gone into each fund. We commit to deals of about 100% of each fund. So it’s not like that money isn’t earmarked for investments. It might not all go in the ground on a rapid fashion. There might be delayed payments that are paid over time. So that metric doesn’t really impact the Blue Owl P&L.
What we all focus on at the management company level is how much we’ve raised in total commitments per fund. And we’ve got about $4 billion left in Fund V. That’s about a good annual pace for our deployment, and our pipeline looks really good. So it’s going to mean that we’re going to start talking to investors towards the middle to end of ’23 about Fund VI. And the key question is when will we flip the switch and turn on fees for Fund VI, it’s likely to be at some point in ’24, depending on pacing of deployment for the rest of this year.
Chris Kotowski: Okay. But — and by the time it flips over and turns over, I mean, let’s assume you were targeting 10% or 20% more for Fund VI than for Fund V, but presumably, the first close would be some fraction of that, right? But…
Michael Rees: Correct. That’s correct. We wouldn’t — it’s unlikely that we will have a one and done close for a big fund like that. It’s not how we typically do it.
Chris Kotowski: Okay. That’s it from me. Thank you.
Michael Rees: Thanks, Chris.
Operator: The next question is from Patrick Davitt with Autonomous Research. Your line is open.
Patrick Davitt: Just a follow-up on the guidance this year. I guess, firstly, you mentioned the lighter deployment rate this year. What are you kind of assuming year-over-year in terms of deployment in that guide? And are you anticipating any inorganic growth in that guide? Thank you.
Alan Kirshenbaum: Sure. Thanks, Patrick. Inorganics, I’ll leave that to one of my partners to talk about. In terms of the fund raise, I think what we’re seeing is a little or what we’re expecting, I should say, Patrick, is a little lighter on the retail side and a little heavier on the institutional side. That balances out to raise the other half of the $25 billion in 2023.
Patrick Davitt: Sorry, deployment, yes, that’s obviously a part of the equation as well in credit.
Marc Lipschultz: Yes. With regard to deployment and credit, in particular, it’s slower right now. As I said, we saw that in the fourth quarter. We see it now. We’re not suggesting we have a crystal ball. But again, remember, with our permanent capital pools and with the variances, the deals we see, the investments we see, we really like. So our shortage, if anything, today, is really capital certainly not opportunity — well, put another way, it’s a shortage of capital against those opportunities. So the exact state of the M&A market in the second half, I don’t really know. In terms of impact on P&L, frankly, that really only shows up in the, sort of, fees in the arrangement fees. So again, we don’t predict that quarter-to-quarter.
We’re assuming a more tepid pace this year than we’ve seen in prior more robust years, and that’s what our — we’re built on. With regard to inorganic, if you want a quick comment on that, look, we continue to be interested, but extremely selective in the idea of adding adjacent capabilities. When we add capabilities, there’s things that are very much front of mind for us, which is, is it really a complementary product that suits our DNA and allows us to sort of deliver on the strengths of Blue Owl and across the platform? Is it a place where we can really deliver a market-leading role and performance? Clearly, in the spaces we’re in, in GP Solutions, in triple net lease, we’re the clear market leader in Direct Lending, one of a couple. And that’s important to us that we’d be in products where we can really lead.
We are not all things to all people. We want to be a handful of really good things to a wonderful side of investors. And then culture fit, critically important, take all that together, Oak Street is certainly a study in the kind of opportunity that we look for. We get a lot of inbounds, as you would expect, and we will continue to look. But that one, we can never predict when that will happen or won’t happen, but we certainly continue to be active in the inorganic side as well.
Operator: That will conclude our question-and-answer session. I’ll turn it over to Doug Ostrover for any closing remarks.
Doug Ostrover: Well, thanks, everybody. We appreciate all the questions. We’re clearly proud of our results for ’22. You’ve heard us in the past talk describe our business using the words I think Marc touched on the stability, profitability and growth. And just to highlight the growth again, revenue, FRE, DE, AUM, all up well over 40% year-over-year. And I think you’ve got a sense on this call, we’re equally as excited about 2023. And we’re reaffirming that $1 billion of DE. So appreciate all the support, and look forward to talking to everyone soon. Thank you.
Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.
