By Isla Binnie and Manya Saini
NEW YORK, July 30 (Reuters) - Alternative asset manager Blue Owl suffered outflows from its credit business in the second quarter as wealthy investors pulled back, but the market took heart on Thursday as data center investments and other businesses continued to grow.
The company was at the center of this year's private credit turmoil and has sought to move past it by highlighting its business beyond direct lending - investments in infrastructure, real estate and stakes
in asset managers.
Shares jumped as much as 6.3% by noon after executives reported rising income from fees on managing assets and said they expected the company to exceed 2026 earnings consensus.
Chief Financial Officer Alan Kirshenbaum said "we think we've troughed by way of inflows" from the wealthy investors who had helped drive the firm's growth.
He added that mass requests to withdraw had been limited to private credit funds. "We haven't seen increases in redemptions across our other wealth dedicated products over the past few quarters."
SPOTLIGHT ON FUNDRAISING
For alternative asset managers, fundraising is a critical measure of investor confidence and prospects for generating future management fees and investment income.
Blue Owl raised total fresh capital of $7.6 billion versus$12.1 billion a year earlier. Alongside redemptions from some funds, this slightly eroded credit assets under management to $158.1 billion from $159.2 billion at the end of March.
Inflows from private wealth fell to $1.7 billion from $4.4 billion a year ago.
Meanwhile institutional investors, which typically include pension funds and insurance companies, committed $5.9 billion, down from $7.6 billion a year earlier.
Kirshenbaum said he expected institutional contributions to improve in the second half of the year.
Analysts at Evercore ISI noted that "private wealth fundraising slowed materially from the prior quarter" but saw "reasonable asset growth all things considered".
Adjusted distributable earnings per share came in at 22 cents, in line with estimates compiled by LSEG. Blue Owl's total AUM increased 12% in the second quarter to $319 billion.
DIRECT LENDING IN FOCUS
The private credit sell-off, exacerbated by fears that AI would fundamentally reshape software and technology business models has subsided in recent months, but retail investors have continued to request redemptions from funds that gave them access to rarely-traded loans.
Blue Owl's direct lending originations were $3.6 billion in the second quarter. It deployed $600 million.
Gross returns from direct lending strategies were 2.6% in the quarter, rebounding from negative 0.4% in the first quarter but shy of 3% in the same quarter of 2025.
"Across our direct lending strategy, credit health remains strong and we have seen no meaningful change to our watchlist compared to a year ago," Co-CEO Marc Lipschultz said in a conference call, using an industry term for risky borrowers.
Direct lenders make loans to companies outside traditional banks to finance buyouts, growth and refinancing. They have faced heightened investor scrutiny this year.
Earlier this month, Blue Owl maintained a 5% quarterly withdrawal limit for two private credit funds as redemption requests remained substantially higher despite falling by a few percentage points in the second quarter.
"While we are not calling for a V-shaped recovery in sentiment around private credit, we do think that the strong fundamental performance of our products has played a role in the decline of redemption requests for the non-traded BDCs (business development companies)," Kirshenbaum said.
He added that the firm was cautiously optimistic that redemptions will keep coming down.
The firm's own shares became a proxy for market jitters around private credit and had lost around 36% of their value this year, through the previous close.
(Reporting by Manya Saini in Bengaluru and Isla Binnie in New York; Editing by Devika Syamnath)
