Blue Owl Capital Inc

NYSE:OWL

Earnings Call Analysis

Blue Owl's Consistent Growth and Dividend Hike

Blue Owl Capital finished 2023 with confidence, touting a 25% growth in both fee-related earnings and distributable earnings and announcing a significant 29% increase in their annual fixed dividend to $0.72 per share for 2024. Management fees rose by 26%, largely from permanent capital which strengthens their financial base. The firm's consistent performance has led to an 11th consecutive quarter of growth in management fees and fee-related earnings, a feat unmatched by peers. For the next two years, Blue Owl has set a FRE margin target of around 60%. Fundraising efforts resulted in $25 billion raised in 2023, and an undeployed asset under management (AUM) sat at $14.5 billion at year-end, indicating potential for future growth. Moreover, Blue Owl expects a favorable ongoing effective tax rate of about 5% for 2024 despite a one-time mid-teens rate in the first quarter due to first cash TRA payment.

Consecutive Growth and Dividend Increase

The company has demonstrated its robust performance with an 11th consecutive quarter of sequential growth in management fees and Fee-Related Earnings (FRE), uniquely distinguishing itself among alternative asset managers. During the same period, the company has impressively grown its dividend by 57% over the past two years.

Stable Revenue and Future Growth Indicators

Management fees saw an increase of 26%, with a significant portion attributed to permanent capital vehicles, indicative of stable and predictable revenue streams. The fees and FRE margins are meeting the company's target, with an expectation to maintain this in the ensuing years. Distributable Earnings (DE) also climbed by 25%.

Strong Fundraising and Asset Under Management Growth

Reflecting investor confidence, the company raised $6.2 billion in the fourth quarter and $15.8 billion over the full year, marking a substantial increase in fundraising. Their strategies and products across different sectors, like credit, GP Strategic Capital, and real estate, have attracted significant capital, leading to an 80% growth in fee-paying Assets Under Management (AUM) since the end of 2021.

Embedded Earnings and Additional Management Fees

The company is poised to unlock substantial embedded earnings over time, with $14.5 billion in AUM not yet incurring fees potentially translating to an additional $200 million in annual management fees once deployed. Additionally, the listing of one of their private Business Development Companies (BDCs) is expected to bring approximately $80 million of the $200-plus million in more annual management fees.

Impressive Credit Portfolio Performance

The credit portfolio yielded strong returns, at 4% for the fourth quarter and close to 18% for the year 2023, while maintaining conservative loan-to-value (LTV) ratios. This performance, along with robust returns across its GP Strategic Capital platform and real estate portfolio, illustrates a significant track record of success.

Favorable Tax Rates and Ongoing Investment in R&D

Benefiting from various tax advantages, the company expects to sustain a lower effective tax rate in the mid-single digits for 2024 and rising slightly in the following year. This fiscal prudence, combined with substantial investments in research and development to pave the way for future growth, underscores the company's strategic foresight and commitment to maintaining industry leadership in revenue and dividend growth.

Real Estate Expansion Amid Market Pessimism

Despite a negative sentiment prevailing in the real estate market, the company has managed to secure considerable cap rate purchases and has a promising deployment backlog with over $1 billion in Letters of Intent (LOIs). This demonstrates the company's ability to navigate and capitalize on market disruptions.

Diverse Product Offerings and Institutional Appeal

With a broad range of products in the credit business, strategic equity, and new initiatives in the real estate space, the company is well-positioned to attract institutional clients. These offerings, including Fund VI and upcoming products, are tailored to align with current market demand and the company's long-term strategy.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning, and welcome to the Blue Owl Q4 2023 Conference Call. Please note that today's call is being recorded. [Operator Instructions]

I will now turn the call over to Ann Dai, Head of Investor Relations. You may begin your conference.

[Ann Dai, executive]

Thanks, operator, and good morning, everyone. Joining me today are Marc Lipschultz, Co-Chief Executive Officer; and Alan Kirshenbaum, our Chief Financial Officer.

I'd like to remind our listeners that remarks made during the call may contain forward-looking statements, which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control.

Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described from time to time in Blue Owl Capital's filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements. We'd also like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our earnings presentation available on the Investor Resources section of our website at blueowl.com.

Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blue Owl funds.

This morning, we issued our financial results for the fourth quarter and full year of 2023, reporting fee-related earnings, or FRE, of $0.20 per share for the fourth quarter and $0.70 per share for the year and distributable earnings, or DE, of $0.18 per share for the fourth quarter and $0.65 per share for the year.

We declared a dividend of $0.14 per share for the fourth quarter payable on March 5 to holders of record as of February 23, and also announced an annual fixed dividend of $0.72 for 2024 or $0.18 per quarter, starting with our 2024 first quarter earnings. During the call today, we'll be referring to the earnings presentation, which we posted to our website this morning. So please have that on hand to follow along.

With that, I'd like to turn the call over to Marc.

[Marc S. Lipschultz, executive]

Great. Thank you, Ann. We finished 2023 on a strong note with another consecutive quarter of management fee and FRE growth, 11 for 11 since we've been a public company, against a market backdrop that has been exceptionally volatile and uncertain. We're confident that our steady, strong and resilient growth continues to differentiate Blue Owl and highlight the benefits of our business model.

Over the past year, we've operated in an environment where the ongoing impact of higher interest rates and future rate uncertainty have constrained capital market activity and capital deployment. And exiting this year, the short-term path of interest rates, geopolitical risk levels and economic growth trends remain heavily debating. By design, Blue Owl's growth has been distinctly more predictable, which is very thesis from the beginning. Our assets are generally permanent capital and our earnings don't include more volatile revenues such as carry and substantial capital markets fees.

We strive to be market leaders in the segments in which we operate, and our growth has been supported by structural demand for our strategies and secular tailwinds for those markets. We strive to generate strong growth in periods where market conditions are favorable, like in 2021. But importantly, to be able to offer strong and differentiated growth in much tougher environments like 2022 and 2023. I think we have certainly done that. We grew FRE and DE 25% this past year, following over 40% growth in both metrics since 2022. In the last 2 years, AUM has increased by over 75% and the over $50 billion we've added in equity and fee eligible debt over that period, represents over 80% of our starting fee paying AUM. This robust growth has allowed us to return significant capital to our shareholders.

And today, we announced our annual fixed dividend for 2024 of $0.72 or $0.18 per quarter. This dividend represents a 29% step-up from 2023, which follows a 22% dividend increase from 2022. Since our listing in May of 2021, total return for our shareholders has been over 60%. These are impressive results in any market environment and much more so given the conditions that we've observed.

Well, there are a multitude of successes across the business that I'd love to highlight, I'll call out just a few that I think represent the advances we are making at Blue Owl. In spite of the very difficult backdrop for real estate fundraising, our latest triple net lease fund was the single largest U.S. real estate fund raised in 2023. We expect to exceed our hard cap of $5 billion, more than doubling the size of the predecessor fund. Furthermore, our overall real estate platform performed admirably on both the relative and absolute basis, returning 9% for the year.

In GP stakes, we saw robust investor demand and deployment pipeline, resulting in an initial close of over $2 billion for our sixth GP minority equity stakes fund, earlier than originally anticipated and despite having just held our final close for Fund V at the end of 2022.

In addition, we announced a joint venture with Lunate, an Abu Dhabi-based global alternative investment manager, to provide growth capital to leading midsized private capital GPs. This will supplement our dominant position as a capital provider to large GPs and we feel this partnership will create a powerful and differentiated proposition for mid-market managers.

In private wealth, the resources we've invested into scaling the business continue to pay dividends with Blue Owl remaining a top fundraiser in both the non-traded BDC and rechannels. Gross flows from our perpetually offered products were $1.9 billion during the fourth quarter, 65% higher than the first quarter. Inflows have been 6x greater than redemption requests, both in the quarter and for the last 12 months, and we think we are just getting started as far as what's possible in wealth over time.

Finally, a couple of weeks ago, Blue Owl Capital Corporation III, or OBDE, successfully listed on the New York Stock Exchange, delivering liquidity to those investors as promised. OBDE is the second of our BDCs to become a publicly traded company, and this listing follows the remarkable 2023 results of our first publicly traded BDC, OBDC which returned 40% in 2023. Our focus remains on providing our direct lending investors flexibility and optionality through product structure while retaining the excellent credit quality, attractive income, downside protection and scale benefits that Blue Owl is known for.

Moving on to business performance. In credit, we again saw booming trends in deployment in the fourth quarter with a constructive environment so far in 2024. Repayments were somewhat elevated, providing additional opportunities to redeploy capital. As Alan will detail, direct lending metrics remain strong, with no notable changes to the health of our portfolio companies.

We remain at 6 basis points of annualized realized loss since inception, which has been more than offset by realized gains and the underlying revenue and EBITDA growth of the portfolio are robust at low double digits on average. We are well positioned to benefit from incremental sponsor-driven activity and growing market share.

In our GP stakes business, we continue to witness the resilience of larger cap GPs with the market share gains of these managers accelerating during more challenging fundraising environments. This phenomenon has been consistent across asset classes. And combined with LPs continuing to allocate more to alternatives broadly translates to the impressive growth we have seen in our partner managers. In addition, we are witnessing a rising pace of consolidation across alternatives, further substantiating the value of scale in this industry and creating incremental tailwinds for the investments in our funds.

In real estate, we continue to actively deploy capital at attractive cap rates close to 8% and have consistently monetized at meaningful spreads to our entry points. The scale benefits of our triple net lease strategy allow us to offer attractive risk return for essentially investment-grade secured credit, and this has resonated well with our investors looking for steady income enhanced live appreciation potential.

Our more recent real estate funds have invested heavily into the demand created by the onshoring movement. With geopolitical tensions and supply chain issues continuing to dominate headlines, companies have elevated onshoring to the top of their priority list. This trillion-dollar opportunity represents, in our view, not a moment in time, but a transformational manufacturing renaissance in the U.S. The capital needs driven by this theme, combined with more constrained capital availability at large have created a very strong pipeline into which we continue to deploy capital.

We're very pleased with the outcomes we've achieved across Blue Owl in 2023. Looking ahead, there are a number of growth avenues we are pursuing to supplement the expansion of our existing platforms. We intend to launch a strategy focused on triple net lease in Europe, driven by deal flow we already see today. Our strategic equity strategy held a first close and committed to its first investment during the fourth quarter, and we expect that we'll continue to expand our alternative credit strategy. And in addition to further expanding our institutional and wealth distribution, we continue to evaluate ways to partner with other large long-duration pools of capital, such as insurance. Generally, we intend to grow organically where we have institutional expertise and the conviction to grow into market leadership. And we will look to acquire where we can benefit from immediate scale and strategic positioning. I speak to the entire team in saying we are very excited about what lies ahead for the business, and there's a lot to look forward to.

With that, let me please turn it to Alan to discuss our financial results.

[Alan Kirshenbaum, executive]

Thank you, Marc. Good morning, everyone. Thank you for joining us today. To start off, we are pleased with our fourth quarter and full year 2023 results. Marc mentioned this, but I'd like to reiterate that this is our 11th consecutive quarter of both management fee and FRE sequential growth, the only alternative asset manager that has demonstrated this over this period. And along with that, as we show on Slide 5, we've been able to grow our dividend 57% over the past 2 years, driven solely by recurring and growing management fees.

Let's go through some of the key highlights of our 2023 results on a full year comparative basis. Management fees are up 26%, and 92% of these management fees are from permanent capital vehicles. FRE is up 25%, and our FRE margin is right on top of our 60% target, which we continue to expect to be the target for the next few years. And DE is up 25%. To double-click on this a little bit, as Marc mentioned earlier, we built our business with the intention of driving strong growth, not only during favorable market conditions, but more importantly, in tougher environments, like we've seen over the past year or so. And we believe the fact that we were able to generate 25-plus percent growth across these key metrics when peers on average generated low teens management fee growth and DE declines over the past year, is a testament to how we are proving out our model.

Now I'd like to spend a moment on our fundraising efforts. As you can see on Slide 12, we raised $6.2 billion in the fourth quarter and $15.8 billion for the full year. Inclusive of debt capital, we raised $25 billion in 2023. I'll break down the fourth quarter numbers across our strategies and products. In credit, we raised over $2.5 billion. This includes $1.9 billion raised in our diversified and first lien lending strategies with $1.2 billion raised in our non-traded BDC, OCIC, up 30% quarter-over-quarter.

The remainder was raised across software lending and our newly launched strategic equity strategy. In GP Strategic Capital, we had an initial close of $2.1 billion for our sixth minority equity stakes funds as well as over $400 million in a co-investment fund for this strategy. In real estate, we raised approximately $1.1 billion with over $650 million for the sixth vintage drawdown fund, which brings that fund to $4.7 billion and over $350 million in our nontraded REIT ORENT, up roughly 20% quarter-over-quarter. We are starting to see early signs of production coming from the distribution platforms that added ORENT in late 2023 and look forward to expanding our presence further on each, while also adding incremental platforms in 2024.

As Marc alluded to earlier, the over $50 billion of fee-paying AUM we have added since Jan 1, 2022, represents over 80% growth in our fee-paying AUM since the end of 2021. While that number is notable in it of itself, I have to emphasize that this is also AUM that is largely permanent capital, so these assets will stay in our system and be the next layer in our layer case.

During the quarter, we raised $4.6 for every dollar that was paid out as a result of distributions or redemptions. For context, last quarter, our peers on average raised $1.7 for every dollar that was paid out. And in addition to the staying power of existing AUM and the benefit of ongoing fundraising, we have substantial embedded earnings that we will unlock over time. AUM not yet paying fees was $14.5 billion at December 31, corresponding to roughly $200 million of incremental annual management fees once deployed. Separately, we had also previously talked about another $200-plus million of incremental management fees that would turn on upon the listing of our private BDCs over time. And as many of you know, one of those BDCs did, in fact, list recently. OBDE's listing translates to approximately $80 million of that $200-plus million of additional annual management fees to Blue Owl.

Moving on to our credit platform. We had gross originations of $8.1 billion for the quarter and net funded deployment of $3.2 billion. This brings our gross originations for 2023 to $17.6 billion with $8.2 billion of net funded deployment. Our credit portfolio returned 4% in the fourth quarter and almost 18% in 2023. Weighted average LTVs remain in the low 40s across direct lending and in the low 30s, specifically in our software lending portfolio.

For our GP Strategic Capital platform, total invested commitments for our fifth GP stakes fund, including agreements in principle or over $11 billion of capital with line of sight into over $2 billion of opportunities, which if all signs would bring us through the remaining capital available in Fund V. And performance across these funds remained strong with a net IRR of 24% for Fund III, 43% for Fund IV and 17% for Fund V, which compare favorably to the median returns for private equity funds of the same vintages.

And in our real estate platform, deployment activity remains robust with over $600 million deployed during the quarter. And our pipeline of opportunities remains strong, with nearly $6 billion of transaction volume under letter of intent or contract to close. With regards to performance, we achieved gross returns across our real estate portfolio of 9% in 2023 comparing very favorably to the broader real estate market as a result of our distinctive net lease strategy and the timing of capital deployment. The net lease structure insulates our returns from the expense inflation that many are experiencing, while the long duration and contractual rent escalators on our leases shield our portfolio from the declining rent growth trends that others across the industry are seeing. And most of our recent funds were raised and are being deployed into a capital scarce environment, which presents attractive risk-adjusted opportunities.

Okay. I'd like to end with a couple of comments on tax rates and FRE margins to set the stage for 2024 and beyond. On taxes, the headline here is we expect our effective tax rate to be lower for longer. We saw the impact of various tax benefits, keeping our effective tax rate for 2023 at a low 2%. For 2024, we are currently expecting that rate to be in the mid-single digits, say, 5%. And for 2025, we expect a high single-digit effective tax rate. We will be making our first cash TRA payment in the first quarter of 2024, which should result in an elevated rate in the mid-teens, say, 15%. For that quarter alone, before stepping down in the subsequent 3 quarters to approximately 2%, averaging for 2024, the roughly 5% I just noted.

And on FRE margins, I've spoken frequently about our 60% FRE margins, which we feel very comfortable operating in the business for the next few years and is among the best in the industry. Let's talk a bit more about why this is the right level for us. We're putting very valuable R&D dollars back into the business, investing in the future so that we can continue to lead the industry in revenue growth. So for every follow-on product launch that helps us scale our business, like our sixth real estate funds or GP stakes fund, we have a new product we're launching like strategic equity or European net lease.

We're also putting those valuable R&D dollars into continuing to grow and expand our wealth and institutional fundraising efforts. All the while, we're not sacrificing growth for FRE margin. Our revenue and dividend growth is among the best in the industry.

With that, I'd like to thank everyone who has joined us on the call today. Operator, can we please open the line for questions?

[Operator]

[Operator Instructions] Your first question comes from Glenn Schorr with Evercore.

[Glenn Schorr, analyst]

So I love all the growth, and I love the outlook stuff. You're doing everything that you said you were going to do. I know we've talked about this before, but I like hearing it continue. Your confidence in Owl defending its big fee premium. You do get paid well for what you do. You are putting up good returns, but your fees are towards the high side of the peer group. So can we just talk through that a little bit?

[Marc S. Lipschultz, executive]

Sure. Well, without sounding snarky at all, I mean, look, to a degree of property, you get what you pay for. I mean we are offering an exceptional result with exceptional performance. And we have, very importantly, when you look at the average fee rate, and you know this, we have always been focused on the quality of our AUM, the quality of what we take on. And so as we've talked about before, we really don't focus on gathering AUM because that is exactly how you drive your average fee rates down.

You can depend whether that's good, bad or otherwise, but the reality is that we focus on where we can generate really high value-added returns for investors and, therefore, high value, high fee income for Blue Owl. So at the end of the day, you can grow a lot of AUM at ever lower fees or you can say, look, what I'm going to do is I'm going to take lesser AUM, relatively speaking, and I'm going to deliver really high-value results on that and get paid for it.

So I think we also look at the end of the day, our pioneering different strategies where we can add that value. And again, people are willing to pay for that appropriately so. Take tech, right? We were really very, very early with the idea of focusing on software lending. And I can remember Clear's Day and the number of people that said, "Well, why would you do that?" And sitting here today, again, I don't say that with any arrogance or anything. But I think at the end of the day, today, I was like, "Well, of course, software loans are where you want to be."

Well, we started that years ago and have pioneered in that space. And so I think that's really the way we do it by having distinctive strategies, having really a direct angle on triple net lease when everybody else's real estate products are suffering this year. We have a thriving real estate product as a differentiated strategy. So that's really the heart and soul of it. But at the end of the day, we got to keep delivering value for our investors, delivering great results. We know that and we plan to.

[Glenn Schorr, analyst]

Can you update us on timing on health care, given Cowen and this conversation? I would think that health care product is right in line with this congo.

[Marc S. Lipschultz, executive]

Well, the health care product certainly is in line and -- or putting it another way, let me contextualize the Cowen acquisition. Health care has been another very active sector for us. And we have done, I think, about $11 billion actually of loans and investments in health care, including an ever expanded level of activity in royalties, which, again, you saw this year.

And adding Cowen brings us yet another set of adjacent capabilities extremely deep on better -- the earlier part of that cycle, in particular, more of the pharma side, the science side. We have a series of PhDs that are part of that team that really understand the science on drug development and that's additive to where we've been more in health care services and in things like structured solutions for, as I said, royalties and the like.

And so -- now we have a full suite, full life cycle of capabilities and by the way, as you've seen, the Cowen team has outstanding results, and they're really in a very, very interesting innovative area where they've dramatically outperformed their peers. So we now have all those pieces together. We see two big areas for growth. Health care is absolutely one of them. We've been starting to talk to investors. Again, we have to make sure we can come up with exactly the right structure, exactly the right product.

To your good first question, we have to do it in a way that's distinctive, in a way that really adds value. We think we've got the pieces of that puzzle and now we've got to finish assembling that. So health care certainly has a meaningful analog to that tech story of 6 years ago. And then alternative credits, the other area, which we'll check just Jason, while we're talking about it, this area outside of the traditional sponsor credit, we've really been developing a lot of capabilities in-house on things like ABL and airplane leasing and that's another rich area that we're focused on. We think about credit opportunities for health care and alternative credit.

[Operator]

Your next question comes from Brian Mckenna with JMP Securities.

[Brian Mckenna, analyst]

So the real estate business has had some terrific growth since you acquired Oak Street at the end of 2021, with AUM up about 80% in just 2 years. And then the outlook is pretty bright as well. Marc and the team have done a terrific job here. But one thing that stands out to me is their ability to source transactions and just the absolute level of deal flow. So can you talk about the size of the investment team today? What's their capacity from an origination perspective? And ultimately, how much AUM can the business support over time?

[Marc S. Lipschultz, executive]

Well, Marc Zahr has done a spectacular job. So if I could -- thank you for that, and I'll join you in commending our partner there really has architected a unique business model, which its durability and attributes, of course, shine through this year. The business, as you know, with our new fund, we have now raised $5 billion, that's twice the size of the last fund, the largest fund -- real estate fund in the U.S. this entire year. And I will tell you that deployment is already off to a strong start. We already have hundreds of millions of dollars in LOIs and over 1 billion -- I'm sorry, in transactions and over $1 billion in LOIs.

So right at this moment, I would say we're probably pacing ahead of the ordinary pace of our product. And the demand is high because it's an alternative solution to capital needs for large corporate users and much like private credit. There's this element of adaptation. People finding the product and ultimately using it in more disruptive markets like people have experienced over the last year, you get more people thinking about innovative ways to finance.

And so we have, right, at this point, our overall backlogs are really running at record highs in terms of all the things in our pipeline over $10 billion. So we have plenty to focus on and, of course, also as we continue to extend that reach into Europe. So I don't want to say there's no constraint. I mean if you think about the massive amount of critical real estate owned by investment-grade institutions around the world, I mean, that is a very, very large and it's mostly a white space. It's just not an area that's transacted.

So I'm not suggesting that every company is going to do it with every asset or even close, but if you kind of take a step back and contextualize what amounts to, of course, our biggest fund in this market are versus that marketplace, we're a fragment. So I don't think addressable market is in any manner a constraint. But we've got to keep going out there and finding the best product and developing the partnerships and proving that, that's a really innovative and effective way for these companies to finance. But clearly, people like Amazon have made that choice, and there's plenty of others that we have worked with that are likewise doing it.

And last point, I guess I'd add is this new onshoring move, onshoring trend, which, of course, everyone is well aware of is going to be a potentially huge driver for this asset class. The amount of money that's being spent just right now on developing semiconductor production in the U.S. These are gigantic fab plants, for example. And the capital intensity, I think I was just reading that Sam Altman wants to raise some number of trillions of dollars to develop chip capacity. Every one of those things is a giant new facility. And in a world of -- not going to be so easy to find trillions of dollars of capital, you certainly don't have to own the real estate.

So we've been very active in dialogues with chip companies, for example, and what a great asset for us. A core institutional asset that's going to run for a very long time, big dollars with many, many wonderful credit counterparties. So I -- we appreciate every day we have to work hard to find the best investments, but addressable market is sizable. Pipeline is very active right now. And then as I mentioned, as Europe is a whole another rich vein that we're continuing and working on how to mine best because the companies we work with are global. And they have real estate in Europe and they ask us about their real estate in Europe. So that's another leg of growth from our point of view.

[Brian Mckenna, analyst]

Super helpful. And congrats on another great quarter.

[Operator]

Your next question comes from Alex Blostein with Goldman Sachs.

[Alexander Blostein, analyst]

I wanted to -- maybe zooming out a little bit, I just want to talk about fundraising a little bit more broadly. You guys had a really nice momentum exiting the year. And it's important to note, I think, that the flows are becoming a little bit more balanced between both channels and products.

So as you're looking out into 2024, what is sort of the aspirations for fundraising for the firm as a whole? And more importantly, how should we think about the breadth of the flows that you're expecting to see next year?

[Marc S. Lipschultz, executive]

Thanks, Alex. And in the insightful phrasing of your question is an observation I just want to start with, which is fourth quarter did indeed reflect, I think, something important about the continuing evolution of the business, both in having the several adjacent legs and having several adjacent strategies, staying very much in our northbound highway. So to be clear, we have a strategy that is not all things all people back to the beginning of this conversation.

But we do have more arrows in that quiver. And so what we saw well set in the fourth quarter was all of that starting to kind of show up in one period. Now I'm very cautious about focus in any quarter. We don't manage our business quarter-to-quarter. Fundraising, as you obviously know, is very episodic quarter-to-quarter just based on mandates and flagships and exact timing of product launches, so try to manage that way or sort of guess that way. But what you did see in the fourth quarter, which I think we will see repeat itself more is this breadth between products.

We have significant fundraising in credit, we have significant fundraise in real estate and we had significant fundraising in GP stakes, and we will continue to -- we expect to see that in 2024. Because again, we now have more multiple product points of access and multiple products.

And then between wealth and institutional, likewise, we've got both very much developing plenty of room to run. There's our -- real estate continues to offer a product, which is the only net inflow real estate product in the marketplace, is still only on a very few number of platforms and we're just have and are launching on many new platforms this year to offer that product. So I think that composition is exactly kind of the building block into 2024.

Again, there's always going to be the ebbs and flows of when a new flagship comes in or when we launch on a new platform, but I think we do feel like we're in a good place heading into 2024 in the balance between products and between channels. And wealth continues to be strong for us and institutional continues to be strong. We've seen some of those SMAs. We've long talked about start to actually convert and credit, and those are big chunky numbers as well.

[Alexander Blostein, analyst]

Great. And then one strategic question for you guys, actually, a bit of a 2-parter, but I promise they're sort of related. On the balance sheet, so you mentioned insurance and you guys are looking to explore insurance opportunities for the firm. How do you think about structuring that? How do you think about minority ownership, majority ownership insurance companies that's kind of part one. And again, sort of related to the balance sheet, I saw you guys launched JV taking minority stakes with an asset manager in Abu Dhabi, maybe a little counterintuitive just given the fact that, that's what Dyal sort of does, obviously, a bigger scale. But why not do the strategy out of GP Solutions? What's the strategy behind partnering and doing a JV?

[Marc S. Lipschultz, executive]

Sure, and appreciate both questions. So first, with regard to insurance, look, it's an area that we have been for years, spending time on trying to develop a Blue Owl appropriate strategy. So let's start with this.

We have 2 terrific channels of capital access that we talked about today, wealth and institutional, traditional institutional. The one we don't have that, obviously, some of our peers have done so well with is insurance. We're aware of that. We've been working on that pretty thoughtfully. We may not be able to develop the right solution, but it's something we're focused on adding to bring that third key leg in that again, most others have developed.

From our point of view, we're going to stay true to our strategy. Look, we are in the asset management business. We are balance sheet light. Both of those will remain our focus. We do not aspire to own an insurance company. We aspire to become an insurance company. People have different strategies, so we're not opining on anybody else's strategy, have been enormously successful for other people. That's not our strategy.

So our strategy is much more about how do we access asset management, the insurance channel in a balance sheet light way. So that's really where our focus is. And it's -- it will continue to be an intense focus. Maybe an ever more intense focus as we head into 2024. And as we've now really gotten our other acquisitions integrated, and you can see kind of the cylinders firing in the fourth quarter.

With regard to -- sorry, what was your second question?

[Alexander Blostein, analyst]

Lunate.

[Marc S. Lipschultz, executive]

Yes, the Lunate JV. Yes. So just to be clear on the architecture, this is part of our GP solutions product and back to this point about having adjacencies that are highly strategic and additive where we can add value for our investors in a distinct way. So today, as you know, we really are the market for large cap GP solutions. And in fact, that fund, very much by design, focuses on large cap managers, the CBCs, the Veritas, the Silver Lakes. And so that's been an area we've built a distinct network. We have our BSP, our operational support resources and we love that space. And of course, we're in with our flagship where we got off to a good start in the fourth quarter.

There's another arena that has not been our focus, which are these more higher -- well, it may not be higher growth actually because those firms we grow quite substantially, but younger firms or smaller firms that have a lot of ongoing potential or the so-called middle market. So hence, our advantage fund in combination with Lunate is our way of coming with a value-added solution to that market.

In all our markets, again, I'll anchor back to what do we want to get paid for. When we're going to get paid for delivering outstanding risk-adjusted results, you have to have a value proposition for that. Well, we are now coming to the middle market, so to speak, the growing marketplace there and we're delivering 2 things with this partnership that are very distinctive. We're delivering our capabilities as, by far, the largest investor in GPs and the entire network that brings with it.

And the operational resources, which are -- certainly been valuable to many of our large cap GPs, but think about the value and impact of those resources to a firm that can't afford to hold all those themselves, right? If you manage $50 billion, $100 billion on Zahr, you can have a whole lot of operational capabilities in-house. But when we manage $5 billion and growing our ability to bring our BSP at all that capability around how to kind of best practice and support growth, that's real value. That's something people should consider beyond price.

And Lunate is a very big investor and intends to continue to be a big investor to the best of our understanding in private equity. So we also bring along someone who's going to have a very, very strong and, obviously, positive view of anybody we partner with. So they'll make their own decision that goes with that, but we bring along this deep capital partner pool. So I think that brings us into a position to add real value in this middle market space, and we don't control that below $10 billion of AUM. So it's complementary. It's not -- it's really just filling out the pie, the puzzle, going all the way across the spectrum.

[Operator]

Your next question comes from Craig Siegenthaler with Bank of America.

[Craig Siegenthaler, analyst]

So we wanted to circle back on private wealth fundraising. So we had OCICs flows roughly doubling in the quarter, which is pretty impressive. And ORENT's flows improved too, although a smaller amount, just given softer investor sentiment in real estate. But I wanted to see if you could comment on the sales trajectory of both products into early 2024. And it would also be helpful if you could provide an update on how many major platform shelves both products sit on today. And if you expect any major wirehouse or PB platform launches over the near term?

[Marc S. Lipschultz, executive]

Great. It's been a channel we've been after since day 1. We're coming up on a decade, 8 years, I guess, and we started trying to build into that channel. And it's obviously great to be able to see the benefits of that investment. We have a lot of people focused on this. We've spent a lot of time building trusted partnerships.

So listen, we did have a very good fourth quarter and that momentum continues. The wealth channel interest in these products. In no small part, I'll keep coming back to it. At the end of the day, it's about delivering performance. And if you look since inception and our TIC product, it's delivered just about a 12% return. You look at our CIC product, just about a 10% return.

And our ORENT product delivering -- I mean, mammoth outperformance and stability with a 7% distribution rate that has tax advantages for many investors. So I always come back to that because that's the value-add part people hopefully are drawn to. So we continue to see great interest and growth in our core income and tech income products. That's on a lot of platforms.

Now I don't have all the numbers of platforms in front of me, so I can't answer that numerically. That's on a lot of platforms. There continue to be places that we work to penetrate. But I will say this, we've looked recently with one of our partner platforms. And you look, the penetration is still very low.

The actual share of FAs who utilize the product is low. And frankly, the number of what so-called power users, the people that really use meaningful amounts of it. I mean that's really low. And so I think that speaks not just to Ball, that's the broader wealth channel. But I have looked at our stats, there's a lot to do inside of the existing platforms, say, our core income, our credit products, which are also the ones that are probably best understood today and most in favor for their attributes.

The ORENT piece, as you note, we had, again, certainly very nice growth, which reflected just the continued organic interest and the addition, I think we may have had a platform or so last year. But now we are adding and already have added a couple of new platforms and we expect several more during the course of this year.

And that is a kind of, therefore, a dual opportunity as the -- as people learn more about the product, and there is a certain virtuous circle in this area as you get adaptation of the product, adoption of the product. And then here, we have new platforms that we're launching on as well. So we view -- real estate has been our fastest-growing business, as you know, this last year in assets. And we continue to look at real estate as the potential to be our fastest-growing business because of the distinctive model we have and the adjacencies. We're still working into both channels of distribution, things like geography, I mentioned.

Europe, when we think ahead, we think about we're deep in credit. We're deep in real estate. We've talked about this before, real estate credit. It would be literally filling in something we have enormous strength in. So I think we're quite enthused about real estate and the opportunity, especially given the disruption.

Last thing I'll say is you said this very, very wisely. There is a -- for a good reason, a very negative sentiment about real estate. So we have to kind of sell through the up. You said those 2 words and then get down to number, wait, yes, it's a disruptive category, but here is the way you succeed in it. And that's actually showing in this manner, we're getting great cap rate purchases today, right? There's a bit of the baby pap water where people are saying, "Oh, real estate, but that's great by our measure, a triple net lease warehouse to an investment-grade client if we get the uplift of just negative sentiment, therefore, higher cap rates, we'll take it.

[Alan Kirshenbaum, executive]

Marc, if I can add to that on the institutional side because we obviously have a very strong wealth platform. We also have a very strong institutional platform. We're expecting a very strong year on the institutional side as well. We've got a number of products. And we saw 4Q, we saw very strong institutional numbers come in 4Q. We were already off to a strong start in 1Q this year already in institutional. And when you think about the breadth of 2024 and what we have out there, we have multiple products in the credit business. We have our strategic equity product. We have diversified lending strategies, first lien fund strategies. We've obviously got GP Stakes Fund VI.

We just did a very big initial close, but we have a long way to go here in 2024 and 2025, and we have some existing and new products in the real estate space that we think are going to be very interesting to institutional clients.

[Craig Siegenthaler, analyst]

Great. Just for my follow-up on Dyal V. I recall the fundraising for this fund being very kind of barbelled with some big raises in the beginning and some at the end, a little hold out in the middle. Do you expect Dyal VI as raises to be more consistent? I know you just had about $2 billion in 4Q, but something like $2 billion every quarter or two until you get to that $13 billion target. And then I know you launched a new middle markets fund, should there be a first close for that over the near term still?

[Alan Kirshenbaum, executive]

Sure. So happy to take that. On your last point, we did an initial close with Lunate so that we just got a press release out just in the last 24 or 36 hours.

[Marc S. Lipschultz, executive]

Yes. I should have mentioned, they're making also a large anchor commitment to the product when I was kind of listing the attributes here, gets us right out of the gates, but I'm sorry on that.

[Alan Kirshenbaum, executive]

No, no, not at all. And so we've got some -- we've got our first close there done. And we have a road ahead to continue to raise that product. We think there's going to be a lot of excitement and interest over that product. It's going to take some time to raise the product just like GP Stakes Fund VI. For Fund VI, we don't expect it to be barbelled like what we saw with Fund V that was right in the middle of when we did our listing for Blue Owl. And so we think it'll be more of a straight line there.

Look, it's going to ebb and flow a little between institutional and wealth. And so you'll see one quarter a little stronger institution, one quarter a little stronger wealth. It may take some time for us to get on all the wealth platforms that we'd like to. Don't forget for Fund V, we were really on one large platform. It was a big private bank. Now we have the ability to bring all the Blue Owl relationships to the table here and really get out on a lot more wealth platform. So we're very excited about that.

And on the institutional side, if you recall, when we brought all these businesses together, we had single-digit percent overlap amongst our investor bases across our 3 businesses. Now we have the opportunity to cross-sell across all of those investors. And so we're very excited about that as well, Craig.

But look, it's still as all alternative products, but certainly this one. It definitely has a bit of a front-end load and a back-end load. So we don't want to -- it will not be $2 billion the quarter. It's nowhere near that linear. Everyone on this -- everyone listening here knows the natural lumpiness of different timings of close. So we did have a particular attribute in Fund V with the acquisition at that time and then the IPO.

So we don't have that. But I think you should still anticipate more get first calls done. It's -- there's some period of time before we then do another close and then some period of time before you get to another close. So it will not be linear, but it will -- it should be quite as hold out in the middle.

[Operator]

Your next question comes from Bill Katz with TD Cowen.

[William Katz, analyst]

Just coming back to direct lending. It's been a theme that's been sort of coming up through the entire earnings season. Just wondering if you could comment a little bit on the volume as well as pricing outlook for the direct lending platform to the extent that competition picks up. Appreciate that maybe there's more unit growth out there. But nonetheless, I'd be particularly curious on how you sort of see the pricing side of things developing.

[Marc S. Lipschultz, executive]

Sure. It's certainly been and continues to be a very good environment for direct lending. You said a lot of people are talking about it. Dyal, I'm not chuckling, but it's a little bit point how much attention all of a sudden wants to talk about private credit, whether that is, in fact, a large part of their strategies or not. But we're happy about it.

We're happy to -- we're perfectly satisfied to have a day in the sun. We also get that everything gets to stay in the sun. So look, we've been at this for a long time and are going to be at it for a very long time, delivering for our users, a capital solution in scale and in tailored fashion and doing that in a way that is reliable to them, and we don't compete with them in private equity.

So I think we do have a distinct architecture here. And with all that said, look, it's a good environment today. I think to call it what it is, the economy is sound. We can all have different views. And of course, about where we'll be in 6 and 12 months. I will tell you that if you look at the performance of our portfolio, this -- the lag with the last full quarter, we have able to report from all our portfolio companies.

Our revenue and EBITDA growth were higher than the prior quarter. In point of fact, the EBITDA growth on average across the platform was 15%. So now we obviously focus on some very, very attractive industries, attractive businesses with the biggest backers. I don't measure suggesting that's indicative of the economy or broadly all portfolios, but it does tell me we've got a very healthy portfolio. And certainly, not an unhealthy economy, and I think actually would be a good reason to think we have a pretty solid economy at this point from the micro -- we're not macro experts from the micro up here in the U.S. So that's good.

We continue to have strong demand. And from what I understand, and again, you all have better insights into this. But if you talk to the M&A community, they're seeing a lot of activity picking up here as we go into the first quarter. Those are natural cyclicality to all things that are M&A related, which is to say fourth quarter is obviously always a big quarter because people are finishing things and then first quarter, people are able to restart these new processes.

So setting aside the natural timing. I think we feel like the sentiment is very strong. So the outlook to us feels very good in terms of likely activity this year. There's $2.5 trillion of private equity dry powder. And they obviously had a very tepid activity year last year. So I think we imagine that in a world that looks like this, expect there'll be a lot more activity.

And more activity would be the one thing I would have liked to have in direct lending, it would be just more aggregate market activity. We love the credits. We love what we're getting done. We love our position and market share. But aggregate activity is still ultimately a boundary condition. So hopefully, and it seems reasonable to expect 2024 should be a more active year and we'll gladly take that.

So finally, to come on to your question about spreads competition. So it's true, of course, that more dollars have been raised in private credit, but no more in proportion than historically to private equity. And in fact, private equity obviously has been accumulating assets here that now have to get deployed. And so I think we feel like the market remains generally in balance and looking out, again, anticipating more activity, I -- we can't meet the needs of all the capital markets.

We need the liquid markets to return to have a fully functioning capital market environment. And so while 2022, of course, it's a wonderful time for credits and spreads, and there was no meaningful public market, hopefully, what we'll have is more activity and a functioning public market. But overall, that big pie will take spreads, have come down from their peaks. We certainly saw them come back in from particularly wide levels. And that's okay. Remember, we operated in exactly that environment just a couple of years ago. We're still getting paid really well by our measure. Look, our -- since inception, we've done over $80 billion in loans, and our running loss rate has been 6 basis points.

And in fact, that's been more than offset by realized gains. So for that kind of underlying credit performance, our ability to deliver double-digit returns. I mean, of course, we'll take a wider spread if we can have it, but we have a very attractive risk-return proposition as we originate today. And in the large end of the market, parting comment is, a lot of the activity in the articles and, of course, are new entrants, to your point, it's like the trendy topic.

But that's a different part of the market we're in. We're in this pyramid that Doug has talked about before. At the top of the pyramid, we're doing the largest companies with the largest sponsors, which we like for credit reasons, not some other reason really headlines and the like, it's better credits in our view. That remains the domain of a handful of people, many of whom have raised a lot of money.

So the dollars -- if you look at the dollar flows, a lot of the dollars are in the hands of the same handful of people that had them before. So the top of the pyramid isn't really changing meaningfully. The bottom of the pyramid, there's definitely been a lot of new people jocking down there. It's not where we operate.

[William Katz, analyst]

Okay -- sorry, I don't mean to interrupt you. So my second question, Alan, for you, one housekeeping item, one bigger picture question within that. The transaction line was particularly strong this quarter. I was wondering if you could flesh out maybe what was going behind that. But the broader question is, you mentioned the 60% margin, which certainly is quite strong, and you continue to reinvest back into the business.

A number of your peers who have started much later than Blue Owl in terms of trying to get particularly into the wealth management business have spent heavily in sort of signaling that they're on the other side of that investment spend cycle. I'm just sort of wondering if you could just unpack a little bit what's behind the still elevated spending for Blue Owl and then how quickly do you think that, that could ramp up production as an offset?

[Alan Kirshenbaum, executive]

Sure. Thanks, Bill. So on the transaction fees, we've talked in the past about that generally follows the trend of gross originations. They don't follow lockstep. So we could have a bigger quarter, one quarter and a little lower transaction fees in the next quarter. 4Q was our second biggest ever growth origination quarter. So we had -- following that, we had a very strong transaction fee quarter.

On the 60% margin, look, we will -- we talk a lot about not being complacent in the industry and we're going to continue to put very valuable dollars back into fundraising. And we're focused on both institutional and wealth in those regards. And we have a very built-out institutional and wealth fundraising teams. We want to continue to grow that. We want to continue to expand. We want to expand both in the U.S., we want to expand both around the world for institutional and for wealth.

So we're going to continue to invest ours in that. We're also launching new products. And so when you think about each scale product, I think I talked about in my remarks, every big scale product that we raise like a real estate Fund VI or GP Stakes Fund VI. We have other new products we're launching that have much lower margins. And so everything blends back to that 60% that we see for the next few years.

[Operator]

Your next question comes from Steven Chubak with Wolfe Research.

[Steven Chubak, analyst]

I wanted to ask on the Cowen Healthcare acquisition, which you gave some great color in response to an earlier question just on the broader strategy. It gives you a great foothold in the health care life sciences space. But what I was hoping to get a better sense of is how quickly you could scale the strategy. Should we think about it following a similar growth trajectory to some of your tech-focused funds? Or could it be even faster just given greater brand recognition, better distribution capabilities that you have today?

[Marc S. Lipschultz, executive]

Well, look, we certainly see a meaningful opportunity. These things take time to develop well and right and to be able to develop the value add. And so -- look, tech has been extraordinary, and I -- we're lucky and we appreciate that we are able to create that opportunity. I wish that was somehow the future of health care and maybe someday, it will.

I don't think that's the template we would have in mind. I think this is about methodically building across the platform. It's already an area we're very active and to be clear. As I said, we've already done $11 billion of investments in this arena. So I think it's too early to really give you a lot of direction on scale and timing, but it is safe to say it's an area we're very focused on developing our platform.

Tech, I think, was a pretty special case. It is true we have a much more developed infrastructure and much more developed platform and a much more developed set of LPs. But software is such a mega trend, and we were so early with that. I think that was pretty special. But this is definitely an exciting opportunity.

I'm talking about another huge part of the economy, and health care is certainly it. And we now have a complete set from life sciences to structured solutions to health care services capabilities. So we're going to work on it, and we'll certainly keep you all posted as we develop. And by the way, I love the -- nothing blue about 72 in your flash note. Thank you for that.

[Operator]

Your next question comes from Patrick Davitt with Autonomous Research.

[Patrick Davitt, analyst]

This view out there that like middle market lending is less exposed to bank disintermediation and deal activity than the larger market where you play. So in that vein, what are you guys seeing in terms of that give and take between new deal volume and refinancing outflows from larger borrowers as the broadly syndicated and high-yield market opens back up.

[Marc S. Lipschultz, executive]

So whether it's less susceptible to bank -- I mean, at the end of the day, the flow lines have been away from the traditional syndicated market toward us, not the other way back, of course, as you know. It's certainly true. You're not going to take small companies and do syndicated loans. But that's kind of part of the problem with the nature of those credits and the scalability. We always get offered brought these smaller transactions.

And listen, nothing -- not a one size fits all, but I can tell you on average, the credits are nowhere near as good and the terms are no better. So I genuinely don't understand the argument for the smaller cap alone strategy. It's a perfectly fine strategy. But somehow, I don't know if you want to try to position us, "Oh, here's an advantage over large cap." There isn't an advantage. That doesn't mean it's not a perfectly good business. With regard to banks and kind of the flows.

So you make a really good point. There's sort of 2 forces at work, and they'll show up in different ways in different times, which is the return of some functioning liquid market, and I think we are seeing the return of some function in liquid market. Again, with the kind of the asterixis on I'll say, we're happy about that. I mean we need that to have a good functioning and vibrant marketplace.

The abstracts is, of course, it's nice when the market is entirely in the private hands. So there's an asterixis to that statement. But that's not a bad dynamic in aggregate. And then there's going to be this bidirectional point when those liquid markets return, of course, that means that's going to be an option for users when it wasn't an option.

But remember, that was a wide open option in 2021 when we were thriving and having some of our biggest origination periods, which kind of speaks to the point that activity meets our value proposition ends up often being the net positive even when there's other people bumping around or even very active in the market. And what's happened over the last several years, and we've talked about this, I think, on a lot of the calls, once people try using the private solution, many, not all, decide that's absolutely what they want to do going forward.

The value proposition of the 3Ps, predictability, privacy, partnership is something that has been now tested by many people, and they said, of course, it's true. And by the way, just I don't mean this to be, again, overly conclusive. I don't have anything like the knowledge every private equity investor asked, but I did do private equity for 20 years.

And I can say this, there is no private equity transaction that will work or not work from a return point of view because you paid a little bit more and we do charge more for the loans. And you had a stricter document. Look, if you're performing well, it won't matter if you have a stricter document. You get in trouble, it will matter, and that's of course, how we protect ourselves.

And so at the end of the day, a lot of people, I think, are realizing the ease of execution having the predictability of terms, having a truly private capital structure, so I'm not dealing with quarterly reporting now to bondholders instead of stockholders. And most importantly, that phone call, when times change for better or worse, that partnership preferably for better.

And we've had a lot of that, people calling up and saying, "Hey, can I add on what an opportunity in 2022. No one else can buy right now. I want to buy. Can you provide me capital?" And our answer is, "Absolutely." So I think that will continue to thrive as an option. And then last, as you mentioned, there will be less, some things will go to the syndicated market. We are not suggesting otherwise. But something that in the syndicated market are going to come down to our market.

As you have noted with your question, and we've already seen that, right? We've done that with Finastra. We've done that with PetVet. Things that are coming out of that market, I would suggest there's probably a lot more opportunity for them to flow in that direction than people who have had a great experience in the private market saying, "Oh, I'm really excited to be back to the market of having 100 different lenders when I can otherwise deal with 1 or 2." So we take everybody seriously. And there's great value propositions. The banks do a great job. I think we do a great job and a healthy ecosystem as both of us doing our job.

[Patrick Davitt, analyst]

Helpful. A quick follow-up. The 15% EBITDA growth in the portfolio, obviously, great, but I assume that excludes the recurring revenue loans. So could you update us on what percentage of the portfolio is recurring revenue and how those borrowers are performing?

[Marc S. Lipschultz, executive]

Don't have the percentage in front of me. So I can't quite answer that, but I can say they're doing very well. That is to say that the software area continues to be extremely healthy. We continue to be in a place where we have not yet had a loss on a software loan.

In fact, we've not had a default on a software loan. And that continues to be true. So the recurring revenue loans are -- or those businesses continue to do very well. And when I think about the portfolio, I would stand by what we concluded 6 years ago. Software on average is -- are the best credit to the market, which is why we went there in the first place and why we go there now.

So the recurring revenue loans are doing very well. Remember, one other thing on recurring revenue loans because again, for reasons I understand, it gets a lot of attention in the sort of, hey, that's not what people traditionally pictured. But recurring revenue loan in the context of a big SaaS company is a company that has a lot of revenue, a tremendous amount of gross profit, right, 80%, 90% margins.

But is spending a lot of that to further grow their business and therefore, further grow those gross margin dollars at rates way above the average enterprise in the U.S. or elsewhere. As a lender to that company, you don't get to spend 50% of your revenues on marketing and sales, if you don't pay your interest bill. So I think one of the durability elements that has shown, and we thought to be true. And I think still though sometimes in this distinction, not to say it's lost, but I think it's undervalued.

If I have $400 million of revenue and a 90% gross margin, I have $360 million to spend. And I may want to spend it all on growing my business. But I don't get to spend any of it until I pay for that 30%. And it's only on average by 30% and a fraction percent of my capital structure that Blue Owl has financed. So I feel very good about the stability of those positions, and we've experienced that when there have been questions raised. Those are some of the earliest people to say, "No problem, we got you." Like let's just talk this through. And we love our company, and we want to keep growing. So how about we put up some more money? How about we come up with something that works for everybody?

[Operator]

Your next question comes from Brennan Hawken with UBS.

[Brennan Hawken, analyst]

Covered a lot this morning. So hopefully, my questions aren't too long here. I was curious about what feedback has been from the listing so far. I know it's early days, but OBDE shares haven't traded that well. So curious whether or not that's impacted any of the reception. And maybe could you talk about any potential to consider a merger between some of the listed BDCs and what benefits those would bring to investors in those vehicles.

[Marc S. Lipschultz, executive]

Of course, well, your questions are certainly not too long. I think we can all conclude there's any danger to my answers are too long. But we like to be transparent. So with that said, with regard to the listing, the listing has been extremely well received and here's why. We told people when we create these private vehicles that we will, in an orderly basis in an appropriate amount of time, create the option but not the obligation to -- for liquidity.

People that had an illiquid position earning a wonderful return, now have a liquid position, earning a wonderful return. And so that no one has to sell anything and in fact, it remained I don't say a mystery to us, but we certainly would prefer to many investors that are considering direct lending, why wouldn't you buy BDCs in the public market at a discount to their NAV?

Now there's a reason for that. Some people don't want that level of volatility. So back to the point, create the ecosystem, create different access points, different people have different preferences for how they want to invest. But it's a heck of a fine proposition. So if you don't sell them these variances in trading really aren't going to matter, and you're going to get your dividends.

But if you want to sell because you have other priorities, adjusted for wherever that price may be, then great. Now you have that option that doesn't exist in a traditional fund. So I think it's been very well received because we -- for us, it's important to us to deliver on our commitments to our investors and our commitment was to deliver that option at the right time. So with regard to the possibilities going forward, mergers, maybe Alan, I'll turn it to you for that.

[Alan Kirshenbaum, executive]

Sure. Thank you, Marc. Brennan, thank you for the question. Look, we continue to evaluate the strategic options that are available to our BDC shareholders. On the diversified lending side, we have BDC 2, we have BDC III, which is now OBDE. We could continue to have that listed on the New York Stock Exchange. It could also be natural to over time merge something like OBDE into OBDC. But we continue to look at that and continue to talk to our shareholders.

On the tech side, on the software lending side, we have 2 private to public BDCs, OTF and OTF II. And we continue to evaluate options for those shareholders as well. We have OTF, which is fully invested, fully deployed. It's fully levered. OTF II, we still are deploying some of the capital. We have not drawn down all the capital from our shareholders there. But over the course of this next year, we'll make a lot of progress there. And we'll continue to evaluate whether it makes sense to merge those 2 and then list them or to list one and then continue to look at that.

[Brennan Hawken, analyst]

Got it. And then I know it was only 3 months ago when you guys last spoke about the dividend and the potential risk to the dollar, but the environment does seem to be getting better. So you guys are putting up some nice growth in the dividend for this year. Has that risk to the dollar in 2025 diminished, given the improvement that you guys have seen in the environment? Or should we still consider those -- that outlook unchanged?

[Marc S. Lipschultz, executive]

Listen, we remain on track to deliver in or around dollar. And certainly, we've taken another really nice step, right? We've raised the dividend 29% to $0.72. And fundamentals in the business are strong. So every time we step closer, obviously, that feels good in trying to get there and deliver. And obviously, you can give us all collectively more comfort. There's still enough variables here in 2025 that we in and around, we pick on purpose. The dollar remains our target. We feel good about being in that range. I think the really important point I want to come back to here is that because of the predictability of our model, the stability and the growth, we've now this year grown kind of all our key metrics 25%.

And that's more than kind of double the average of our many of our peers when we look at results, which are all good results, an incredible organization. So we've done that in a highly predictable way. Remember also where we are right now is exactly where we all talked about a year ago. And that is true. I think what maybe is most distinct about our performance this year is not just the pure strength of it, which, I mean obviously, we're very pleased with, but also the consistency and predictability despite all the changes in the market. We don't have carry in our numbers.

We did -- a lot of people have some really strong fourth quarters, but that was after people didn't expect things to be good in the fourth quarter. People didn't think there'd be much carry. So numbers came down. So I think that predictability gives us the following comfort. And every time you get closer, probably qualitatively a tighter band, the band around that dollar should be narrow. So our aim remains the dollar. We continue to see the pathway forward. But in any case, that band gets narrower and it should be within a narrow band given just the nature of our business.

[Alan Kirshenbaum, executive]

So Marc, what I'd love to do for folks, and hopefully, Brennan, you and your colleagues will find this helpful. When we think about how do we paint the picture for you all of how do you get to the $1 a share in your modeling. It's really straightforward, and it's not that many things that have to happen. It's just keeping that real focus on a handful of things to get to that goal. So when I think about 2023 revenues of $1.6 billion to $1.7 billion. We have another $1 billion of revenue that we have line of sight on.

So what is that $1 billion? Some of that, by the way, about $400 million, $425 million of those revenues are not from raising any more equity fundraise dollars. And so we have a 25% growth in the 2023 revenues just from taking our AUM not yet earning fees and deploying that as well as the fee step-ups from our private to public BDCs. That's over $400 million that would represent 25% growth on our revenue line from 2023 without doing any fundraising whatsoever.

Then when you add fundraising for just a few products, our GP stakes 6 product and our non-traded BDCs, OCIC and OTIC, that's another $450 million to $500 million of revenues over the next 2 years, right? So we've talked about GP Stake VI. That's a 2-year -- we're targeting '24 and '25. As Marc commented, as I commented earlier, that's going to ebb and flow a little between closes, but that's a total of a 60% revenue growth.

And so when you think about what do we need to do to hit the $1 a share, we need to keep fundraising on the wealth side. We have to raise -- continue to raise our nontraded products, CIC, TIC, ORENT, all of those are key to this. Fundraise for GP Stakes Fund VI. We've already listed OBDC III, now traded as OBDE. And then if we can list one, maybe both, but one of our software lending BDCs, there's an accretive M&A deal out there. We achieved our goal of $1 a share. It's not 12 things that have to happen.

When you look out beyond 2025, obviously, we're putting a number of coals in the fire to continue that growth, and we've talked about the 60% FRE margin and how we're putting a lot of that R&D dollars back into the business to keep a very strong growth rate out beyond 2025. And but it's a few things that have to happen for us to achieve that dollar a share dividend. It's going to take a lot of hard work, just to be clear, but it's not a lot of things that have to happen.

[Operator]

Your next question comes from Crispin Love with Piper Sandler.

[Crispin Love, analyst]

Just one question for me. On the European net lease product, can you talk a little bit more about that? Is that expected to be done all organically over time? And if there are any major differences between the European and the U.S. product other than the obvious?

[Marc S. Lipschultz, executive]

Yes, happy to. So today, we do some opportunities in Europe, but we have a U.S.-centric product, obviously, in a U.S.-centric focus. But the companies we work with are global. And so they have regularly come to us and said, "Hey, listen, this really great solution we have with you in the U.S., how about Europe?" And periodically, we do one. But what we need now is a dedicated pool of capital to expand what we have available to be able to meet that need, and we'll do that through a structure that's appropriate for Europe. And so we're really following our customers, really following the demand and that demand is substantial. Is there a difference?

Well, the similarities is they're very high-quality companies. And in many cases, the same global enterprises, not obviously, in every case. So it expands our lens in terms of where we can work with our current customers. It expands the customers we can work with. The opportunity, therefore, for us is organic because we already are the leader in that market and have the distinctive skills. So this is an organic build, an opportunity. Are there any real differences?

The only thing when I talk to the team today, on average, the terms that is to say the lease terms, the opportunities are probably a little better in Europe right now. So I'd say, cap rates meet quality of credit, probably a little more attractive. But I don't know if that's statistically significant. At the end of the day, it's really doing what we do so well here and taking it to this marketplace and putting in place a structure that is optimized for doing so in Europe.

[Operator]

Your next question comes from Brian Bedell with Deutsche Bank.

[Brian Bedell, analyst]

Great. Alan, you answered my question with Brennan's question mostly. So I'm going to skip that one and go right to my follow-up. Maybe for Marc, just you mentioned earlier in your prepared remarks about the rising consolidation in the alternative asset management business. Certainly, we've been seeing this. Maybe if you can just talk about how you see that impacting your GP Solutions business, the opportunities that you can get from that. Whether there's also within that vein, opportunities on the direct lending size, maybe combine the deal activity. And then just maybe thoughts around -- considering that thoughts around the potential for the -- turning on Fund VI of NGP stakes, whether that's -- it sounds like that's probably more 2025 event, but I just wanted to check in on that.

[Marc S. Lipschultz, executive]

Absolutely. And thank you. The consolidation activity in alts is -- it's clearly noticeable, right? It's happening in a pretty material fashion, and it seems like there's continuing to be a lot of activity out there in terms of pending conversations, explorations people are having. And so a few implications of that. And your question hits right on probably the most substantial one, which is, look, it's clearly a tailwind for our GP Strategic Capital business.

And I say that, I guess, in 2 ways. Most importantly, I was coming back to how do we deliver great results for our investors. We own a vast number of stakes in GPs, some of whom will end up selling themselves to other consolidated tours or other big products. We've already seen that, right? We've seen like [ ArcBot ] get purchased and that was a great result for us.

Perhaps there'll be some more IPOs, that tends to be a good path for us over time. So that consolidation is a lift in the potential valuation and realization of value in all our prior GP funds. So I'm going to start there, that's good for our investors. It also presents new opportunities, because on the other hand, you're also going to have people where there's one firm choosing to buy another and need capital to do it, right? So that's another great motivation for working with our GP Strategic Capital business is to provide the capital you might need to be one of the consolidators.

And so that creates more demand. We're active on the GP stake side. We have a lot of active conversations. We're largely through the commitments, as you know, of investing Fund V. In fact, we even did a little bridge co-investment vehicle that we mentioned here before, just to kind of bring us from Fund V to now Fund VI, where we've done this close. So it should be an active area. It is clearly a favorable dynamic to have more consolidation activity, both for portfolio and for deal activity. So it's a positive exactly how much of a positive we'll see as the year plays out, but it's a helpful trend.

[Alan Kirshenbaum, executive]

And on the Fund VI closing, just to close that out, Brian, we did our closing towards the end of the quarter. So we'll start to see a positive management fee impact starting in 1Q.

[Operator]

Your final question comes from Ken Worthington with JPMorgan.

[Kenneth Worthington, analyst]

Hard to imagine there's any questions left, but I've got one.

[Marc S. Lipschultz, executive]

Bring it home strong.

[Kenneth Worthington, analyst]

Yes. Real estate returns, you called out were negative in the quarter and triple net lease has held up really well versus other parts of the private real estate market this year and last year and the yield environment was sort of favorable in 4Q. So anything to kind of call out on the returns this quarter? Or what drove the negative?

[Marc S. Lipschultz, executive]

So look, this has been a really wonderful durable strategy by design. I mean that is our reason to be. That's our value add and in high-risk on market, people -- it's hard to get that signal through the noise. And obviously, in this environment, the signal comes through loud and this is a brand that performs in all markets, and we've seen that here.

As for the loss, this very small loss this quarter, that was actually a portfolio has done really, really well. The slight negative for what it's worth was tied to a mark-to-market on the debt in our real estate business. But I -- not to haggle which direction. The aggregate result for the year is a pretty good template for where we are and where we've been. There was nothing peculiar about fourth quarter other than some peculiarities in this mark-to-market part, but nothing about performance. Performance remains extremely strong.

[Operator]

This concludes our question-and-answer session. I will now turn the call back over to Marc Lipschultz for any closing remarks.

[Marc S. Lipschultz, executive]

Thank you all for your time. We really do appreciate the patience here this morning and spending the time with us. And we look forward to continuing to drive hard. We have a lot of work ahead, but we are excited about the starting point for this year and the opportunities and conditions to keep driving forward in our mission and goal to try to get to that $1 a share in 2025. Have a good day.

[Alan Kirshenbaum, executive]

Thank you, everyone.

[Operator]

This concludes today's conference. You may now disconnect.