The Exchanges

Q And in the middle, maybe not so much. How have you thought about scale beyond what you mentioned, the ability to have the resources to have breadth and depth of client relationships?

A Can I talk about scale on an investment standpoint? I very much bought into David Swenson's book, Pioneering Portfolio Manage. And one of the premises there was Find differentiated uncorrelated returns. The premise around that was that you had to be in the alternative space, and a lot of that he talked about the hedge fund universe. What I identified in that is to really generate significant alpha. You had to go into these small asymmetric deals, and he talks about the dispersion between being a public manager's returns first and third quartile is very tight. Where the dispersion in alternatives managers is large. So the selection, this one's asset allocation. This one here is manager selection. You have to get that right because I think he talks about VC where the median return for VC actually lagged public market returns. So I used to think that scale was a bad thing. I used to think that you had to be small in the alternative space to generate alpha. But I've found that there's alpha in scale. There's relevancy in scale. When you're large, you command a tremendous amount of attention from people. You can't do that if you're small. If it's income generation and capital preservation, then the scale and the quality of these businesses, whether it's a GP in a world where people are doing more with less and bigger managers are getting the majority of the attention, you can only d…

AI assessment note: “I used to think that scale was a bad thing... But I've found that there's alpha in scale.”

Q What was your first paid job and what'd you learn from it?

A I worked in a department store in Sydney and they kept me away from all the sort of fashionable stuff and they put me in the suitcase department. We didn't have cell phones in the mid nineties. So I'm sitting there behind the counter, just staring around doing my four hours and leaving. There was no flow on these suitcases. I learned within a week or two, what do people use a suitcase for? They're going somewhere. By asking those questions, I was able to start to qualify what type of suitcase they needed. If it was a businessman, you need durability. If it's a family going on their first trip, get them a big one. And then I would start to read the brochures, where they were made, what they were made of, and was able to talk about the product. When you travel, you get a very fond attachment to your suitcase. It is everywhere with you. I had this Tumi that I bought, and this thing lasted me 20 years. And I dragged this thing every, it probably went around the world 50 times, and it was battered and bruised, and I remember being on a trip with Mark Lipsholtz in the Middle East. He's like, can I just buy you a new suitcase? That was my first paid job. What I learned from it was ask questions. Don't just stand there, don't just be a cashier, and I think in this industry, you're either at McDonald's window, there's high demand, and you're standing there, and you're just taking fun do…

AI assessment note: “That was my first paid job. What I learned from it was ask questions.”

Q In the very normal tried and true path of standup comedy to finance. How did you make that bridge?

A The mid nineties was a period of apathy. You had Navani. People were wearing loose clothes. They kind of was like, oh, life will all work out, man. You know, it was a different time. I got into financial journalism. I could always write because I had a media background on radio. I ended up reading the financial stock market reports at the end of each day. My dad was in finance, and I would say, the ASX was down three points, and my dad would call me up and go, yeah, the terminology for that is flat. I had literally no understanding. I couldn't have told you the difference between a stock and a bond back then. But I was fascinated by it. I was just intrigued with getting to know people. One of the influences on my life was a guy I met who actually works for me now, a guy by the name of John Wilson. He was running PIMCO in Sydney and we met and he said, I think you have the right personality that people want to be around and that can communicate well. So he gave me this job and I just remember reading Frank Fabozzi and all these books. And educated myself. I made so many faux pas, so many mistakes, so many times where people would give me the benefit of the doubt because I was 27. PIMCO was one of the greatest experiences of my life. It was such a great foundation for anybody to start. It was just this institutional apparatus, and it was a very tough environment. It wasn't overly…

AI assessment note: “I got into financial journalism... He was running PIMCO in Sydney... gave me this job”

Q How's your life turned out differently from how you expected it to?

A Oh my goodness. I'm here. I'm in America. If you'd showed me a map of America in And told me to point to the cities. I would have got Detroit mixed up with Idaho or something. I've been to 47 of the states. Out of 50. I didn't grow up in snow. I've tried to drive a car in Michigan in snow and skidded it off the road. I just never thought I would be here, and I didn't think I'd be here this long. I came here for a year or two just to test it out, and then I just absolutely fell in love with it. It's a marvelous place. I miss Australia dearly, but I would say being here and also being in finance. So basically everything has turned out differently. There was a period there where I just thought I was going to write Scripts for comedians. I did that for a week, and it weren't very good, and then I got into this, and I've loved it ever since, and I just love people. That's really what it boils down to. It's a relationship business.

AI assessment note: “basically everything has turned out differently.”

Q On the cultural side, both internally and with a global client base, how do you think about different international cultures, both inside the firm and outside?

A It's so important. To me in this business, there are acquaintances and there are relationships, and they're two completely different things. You go to the big conference out in California, or the one in Berlin in a few weeks, everybody's running into each other. Oh, I know I know this person. I know that person. I know that person. We know them. But are you regularly in their ecosystem? I can tell you in Australia, there is a building where there are about three or four super funds in it. I used to go down there in the early 2000, never have a meeting and sit in the lobby and people would come in and you would just have these casual conversations with no agenda. Australia is very concentrated in Queensland, Sydney, and Melbourne and how they interact and how they talk to each other. And the nuances to Australian culture are completely different from the Nordics. So one of the things that we've done recently is Is have people that have a really good understanding of those markets. They've been doing it for a long time. They speak the language. Where I was going out to the Middle East a lot, and I absolutely loved it. But it was apparent to me that doing it from New York, even if it was six times a year, was not enough. I needed a local. I needed someone that had familiarity there, was in their time zone. Also, it was a demonstration of our commitment to the region. Australia's t…

AI assessment note: “I needed a local. I needed someone that had familiarity there, was in their time”

Q How do you balance that between the initial investors? And now many, many, many more investors who won't be part of that group.

A You have to flex so heavily right now into the investor experience. Yes, you have your seed partners, but if you can treat every single client, regardless of size, some clients are small and they want a lot of attention. Some are big and they don't. If you can elevate that client service experience You have to make sure that everybody feels like they're the most important thing. With scale, I don't think every manager has that luxury, because you have to be big to do that. You have to be able to hire people. You have to make sure that every single client is being covered, regardless of size. And the institutional, well, I think we got 900 of them. The other thing that we've done, which I think is completely different, is that I've hired people that have sat in the allocated seat. I had this woman, Alicia Gregory. She was a former deputy CIO at the Fuchsia Fund. She sat in that seat. She understands what's important. I've hired folks that worked at asset consultants. We have people that have been on trustee boards come in and work for us, educate us, say to us, this is the most important thing. You're doing this wrong. This is the way to engage people in the local markets where they have that halo effect of their brand. And people really trust and respect them. I'm always looking and thinking of ways to give everybody that experience, whether they're a seed investor or not.

AI assessment note: “give everybody that experience, whether they're a seed investor or not.”

Q What are the most important things you learned at PIMCO that you carried forward and what works in this process?

A Keep your learning curve vertical. You just cannot stop at a level and say, I know everything. You stick with the winners, and there were a lot of winners there. One of the great inspirations for me was the CEO there at the time. Bill Thompson. He was an old Solomon Brothers guy. He'd been around lies poker in the Meriwether days. I think it was 93. Bill Gross made the right decision. I want to focus here, and I need someone to do all this. But Bill was all about process. There were no loose conversations. His values were impeccable. His institutional nows, the way to run an organization, and if you could tap into that and listen and learn, Rather than be didactic and dictate back, I think you were key for success. They put a very high premium on product knowledge, and if you go back to what I was talking about before, I had to get up the learning curve really quickly on that. They wanted to make sure there was a differentiation that the investment people were doing investing, and all the other people were capable of telling the story. I think one of the things in the alternative space that I observed early on was, it was more like cap intro. Here's the person. What do you guys think? At PIMCO, what you got to learn was you had to be in front of people bringing content and bringing value. I have a tremendous amount of gratitude to that organization. A lot of things I see them d…

AI assessment note: “Keep your learning curve vertical. You just cannot stop at a level”

Q When you went out to tell that story in the early years, what are the most important ways that you found just delivering a message that works?

A What we quickly tapped into was the definition of partnership. Partnership in the past is, we do great, you do ok. We give you a fee discount, we give you some co-investment, What we wanted to do was bring them along for the journey. We could do that because we were small. So we gave them opportunity to participate in our funds, essentially riding alongside the growth of these strategies. So providing an added amount of alpha. We were able to do that through the form of giving strategic capital to them, being seed investors in these strategies. And we attracted a cadre of blue ribbon investors, universities, family offices, Big pensions. So we added another component to partnership. It's very tough to do that, to give away those economics when you're half a trillion dollars, but when you're small and scrappy, You'll do it. That playbook, he invented. The difference is the continuation of that. There's a big pension fund out on the West Coast we have deep respect for. They call it the collaborative model. A lot of firms have tried to replicate that, but you can only do that if you grow, and we were able to grow. The message was, we want you to ride along this story. We want you to lock arm in arm with us, and we want to navigate this together. It was a meeting of our philosophy of how to be partners married with their intent of where to direct capital, and we've continued that.

AI assessment note: “What we quickly tapped into was the definition of partnership.”

Q On your path to Blue Owl, what did you learn about different investment organizations from the places that didn't resonate for you with your values?

A You learn by losing. I wrote this white paper called Mets, Jets, and Rejects. When organizations go through challenging times is actually when the relationships need to be flexed into. I think that a lot of people run away from the pain. People don't like tough conversations. But I learned in those organizations that portfolio fit was the most important thing. You can have a great strategy. The amount of times I've had a portfolio manager say to me, this is such a great investment opportunity. Okay. It probably is. But when you think about an organization like a sovereign wealth fund is very different to a public pension. One of which probably more than likely follows a total portfolio approach. Another one follows a strategic asset allocation. When people are doing this strategic asset allocation, you're about the third derivative from choice. Their first thing is, what's our funding ratio? What's our actual rate of return? What should the portfolio look like? How should we populate it? And then who should we populate it with? These are great organizations, but they may not just fit. I don't have all the answers, but what I've learned over time is Tapping into that, listening. People don't listen in this industry in my mind. They're in send mode, not in receive mode. And if you're in send mode, you hear what you want to hear. I learned over time that it was so important to und…

AI assessment note: “I learned in those organizations that portfolio fit was the most important thing.”

Q How does being a public company fit into the ability to have permanence and all the pluses and minuses that come with that?

A There is always an apprehension in the institutional market of when businesses merge, acquire. It's totally a natural state to get to, because remember, they're buying into something with certainty that things aren't going to meddle with the process, that what they invested in is going to continue to be the same. I get it, and it's something that we have to give comfort that that comes to transparency, trust, and communication. The thing that we've done on the investment side is those businesses continue to operate the way they are. That's number one, table stakes. Number two is there's the constant pressure of being public, having a share price that trades daily, and a lot of the time the conversation is around capital formation, totally natural. We're in an envious position that 90% of our capital is permanent. There's this base there. The way I've thought about it is that this is a business where you have to continue to stay ahead, and if you've had that Lens of the stock price on you all the time. You are constantly thinking of how to get better, and I think that in turn helps the clients. Where the mistake happens is if you put your own interests ahead of the clients. It's about the process. The moment they're unhappy, It's going to affect the share price, so you can't really think about that. What you need to be thinking about every day, and we've got just under a hundred…

AI assessment note: “Number two is there's the constant pressure of being public, having a share price”

Q What are examples of seeing something changing and trying to outmaneuver the competitors?

A It's a really good question, and I'm constantly thinking about it every day. From a client service perspective, it's the velocity of conversations, it's how the engagement takes place, the constant maniacal focus on what are people trying to do and how are they trying to do it. The other thing is sometimes step back if there's nothing there to do. Hey, you know what? We're not a fit, but let's keep talking. We are constantly looking at areas where the supply of capital is greater than the demand. And there are only a few people that are capable of doing it. The best examples of that early on were our triple net lease business. In fact, as more people have tried to enter that space, the percentage of the deals that we've gone up is higher. Going to these areas where the competition is less, data centers. Going where people are less frequent, less visible, and essentially where there's an inefficiency. We've done really well, but mergers are tricky. One of the things that we have been very focused on is culture. Culture is imperative to us. We've tried to create a softer, gentler culture. You bring in new groups, and particularly in my space, they're coming at it from the mindset of, this is how we did it. But now they're part of a two hundred and sixty billion dollar organization. It's a very different situation. When you work at a bigger organization, you actually have to flex …

AI assessment note: “The best examples of that early on were our triple net lease business”

Q From all the conversations you have with institutional investors, what pieces of advice do you give someone on the allocator seat?

A I'm not necessarily in the advice business. I'm in the listing business. I try and illuminate for them what everybody else is doing around the world and how people are taking on the market in different ways. There are growth markets around the world. Australia is a growth market. The Middle East is a growth market. Canada's a growth market. These are defined contribution plans in Australia. They have a compulsory savings rate, but they have to think about things differently, but they have perspective. And I've tried to sync up these different groups. So you should speak to this person. There was a group in the Middle East that I had speak to someone in Australia, very similar. I'm not on the call, but I'm able to sort of be that facilitator because I'm here and I'm here and I'm here. They're not. Look, I heard this. This may be interesting. And half the time they're like, thanks for the idea. No mask. There are times where they say, put me in touch. That's interesting what they're doing. I want to learn that. And then there are times where they may even be interested personally in going there, maybe trying to help them out. A lot of the US pensions now, some of them are considering this total portfolio approach. They've been very public about it. Moving strategic allocation to total portfolio approach. There are organizations that have done that globally for years.

AI assessment note: “I'm not necessarily in the advice business. I'm in the listing business.”

Q As you're building up those relationships over time, how did you balance the role of needing to raise capital? Because that's going to take a couple of years, and you don't really start with those relationships.

A Yeah, I mean, there's always that internal friction between people that don't do it on a daily basis, and people that do, and it's natural, and it's a state, and it'll exist forever. But if you ground everything in what's the best interest of the client, and you start to show results, that process works, people will buy into it. It never happens the way that people want, but the moment you put a firm's interest ahead of the clients, you're done. You have to be. They can sense it. The barriers to this industry in institutional asset management are so low. Anybody can start a fund. They can call up whomever it is, pension fund, and try and get meetings. Some of these CIOs will be out for dinner, and they'll hold up their phone, and it'll just go tick, tick, tick for meetings. Once you understand them, and you understand the direction of where they're going, you'll put yourself in a position to win, and you just have to show that over time, they can't stand being sold to. These are smart people. They have objectives. You work with a three hundred billion dollar firm, and they give you a billion dollars, that's incredible, but you're like a 30 basis point consideration or something. How often do you spend time thinking about 30 basis point position? But it's what does that position do for the overall portfolio, and if you understand that, you're gonna win. People internally don't s…

AI assessment note: “there's always that internal friction between people that don't do it on a daily basis”

Q What are you most excited to continue learning over the next couple of years?

A One of the things that just drives me about this industry is that some people think it's very stagnant. I think it's constantly evolving. You and I have been in this for a long time. I would love to get a conference agenda from 2005, 2015 and now one 20 20 strategies. There was obviously a lot of the hedge fund stuff back in the day. There was portable alpha. I'm sure some of those things still exist, and I'm sure people are doing very well in those, but the industry does evolve, and I'm very excited. I think the next three or four years probably shapes the next 10. I personally believe that in an industry like institutional asset management, which is so competitive, the demands on people's time, we don't have a right on their time. It is not a God-given right that they should take our meeting, ever. But if we can stay in the thicket of that discussion and that relevance in that competitive environment, that's what excites me. There is so much more that we can do with these organizations that transcends product. The quicker that asset managers can get closer to their clients and have these big strategic partnerships, it's a win-win for everybody. How we do that, I don't have the answers to all of that. I've given you some of them, but I think it's worth diving into that even further, and that comes through conversations and partnership. That's what I'm excited about.

AI assessment note: “How we do that, I don't have the answers to all of that.”