The ex-Goldman Sachs bankers and others earning $1.5m on average at Blue Owl

Private credit firm Blue Owl Capital is not what it was. Shares in the firm have fallen 60% in the past 13 months and it's become the poster child for problems in the private capital industry. “A shadowy private credit firm is suddenly blocking investors from withdrawing their money,” observed US Senator Elizabeth Warren last week. Blue Owl would almost certainly object to that categorisation, but it does seem that the party might be drawing to a close.

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It was fun while it lasted. Blue Owl, which didn't respond to a request to comment for this article, says it employs circa 1,365 people. Last year, it paid them a combined $1.3bn in bonuses plus a further $765m in compensation from "fee related earnings." Some of the fee related earnings were in the form of stock which has since depreciated. Even so, the implication is that the average Blue Owl employee received $957k in salary and bonus, plus $560k in fee related payments. That's $1.5m in total.

High pay explains why Blue Owl's 1,365 people include an array of names with experience at Goldman Sachs and often Credit Suisse before that. Craig Packer, who co-founded Blue Owl's predecessor Owl Rock Capital in 2016, was global head of high yield capital markets at Credit Suisse and then a partner at Goldman Sachs. Jonathan Lamm, Blue Owl's CFO, spent 22 years at Goldman. Logan Nicholson, the president of diversified lending, was at Goldman for 18 years. Chris Crampton, the head of strategic equity, was there for nearly 20. Senior Blue Owl managing director was a former Goldman head of TMT leveraged finance capital markets. Another senior MD, Jon ten Oever, came the Credit Suisse-Goldman Sachs route. The names are legion.

It's a reunion. But there's been a lot more than Prosecco and vol-au-vents. 

Blue Owl's perceived problem is its exposure to software companies. As the firm has been used to proudly pointing out, it has a team of 40 "tech-focused investment professionals," led by Erik Bissonnette (ex-Wachovia and BofA), and it has "always liked software." It still does. In the words of Craig Packer last week: "We have a significant team. We think we're one of the largest investors and have the capacity to differentiate between a software business that's going to be well protected in an AI world and one that's going to be more vulnerable."

Not everyone is so certain. Although Blue Owl is adamant that its decision to change the redemption schedule for its $1.6bn OBDC II retail fund from 5% of the fund's value per quarter to episodic redemptions is really and honestly no big deal, investors are not so sure. They might like their cash back now. In an attempt at reassurance, Blue Owl said it already sold some of OBDC II's loan book at 99.8% of the carrying value, but as Bloomberg observes, some of the buyers were entities affiliated to Blue Owl. By comparison, veteran credit investor Boaz Weinstein is offering to buy shares in OBDC II (also known as Blue Owl Capital Corporation II) for a discount of 35%. 

It's presumably a worrying time for Blue Owl's 40 tech-focused investment professionals and the rest. They can at least console themselves with their $957k average salaries and bonuses from last year, though.

Blue Owl's co-chief executives, Doug Ostrover (ex-head of leveraged finance at Credit Suisse) and Marc Lipschultz (ex-KKR), have a little more to lose. Bloomberg reported on February 9th that that the two men juiced their compensation by using a combined $1.8bn of their Blue Owl stock (valued last April) as collateral for loans from financial institutions. That stock has since fallen 39%, or by $702m. 

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