Deutsche Bank has moved Blue Owl Capital from a Buy rating to a Hold and lowered its price objective to $10 from $15, reflecting what it describes as an anticipated slowdown in net flows to retail private credit vehicles.
The bank said it is trimming its forecasts modestly across the alternative asset manager coverage it follows, pointing to a more difficult near-term fundraising backdrop for retail private credit. While Deutsche Bank does not foresee major performance issues across product lines, it warned that heightened investor worry and continuing negative headlines about private credit could produce increased redemption requests and reduced new sales over the next one to two quarters.
Analysts at Deutsche Bank noted that any recovery in flows would hinge on three developments: a decrease in adverse headlines, no emergence of new private credit defaults, and a rebound in investor risk appetite. The bank adjusted its estimates for Blue Owl more sharply than for some peers because a larger portion of its fee-paying assets under management is concentrated in retail private credit vehicles. That concentration, the bank said, makes Blue Owl's earnings more exposed to redemption activity and slower inflows.
The downgrade also incorporates a slower projected pace of long-term fee-related earnings growth for Blue Owl, which was a key factor in the lowered price target. Deutsche Bank stated that its revisions translate into a 33% reduction in its valuation for the firm.
Deutsche Bank said it lowered estimates for a group of other alternative managers as well. The bank reduced estimates for Blackstone, Ares Management and TPG by larger amounts, while changes for Carlyle Group, Apollo Global Management and Brookfield Asset Management were more modest. Price target cuts for Blackstone and TPG were 9% and 10%, respectively, and reductions for the remainder of the group were in the low single digits.
Separately in the institutional conversation referenced by the bank, the question of current positioning in Blackstone arose, with a focus on whether data-driven strategies highlight Blackstone favorably versus other opportunities. The commentary noted that systematic screening across many metrics can generate stock ideas, but did not alter the bank's assessment of the near-term fundraising environment for retail private credit.
Key points
- Deutsche Bank downgraded Blue Owl to Hold and cut the price target to $10 from $15, citing weaker expected net flows into retail private credit products.
- The bank trimmed forecasts across alternative asset managers, seeing a more challenging near-term retail private credit fundraising environment.
- Deutsche Bank applied a deeper estimate cut to Blue Owl because a larger share of its fee-paying AUM is tied to retail private credit, increasing sensitivity to redemptions and slower inflows. Other managers saw mixed, generally smaller, estimate reductions.
Risks and uncertainties
- Elevated investor anxiety and persistent negative headlines around private credit could prompt higher redemption requests and weaker new sales in the next one to two quarters - impacting alternative asset managers and asset managers with retail private credit exposure.
- Any improvement in flows is conditional on a slowdown in adverse headlines, an absence of new private credit defaults, and a recovery in investor risk appetite - conditions the bank identifies as necessary but not guaranteed.
- Because Blue Owl has a larger share of fee-paying assets tied to retail private credit vehicles, its earnings are more exposed to changes in investor behavior, making projected fee-related earnings growth more uncertain.
Tags: alternatives, credit, BlueOwl, assetmanagement, flows