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Table of Contents
As filed with the Securities and Exchange Commission on October 4, 2021
Registration
No. 333-                
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
BLUE OWL CAPITAL INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
6282
 
86-3906032
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification No.)
399 Park Avenue
38th Floor
New York, NY 10022
(212)
419-3000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
Neena A. Reddy
399 Park Avenue
38th Floor
New York, NY 10022
(212)
419-3000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
Copies of all communications, including communications sent to agent for service, should be sent to:
Philippa Bond, P.C.
H. Thomas Felix
Kirkland & Ellis LLP
2049 Century Park East
37th Floor
Los Angeles, CA 90067
+1 (310)
552-4200
 
 
Approximate date of commencement of proposed sale to the public
: From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer,
a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in
Rule 12b-2 of
the Exchange Act. (Check one):
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated filer
     Smaller reporting company  
       
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  
 
 
CALCULATION OF REGISTRATION FEE
 
 
Title of Each Class of
Securities to be Registered
 
Amount
to be
Registered
 
Proposed
Maximum
Offering Price
per Share
 
Proposed
Maximum
Aggregate
Offering Price
 
Amount of
Registration Fee
Class A common stock, par value $0.0001 per share
 
2,500,000 (1)
 
$15.645 (2)
 
$39,112,500.00 (2)
 
$3,625.73(3)
 
 
 
(1)
Pursuant to Rule 416(a) under the Securities Act of 1933, as amended, this Registration Statement also covers such additional shares of Class A common stock as may be issued to prevent dilution of the shares of Class A common stock covered hereby resulting from stock splits, stock dividends, or similar transactions.
(2)
Estimated solely for purposes of determining the registration fee. This amount was calculated in accordance with Rule 457(c) of the Securities Act and based on the average high and low sale prices of the registrant’s common shares of beneficial interest as reported on the New York Stock Exchange on September 29, 2021.
(3)
The registration fee has been calculated in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Pursuant to Rule 457(p) of the rules and regulations under the Securities Act of 1933, as amended, the Registration Fee of $3,625.73 due for the registration of the securities to be registered pursuant to this registration statement is offset in its entirety by the registration fee previously paid by the registrant under Registration Statement No. 333-257190, which was initially filed on June 17, 2021 and declared effective on August 2, 2021.
 
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
 
 
 

Table of Contents
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
SUBJECT TO COMPLETION, DATED OCTOBER 4, 2021
PRELIMINARY PROSPECTUS
BLUE OWL CAPITAL INC.
DIVIDEND REINVESTMENT PLAN
2,500,000 Shares of Class A Common Stock
 
 
This prospectus describes and constitutes the Blue Owl Capital Inc. Dividend Reinvestment Plan (the “Plan”). Under the Plan, eligible stockholders have the opportunity to reinvest the cash dividends paid on some or all of their shares of Class A common stock (“Class A Shares”) in additional Class A Shares. The reinvestment price may be at a discount to the then-current trading price of our Class A Shares to be set by our board of directors (the “Board”) from time to time in its sole discretion. As of the date of this prospectus, we do not intend to offer a discount for future dividend reinvestment purchases, but we reserve the right to offer the discount at any time.
Class A Shares will be purchased under the Plan from newly issued shares, shares held in the treasury of the Company or shares purchased in the open market or by negotiated transactions. To the extent that Class A Shares issued hereunder are authorized but previously unissued shares or treasury shares rather than shares acquired in the open market, the Plan will raise additional capital for the Company. If the shares are purchased from Blue Owl Capital Inc. (“Blue Owl”), your purchase price will be the closing price of our Class A Shares on the New York Stock Exchange (“NYSE”) for that investment date, subject to any discount to be set by our Board from time to time in its sole discretion. If the NYSE is closed on that date, then the price will be the closing price of our Class A Shares on the NYSE for the next business day the NYSE is open. If the shares are purchased in the open market or by negotiated transaction, your purchase price will be the weighted average price per share of the aggregate number of shares purchased under the Plan in the open market or by negotiated transaction for the specific batch for such shares purchased by the Plan Administrator’s broker on the investment date.
We have appointed Computershare Trust Company, N.A. (the “Plan Administrator”) to serve as the administrator of the Plan. Computershare, Inc. acts as service agent to the Plan Administrator. You may enroll in the Plan through the Plan Administrator’s website (www.computershare.com/investor) or by calling
(866) 690-7918
- toll-free and responding to the appropriate prompts. You may also enroll in the Plan by completing an enrollment form and returning it to the Plan Administrator.
You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our Class A Shares.
Our Class A Shares are listed on the NYSE under the symbol “OWL”. On October 1, 2021, the closing price of our Class A Shares was $15.59 per share.
We are an “emerging growth company,” as that term is defined under the federal securities laws and, as such, are subject to certain reduced public company reporting requirements.
 
 
Investing in our Class A Shares involves risks that are described in the “Risk Factors” section beginning on page 22 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is     , 2021

Table of Contents
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     F-1  
You should rely only on the information contained in this prospectus. No one has been authorized to provide you with information that is different from that contained in this prospectus. This prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this prospectus is accurate as of any date other than that date.
 
i

Table of Contents
ABOUT BLUE OWL
Blue Owl Capital Inc. is a leading alternative asset management firm with approximately $62.4 billion in combined AUM as of June 30, 2021. Formed through the combination of Owl Rock and Dyal, our firm provides investors access to asset management capital solutions through our Direct Lending and GP Capital Solutions products. Our breadth of offerings and permanent capital base enable us to offer a differentiated, holistic platform of capital solutions to both middle market companies and large alternative asset managers. We provide these solutions through our permanent capital vehicles, as well as long-dated private funds, that we believe provide our business with a high degree of earnings stability and predictability. Our global, high-caliber, investor base includes a diversified mix of institutional investors, including prominent public and private pension funds, endowments, foundations, family offices, private banks, high net worth individuals, asset managers and insurance companies, as well as retail clients, accessed through many well-known wealth management firms. We have continued to grow our investor base and presence in the growing private markets and alternative asset management sector by emphasizing our disciplined investment approach, client service, and portfolio performance. Our operations consist of eight differentiated investment strategies, and we currently manage eleven permanent capital vehicles, five of which are business development companies. We also manage long-dated private funds and managed accounts. Blue Owl Capital Inc. (formerly Altimar Acquisition Corporation, a blank check company incorporated as a Cayman Islands exempted company) domesticated as a Delaware corporation on May 19, 2021 in connection with the Business Combination. Our principal executive offices are located at 399 Park Avenue, 38th Floor, New York, New York 10022 and our telephone number is
(212) 419-3000.
Our website address is www.blueowl.com. This website address is not intended to be an active link and information on our website should not be construed to be part of this prospectus.
This prospectus incorporates business and financial information about Blue Owl that is not included in or delivered with this prospectus. This information is available to you without charge upon written or oral request. See “Where You Can Find More Information”.
 
ii

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MARKET AND INDUSTRY DATA
This prospectus includes market and industry data and forecasts from independent consultant reports, publicly available information, various industry publications, other published industry sources and our internal data, estimates and forecasts. Independent consultant reports, industry publications and other published industry sources generally indicate that the information contained therein was obtained from sources believed to be reliable.
Our internal data, estimates and forecasts are based upon information obtained from our investors, partners, trade and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.
 
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TRADEMARKS AND TRADE NAMES
We own or have rights to trademarks, service marks, copyrights and trade names that we use in conjunction with the operation of our business. This prospectus also includes trademarks, service marks and trade names of other companies. Each trademark, tradename or service mark of any other company appearing in this prospectus is, to our knowledge, owned by such other company.
 
iv

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SELECTED DEFINITIONS
This prospectus has been prepared using a number of stylistic conventions, which you should consider when reading the information herein or therein. Unless otherwise expressly stated or, unless the context otherwise requires, references in this prospectus to:
 
   
Adjusted EBITDA
”, a
non-GAAP
measure, is used to assess the Company’s ability to service its borrowings. Adjusted EBITDA is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of net income (loss) before income taxes. Adjusted EBITDA represents Distributable Earnings plus (a) interest expense, (b) income tax expense (benefits), and (c) depreciation and amortization.
 
   
Adjusted Revenues
” a
non-GAAP
measure, is used to assess the net revenue expected to be received by the Company. Adjusted Revenues are derived from and reconciled to, but not equivalent to its most directly comparable GAAP measure of total revenues, net. Adjusted Revenues differ from total revenues computed in accordance with GAAP as it excludes reimbursed expenses and dealer manager revenues, if applicable, that have an offsetting amount included within expenses on the consolidated and combined statement of operations.
 
   
Adjusted Compensation
”, a
non-GAAP
measure, is used to assess the net cash settled compensation to be paid by the Company. Adjusted Compensation is derived from and reconciled to, but not equivalent to its most directly comparable GAAP measure of compensation and benefits. Adjusted Compensation differs from compensation and benefits computed in accordance with GAAP as it excludes equity compensation expense and compensation and benefits reimbursed through the receipt of administrative revenues. The administrative revenues reflect allocable compensation and expenses incurred by certain professionals of the Company and reimbursed by products managed by the Company.
 
   
Advisers Act
” refers to the Investment Advisers Act of 1940, as amended, and the rules and regulations promulgated thereunder.
 
   
Altimar
” refers to Altimar Acquisition Corporation, a blank check company incorporated as a Cayman Islands exempted company.
 
   
Altimar Founders
” refers to Altimar Sponsor and certain equityholders of Altimar.
 
   
Altimar Sponsor
” refers to Altimar Sponsor LLC, a Delaware limited liability company.
 
   
assets under management
” or “
AUM
” refers to the assets that we manage, and are generally equal to the sum of (i) net asset value (“NAV”); (ii) drawn and undrawn debt; and (iii) uncalled capital commitments. Following the closing of the Business Combination, we adopted a new methodology for calculating the AUM of the Dyal business. Please refer to the section entitled “Blue Owl’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the restated figures.
 
   
AUM not yet paying fees
” generally relates to unfunded capital commitments (to the extent such commitments are not already subject to fees) and undeployed debt (to the extent we earn fees based on total asset values, inclusive of assets purchased using debt) that will generally begin earning fees once these amounts are invested in the underlying products.
 
   
available capital
” (also referred to as “dry powder”) is comprised of uncalled committed capital (including commitments to products that have yet to commence their investment periods); cash and cash equivalents; and, for certain funds and accounts permitting leverage, undrawn debt (at the product-level including certain amounts subject to restrictions).
 
   
BCA
” or “
Business Combination Agreement
” refers to the Business Combination Agreement, dated as of December 23, 2020 (as amended by that Amendment to Business Combination Agreement, dated as of January 4, 2021, Second Amendment to Business Combination Agreement, dated as of March 25, 2021, and Third Amendment to Business Combination Agreement, dated as of April 11, 2021, as the same has been or may be further amended, modified, supplemented or waived from time to time in accordance with its terms), by and among Altimar, Owl Rock Capital Group LLC, Owl Rock Feeder, Owl Rock Capital Partners and Neuberger Berman Group LLC (“Neuberger”).
 
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BDC
” refers to a business development company, as regulated under the Investment Company Act.
 
   
BDC Part I Fees
” refers to quarterly performance income on the net investment income of the Owl Rock BDCs, currently ORCC, ORCC II, ORCC III, ORTF and ORCIC, subject to a fixed hurdle rate. These fees are classified as management fees as they are predictable and recurring in nature, not subject to contingent repayment, and cash-settled each quarter.
 
   
BDC Part II Fees
” refers to fees for the Owl Rock BDCs that are paid in arrears as of the end of each calendar year when the cumulative aggregate realized capital gains exceed the cumulative aggregate realized capital losses and aggregate unrealized capital depreciation, less the aggregate amount of BDC Part II Fees paid in all prior years since inception.
 
   
Blue Owl
” refers to Blue Owl Capital Inc., a Delaware corporation and the combined company following the consummation of the Business Combination, and its consolidated subsidiaries.
 
   
Blue Owl Carry
” refers to Blue Owl Capital Carry LP, a Delaware limited partnership.
 
   
Blue Owl Carry Common Units
” refers to the limited partnership interests in Blue Owl Carry.
 
   
Blue Owl GP
” refers to Blue Owl Capital GP LLC, a Delaware limited liability company, direct subsidiary of Blue Owl, and general partner of each of Blue Owl Holdings and Blue Owl Carry.
 
   
Blue Owl Holdings
” refers to Blue Owl Capital Holdings LP, a Delaware limited partnership.
 
   
Blue Owl Holdings Common Units
” refers to the limited partnership interests in Blue Owl Holdings.
 
   
Blue Owl Operating Group
” refers collectively to the Blue Owl Operating Partnerships and their consolidated subsidiaries.
 
   
Blue Owl Operating Partnerships
” refers to Blue Owl Carry and Blue Owl Capital Holdings, collectively.
 
   
Blue Owl Limited Partnership Agreements
” refer to the amended and restated limited partnership agreements of Blue Owl Carry and Blue Owl Holdings to be entered into in connection with the Closing, as the same may be amended, modified, supplemented or waived from time to time in accordance with their terms.
 
   
Blue Owl Securities
” refers to Blue Owl Securities LLC, a Delaware limited liability company. Blue Owl Securities is a broker-dealer registered with the SEC, a member of FINRA and the Securities Investor Protection Corporation. Blue Owl Securities is an affiliate of Blue Owl and provides distribution services to Blue Owl.
 
   
Board
” refers to Blue Owl’s board of directors.
 
   
Business Combination
” refers to the transactions contemplated by the BCA.
 
   
Business Combination Date
” refers to May 19, 2021.
 
   
Business Services Platform
” refers to the Dyal team that provides strategic services to partner managers.
 
   
Capital Commitments
” refers to the commitments to our funds, including BDCs, as applicable, and the commitments of Dyal, Owl Rock and our respective affiliates.
 
   
carried interest
” or “
carried interest allocations
” refers to, in carry fund structures, the allocation of gain or profit to the general partner or another affiliated entity or entities of amounts otherwise allocable to the limited partners, commonly referred to as carried interest, as defined in the fund’s investment management or partnership agreements (excluding, for the sake of clarity, incentive fees). Carried interest is typically calculated for a given fund based on cumulative fund performance. Carried interest entitles the general partner (or an affiliate) to a special allocation of income and gains from a fund, and is typically structured as a net profits interest in the applicable fund. Carried interest is generally calculated on a “realized” basis and the recipient is generally entitled to a carried interest based upon the net realized income and gains often taking into account certain unrealized losses generated by such fund. Net realized income/gains or loss is not netted between or among funds.
 
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Class
 A Shares
” refers to the Class A Shares, par value $0.0001 per share, of the Company, including any shares of such Class A common stock issuable upon the exercise of any warrant or other right to acquire shares of such Class A common stock.
 
   
Class
 B Shares
” refers to the Class B Shares, par value $0.0001 per share, of the Company, including any shares of such Class B common stock issuable upon the exercise of any warrant or other right to acquire shares of such Class B common stock.
 
   
Class
 C Shares
” refers to the Class C Shares, par value $0.0001 per share, of the Company, including any shares of such Class C common stock issuable upon the exercise of any warrant or other right to acquire shares of such Class C common stock.
 
   
Class
 D Shares
” refers to the Class D Shares, par value $0.0001 per share, of the Company, including any shares of such Class D common stock issuable upon the exercise of any warrant or other right to acquire shares of such Class D common stock.
 
   
Class
 E Shares
” refers to the Class E common stock, par value $0.0001 per share, of the Company.
 
   
Class
 E-1
Shares
” refers to the
Class E-1
common stock of the Company.
 
   
Class
 E-2
Shares
” refers to the
Class E-2
common stock of the Company.
 
   
Closing
” refers to the closing of the Business Combination.
 
   
common stock
” refers to the Class A Shares, the Class B Shares, the Class C Shares, the Class D Shares, the
Class E-1
common stock and the
Class E-2
common stock, collectively.
 
   
Common Unit
” refers to a combination of one Blue Owl Carry Common Unit and one Blue Owl Holdings Common Unit.
 
   
Company
,” “
Registrant
” “
our
,” “
we
” or “
us
” refers, prior to the Business Combination, to Altimar, Owl Rock or Dyal, as the context suggests, and, following the Business Combination, to Blue Owl Capital Inc.
 
   
DE
” refers to Distributable earnings, a
non-GAAP
measure, which is used to assess performance and amounts available for dividends to members. DE is derived from and reconciled to, but not equivalent to its most directly comparable GAAP measure of net income (loss) before income taxes. Distributable Earnings is FRE less current income taxes and includes (other than with respect to Owl Rock) net realized gains, realized performance income and performance related compensation. DE differs from income before taxes computed in accordance with GAAP as it adjusts for certain items that we believe are indicative of our ability to make our dividend payments. Our presentation of DE represents our operating performance, as further adjusted for performance income and performance related compensation, as applicable. Management believes that these adjustments enable investors to better understand the Company’s earnings that are available for distribution.
 
   
DGCL
” refers to the Delaware General Corporation Law, as amended.
 
   
“Direct Lending” refers to our Direct Lending products, which offer private credit solutions to middle-market companies through four investment strategies: diversified lending, technology lending, first lien lending and opportunistic lending. Direct Lending products comprise the pre-Business combination Owl Rock business.
 
   
dollars
” or “$” refers to U.S. dollars.
 
   
Domestication
” refers to the continuation of Altimar by way of domestication of Altimar into a Delaware corporation, with the ordinary shares of Altimar becoming shares of common stock of the Delaware corporation under the applicable provisions of the Cayman Islands Companies Act (2020 Revision) of the Cayman Islands, as the same may be amended from time to time, and the DGCL; the term includes all matters and necessary or ancillary changes in order to effect such Domestication, including the adoption of our certificate of incorporation consistent with the DGCL and changing the name and registered office of Altimar.
 
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Dyal
” or “
Dyal Capital
” refers, prior to the Business Combination but after giving effect to a
pre-Closing
reorganization, to Dyal Capital Partners and the entities and personnel comprising the Dyal business of Neuberger Berman Group LLC, and, following the Business Combination, to Dyal Capital Partners, the GP Capital Solutions product of Blue Owl.
 
   
Dyal Equity Funds
” refers to existing funds within the GP Minority Equity Investments strategy: Dyal Capital Partners (A) LP, Dyal Capital Partners (B) LP and Dyal Investment Partners LP and their related feeder, blocker, parallel, alternative investment and holding entities (“Dyal Fund I”); Dyal Capital Partners II (A) LP, Dyal Capital Partners II (B) LP and Dyal II Investment Partners LP and their related feeder, blocker, parallel, alternative investment and holding entities (“Dyal Fund II”), Dyal Capital Partners III (A) LP and Dyal Capital Partners III (B) LP and their related feeder, blocker, parallel, alternative investment and holding entities (“Dyal Fund III”), Dyal Capital Partners IV (A) LP, Dyal Capital Partners IV (B) LP and Dyal Capital Partners IV (C) LP and their related feeder, blocker, parallel, alternative investment and holding entities (“Dyal Fund IV”) and Dyal Capital Partners V (A) LP and Dyal Capital Partners V (B) LP and their related feeder, blocker, parallel, alternative investment and holding entities (“Dyal Fund V”), collectively.
 
   
Dyal Equityholders
” refers to Neuberger, the Dyal Principals and any other holders of Dyal equity interests.
 
   
Dyal Financing Fund
” refers to the existing fund and its related feeder, parallel, alternative investment and holding entities within the GP Debt Financing Investments strategy.
 
   
Dyal HomeCourt Fund
” refers to the existing fund and its related feeder, parallel, alternative investment and holding entities that seeks to acquire minority equity investments in NBA Teams that forms part of the Professional Sports Minority Investments strategy.
 
   
Dyal Principals
” refers to Michael Rees, Sean Ward and Andrew Laurino.
 
   
Electing Owl Rock Equityholders
” refers to the Owl Rock Equityholders who elect to receive Common Units in connection with the Business Combination in lieu of common stock of Blue Owl.
 
   
fee paying AUM
” or “
FPAUM
” refers to the AUM on which management fees are earned. For our BDCs, FPAUM is generally equal to total assets (including assets acquired with debt, but excluding cash). For our other Direct Lending products, FPAUM is generally equal to NAV or investment cost. FPAUM also includes uncalled committed capital for products where we earn management fees on such uncalled committed capital. For our GP Capital Solutions products, FPAUM for the GP minority equity investments strategy is generally equal to capital commitments during the investment period and the cost of unrealized investments after the investment period. For GP Capital Solutions’ other strategies, FPAUM is generally equal to investment cost.
 
   
fee related earnings
” or “FRE”, a
non-GAAP
measure, is used to assess our operating performance by determining whether recurring revenue, primarily consisting of management fees, is sufficient to cover operating expenses and to generate profits. FRE is derived from and reconciled to, but not equivalent to its most directly comparable GAAP measure of net income (loss) before income taxes. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for transaction-related charges, equity-based compensation,
non-controlling
interests in subsidiaries of the Company and certain other items that we believe reflects our operating performance. Other than for Owl Rock, the calculation of FRE also adjusts for performance income, performance related compensation and investment net gains (losses). Management believes that adding these adjustments assist in clarifying stable and predictable cash flows that cover operating expenses and lead to the generation of profits.
 
   
our funds
” refers to the funds, investment vehicles, BDCs, managed accounts and other entities, accounts and investment products that are managed or
co-managed
by Blue Owl, Owl Rock or Dyal.
 
   
FIC Assets
” refers to the “FIC Assets” described in Note 1 of the Notes to Consolidated and Combined Financial Statements of Owl Rock Group and subsidiaries and Owl Rock Securities.
 
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FINRA
” refers to the Financial Industry Regulatory Authority, Inc.
 
   
GAAP
” refers to United States generally accepted accounting principles, consistently applied.
 
   
GP Debt Financing strategy
” refers to the investment strategy of certain Dyal funds that primarily relates to originating and making collateralized, long-term debt investments, preferred equity investments and structured investments in private capital managers.
 
   
GP Minority Equity Investments strategy
” refers to the investment strategy of certain Dyal funds that primarily relates to acquiring minority equity interests in investment management businesses or fund sponsors.
 
   
incentive fees
” refers to contractual fees or other payments based on a percentage of a fund’s net gains, profits and/or income, which formulation may take into account a preferred return threshold, in each case as described in the fund’s constituent documents (excluding, for the sake of clarity, carried interest allocations). Incentive fees may be calculated based on a combination of realized and unrealized amounts and/or current income.
 
   
Investment Company Act
” refers to the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.
 
   
Investor Rights Agreement
” refers to the Investor Rights Agreement, dated as of May 19, 2021, by and between Blue Owl, Altimar Sponsor, the Altimar Founders and certain of the Owl Rock Equityholders and Dyal Equityholders, as the same may be amended, modified, supplemented or waived from time to time in accordance with its terms.
 
   
IPO
” refers to Altimar’s initial public offering of its Units, Public Shares and Public Warrants pursuant to the IPO registration statement and completed on October 27, 2020.
 
   
long dated
” refers to the contractual life of any finite private fund or managed account of 5 years or more as of the date hereof.
 
   
management fees
” for Owl Rock refers to fees that it earns for advisory services provided to its funds, which are generally based on a defined percentage of average fair value of gross assets (excluding cash), or average fair value of gross assets (excluding cash) plus undrawn commitments, in the case of the Owl Rock BDCs, or fair value of gross assets (excluding cash), fair value of investments plus undrawn commitments, or invested capital in the case of Owl Rock’s private debt funds and managed accounts, and also include BDC Part I Fees. For Dyal, management fees are derived from investment management services provided to private funds and are payable quarterly or semi-annually, at the beginning or end of the service period. For the GP Minority Equity Investments strategy, the fees are generally determined based upon a percentage of capital committed during the investment period, and thereafter generally based on the cost of unrealized investments; or as otherwise defined in the respective agreements. For the other Dyal strategies, the fees are generally determined based upon a percentage of investment cost or as otherwise defined in the respective agreements.
 
   
NBA
” refers to the National Basketball Association.
 
   
Neuberger
” refers to Neuberger Berman Group LLC, a Delaware limited liability company.
 
   
NYSE
” refers to the New York Stock Exchange.
 
   
our BDCs
” refers to our business development companies, as regulated under the Investment Company Act of 1940, as amended: Owl Rock Capital Corporation (NYSE: ORCC) (“ORCC”), Owl Rock Capital Corporation II (“ORCC II”), Owl Rock Capital Corporation III (“ORCC III”), Owl Rock Technology Finance Corp. (“ORTF”) and Owl Rock Core Income Corp. (“ORCIC”).
 
   
Owl Rock
” refers, prior to the Business Combination, to Owl Rock Capital and Owl Rock Securities, and, following the Business Combination, Owl Rock Capital together with Owl Rock Securities, the Direct Lending product of Blue Owl.
 
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Owl Rock BDCs
” refers to Owl Rock Capital Corporation (NYSE: ORCC) (“ORCC”), Owl Rock Capital Corporation II (“ORCC II”), Owl Rock Capital Corporation III (“ORCC III”), Owl Rock Technology Finance Corp. (“ORTF”) and Owl Rock Core Income Corp. (“ORCIC”).
 
   
Owl Rock Capital
” refers to a
carve-out
of Owl Rock Group and its consolidated operating subsidiaries (which
carve-out
excludes such operating subsidiaries constituting FIC assets) after giving effect to a
pre-Closing
reorganization.
 
   
Owl Rock Capital Partners
” refers to Owl Rock Capital Partners LP, a Delaware limited partnership and indirect equityholder in, and managing member of, Owl Rock.
 
   
Owl Rock Equityholders
” refers to the Owl Rock Principals, Owl Rock Feeder and certain other direct and indirect third party holders of equity interests in Owl Rock Capital.
 
   
Owl Rock Feeder
” refers to Owl Rock Capital Feeder LLC, a Delaware limited liability company.
 
   
Owl Rock Group
” refers to Owl Rock Capital Group LLC, a Delaware limited liability company.
 
   
Owl Rock Principals
” refers to Douglas I. Ostrover, Marc S. Lipschultz, Craig W. Packer and Alan J. Kirshenbaum.
 
   
partner manager
” refers to an investment management business or fund sponsor in which the GP Minority Equity Investments strategy funds invests.
 
   
performance income
” refers to income earned or allocated based on the performance of a fund as defined in the product’s investment management or partnership agreements and may be either incentive fees or carried interest and/or incentive allocations. Notwithstanding the foregoing, BDC Part I Fees are generally treated as management fees due to their recurring nature.
 
   
permanent capital
” refers to capital of our products that do not have ordinary redemption provisions or a requirement to exit investments after a prescribed period of time and to return to investors the proceeds representing the capital invested in such investments, except as required by applicable law or pursuant to redemption requests that can only be made after significant
lock-up
periods. Such products may be required, or elect, to return all or a portion of capital gains and investment income. Permanent capital may be subject to management fee step downs or roll-offs over time.
 
   
PIPE Investment
” means the private placement pursuant to which PIPE Investors have committed to make a private investment in the aggregate amount of $1,500,000,000 in public equity in the form of Class A Shares on the terms and conditions set forth in the Subscription Agreements.
 
   
PIPE Investors
” refers to the investors that have signed Subscription Agreements.
 
   
PIPE Securities
” refers to the Class A Shares sold to the PIPE Investors pursuant to the Subscription Agreements.
 
   
Plan
” refers to the Blue Owl Capital Inc. Dividend Reinvestment and Stock Purchase Plan.
 
   
Plan Administrator
” refers to Computershare Trust Company, N.A.
 
   
portfolio companies
” and “
portfolio investments
” refer to partner managers with which Dyal invests, borrowers of Owl Rock loans, and investments of both platforms and, in certain cases, investment thereby, in each case unless the context indicates otherwise.
 
   
Private Placement Warrants
” refers to the warrants acquired by Altimar Sponsor for an aggregate purchase price of $7,000,000 in a private placement simultaneously with the closing of the IPO, which
 
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were subsequently converted into warrants to purchase Class A Shares in connection with the Business Combination.
 
   
Public Shareholders
” refers to the holders of the Public Shares or Public Warrants that were sold in the IPO.
 
   
Public Warrants
” refers to the warrants issued in the IPO, entitling the holder thereof to purchase one of Altimar’s Class A ordinary shares at an exercise price of $11.50, subject to adjustment, which were subsequently converted into warrants to purchase Class A Shares in connection with the Business Combination.
 
   
reimbursed expenses
” refer to expenses reimbursed by Dyal’s private funds, such as travel, and also expenses incurred by Dyal’s Business Services Platform in connection with the provision of strategic support services to partner managers.
 
   
“SEC”
refers to the U.S. Securities and Exchange Commission.
 
   
Securities Act
” refers to the Securities Act of 1933, as amended.
 
   
Seller Earnout Securities
” refers to the Seller Earnout Shares and the Seller Earnout Units, collectively and as applicable. For the avoidance of doubt, a “Seller Earnout Security” shall refer to either (i) one Seller Earnout Share, in the case of Owl Rock Equityholders who are not Electing Owl Rock Equityholders, or (ii) one Seller Earnout Unit, in the case of Dyal Equityholders and Electing Owl Rock Equityholders, as applicable.
 
   
Seller Earnout Shares
” refers to the Series
E-1
common stock and Series
E-2
common stock that were issued to the Owl Rock Equityholders that are not Electing Owl Rock Equityholders in connection with the Business Combination. For the avoidance of doubt, a “Seller Earnout Share” shall refer to either (i) one share of Series
E-1
common stock or (ii) one share of Series
E-2
common stock, as applicable.
 
   
Seller Earnout Units
” refers to the Series
E-1
Units and Series
E-2
Units of each of Blue Owl Holdings and Blue Owl Carry that will be issued to the Dyal Equityholders and the Electing Owl Rock Equityholders in connection with the Business Combination in lieu of Seller Earnout Shares.
 
   
Specified Interests
”, with respect to management fees and similar fees, refers to the rights to share in amounts that were granted (a) as a rebate or incentive to a third party investor making a capital commitment in one or more funds, including a seed or foundation investor, (b) to certain new hires or reassigned employees who are primarily dedicated to a new business line not previously engaged in by Blue Owl or its subsidiaries, or (c) to a third party in connection with a bona fide arms’ length joint venture or bona fide arms’ length arrangement with a third party service provider.
 
   
Subscription Agreements
” refers to the subscription agreements, dated as of December 23, 2020, by and among Altimar, Neuberger, Owl Rock and the PIPE Investors, pursuant to which Altimar has agreed to issue an aggregate of 150,000,000 Class A Shares to the PIPE Investors immediately before the Closing at a purchase price of $10.00 per share, as the same may be amended, modified, supplemented or waived from time to time in accordance with its terms.
 
   
“Tax Receivable Agreement
” or “
TRA
” refers to the Tax Receivable Agreement entered into between Blue Owl, Blue Owl GP, the Blue Owl Operating Partnerships, the Dyal Equityholders, (including certain Owl Rock Equityholders that sold certain blocker corporations to Blue Owl GP in the Business Combination) at the Closing as included in Exhibit 10.1 to the Current Report on Form
8-K,
filed with the SEC on May 21, 2021, as the same may be amended, modified, supplemented or waived from time to time in accordance with its terms. The agreement requires Blue Owl GP to pay to such members (or their owners) 85% of the amount of tax savings, if any, that the Company realizes (or is deemed to realize in certain circumstances) as a result of (i) increases in tax basis resulting from the Business Combination, (ii) certain tax attributes of the Blue Owl Operating Group (or certain corporations acquired in connection with the Business Combination) existing prior to the Business Combination, and (iii) tax benefits attributable to payments made under the TRA.
 
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Trust Account
” refers to the trust account of Altimar which holds the net proceeds from the IPO and certain of the proceeds from the sale of the Private Placement Warrants, together with interest earned thereon, less amounts released to pay taxes.
 
   
transfer agent
” refers to Computershare Trust Company, N.A. and Computershare Inc.
 
   
UBT
” refers to Unincorporated Business Tax.
 
   
Warrant Agent
” refers to Computershare Trust Company, N.A. and Computershare Inc.
 
   
Warrants
” refers to the Public Warrants and the Private Placement Warrants.
 
   
Working Capital
” of Owl Rock Capital or the Dyal Business refers to the sum of (a) the cash and current receivables held or accrued as of the time of determination minus (b) the sum of the (i) operating expenses reasonably expected to arise immediately after the time of determination, consistent with past practice, and (ii) anticipated bonuses and other expenses in respect of the periods ending on or prior to the Closing, consistent with past practice.
Many of the terms used in this prospectus, including Adjusted Compensation, Adjusted EBITDA, Adjusted Revenues, AUM, DE, FPAUM and FRE, may not be comparable to similarly titled measures used by other companies. In addition, our definitions of AUM and FPAUM are not based on any definition of AUM or FPAUM that is set forth in the agreements governing the investment products that Owl Rock and Dyal manage and may differ from definitions of AUM or FPAUM set forth in other agreements to which Owl Rock or Dyal is a party or definitions used by the SEC or other regulatory bodies. Further, Adjusted Compensation, Adjusted EBITDA, Adjusted Revenues, DE and FRE are not measures of performance calculated in accordance with GAAP. We use Adjusted Compensation, Adjusted EBITDA, Adjusted Revenues, DE and FRE as measures of operating performance, not as measures of liquidity. They should not be considered in isolation or as substitutes for operating income, net income, operating cash flows, or other income or cash flow statement data prepared in accordance with GAAP. The use of these measures without consideration of related GAAP measures is not adequate due to the adjustments described above. Our management compensates for these limitations by using FRE as supplemental measures to our GAAP results. We present this measure to provide a more complete understanding of our performance as our management measures it. Amounts and percentages throughout this prospectus may reflect rounding adjustments and consequently totals may not appear to sum. For reconciliations of
non-GAAP
measures used by Blue Owl to Blue Owl’s GAAP results, see “
Blue Owl’s Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Reconciliation of Consolidated GAAP Financial Measures to Certain
Non-GAAP
Measures
” and for reconciliations of
non-GAAP
measures used by Dyal to Dyal’s GAAP results, see “
Dyal’s Management’s Discussion and Analysis of Financial Condition and Results of Operations
Reconciliation of Combined GAAP Financial Measures to Certain
Non-GAAP
Measures
” in this prospectus.
We disclose certain financial measures in this prospectus that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to shareholders in assessing the overall performance of Blue Owl’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP, if available. We caution readers that these
non-GAAP
financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers.
 
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes statements that express Blue Owl’s and Blue Owl’s subsidiaries’ opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this prospectus and these
forward-looking
statements reflect management’s expectations regarding our future growth, results of operations, operational and financial performance and business prospects and opportunities. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting our business. Factors that may impact such forward-looking statements include:
 
   
the anticipated growth rate and market opportunity of Blue Owl;
 
   
various conflicts of interest that could arise among us, our funds, affiliates, investors and partner managers;
 
   
our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
 
   
our directors and officers potentially having conflicts of interest with our business, as a result of which they would receive compensation;
 
   
intense competition and competitive pressures from other companies in the industry in which we operate;
 
   
factors relating to our business, operations and financial performance, including market conditions and global and economic factors beyond our control;
 
   
the impact of
COVID-19
and related changes in base interest rates and significant market volatility on our business, our industry and the global economy;
 
   
increased costs related to being a public company;
 
   
the effect of legal, tax and regulatory changes; and
 
   
other factors detailed under the section entitled “
Risk Factors.
The forward-looking statements contained in this prospectus and in any document incorporated by reference herein are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “
Risk Factors
” in this registration statement. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
 
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SUMMARY
This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information you should consider when making your investment decision. We urge you to read this prospectus in its entirety, including the consolidated financial statements of Owl Rock and Dyal and accompanying notes, carefully to gain a fuller understanding of our business and the terms of the notes, as well as some of the other considerations that may be important to you, before making your investment decision. You should pay special attention to the “Risk Factors” sections of this prospectus to determine whether an investment in the notes is appropriate for you.
Our Company
We are a leading alternative asset management firm with approximately $62.4 billion in combined AUM as of June 30, 2021. Formed through the combination of Owl Rock and Dyal, our firm provides investors access to asset management capital solutions through our Direct Lending and GP Capital Solutions products. Our breadth of offerings and permanent capital base enable us to offer a differentiated, holistic platform of capital solutions to both middle market companies and large alternative asset managers. We provide these solutions through our permanent capital vehicles, as well as long-dated private funds, that we believe provide our business with a high degree of earnings stability and predictability. Our global, high-caliber, investor base includes a diversified mix of institutional investors, including prominent public and private pension funds, endowments, foundations, family offices, private banks, high net worth individuals, asset managers and insurance companies, as well as retail clients, accessed through many well-known wealth management firms. We have continued to grow our investor base and presence in the growing private markets and alternative asset management sector by emphasizing our disciplined investment approach, client service, and portfolio performance. Our operations consist of eight differentiated investment strategies across our platform and we currently manage eleven permanent capital vehicles, five of which are business development companies. We also manage long-dated private funds and managed accounts. Our permanent capital vehicles refer to capital of our products that do not have ordinary redemption provisions or a requirement to exit investments after a prescribed period of time and to return invested capital to investors, except as required by applicable law or pursuant to redemption requests that can only be made after significant
lock-up
periods, whereas our long-dated private funds and managed accounts refers to the contractual life of any finite private fund or managed account of five years or more remaining as of June 30, 2021. The indefinite duration of our permanent capital vehicles and long duration of our long-dated private funds and managed accounts provides a high degree of earnings stability and predictability. Our success is rooted in, and reflective of, the deep experience of our founders and a world-class investment management team as well as strong operational infrastructure and approximately 250 employees. For the six months ended June 30, 2021, approximately 97% of our management fees were earned on AUM that we refer to as permanent capital Our $62.4 billion in combined AUM reflects a compounded annual growth rate (“CAGR”) of 33% since December 31, 2018 for our combined AUM. Over the last twelve months, we have collectively raised over $7.2 billion across new and existing strategies. Our executives and employees have invested and committed over $1.9 billion in our products.
 
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Business Products
We have two major product lines: Direct Lending and GP Capital Solutions. We believe our products, while distinct, are complementary to each other and together enable us to provide a differentiated platform of various capital solutions to the alternative asset management industry. Each of our products employ a disciplined investment philosophy with a focus on long-term investment horizons and are managed by tenured leadership and investment professionals with significant experience in their respective strategies.
 
Blue Owl
AUM: $62.4 billion
Direct Lending Products
AUM: $31.2 billion
  
GP Capital Solutions Products
AUM: $31.2 billion
Diversified Lending
Commenced 2016
AUM: $19.8 billion
  
GP Minority Equity
Commenced 2010
AUM: $30.0 billion
Technology Lending
Commenced 2018
AUM: $6.2 billion
  
GP Debt Financing
Commenced 2019
AUM: $1.0 billion
First Lien Lending
Commenced 2018
AUM: $3.2 billion
  
Professional Sports Minority Investments
Commenced 2021
AUM: $0.2 billion
Opportunistic Lending
Commenced 2020
AUM: $1.9 billion
  
Co-Investments and
Structured Equity
Not Yet Launched
Note:
Co-Investments and
Structured Equity is an expected new strategy of the Dyal business. There can be no assurance that such strategy will launch as expected.
Direct Lending
Our Direct Lending products offer private credit products to middle-market companies seeking capital solutions. We believe our breadth of offerings establishes us as the lending partner of choice for private-equity sponsored companies, as well as other predominately
non-cyclical,
recession-resistant businesses. Since the launch of our flagship institutional product, ORCC, we have continued to prudently expand our offerings, focusing on adjacent strategies that are both additive and complementary to our existing product base. We
 
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operate five BDCs as well as long-dated private funds and managed accounts across our four investment strategies:
 
   
Diversified Lending:
Our Diversified Lending strategy seeks to generate current income and, to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns across credit cycles with an emphasis on preserving capital primarily through originating and making loans to, and making debt and equity investments in, U.S. middle market companies. We provide a wide range of financing solutions with strong focus on the top of the capital structure and operate this strategy through significant diversification by borrower, sector, sponsor, and position size. Our Diversified Lending strategy is primarily offered to investors through our BDCs.
 
   
Technology Lending:
Our Technology Lending strategy seeks to maximize total return by generating current income from our debt investments and other income producing securities, and capital appreciation from our equity and equity-linked investments primarily through originating and making loans to, and making debt and equity investments in, technology related companies based primarily in the United States. We originate and invest in senior secured or unsecured loans, subordinated loans or mezzanine loans, and equity and equity-related securities including common equity, warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity. Our strategy invests in a broad range of established and high growth technology companies that are capitalizing on the large and growing demand for technology products and services. This strategy will focus on companies that operate in technology-related industries or sectors which include, but are not limited to, information technology, application or infrastructure software, financial services, data and analytics, security, cloud computing, communications, life sciences, healthcare, media, consumer electronics, semi-conductor, internet commerce and advertising, environmental, aerospace and defense industries and sectors. Our Technology Lending strategy is offered to investors through our technology-focused BDC.
 
   
First Lien Lending:
Our First Lien Lending strategy seeks to realize significant current income with an emphasis on preservation of capital primarily through originating primary transactions in and, to a lesser extent, secondary transactions of first lien senior secured loans in or related to private-equity sponsored, middle market businesses based primarily in the United States. Our First Lien strategy is offered to investors through our long-dated private fund and managed accounts.
 
   
Opportunistic Lending:
Our Opportunistic Lending strategy seeks to generate attractive risk-adjusted returns by taking advantage of credit opportunities in U.S. middle market companies with liquidity needs and market leaders seeking to improve their balance sheets. We focus on high quality companies that could be experiencing disruption, dislocation, distress or transformational change. Our strategy intends to make opportunistic investments in predominately U.S. middle-market companies and be the partner of choice for companies by being well-equipped to provide a variety of financing solutions to meet a broad range of situations, including but not limited to the following: (i) rescue financing, (ii) new issuance and recapitalizations, (iii) wedge capital,
(iv) debtor-in-possession
loans, (v) financing for additional liquidity and covenant relief and (vi) broken syndications. Our Opportunistic Lending strategy is offered to investors through our long-dated private fund and managed accounts.
GP Capital Solutions
Our GP Capital Solutions product is a leading capital solutions provider to large private capital managers. We primarily focus on acquiring equity stakes in, or providing debt financing to, large, multi-product private equity and private credit platforms. We are in the process of expanding our existing GP Capital Solutions product to provide capital to seasoned portfolio companies owned by funds that are managed by alternative asset managers that we have a
pre-existing
relationship with, either through our GP Minority Equity Investments or GP
 
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Debt Financing strategies. Our GP Capital Solutions product also houses our Business Services Platform, which provides strategic support to the partner managers in which the Dyal funds hold an interest in. In addition to the GP Capital Solutions strategies, we have recently launched a strategy focused on acquiring passive minority stakes in sports teams, initially focusing on the NBA. This product operates through the following four investment strategies:
 
   
GP Minority Equity Investments:
We build diversified portfolios of minority equity investments in institutionalized alternative asset management firms across multiple strategies, geographies, and asset classes. Our investment objective is to generate compelling cash yield by collecting a set percentage of contractually fixed management fees, a set percentage of carried interest and return on balance sheet investments made by underlying managers. We primarily focus on acquiring minority positions in large, multi-product alternative asset managers who continue to gain a disproportionate proportion of the assets flowing into private investment strategies and exhibit high levels of stability. Our inaugural funds followed a hedge fund manager-focused investment program that has since evolved into a private capital manager-focused investment program, as implemented by our later funds. Our GP Minority Equity Investments strategy is offered to investors through our
closed-end
permanent capital funds. A fundamental component of the fundraising efforts for our investment programs is the ability to identify and execute
co-investment
opportunities for our investors. We may offer, from
time-to-time
and in our sole discretion,
co-investment
opportunities in certain fund investments, generally with no management or performance-based fee.
 
   
GP Debt Financing:
This strategy focuses on originating and making collateralized, long-term debt investments, preferred equity investments and structured investments in private capital managers. We originate and invest in secured term loans that are collateralized by substantially all of the assets of a manager and subject to repayment on an accelerated basis pursuant to cash flow sweeps of set percentages of management fees, GP realization, carried interest and other fee streams of the management company in the event that certain minimum coverage ratios are not maintained. Our investment objective is to generate current income by targeting investment opportunities with attractive risk-adjusted returns. We expect that the loans will be made to allow borrowers to support business growth, fund GP commitments, and launch new strategies. The GP Debt Financing strategy allows Dyal to offer a comprehensive suite of solutions to such private capital managers. To date, certain loans to private capital managers through the GP Debt Financing Strategy have been made in combination with another Dyal fund making an equity investment in the same private capital manager.
 
   
Professional Sports Minority Investments:
We plan to build diversified portfolios of minority equity investments in professional sport teams. Our first endeavor in this area was creating an innovative partnership with the NBA, which has
pre-approved
us as a prospective buyer of NBA franchises and waived both its requirement that any minority owner own a stake in a single franchise and its limitation on any team having more than 25 individual beneficial owners. The NBA has also provided
pre-approval
for us to own interests in multiple NBA franchises. We believe having these approvals and waivers already established will provide selling owners with more certainty of our ability to close on any investment and will make us the buyer of choice when a minority interest in an NBA franchise becomes available. Our investments in the NBA are intended to provide low correlation to other asset classes and long-term value appreciation. The first of such funds was launched in June 2021, and is currently seeking potential investments.
 
   
Co-Investment
and Structured Equity:
This emerging strategy will focus on providing capital to seasoned portfolio companies managed by established private capital managers, in whom we have previously invested through our GP Minority Equity Investments or GP Debt Financing strategies and potentially with which we have a business relationship. The strategy will seek to make investments that are intended to provide strategic capital for organic and inorganic growth at
mid-life
investments, access to potential strategic partners for knowledge and intellectual property transfer and liquidity to

 
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existing fund investors. Our investment objective is to generate compelling investment returns, similar to traditional
buy-out
funds but with mitigated downside risk and faster return of capital.
Our eight investment strategies and their respective products create a robust foundation for our holistic platform. We believe the success and growth in our businesses since inception has been driven by a singular, dedicated focus on providing capital solutions and the following differentiating features of our platform:
 
   
Serve as a total solution provider, allowing for a broader view of market opportunities
 
   
Expansive product set provides flexibility to help meet private capital managers’ and borrowers’ needs
 
   
Extensive senior-level relationships with alternative asset managers, sponsors and other direct lenders that potentially create enhanced sourcing through multiple touchpoints
 
   
Scaled platform creates ability to competitively access unique opportunities in the market
 
   
Large deal funnel that allows for high degree of selectivity when considering investment opportunities
 
   
Relationship-oriented approach with significant involvement from founders through the investment process
 
   
Strong culture of risk management founded on continuous,
pro-active
evaluation of portfolio positions and multiple layers of portfolio review
 
   
Industry leading management team and deeply experienced team of investment professionals solely dedicated to direct lending
Our History
Blue Owl’s history is predicated on the key milestones of both Owl Rock and Dyal. Owl Rock was founded in 2016 by Doug Ostrover, Marc Lipschultz and Craig Packer to address the evolving need for direct lending solutions by middle-market companies and Dyal was founded in 2010 by Michael Rees to fill the need for flexible capital solutions for GPs of private capital managers.
The combination of Owl Rock and Dyal creates a platform primed to continue servicing these markets. Blue Owl’s robust and diversified platform offerings will continue to serve as a response to the following sector dynamics:
 
   
shifting allocations by retail and institutional investors;
 
   
rotation into alternatives given the search for yield and reliability of returns;
 
   
rising need for private debt driven by sponsor demand;
 
   
evolving landscape of the private debt market;
 
   
de-leveraging
of the global banking system; and
 
   
increasing need for flexible capital solutions by GPs

 
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The following is a timeline of key fund launch milestones for our businesses:
 

Across both businesses, our presence in the market combined with our constant dialogue with financial sponsors, companies and our investors, has allowed us to identify attractive opportunities in adjacent subsectors over time. Since inception, both Owl Rock and Dyal have launched multiple new strategies and products, exclusively in areas where we believed we could leverage our competitive advantage and expertise, and where we believe we had identified critical mass of lending and capital solutions opportunities as well as heightened investor interest. We have focused on executing on key adjacencies that are natural extensions of existing core strategies in order to capitalize on the growing dislocations in the market and rising investor demand.
We attribute our successful, disciplined growth to paying close attention to our investors’ needs and proactively developing our product offerings to meet the evolving appetites of our dedicated and growing lending and GP bases. This strategy has helped us secure key investors and expand our product suites leading up to our combination from which we create a diversified asset manager.
Our Market Opportunity
Increasing demand for alternative assets as investors search for yield in a low rate environment
Over the past two decades, investors have significantly increased their asset allocations to alternative investment strategies, with a notable increased acceleration since 2015. Preqin Ltd. (“Preqin”), an alternative assets industry data and research company, estimates that AUM allocated to alternative investments, including private equity, private debt, real estate, infrastructure and natural resources, has achieved a 12% compound annual growth rate since 2000 for the
20-year
period through year end 2020, projecting sustained momentum in growth, with a forecasted 12% compound annual growth rate from 2020 to 2025. We expect this secular rotation
 
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into alternatives to continue as investors increasingly view allocations to private markets as a crucial requirement to meet their return objectives, as we believe alternative assets offer lower correlated and higher levels of returns as compared to traditional public equities and fixed income. Additionally, we have a diversified capital base across both institutional and high net worth clients, which represent 74% and 24% of our investor base, respectively.
Emergence of Private Debt and GP Minority Investing
Within the growing landscape of alternative assets, there is also a differentiated need for yield-oriented strategies.
The evolving landscape following the financial crisis of 2007 and 2008 (the “Global Financial Crisis”) has stimulated growth in both the private debt and GP minority investing markets. As banks pulled back from the middle markets in an effort to
de-risk
their balance sheets, the resulting void created a natural market opportunity that beget the emerging popularity of private debt, which has continued to increase in recent years. According to Preqin, since 2009, private debt is estimated to have raised over $957 billion globally, of which over $562 billion was raised since 2015 through 2020. Capital allocations to private debt, in particular, have an estimated compound annual growth rate of 16% through 2020 over a
20-year
time period, compared to 11% for private equity. As of September 30, 2020, private debt is the third-largest asset class in the private alternatives space second only to private equity and real estate, and comprises 12% of total private capital, up from 6% in 2000, with tailwinds for future growth.
Similarly, following the Global Financial Crisis, the rising needs of GPs for liquidity and stable capital resulted in the strong growth of GP minority stake investing market. While previously GP minority stake investing was relatively infrequent and driven by opportunistic acquisitions by financial institutions and institutional investors, the years after the Global Financial Crisis were marked by strong growth in the sector. According to Preqin and Pitchbook, between 2010 and 2014, there were 23 stake sales and $8.6 billion capital raised for the GP minority investment funds, primarily targeting hedge fund managers. Over the last several years, GP minority stake investing has rapidly evolved, refocusing on acquiring minority stakes in private capital managers, with 73 stake sales completed and $31.3 billion capital raised across closed and open funds between 2015 and 2019. We believe this growth in activity increased awareness of the strategic benefits that alternative asset managers can derive from partnering with long-term, stable capital providers and highlighted to the investor community the merits of investing in portfolios of GP minority investments.
We expect this rapid growth in both asset classes to continue to meet the following rising needs:
 
   
Sponsor-driven demand for debt capital
: We believe the large amount of uninvested capital held by funds of private equity firms, estimated by Preqin Ltd. to be $1.5 trillion as of March 2020, will continue to drive deal activity. We expect that private equity sponsors will continue to pursue acquisitions and leverage their equity investments with secured loans provided by our product offerings. Furthermore, we believe if strong growth in fundraising in the private equity industry continues, it will naturally drive sponsor demand for financing solutions for their equity investments. We also believe continued growth in the private equity industry will facilitate increased demand by sponsor-owned U.S. middle market companies for financing solutions as they continue to require access to debt capital for operational and financing purposes. We believe that an expanding middle-market as well as the growing capital base of the private equity industry will support the continued demand for private debt.
 
   
Evolving financial and strategic objectives of GPs:
Given the growth in the alternative asset management industry, we expect the needs of GPs to continue to evolve and expand, driving increased activity in GP minority stake investing. We believe the search for long-term / permanent capital to fund

 
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commitments, new product launches, geographic expansion and opportunistic acquisitions will only amplify as the industry expands. We also believe the desire by GPs and founders to crystallize value, optimize ownership structures and create long-term employee incentive mechanisms to ensure successful succession will remain a relevant activity driver as the first generation of leaders near retirement age.
 
   
Increasing Diversity within Private Debt
: As macroeconomic conditions evolve, private debt funds have expanded their offerings. There is increasing investor demand for opportunistic lending. We expect the flexibility with which the private debt market evolves and expands will also support its future growth.
Investors’ growing preference for reliability of returns through favorable positioning in the capital structure
The increasing investor allocation into alternatives in search of yield has been accompanied by an increased focus on relative reliability of returns in recent years. As the primary private equity sector matures and oversaturates, the increased competitiveness of valuations has added pressure to the ultimate returns. We believe our private debt and GP minority investing strategies have demonstrated a strong ability to provide stable yields that, on a risk-adjusted basis, can exceed the average private equity return through the following avenues:
 
   
Favorable positioning in the capital structure.
The relative seniority of debt to equity in the capital structure improves the risk profile of investment returns through lower relative variability. According to Preqin, the risk / return (defined as the ratio of standard deviation to the median) for investments with vintages between 2007 and 2016 for private debt is 0.91, versus 1.01 for private equity. Within the private debt asset class, direct lending represents an attractive
sub-sector,
with a risk / return of 0.43 and median net IRR of 8.9%. We believe this favorable risk / return profile of our Direct Lending business will continue to attract investors. Since our private debt strategies primarily operate in the senior secured lending space, and our target companies are in the upper middle market, we have a prime position within the capital structure of established companies. The relative seniority of our products is especially relevant, and can provide a greater degree of certainty for ROIC in periods of market turmoil.
 
   
Stability of cash flows from prudently structured portfolios.
The portfolios of GP minority investments can provide more stable and predictable cash flows due to diversification benefits, significant proportion of contractually fixed cash flow, negotiated structural protections and exposure to a secularly growing industry. The portfolio diversification is achieved through broad exposure across multiple partner managers who collectively manage varied investment strategies across a multitude of fund vintages, geographies, sectors, and enterprise values. A significant portion of the expected cash return comes from contractual, fixed management fees, which enhances visibility into quarterly cash flows and provide for downside protection during an economic downturn. The total cash flows may be substantially increased by realized carried interest and gains from the
GP-funded
commitments.
Shifting asset allocation policies of institutional investors
Institutional investors are continuing to pivot their allocations away from traditional public market products toward higher-return alternative asset classes in an effort to decrease widening funding gaps and capture yield in a
low-rate
environment. According to a November 2020 Preqin survey, 81% of global investors expect to increase their allocation to alternatives in the next five years, with 26% indicating an expectation to increase their allocation significantly. Within alternatives, growth in private debt and private equity has meaningfully contributed to the increased demand and we believe our products will continue to benefit from the favorable shifts in allocations. The rotation into private debt has been supported by the attractiveness of stable cash flows and a continually diversifying sector, given the rise of distressed and opportunistic lending. Similarly, allocations
 
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to the GP minority stake strategy have been supported by the differentiated breadth of exposure to Private Equity and other alternative asset classes. The strategy offers stable and growing cash flows and diversification across vintages, geographies, sectors, asset classes and enterprise values. Our breadth of fund offerings across strategies, and leverage to alternative asset classes is well-primed to benefit from these positive asset allocation trends. We believe we can provide a compelling opportunity for investors looking to place capital in one or more
yield-oriented
strategies as they seek to optimize their portfolio construction and returns, and we expect these allocation trends to persist for institutional investors, particularly as defined benefit plans and insurers continue to face the following headwinds:
 
   
Pension plans
: The funding gap between pension assets and liabilities has continued to widen in recent years, which has exacerbated the difficulty of meeting rising pension obligations. The Geneva Association estimates a $41 trillion funding gap in pensions worldwide as of 2016. Pension funds have increased their allocations to alternative investments in an effort to enhance returns and narrow the existing gap. According to Preqin, public pension funds have been steadily increasing allocations to alternatives over the past decade, with the median allocation rising from 18% in 2010 to 30% in 2020.
 
   
Insurance companies
: Insurance companies have notably increased their allocation into alternatives over the past several years.
Low-rate
environments have pressured insurers to seek alpha generation through higher-return alternatives, in order to generate adequate yield to satisfy their asset-liability matching requirements. Alternatives have also gained favor as a way to further diversify insurance companies’ asset portfolios.
Increasing demand for alternative assets from retail investors
Retail investors are increasing their demand for alternative investment products as a means to diversify and achieve higher, differentiated returns. According to Boston Consulting Group, in 2019, the retail channel represented 42% of global AUM and was the fastest-growing segment of global AUM, at 19% growth both globally and in North America. We expect the growth in the retail channel to continue and generate further demand for alternative products. Cerulli Associates, a research firm focused in global asset management, estimates that registered investment advisers will produce the greatest increase in allocations to alternatives between 2019 and 2021E, increasing their allocation by 17%, while allocations to traditional products such as fixed income, variable annuities, mutual funds and money markets are expected to decline. Owl Rock has benefited from this demand, notably through the growth of ORCC II, which it is seeking to expand through the launch of ORCIC. Commitments from retail investors in Owl Rock’s retail products have increased to approximately $4.6 billion in 2020. In addition, we have begun to penetrate the
ultra-high-net-worth
and family office sectors in our GP Minority Investments strategy, which together represent $2.0 billion in total commitments. We have well-established and growing relationships with over 85 wealth management platforms, including several of the largest platforms in North America. We believe our current relationships and market presence will enable us to continue penetration of the growing demand within the retail channel. Additionally, we have a diversified, global capital base with a strong investor domestic foundation. Approximately 72% is from U.S. & Canada, 18% from APAC, 9% from EMEA and 1% from the rest of the world.
De-leveraging
of the global banking system
Since the Global Financial Crisis, there has been a significant
de-leveraging
of the global banking system. As the industry fell under more stringent capital requirements, stronger balance sheet discipline and higher standards of regulatory compliance, the commercial and investment banks increased their focus on large corporate companies, resulting in a reduction in the amount of capital provided to middle-market companies and private alternative asset management firms. This dynamic created an opportunity for
non-bank
lenders to service both groups, each of which comprise a large addressable market. We believe well-capitalized, reputable
 
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non-bank
direct lenders like ORCC, Dyal Financing Fund, and our other products have been able to help provide financing solutions to the middle-market and private alternative asset management firms, and fill the gap left by retreating, traditional lenders.
Our Competitive Strengths
High proportion of permanent capital
We have a high-quality capital base heavily weighted toward permanent capital. For the six months ended June 30, 2021, approximately 97% of our management fees were earned on AUM that we refer to as permanent capital, with the remainder (including private funds and managed accounts) in long-dated funds, which we define as funds with a contractual finite life of 5 years or more. Our BDCs, by nature, are
closed-end,
permanent (or potentially permanent) funds with no mandatory redemption and potentially unlimited duration once listed. The underlying funds of our GP Minority Equity Investments, GP Debt Financing,
Co-Investments and
Structured Equity and Professional Sports Minority Investments strategies are also structured as permanent capital vehicles. The high proportion of permanent capital in our AUM provides a stable base and allows for our AUM to grow more predictably without having reductions in our asset levels due to ordinary redemptions as with
non-permanent
fund structures. It also enables us to grow our fee revenue while leveraging our existing expense base. Our permanent capital base also lends stability and flexibility to our portfolio companies and partner managers, providing us the opportunity to grow alongside these companies and positioning us to be a preferred source of capital and the incumbent lender for
follow-ons
and other capital solutions to high-performing companies and GPs. As such, we are able to be a compelling partner for these firms as they seek capital to support their long-term vision and business development goals. The stability of our AUM base enables us to focus on generating attractive returns by investing in assets with a long-term focus across different periods in the market cycle.
Significant embedded growth in current AUM with
built-in
mechanisms for fee revenue increases
While we expect to continue our successful fundraising track record to supplement our existing capital base, our current AUM, predominately permanent capital in nature, already provides for significant embedded growth. Of our $62.4 billion AUM base, $42.8 billion represents our current
fee-paying
AUM. As of June 30, 2021, we have approximately $8.5 billion in AUM not yet paying fees. In addition, to the extent any of our BDCs become publicly listed, under the advisory agreements the advisory fees from the applicable BDC could potentially increase, subject to any fee waivers or deferral arrangements agreed to by us and the applicable BDC.
Stable earnings model with attractive margin profile
The majority of our revenues is generated from our management fees, which are contractual, fixed fees charged on
fee-paying
AUM. For the six months ended June 30, 2021, approximately 90% of our
pro forma
total revenue was comprised of management fees, which includes BDC Part I Fees from our BDCs. See “
Risk Factors—Risks Related to Our Business and Operations—The management fees of our BDCs and management fees and performance income of our private funds comprise substantially all of our revenues and a reduction in fees and performance income could have an adverse effect on our results of
operations and the level of cash available for distributions to our stockholders.
” and Note 1 to the
“Notes to the Unaudited Pro Forma Combined Financial Information.
 
   
Management fees are generally based upon a defined percentage of average fair value of gross assets (excluding cash) or average fair value of gross assets (excluding cash) plus undrawn commitments in the case of our BDCs, or fair value of gross assets (excluding cash), fair value of investments plus undrawn commitments, or invested capital in the case of our Private Debt funds and Managed Accounts, investment cost for our GP Debt Financing strategy, and capital committed during the

 
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investment period, and thereafter generally based on the cost of unrealized investments, in the case of our GP Minority Equity Investments strategy, or based upon a defined percentage of the aggregate acquisition value adjusted for the cost of investment in the case of our Dyal HomeCourt Fund. Our management fees also include BDC Part I Fees.
 
   
BDC Part I Fees refers to a quarterly incentive fee on the net investment income of ORCC, ORCC II, ORTF and ORCIC (and, should such BDC become publicly listed in the future, ORCC III), subject to a fixed hurdle rate. These fees are classified as management fees as they are predictable and recurring in nature, not subject to contingent repayment, and cash-settled each quarter.
Our predictable revenue base translates to a stable earnings model through a disciplined, efficient cost structure, producing strong profit margins and mitigating the risk of volatility in the profit margins. Expenses related to our Business Services Platform are generally charged across the Dyal Equity Funds. This allows our business model to maintain a disciplined cost structure and stable operating margins while continuing to provide our partner managers with operational support which is core to our value proposition. Additionally, certain costs associated with our middle/back office personnel supporting our products are charged back to the underlying Direct Lending funds.
Extensive, long-term relationships with a robust and vast network of alternative asset managers
We have extensive alternative asset manager relationships, which allow us to quickly and efficiently source potential GP and fund level investment opportunities. Since inception, on a combined basis, we have generated fund level deal flow from over 570 sponsors and completed over 60 equity and debt GP level transactions. We believe our deep relationships position us to receive “early looks” and “last looks” from alternative asset managers, which in turn, allow us to be highly selective in deciding which investments to pursue. We believe the depth and breadth of our relationships are predicated on several, differentiating features of our platform and that alternative asset managers value our team’s experience and deep focus both within products and across a broad spectrum of capital solutions. Our Direct Lending business has over 65 investment professionals with an average of 20 years of experience and our GP Capital Solutions business has 16 investment professionals with the seven investment team Managing Directors having an average of 19 years of experience. Our expansive set of product offerings allows us to provide flexible and creative solutions, and in tandem with our sizeable permanent capital base, enables us to provide access to scaled, sizeable commitments. Alternative asset managers also value our Business Services Platform, which provides strategic value-added services to our partner managers in five key areas: client development and marketing support, business strategy, product development, talent management, and operational advice. We also believe our independence positions us as a trusted partner to the alternative asset management community. Our ability to move quickly and with transparency provides execution certainty to these alternative asset managers. We expect our differentiated approach and broad spectrum of capital solution products will continue to strengthen our relationships, and we intend to further expand our network to fortify our position as a preferred partner for alternative asset managers and their portfolio companies.
Increasing benefits of scale
We believe our robust, scaled platform presents us with a competitive advantage which enables us to provide attractive solutions as a trusted partner and therefore continue to capture market share.
Within Direct Lending, there is significant competition for loans below $50 million, but there are much fewer lenders capable of providing solutions over $100 million. Our differentiated approach and scaled direct lending platform allow us to capitalize on opportunities across the sizing spectrum – from loans below $50 million to loans up to $1.0 billion. Our platform’s scale has demonstrated the ability to originate larger deals,

 
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while also providing diversification in our portfolios. We believe our scale enables us to broaden our deal funnel and provides us access to more investment opportunities than many other direct lenders. We have significant dry powder that allows us to provide scaled financing solutions, commit to full capital structures and support capital needs of borrowers. We believe being a total solutions provider also grants us a broader view of market opportunities, which allows us to continue operating as a market leader.
Within GP Minority Equity Investments, we have also established ourselves as a market leader, with a long track record, greatest amount of aggregate capital raised and largest number of publicly-announced deals. The size of our most recent fund, at $9.0 billion, is materially larger than the target $4 billion fund sizes of our main competitors. Our large base of stable capital not only enables participation in investments across the sizing spectrum, but also creates a competitive advantage by positioning us as a highly qualified buyer for minority stakes in large, established GPs. We believe we also gain access to proprietary deal flow as a result of the market’s confidence in our ability to execute on large investments expeditiously. While our GPs vary in size, the median AUM of the underlying private capital GPs in our GP Minority Equity Investments’ Fund III and Fund IV is $24.2 billion as of December 31, 2020. We believe our strong reputation in the market combined with our scale will continue to provide us with unique access to the most attractive sectors of the alternative asset management universe.
Many institutional investors are concentrating their relationships in an effort to partner with dependable, scaled firms with proven track records that they have a high level of comfort with. Our scaled platform enables us to remain a partner of choice not only for borrowers and GPs, but also for investors. We believe we will not only maintain, but continue to expand our share of the market as a result of the high level of confidence investors have in our scaled capital solutions platform.
Our ability to provide diversification and niche access points will continue to attract investor interest as they seek diversification and continue to value lower-correlation portfolio allocations.
Diverse, global and growing high-quality investor base
Our global investor base, across our strategies, is composed of long-standing institutional relationships as well as a growing retail investor base. Our institutional clients include large domestic and international public and private pension funds, endowments, foundations, family offices, sovereign wealth funds, asset managers and insurance companies. Our retail clients include prominent wealth management firms, private banks, and
high-net
worth investors. We continue to grow our investor relationships and have over 650 unique relationships as of June 30, 2021. As we continue to grow, we expect to retain our existing clients through our breadth of offerings. As of June 30, 2021, approximately 36% of our investors are invested in at least two products, with many increasing their commitment to their initial strategy and additionally committing additional capital across our other strategies. We believe our diligent management of investors’ capital, combined with our strong performance and increasingly diversified product offerings has helped retain and attract investors which has furthered our growth in fee paying AUM and facilitated further expansion of our strategies. We also believe the global nature of our investor base enables significant cross-selling opportunities between our products and strategies. We are committed to providing our clients with a superior level of service. We believe our client-focused nature, rooted in our culture of transparency will help us continue to retain and attract high quality investors to our platform.
Industry-leading management team with proven track record
We are led by a team of seasoned executives with significant and diverse experience at the world’s leading financial institutions. Our
best-in-class
management team has considerable expertise across the direct lending

 
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space and GP minority stake strategies, with a long track record of successful investing experience across multiple businesses and credit cycles. Members of our senior management have an average of over 25 years of experience and a strong track record in building successful businesses from the ground up and generating superior returns across market cycles. Additionally, our senior management team has experienced no turnover since the inception of our predecessor businesses which we believe has enabled us to build meaningful long-term relationships and partnerships with alternative asset managers as well as with our investors.
Alignment of interests with stakeholders
We consider the alignment of interests of our principals, executive management team and professionals with those of our investor base and unitholders to be core to our business. Our principals, executive management team and professionals have committed almost $1.9 billion of capital across our products, which aligns our interests with client interests. This arrangement only furthers the alignment of interests by reinforcing the long-term ownership of our equity by our
co-Founders,
investment professionals and other employees, while also motivating the continued high-performance and retention of our dedicated team of professionals.
Our Growth Strategy
We aim to continue applying our core principles and values that have guided us since inception in order to expand our business through the following strategies:
Organically grow our core business
We expect to continue to grow AUM in our existing strategies, and intend to launch additional, successor permanent capital vehicles and similar long-dated products in the future. We will benefit from significant embedded growth in our current AUM that can be realized as we continue to deploy and lever our existing capital base. As of June 30, 2021, we have approximately $8.5 billion in AUM not yet paying fees. As we realize this embedded growth, the conversion of available capital will create access to fee growth by increasing our
fee-paying
AUM. We believe these key attributes, in conjunction with our ability to raise successor products in existing strategies, will continue to play a key role in our growth profile. We also expect to enhance our AUM growth by expanding our current investor relationships and also continuing to attract new investors.
Expand our product offering
We plan to grow our platform by expanding our product offerings. We intend to take a diligent and deliberate approach to expansion, only adding products that are complementary, adjacent or additive to our current strategies. To date, our measured approach to growth through the addition of adjacent strategies has allowed us to continue delivering high performance to our dedicated investor base. We expect that as we continue to grow our existing strategies, there will be additional adjacencies that provide natural expansion opportunities. We believe through the disciplined expansion of our platform, we can continue to develop our breadth of offerings and further our position as a leading solutions provider. As we grow, we expect to attract new investors as well as leverage our existing investor base, as we have done with previous product launches.
Leverage complementary global distribution networks
Both Owl Rock and Dyal have demonstrated fundraising capabilities, that combined are well positioned to continue to penetrate the growing global market. Owl Rock’s fundraising success to date has been primarily focused within the United States, and Dyal’s global investor base is primarily located in North America, Asia Pacific, Europe, and the Middle East. We intend to continue fundraising both domestically and internationally. The

 
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favorable industry tailwinds are global in nature and we believe that there is additional market opportunity across the global landscape. As of June 30, 2021, 72% of our capital raised represents capital raised in the United States and Canada. We believe our strong network and track record of global fundraising has primed us to further extend our fundraising efforts across products and into additional international markets, as institutional investors across the globe are facing the same pressures and seeking the same positive attributes of the sector that have attracted domestic investors thus far. We also believe we have a significant opportunity to leverage Dyal’s global fundraising capabilities and investor relationships to cross-sell our Direct Lending products, as well as utilize Owl Rock’s existing domestic retail channel to cross-sell our GP Capital Solutions products while increasing our global capabilities. The global market represents a large, and relatively untapped opportunity for many of our products that we believe will facilitate our pursuit of international expansion in the coming years, and position us to enter into less-developed markets where we can be a significant first-mover and play a key role in defining the markets.
Enhance our distribution channels
As investors continue to increase their alternatives allocation in the search for yield, we believe we have the opportunity to continue diversifying our client base by attracting new investors across different channels. We intend to leverage our strong growth within and across our strategies as a means to add new investors to our growing family of funds. We have already begun executing on this strategy, with a notable influx of wealth management platforms and public and private pension fund investors in recent years. These additions helped further diversify our investor base which also includes, but is not limited to, insurance, family offices, endowments and foundations. In addition, we have continued to grow our relationships in the consultant community. We intend to be the premier direct lending and GP minority investing platform for investors across the institutional and retail distribution channels.
Deepen and expand strong strategic relationships with key institutional investors
We have established invaluable relationships with strategic partners, consultants and large institutional investors who provide us with key market insights, operational advice and facilitate relationship introductions. We pride ourselves on continuing to foster these relationships as they are fundamental to our business and reflect the strong alignment of interests that are highly valued by our partners. As of June 30, 2021, six institutional investors have committed at least $1.0 billion across our strategies. Seventeen institutional investors have committed at least $500 million, and 35 have committed at least $250 million across our strategies and 36% of our institutional investors are invested in more than one product. Our strategic partnerships allow us to craft customized solutions tailored to the objectives of our clients, while reflecting the breadth of our capabilities across our strategies. We also have important relationships with sponsors, wealth management firms, banks, corporate advisory firms, industry consultants and other market participants that we believe are of significant value. As we continue to grow, both organically and through product and geographic expansion, we will continue to pursue the addition of incremental key strategic partners.
Opportunistically pursue accretive acquisitions
In addition to our various avenues of organic growth, we intend to diligently evaluate acquisition opportunities that we believe would be value-enhancing to our current platform. These could include, but are not limited to, acquisitions that would expand the breadth of our product offerings, further develop our investor base, or facilitate our plans for global expansion. We believe that as the market continues to evolve, there will be numerous opportunities for us to consider, of which we intend to only pursue the most accretive acquisitions.

 
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Recent Developments
Business Combination Completed
On May 19, 2021, Altimar consummated the Business Combination pursuant to the terms of the BCA, which, among other things, provided for (i) Altimar changed its jurisdiction of incorporation by deregistering as an exempted company in the Cayman Islands and continuing and domesticating as a corporation under the laws of the State of Delaware (the “Domestication”), upon which Altimar changed its name to “Blue Owl Capital Inc.” (“Blue Owl”), (ii) Blue Owl’s wholly-owned subsidiary, Blue Owl Capital GP, LLC (“Blue Owl GP”), began serving as the general partner of two Delaware limited partnerships: Blue Owl Holdings LP (“Blue Owl Holdings”) and Blue Owl Carry LP (“Blue Owl Carry” and, together with Blue Owl Holdings, the “Blue Owl Operating Group”), (iii) Blue Owl Holdings acquired (a) Owl Rock’s business of sponsoring, offering and managing all existing and future Owl Rock business development companies, funds and managed accounts (the “Owl Rock Funds”) and (b) the Dyal Capital Partners division of Neuberger (“Dyal”), including the business and operations related to sponsoring, offering and managing the Dyal funds and any successor fund thereof and Dyal’s business services platform and (iv) Blue Owl Carry acquired 15% (net of certain investor and other third party arrangements) of the carried interest, performance fees and/or incentive fees or allocations arising in respect of the existing and future Owl Rock Funds (other than the fees of the Owl Rock business development companies, 100% of which (net of certain investor and other third party arrangements) were contributed to Blue Owl Holdings as described in clause (iii)) and in respect of future Dyal funds (specifically excluding Dyal
Funds I-V for
which carried interest is not being contributed). Pursuant to the terms of the BCA, the Blue Owl Operating Group, directly or indirectly, holds substantially all of the consolidated assets and business of Blue Owl.
At the Closing of the Business Combination, Blue Owl’s ticker symbols on The New York Stock Exchange for its Class A Shares and warrants to purchase Class A Shares were changed to “OWL” and “OWL.WS,” respectively. For more information regarding the Business Combination, see “
Certain Relationships and Related Party Transactions—The Business Combination
.”
Senior Notes Offering
On June 10, 2021, Blue Owl Finance LLC, an indirect subsidiary of Blue Owl, completed an offering of $700,000,000 aggregate principal amount of 3.125% Senior Notes due 2031 (the “notes”). The notes will be fully and unconditionally guaranteed on a joint and several basis by each of Blue Owl Holdings, Blue Owl Carry, Owl Rock Group, Dyal Capital Holdings LLC, Owl Rock Capital GP Holdings LP and Dyal GP Holdings LLC. The Company used the net proceeds from the offering to (i) repay all outstanding borrowings under the Company’s existing term loan facility and (ii) to pay fees and expenses in connection therewith and of the offering. Any remaining net proceeds will be used for general corporate purposes, including to fund any future strategic acquisitions or related transactions and growth initiatives.
Agreements of Purchase and Sale
On September 20, 2021, the Company entered into an Agreement of Purchase and Sale, dated as of September 20, 2021, by and among the Company and Blue Owl Capital Holdings LP on the one hand, and each of Koch Companies Defined Benefit Master Trust (“Koch Pension”), Koch Financial Assets III, LLC (“KFA”) and Illiquid Markets 1888 Fund, LLC (“Illiquid Markets” and, together with Koch Pension and KFA, each a “Dyal Fund Investor”), on the other hand (each, a “Purchase and Sale Agreement”). Pursuant to the terms of each Purchase and Sale Agreement, Dyal Fund Investors relinquished their respective rights to receive management fee shares with respect to Dyal Capital Partners III (A) LP, Dyal Capital Partners III (B) LP, Dyal Capital Partners IV (A) LP, Dyal Capital Partners IV (B) LP, Dyal Capital Partners IV (C) LP, Dyal Capital Partners V (A) LP, Dyal Capital Partners V (B) LP and/or Dyal Finance Investors (US) LP, as well as feeder funds, alternative vehicles, parallel funds and

 
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future investment funds, accounts, vehicles and/or other similar arrangements investing alongside therewith, or formed in succession thereof. Applicable Dyal Fund Investors also waived the respective competing fund covenants in respect of each of Dyal Capital Partners V (A) LP, Dyal Capital Partners V (B) LP and/or Dyal Finance Investors (US) LP, as applicable, and agreed to subscribe for incremental commitments to Dyal Capital Partners V (A) LP and/or Dyal Capital Partners V (B) LP. In exchange for the foregoing, (a) the Company issued its Class A Shares in the amount of (i) 18,799,854 shares to Koch Pension, (ii) 7,167,817 shares to KFA and (iii) 3,733,342 shares to Illiquid Markets, and (b) Capital Holdings paid a cash purchase price in the amount of (i) $36.2 million to Koch Pension, (ii) $13.8 million to KFA and (iii) $7.5 million to Illiquid Markets. In addition, the Company entered into Registration Rights Agreements, each dated as of September 20, 2021, with each of (i) Koch Pension, (ii) KFA and (iii) Illiquid Markets (each, a “Registration Rights Agreement”), that provides each Dyal Fund Investor with certain registration rights. The Registration Rights Agreements will, among other things, require the Company to use its reasonable best efforts to file a resale shelf registration statement registering each Dyal Fund Investor’s resale of the shares of the Company’s Class A Shares and will provide each Dyal Fund Investor with certain customary piggyback registration rights with respect to such shares of Class A common stock, subject to the limitations set forth therein.

 
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Organizational Structure
The simplified diagram below (which omits certain intermediate holding companies) depicts our legal organizational structure. Ownership information in the diagram below is presented as of June 30, 2021. Blue Owl Capital, Blue Owl GP, Blue Owl Holdings and Blue Owl Carry are organized in the state of Delaware. Blue Owl Capital is a holding company and consolidates the financial results of its direct subsidiaries, their consolidated subsidiaries and certain consolidated funds.
 
 
*
Economic interests and voting rights do not include Class A Shares issuable upon the exercise of warrants or shares of common stock or Common Units issuable in respect of Seller Earnout Securities, as applicable, or shares issuable in respect of the special incentive award. For further detail regarding the special incentive award, refer to “
Blue Owl’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Expenses
.”
(1)
Owl Rock Principals and Dyal Principals collectively represent 90% of the voting interests in Blue Owl.
(2)
Ownership percentages based on ownership of common units of Owl Rock Capital Feeder LLC.
(3)
Class C Shares and Class D Shares represent
non-economic
interests in Blue Owl (other than the right to receive the par value of such shares in connection with the liquidation, dissolution or winding up of Blue Owl) and are exchangeable for Class A Shares and Class B Shares, respectively, together with an equal number of Common Units.
Blue Owl’s outstanding common stock consists of five classes: (i) economic,
“low-vote”
Class A Shares, (ii) economic, “high-vote” Class B Shares,
(iii) non-economic
(other than the right to receive par value in the event of a liquidation, dissolution or winding up of Blue Owl),
“low-vote”
Class C Shares,
(iv) non-economic
(other than the right to receive par value in the event of a liquidation, dissolution or winding up of Blue Owl), “high-vote” Class D Shares, and (v) economic (upon conversion to Class A Shares),
“no-vote”
(other than as

 
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required by law) Class E Shares, which shall consist of two series: Series
E-1
Shares and Series
E-2
Shares. Each Class A Share and Class C Share is entitled to one vote per share, with the Class C Shares being held by holders of Common Units, other than the Owl Rock Principals and the Dyal Principals (each of whom will hold Class D Shares immediately following the Closing). Together, the Class B Shares and Class D Shares will represent 90% of the total voting power of all shares of capital stock of Blue Owl (including shares issued in the future) until the Sunset Date. On the Sunset Date, all Class B Shares and Class D Shares will automatically convert into Class A Shares or Class C Shares, respectively.
Until the Sunset Date, as holders of our Class B Shares and Class D Shares (as applicable), the Owl Rock Principals and Dyal Principals will be the beneficial owners of 90% of the voting control of our outstanding capital stock, as a result of which the Owl Rock Principals and Dyal Principals will have the power to elect a majority of Blue Owl’s directors.
Corporation Information
Blue Owl Capital Inc. is a Delaware corporation. Our principal executive offices are located at 399 Park Avenue, 38th Floor, New York, NY 10022 and our telephone number at that address is
(212) 419-3000.
Our website is located at www.blueowl.com. Our website and the information contained on, or accessed through, our website are not part of this prospectus, and you should rely only on the information contained in this prospectus when making a decision as to whether to invest in the notes.

 
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The Offering
 
Issuer
Blue Owl Capital Inc.
 
Class A Shares offered under the Plan.
Up to 2,500,000 shares of common stock
 
Use of proceeds
To the extent that shares of common stock used to fund the Plan are purchased on the open market, there will be no proceeds to us from the purchase of those shares. The net proceeds to us from the sale of newly issued shares of common stock issued under the Plan will be used for general corporate purposes.
 
Market for our shares of common stock
Our Class A Shares are currently listed on the NYSE under the symbol “OWL.”
 
Risk factors
Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “
Risk Factors
” and elsewhere in this prospectus.

 
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SELECTED HISTORICAL CONSOLIDATED AND
COMBINED FINANCIAL INFORMATION OF BLUE OWL
The following table shows summary historical consolidated and combined financial information of Blue Owl for the periods and as of the dates indicated.
The summary historical consolidated and combined financial information of Blue Owl as of and for the years ended December 31, 2020, 2019 and 2018 was derived from the historical consolidated and combined financial statements of Owl Rock included elsewhere in this prospectus. The summary historical interim financial information of Blue Owl as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 was derived from the unaudited interim consolidated and combined financial statements of Owl Rock included elsewhere in this prospectus. The following summary historical financial information should be read together with the consolidated financial statements and accompanying notes and “
Blue Owl’s Management’s Discussion and Analysis of Financial Condition and Results of Operations
” appearing elsewhere in this prospectus. The summary historical financial information in this section is not intended to replace Blue Owl’s consolidated and combined financial statements and the related notes. Blue Owl’s historical results are not necessarily indicative of Blue Owl’s future results, and Blue Owl’s results as of and for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
As explained elsewhere in this prospectus, the financial information contained in this section for the periods prior to the Business Combination relates to Owl Rock, prior to and without giving pro-forma effect to the impact of the Business Combination and, as a result, the results reflected in this section may not be indicative of the results of Blue Owl going forward. See the section entitled “
Unaudited
Pro Forma Combined Financial Information
” included elsewhere in this prospectus.
 
($ amounts in thousands)
 
June 30,
2021
(Unaudited)
   
December 31,
2020
   
December 31,
2019
   
December 31,
2018
 
Consolidated statements of financial condition data
       
Total assets
  $ 6,872,237     $ 121,597     $ 56,718     $ 44,449  
Debt obligations, net
    683,338       356,386       287,104       29,676  
Total liabilities
    2,488,490       622,758       407,215       117,054  
Member’s deficit prior to the Business Combination
    —         (507,687     (352,756     (69,916
Total shareholders’ equity attributable to Blue Owl Capital Inc.
    1,099,762       —         —         —    
Non-controlling interests
    3,283,985       6,526       2,259      
(2,689

Total shareholder’s equity (deficit)
    4,383,747       (501,161     (350,497     (72,605
 
   
For the Six
Months Ended
June 30,
   
For the Years Ended December 31,
 
($ amounts in thousands)
 
2021
   
2020
   
2020
   
2019
   
2018
 
   
(Unaudited)
                   
Consolidated statements of operations data
     
Total revenues, net
  $ 287,484     $ 89,766     $ 249,815     $ 190,850     $ 121,249  
Total expenses
    1,357,265       99,259       308,542       163,483       122,888  
Other income (loss)
    (507,236     (11,880     (23,816     (6,662     (1,128
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) before income taxes
    (1,577,017     (21,373     (82,543     20,705       (2,767
Income tax (benefit) expense
    (29,011     (93     (102     240       (180
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) including
non-controlling
interests
    (1,548,006     (21,280     (82,441     20,465       (2,587
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net (income) loss attributed to
non-controlling
interests
    1,225,076       1,777       4,610       2,493       4,635  
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) attributable to Blue Owl Capital Inc. (after May 19, 2021)/Owl Rock Capital (prior to May 19, 2021)
  $ (322,930   $ (19,503   $ (77,831   $ 22,958     $ 2,048  
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
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MARKET PRICE, TICKER SYMBOL, AND DIVIDEND INFORMATION
Blue Owl’s Class A Shares and public warrants are listed for trading on NYSE under the symbols “OWL” and “OWL.WS,” respectively.
The closing price of the Class A Shares and the warrants to purchase Class A Shares on October 1, 2021 was $15.59, and $4.86, respectively. Holders of Class A Shares and warrants should obtain current market quotations for their securities.
Blue Owl has not paid any cash dividends on its Class A Shares to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends will be within the discretion of the Board.

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RISK FACTORS
In addition to the other information contained in this prospectus, the following risks have the potential to impact the business and operations of Blue Owl. These risk factors are not exhaustive and all investors are encouraged to perform their own investigation with respect to the business, financial condition and prospects of Blue Owl. Unless otherwise indicated or the context otherwise requires, references in this “Risk Factors” section to “Blue Owl,” “we,” “our,” “us” and other similar terms refer to Blue Owl Capital Inc. and its consolidated subsidiaries, including Owl Rock and Dyal and each of their respective subsidiaries, after giving effect to the Business Combination.
Risks Related to Our Business and Operations
The
COVID-19
pandemic has caused severe disruptions in the U.S. and global economy, has disrupted, and may continue to disrupt, industries in which we, our funds and our funds’ portfolio companies operate and could potentially negatively impact us, our funds or our funds’ portfolio companies.
The
COVID-19
pandemic has adversely impacted global commercial and economic activity and contributed to significant volatility in certain equity and debt markets. The impact of the outbreak continues to develop and many countries, including the United States, and states and municipalities in which we and our funds’ portfolio companies operate, have instituted quarantines, prohibitions on travel and the closure of offices, businesses, schools, retail stores and other public venues. Individual businesses and industries are also implementing similar precautionary measures. Those measures, as well as the general uncertainty surrounding the dangers and effects of
COVID-19,
have created significant disruption in supply chains and economic activity and are having a particularly adverse impact on transportation, hospitality, tourism, entertainment and other industries, including industries in which certain of our funds, borrowers, partner managers and their respective portfolio companies operate and invest. The effects of
COVID-19
have led to significant volatility and it is uncertain how long this volatility will continue. As
COVID-19
continues to spread, the potential effects, including a global, regional or other economic recession, are increasingly uncertain and difficult to assess. The continued spread of the virus globally could lead to a protracted world-wide economic downturn, the effects of which could last for some period after the pandemic is controlled and/or abated.
The extent of the impact of the
COVID-19
pandemic on us and our funds’ operational and financial performance will depend on many factors, including the duration and scope of the public health emergency, the actions taken by governmental authorities to contain its financial and economic impact, the continued or renewed implementation of travel advisories and restrictions, the widespread availability of a vaccine, the impact of the public health emergency on overall supply and demand, goods and services, consumer confidence and levels of economic activity and the extent of its disruption to global, regional and local supply chains and economic markets, all of which are uncertain and difficult to assess. Significant volatility and declines in valuations in the global markets as well as liquidity concerns may impair our ability to raise funds or deter fund investors from investing in new or successor funds that we are marketing. Actions taken in response to the
COVID-19
pandemic (whether imposed by governments or adopted by businesses or individuals) may give rise to difficulty marketing and raising new or successor funds due to
shelter-in-place
orders, travel restrictions and social distancing requirements implemented or undertaken in response to the
COVID-19
pandemic, which may lower or delay anticipated fee revenues. For existing funds, those actions may slow the pace of investment activity, by, for example, hindering the diligence process. This, in turn, could adversely affect the timing of raising capital for new or successor funds, the terms that might be offered and the management fees we earn on our funds that generate fees based on invested (and not committed) capital. In addition, cash flows from management fees may be impacted by, among other things, a failure of our clients to meet capital calls. Borrowers of loans and other credit instruments made by our funds may be unable to make their loan payments on a timely basis and meet their loan covenants, resulting in a decrease in value of our funds’ credit investments and lower than expected returns.
 
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We are continuing to monitor the impact of
COVID-19
and related risks, including risks related to the ongoing spread of
COVID-19
and efforts to mitigate the spread and deployment of vaccines. However, the rapid development and fluidity of the situation precludes any prediction as to its ultimate impact on us. If the spread and related mitigation efforts continue, our business, financial condition, results of operations and cash flows could be materially adversely affected. The impact of
COVID-19
could have the effect of heightening many of the other risk factors described herein.
Difficult market and political conditions may reduce the value or hamper the performance of the investments made by our funds or impair the ability of our funds to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition.
Our businesses are affected by conditions and trends in the global financial markets and the global economic and political climate relating to, among other things, interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to our taxation, taxation of our clients and the possibility of changes to regulations applicable to alternative asset managers), trade policies, commodity prices, tariffs, currency exchange rates and controls, political elections and administration transitions, and national and international political events (including wars and other forms of conflict, terrorist acts, and security operations) and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and pandemics. Those factors are outside of our control and may affect the level and volatility of credit and securities prices and the liquidity and value of fund investments, and we and our funds may not be able to or may choose not to manage our exposure to these conditions.
During periods of difficult market conditions or slowdowns, which may be across one or more industries, sectors or geographies, companies in which our funds invest may experience decreased revenues, financial losses, credit rating downgrades, difficulty in obtaining access to financing and increased funding costs. During such periods, those companies may also have difficulty in pursuing growth strategies, expanding their businesses and operations (including to the extent that they are partner managers, raising additional capital) and be unable to meet their debt service obligations or other expenses as they become due, including obligations and expenses payable to our funds. Negative financial results in our funds’ portfolio companies may reduce the net asset value of our funds, result in the impairment of assets and reduce the investment returns for our funds, which could have a material adverse effect on our operating results and cash flow or ability to raise additional capital through new or successor funds. In addition, those conditions would increase the risk of default with respect to credit-oriented or debt investments by our funds.
The management fees of our BDCs and management fees and performance income of our private funds comprise substantially all of our revenues and a reduction in fees and performance income could have an adverse effect on our results of operations and the level of cash available for distributions to our stockholders.
The management fees we received from our BDCs and Owl Rock private funds and managed accounts comprised approximately 50% of our
pro forma
revenue and the management fees from the legacy Dyal funds comprised approximately 40% of our
pro forma
revenue in the three months ended March 31, 2021. All management fees received are net of any amounts payable to third parties pursuant to any revenue share or other Exempted Performance Income.
Owl Rock Funds
The investment advisory agreements we have with each of our BDCs categorize the fees we receive as: (a) base management fees, which are paid quarterly and generally increase or decrease based on the average fair value of our BDC’s gross assets (excluding cash and cash equivalents) or average fair value of gross assets (excluding cash) plus undrawn commitments, (b) fees based on our BDC’s net investment income (before Part I Fees and Part II Fees), which are paid quarterly (“BDC Part I Fees”) and (c) fees based on our BDC’s net capital
 
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gains, which are paid annually (“BDC Part II Fees”). We classify the BDC Part I Fees as management fees because they are predictable and recurring in nature, not subject to contingent repayment and generally cash- settled each quarter. If any of our BDCs’ gross assets or net investment income (before BDC Part I Fees and BDC Part II Fees) were to decline significantly for any reason, including, without limitation, due to fair value accounting requirements, the poor performance of its investments or the inability to obtain or maintain borrowings for each of our BDCs, the amount of the fees we receive from our BDCs, including the base management fee and the Part I Fees, would also decline significantly, which could have an adverse effect on our revenues and results of operations. In addition, because the BDC Part II Fees are not paid unless each of our BDCs achieves cumulative aggregate realized capital gains (net of cumulative aggregate realized capital losses and aggregate unrealized capital depreciation), each of our BDCs’ Part II Fees payable to us are variable and not predictable. Our advisory agreements typically provide that the rates at which we earn advisory fees from our BDCs increase after our BDCs are publicly listed (where before the listing the advisory fees typically are a reduced management fee with a reduced or no BDC Part I or II fees). If our BDCs do not become publicly listed for any reason, including the poor share performance of our BDCs, Blue Owl will not benefit from this increase, and those BDCs may need to return their capital to investors, further reducing our management fee income. We may also, from time to time, (a) waive or voluntarily defer any fees payable to us by our BDCs or any BDCs that we may manage after the date hereof and (b) restructure any existing fee waivers granted by us to our BDCs so that such of our BDCs will be obligated to pay fee amounts that are less than the full fee amounts owed to us pursuant to the terms of the applicable advisory agreement between us and such BDC, and the duration and extent of such waivers and deferrals in each of (a) and (b) may need to be significant to support continued fundraising. In addition to those arrangements, we have entered into and in the future may enter into expense supporting arrangements with certain of our BDCs where we pay or reimburse certain expenses of our BDCs in order to support their target dividend payments.
Our investment advisory and management agreements with our BDCs renew for successive annual periods subject to the approval of the applicable BDC’s board of directors or by the affirmative vote of the holders of a majority of such BDC’s outstanding voting securities. In addition, as required by the Investment Company Act, the investment advisory agreements with our BDCs generally may be terminated without penalty upon 60 days’ written notice to the other party. Termination or
non-renewal
of any of these agreements would reduce our revenues significantly and could have a material adverse effect on our financial condition.
Each of the existing Owl Rock funds that is not a BDC has entered into an investment advisory agreement whereby we generally receive base management fees from the inception of such fund through the liquidation of such fund. For each Owl Rock fund that is not a BDC, the base management fee is typically based on a percentage of gross asset value (which includes the portion of such investments purchased with leverage).
Because each of the Owl Rock funds that is not a BDC has an end date for paying management fees, our revenues will decline in respect of such funds if we are unable to successfully raise successor funds that replace the management fee payments that terminate on the funds or such successor funds do not generate fees at the same rate. Additionally, given that such management fees are based on gross asset value, the management fee received in respect of such fund will be reduced when a fund realizes investments or if the value of an investment is impaired. During the investment period of such Owl Rock fund, such fund expects to actively recycle capital into new investments, which would have the impact of replacing investments that have been realized during the investment period, but there are many factors that may limit our ability to effectively recycle capital and realize the full fee potential of any particular fund. For many Owl Rock funds, the gross asset value used as the base for the management fee includes investments purchased with leverage. If we are unable to obtain leverage at the expected level, or at all, this will have a negative impact on our ability to realize the full fee potential of any particular fund.
Further, our right to receive management fees can be impaired by certain actions of investors in an Owl Rock fund that is not a BDC. Owl Rock funds that are not BDCs generally provide investors with the right to
 
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terminate such fund on both a cause basis and a no fault basis, each with a super-majority vote. If the investors would exercise their right to vote for an early termination, we will continue to receive management fee through the liquidation of such fund, but we may face pressure to liquidate investments earlier than we otherwise believe is appropriate to maximize the value of such investment. Owl Rock funds in the Opportunistic Lending strategy also provide investors with the right to remove the general partner of such fund on a cause basis with a super- majority vote. Upon the removal of the general partner of a fund becoming effective, the investment advisory contract in respect of such fund will cease to exist and our rights to payment of management fee will terminate.
The general partner or an affiliate of certain of our Owl Rock funds that are not BDCs may be entitled to receive carried interest from a fund based on cumulative fund performance to date. Carried interest entitles the general partner (or an affiliate) to a special allocation of income and gains from a fund, and is typically structured as a net profits interest in the applicable fund. Carried interest is generally calculated on a “realized” basis, and the recipient is generally entitled to a carried interest based upon the net realized income and gains often taking into account certain unrealized losses generated by such fund. Net realized income/gains or loss is not netted between or among funds.
If the investments we make on behalf of our funds or separate accounts perform poorly, we may suffer a decline in our incentive fees, which may limit our ability to pay dividends. For most funds, the carried interest is subject to a preferred return of approximately 8%, subject in most cases to a
catch-up
allocation to the general partner. Generally, if at the termination of a fund, the fund has not achieved investment returns that exceed the preferred return threshold or the general partner receives net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, the general partner will be obligated to repay an amount equal to the extent the previously distributed carried interest exceeds the amounts to which the general partner is entitled. These repayment obligations may be related to amounts previously distributed to us and our senior professionals. Additionally, similar to management fees as described above, if the fund is terminated early by the investors or the general partner is removed by the investors of a fund, this may have a negative impact on the value of investments, which will then reduce the carried interest allocations to the general partner, and, in the instance where the general partner is removed for cause, a penalty reduction may be assessed against any remaining carried interest. Amounts that could otherwise go to satisfy dividend payments may be deferred or reserved to satisfy potential repayment obligations. In addition, although Blue Owl is only entitled to 15% of this performance income, Blue Owl professionals will be entitled to the balance of this revenue stream outside of the company. To the extent that such amounts diminish, it may be more difficult or more costly to retain such professionals.
Our cash flow may fluctuate significantly due to the fact that the timing and amount of carried interest allocations or incentive fees generated by Owl Rock Funds is uncertain. Currently the Owl Rock funds with a carried interest allocation have distribution waterfalls that require that, in respect of an investor, such investor has received a return of its contributions plus its preferred return on such contributions prior to the general partner being entitled to a carried interest allocation. As such, carried interest is measured on a cumulative performance of a fund and is not expected, to accrue, if at all, to the general partner until the latter portion of the fund’s life cycle. We cannot predict when, or if, any realization of investments will occur, and thus, we cannot predict the timing or amounts of carried interest distributions to us. If we were to receive a distribution of carried interest in a particular quarter, it may have a significant impact on our results for that particular quarter, which may not be replicated in subsequent quarters. As a result, achieving steady growth in net income and cash flow on a quarterly basis may be difficult, which could in turn lead to large adverse movements or general increased volatility in the price of our common stock.
Dyal Funds
Each Dyal Equity Fund has entered into an investment advisory agreement whereby we receive management fees for a set period of time (10 years following the final closing for each of Dyal Fund I and Dyal
 
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Fund II, 15 years following the initial or final closing of Dyal Fund III and Dyal Fund IV, respectively, and approximately 17 years from the initial closing of Dyal Fund V). For each Dyal Equity Fund, the management fee is initially a set percentage of capital committed by investors, and then, following a step down event (generally either the end of the investment period or, for certain funds, when the fund’s commitments become substantially invested or drawn), is adjusted to a lower percentage of the fund’s cost of unrealized investments, subject to impairment losses for certain funds. We are also entitled to receive from the Dyal Equity Funds reimbursements of our costs for maintaining our Business Services Platform, which reimbursement payments do not offset our management fees.
Because each Dyal Equity Fund has an end date for paying management fees, our revenues will decline in respect of such strategy if we are unable to successfully raise successor funds that replace the management fee payments that terminate on the older Dyal Equity Funds, or successor funds do not generate fees at the same rate. Following the management fee step down event for a Dyal Equity Fund, the management fee we receive will be reduced when a fund realizes investments or in certain cases when there are permanent changes to the cost basis of unrealized investments. While those funds are not required to realize assets as of any date, there is an obligation to explore liquidity strategies with respect to a fund, and should a liquidity strategy event occur prior to the management fee end date, it could cause a reduction in the amount of management fees we are otherwise entitled to receive. Further, any realization of assets will be within the control of certain of our employees and those persons may be incentivized through the allocation of carried interest to effect a realization earlier than one otherwise would expect had carried interest not been applicable.
Further, our right to receive management fees can be impaired by certain actions of investors in an existing or future Dyal Equity Fund. In addition to the investors right to remove us as manager of a fund for cause, the investors (with a supermajority consent) generally have the right to create an early step down event with respect to a fund (thereby reducing the management fees payable), including upon the loss of key people with respect to the fund, or in the case of Dyal Fund II, with majority consent in conjunction with an early dissolution of the fund. In the case of Dyal Fund I and Dyal Fund II, the investors (with majority consent for Dyal Fund I and supermajority consent for Dyal Fund II) may terminate us as manager without cause. We cannot be removed without cause as manager of Dyal Fund III, Dyal Fund IV or Dyal Fund V.
Our revenues with respect to our Dyal Financing Fund include both a management fee (which is a set percentage of the acquisition cost of investments in the fund) and incentive fees that are a percentage of net income before realized and unrealized gains and losses subject to a preferred return and a percentage of any net realized capital gains (net of cumulative aggregate realized capital losses and aggregate unrealized capital depreciation). Pursuant to the terms of the Business Combination, 85% of the incentive fees in respect of the GP Debt Financing Strategy will be paid to certain of our stockholders, principals and employees, and 15% will be retained by Subsidiaries of Blue Owl (net of certain investor and other third party arrangements). If any of the assets were to suffer impairment losses affecting their cost basis or income accruals for any reason, including, due to borrower defaults, the amount of the fees we receive from our Dyal Financing Fund would also decline significantly. Further, after an initial lock up period, investors may issue redemption notices with respect to their interests; as such interests are redeemed, the fees will decrease unless we are able to find new investors to replace those redeeming.
Our revenues with respect to our Dyal HomeCourt Fund include both a management fee (which is a set percentage of the adjusted cost of investments in the fund) and incentive allocations that are a percentage of net appreciation subject to a preferred return. Pursuant to the terms of the Business Combination, 85% of the incentive fees in respect of the Dyal HomeCourt Fund will be paid to certain of our stockholders, principals and employees, and 15% will be retained by Subsidiaries of Blue Owl (net of certain investor and other third party arrangements, including to the NBA). If any of the NBA Teams in which the Dyal HomeCourt Fund invests were to suffer losses, the amount of the fees and incentive amounts we receive from our Dyal HomeCourt Fund would also decline significantly. Further, after an initial lock up period, investors may issue redemption notices with
 
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respect to their interests; as such interests are redeemed, the fees and incentive amounts will decrease unless we are able to find new investors to replace those redeeming.
Notwithstanding the formulas for calculating management fees provided in the governing documents for our funds, Dyal has provided (and expects to provide in the future) discounts to investors on such fees based on the size of their commitments to the fund (or Dyal funds generally), the timing of their commitments to the fund or other factors that Dyal deems relevant. Certain investors are effectively given management fee discounts through Specified Interests and discounts with respect to carried interest or performance income through the grant of participation rights.
We also receive fee income for providing services to certain portfolio companies of Owl Rock funds and other products. Such services include arrangement, syndication, origination, structuring analysis, capital structure and business plan advice and other services. Certain types of transaction-related fees are required to be distributed to the Owl Rock funds and other products under the terms of our
Co-investment
Exemptive Order, as discussed in “
Conflicts of interest may arise in connection with
co-investments
between our private funds and our BDCs
” below, or are required to be distributed to investors in Owl Rock funds and other products or offset against management fees that would otherwise be payable pursuant to the terms of the governing agreements of the relevant vehicles, while other types of related fees may be retained by us and contribute to our revenues and, ultimately, to our net income. We may decide not to seek those fees. Our ability to receive and retain those fees, and to continue to receive and retain those fees in the future, is dependent on the terms we negotiate with investors in Owl Rock funds and other products, our ability to successfully negotiate for those fees with underlying portfolio companies, the permissibility of receiving and retaining those fees under the relevant legal and regulatory frameworks, and our business determination to negotiate for those fees. As a result, any change to the willingness of portfolio companies to bear those fees, the terms of Owl Rock funds and other products that permit us to receive and retain those fees, the legal and regulatory framework in which we operate or our willingness to negotiate for those fees with portfolio companies of Owl Rock funds and other products, could result in a decrease to our revenues and net income, and ultimately decrease the value of our common stock and our dividends to our shareholders. In addition, the fees generated are typically dependent on transaction frequency and volume, and a slowdown in the pace or size of investments by our funds could adversely affect the amount of fees generated.
Our growth depends in large part on our ability to raise new and successor funds. If we were unable to raise such funds, the growth of our FPAUM and management fees, and ability to deploy capital into investments, earning the potential for performance income, would slow or decrease, all of which would materially reduce our revenues and cash flows and adversely affect our financial condition.
A significant portion of our revenue from our private funds in any given period is dependent on the size of our FPAUM in such period and fee rates charged on the FPAUM. We may not be successful in procuring investment returns and prioritizing services that will allow us to maintain our current fee structure, to maintain or grow our FPAUM, or to generate performance income. A decline in the size or pace of growth of FPAUM or applicable fee rates will reduce our revenues. A decline in the size or pace of growth of FPAUM or applicable fee rates may result from a range of factors, including:
 
   
Volatile economic and market conditions, which could cause fund investors to delay making new commitments to alternative investment funds or limit the ability of our existing funds to deploy capital;
 
   
Intense competition among alternative asset managers may make fundraising and the deployment of capital more difficult, thereby limiting our ability to grow or maintain our FPAUM. Competition may be amplified by changes in fund investor allocations away from alternative asset managers;
 
   
Continuation or amplification of general trends within the investment management industry towards lower fees including through direct reductions, deferrals, rebates or other means, which may also result in our competitors operating based on fee structures with which we are unable to successfully compete.
 
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In response to those trends, we may, in certain cases, lower the fees we charge or grant fee reductions or holidays for a period of time in order to remain competitive;
 
   
A change in terms for how we assess management fees for certain of our funds or strategies;
 
   
Poor performance of one or more of our funds, either relative to market benchmarks or in absolute terms (e.g., based on market value or net asset value of our BDC’s shares), or compared to our competitors may cause fund investors to regard our funds less favorably than those of our competitors, thereby adversely affecting our ability to raise new or successor funds;
 
   
Our funds may engage in strategic transactions or other dispositions that reduce the cost basis upon which we charge management fees with respect to one or more of our funds. For example, a fund may sell all or a portion of its interests in portfolio companies that causes such fund’s management fee base to be reduced; and
 
   
Certain of our funds contain “key person” provisions or other provisions allowing investors to take actions following certain specified events. The occurrence of one or more of those events prior to the end of a fund’s investment period could result in the termination of a fund’s investment period and a material decrease in the management fees paid by such fund or, in certain cases, cessation of the funds.
Our funds may suffer losses if our partner managers are unable to raise new funds or grow their AUM.
As our investments in partner managers are intended to be held for an indefinite duration, we are dependent upon the ability of our partner managers to execute successfully their investment program and grow their assets under management. In the event that a partner manager is unable to grow their assets under management or such partner manager’s investment returns fail to meet expectations, the returns attributable to such investment may be reduced or we may suffer a loss on such investment. A partner manager’s failure to grow assets under management may result from a range of factors common to asset managers, including factors to which we are subject ourselves, or specific factors attributable to its business including the departure of key persons, the inability of such partner manager to diversify into new investment strategies, investment performance and regulatory enforcement actions.
The investment management business is intensely competitive.
The investment management business is intensely competitive, with competition based on a variety of factors, including investment performance, business relationships, quality of service provided to clients, fund investor liquidity, fund terms (including fees and economic sharing arrangements), brand recognition and business reputation. Maintaining our reputation is critical to attracting and retaining fund investors and for maintaining our relationships with our regulators, sponsors, partner managers, potential
co-investors
and joint venture partners, as applicable. Negative publicity regarding our company, our personnel or our partner managers could give rise to reputational risk that could significantly harm our existing business and business prospects. We are also currently subject to and may be subject in the future to litigation between ourselves and our partner managers, which may harm our reputation.
Similarly, events could occur that damage the reputation of our industry generally, such as the insolvency or bankruptcy of large funds or a significant number of funds or highly publicized incidents of fraud or other scandals, any one of which could have a material adverse effect on our business, regardless of whether any of those events directly relate to our funds or the investments made by our funds.
Our Direct Lending and GP Capital Solutions products compete with a number of specialized funds, corporate buyers, traditional asset managers, real estate companies, commercial banks, investment banks, other investment managers and other financial institutions, including certain of our shareholders, as well as domestic and international pension funds and sovereign wealth funds, and we expect that competition will continue to increase. In addition, our BDCs and private credit funds compete with a number of other BDCs, private funds, commercial banks, and other financial institutions.
 
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Numerous factors increase our competitive risks, including, but not limited to:
 
   
A number of our competitors may have or are perceived to have more expertise or financial, technical, marketing and other resources and more personnel than we do;
 
   
Some of our funds may not perform as well as competitors’ funds or other available investment products;
 
   
Several of our competitors have raised significant amounts of capital, and many of them have similar investment objectives to ours, which may create additional competition for investment opportunities;
 
   
Some of our competitors may have lower fees or alternative fee arrangements that potential clients of ours may find more appealing;
 
   
Some of our competitors may have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to our funds, including our funds that directly use leverage or rely on debt financing of their portfolio investments to generate superior investment returns;
 
   
Some of our competitors may have higher risk tolerances, different risk assessments or lower return thresholds than us, which could allow them to consider a wider variety of investments and to bid more aggressively than us or to agree to less restrictive legal terms and protections for investments that we want to make;
 
   
Some of our competitors may be subject to less regulation or conflicts of interest and, accordingly, may have more flexibility to undertake and execute certain businesses or investments than we do, bear less compliance expense than we do or be viewed differently in the marketplace;
 
   
Some of our competitors may have more flexibility than us in raising and deploying certain types of funds under the investment management contracts they have negotiated with their fund investors; and
 
   
Some of our competitors may offer a broader investment platform and more partnership opportunities to portfolio companies than we are able to offer.
Certain of our strategic relationship investors may be granted the right to participate in the net profits of our advisory business for certain strategies.
Owl Rock has granted certain strategic relationship investors the right to participate in the net profits or gross revenues of certain advisory businesses that are associated with a subset of Owl Rock strategies that engage primarily in middle-market direct lending to (x) a diversified (across-sector) portfolio of companies (including through certain of our funds) and (y) U.S. technology companies. Owl Rock has also provided certain strategic relationship investors with the right to participate in a percentage of the gross management fee revenue derived from its First Lien Lending strategy and its Opportunistic Lending strategy, which sharing arrangements apply to both current funds and accounts within these strategies as well as certain future funds and accounts in these strategies for a stated period of time, in some cases even if such strategic relationship investors themselves do not continue to invest in the relevant strategy.
Similarly, certain strategic investors in most Dyal funds have been granted certain participation rights. The strategic relationship investor in Dyal Fund I, for example, shares in net operating income that would otherwise be earned by us with respect to management fees paid by Dyal Fund I. Strategic relationship investors in Dyal Fund III, Dyal Fund IV, Dyal Fund V, and the Dyal Financing Fund are entitled to share in a percentage of adjusted management fees (including in the case of Dyal Financing Fund, incentive fees) otherwise received by us with respect to those funds. Those strategic relationship investors are also entitled to share in carried interest, which in the case of the current Dyal Equity Funds reduces amounts distributable to those persons otherwise entitled to such carried interest (
i.e.
, our shareholders, principals and employees), but does not affect us.
 
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To the extent gross revenue participations or similar arrangements are offered, they will reduce the revenue earned by the Blue Owl Business, but Blue Owl will continue to bear all applicable expenses, even if the product is not generating positive cash flow. We may also offer our employees the opportunity to participate in certain types of revenue sharing arrangements in certain circumstances as a way of compensating or incentivizing employees. There is generally no limitation on the size or the duration of future economic sharing arrangements. In addition, to the extent that strategic relationship investors may be asked from time to time to vote upon or consent to matters that arise in connection with their investments in the applicable Dyal or Owl Rock funds, or in connection with their participation in the economic streams described above, the interests of such strategic investors may differ from those of other investors in Dyal or Owl Rock funds.
In addition, in the ordinary course we may offer fee discounts to investors in existing and future Dyal and Owl Rock funds and we expect to continue to waive fees for
co-investments
related to GP Minority Equity Investments funds’ investments in partner managers. We currently expect, at least in certain instances, to continue to offer these economic sharing arrangements to our strategic relationship investors (which may include certain of our PIPE Investors and other shareholders) in the future, which may reduce the management fee and performance income ultimately earned by Blue Owl in respect of these products, although it is hoped in many instances this will be balanced by the broader strategic benefits. Notwithstanding Blue Owl’s general right to 15% of performance income from the Blue Owl Funds and general ownership of the
fee-earning
businesses, it will bear dilution, generally pro rata with other employees and officers of Blue Owl, to third parties, including third party investors and joint venture partners and in the case of management fees to newly hired or reassigned personnel in connection with new business line launches. Although such amounts will typically be awarded in circumstances where Blue Owl management believes there will ultimately be long-term benefits to the Company, there can be no assurance that the ultimate benefit attained will be commensurate with the value awarded, or as to how long it may take to recoup such value.
Conflicts of interest may arise in our allocation of capital and
co-investment
opportunities.
As an asset manager with multiple clients, including our various funds and product lines, we confront conflicts of interests relating to our investment activities and operations. In particular, our allocation of capital and
co-investment
opportunities across our funds and products is subject to numerous actual or potential conflicts of interest. Although we have implemented policies and procedures to address those conflicts, our failure to effectively identify and address them could cause reputational harm and a loss of investor confidence in our business. It could also result in regulatory lapses that could lead to applicable penalties, as well as increased regulatory oversight of our business.
Potential conflicts of interest in allocation among funds
Certain of our funds may have overlapping investment objectives, including funds that have different fee structures, and potential conflicts may arise with respect to our decisions regarding how to allocate investment opportunities among those funds. We may allocate an investment opportunity that is appropriate for two or more investment funds in a manner that excludes one or more funds or results in a disproportionate allocation based on factors or criteria that we determine, including but not limited to differences with respect to available capital, the current or anticipated size of a fund, minimum investment amounts, the remaining life of a fund, differences in investment objectives, guidelines or strategies, diversification, portfolio construction considerations and other considerations deemed relevant to us and in accordance with our policy. Although we will adopt one or more investment allocation policies and procedures that are designed to ensure fair and equitable treatment over time, and expect these policies and procedures to continue to evolve as a result of the Business Combination, those policies and procedures will not eliminate entirely conflicts. Certain investment opportunities may be allocated to certain funds that have lower fees or to our
co-investment
funds on a
no-fee
and
no-carry
basis. To the extent that those investments could otherwise have been allocated to funds generating FPAUM, our revenues will be less than what would otherwise have been generated were those investments made through fee paying structures.
 
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Potential conflicts of interest in connection with
co-investments
between our private funds and our BDCs
Our BDCs are permitted to
co-invest
in portfolio companies with each other and with affiliated investment funds in negotiated transactions pursuant to an SEC order (the
“Co-investment
Exemptive Order”). Pursuant to that exemptive relief, our BDCs and other affiliated investment funds generally are permitted to make such
co-investments
if a “required majority” (as defined in Section 57(o) of the Investment Company Act) of such BDC’s directors (including the independent directors) makes certain conclusions in connection with the
co-investment
transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to such BDC and its shareholders and do not involve overreaching in respect of such BDC or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of such BDC’s shareholders and with its investment objective and strategies, and (3) the investment by one of our BDCs and other affiliated investment funds would not disadvantage any other of our BDCs, and such BDC’s participation would not be on a basis different from or less advantageous than that on which the other BDCs or other affiliated investment funds are investing. The different investment objectives or terms of the BDCs and affiliated investment funds may result in a potential conflict of interest, including in connection with the allocation of investments among our BDCs and/or our affiliated investment funds pursuant to the
Co-investment
Exemptive Order or otherwise.
As a result of the Business Combination, the Dyal funds are affiliated investment funds of our BDCs and are prohibited from
co-investing
with our BDCs, except as permitted by the Investment Company Act and the
Co-investment
Exemptive Order. Those restrictions may limit the ability of the Dyal funds to make certain investments they otherwise would have made, and subject our funds to additional compliance and regulatory risk. While it is not currently anticipated that there will be substantial overlap in the investment opportunities pursued by our BDCs, on the one hand, and the Dyal funds, on the other hand, the
Co-investment
Exemptive Order will require that any opportunities that are appropriate for both our BDCs and the Dyal funds will need to be offered to our BDCs and any such investments, if made, will need to be conducted in compliance with the conditions of the
Co-Investment
Exemptive Order and other requirements under the Investment Company Act.
Conflicts related to investments by several of our funds at different levels of the capital structure of a single portfolio company.
Different funds that we advise may invest in a single portfolio company, including at different levels of the capital structure of the portfolio company. For example, in the normal course of business, one of our funds may acquire debt positions in, or lend to, companies in which another of our funds owns common equity securities or a subordinated debt position. This could occur at the time of, or subsequent to, the initial investment in the portfolio company. A direct conflict of interest could arise among the various debt holders and equity holders if the company were to experience financial distress. In addition, if one of our BDC’s is an investor in a portfolio company alongside other of our BDCs or affiliated investment funds we advise that have invested in a different part of the portfolio company’s capital structure, the Investment Company Act may prohibit us from negotiating on behalf of any such fund in connection with a reorganization or restructuring of the portfolio company. While we have developed general guidelines regarding when two or more funds can invest in different parts of the same company’s capital structure and created a process that we employ to handle those conflicts when they arise, our decision to permit the investments to occur in the first instance or our judgment on how to minimize the conflict could be challenged. If we fail to appropriately address those conflicts, it could negatively impact our reputation and ability to raise additional funds and the willingness of counterparties to do business with us or result in potential litigation against us.
Conflicts of interest may arise in our allocation of costs and expenses, and we are subject to increased regulatory scrutiny and uncertainty with regard to those determinations.
As an asset manager with multiple funds we regularly make determinations to allocate costs and expenses both among our funds and between our funds and their investment advisors. Certain of those determinations are
 
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inherently subjective and virtually all of them are subject to regulatory oversight. Any determination or allegation of, or investigation into, a potential violation could cause reputational harm and a loss of investor confidence in our business. It could also result in regulatory lapses and any applicable penalties, as well as increased regulatory oversight of our business. In addition, any determination to allocate fees to the applicable investment adviser or Blue Owl could negatively affect our net income, and ultimately decrease the value of our common stock and our dividends to our stockholders.
Allocation of costs and expenses among our funds
We have a conflict of interest in determining whether certain costs and expenses are incurred in the course of operating our funds, including the extent to which services provided by certain employees and associated costs are allocable to certain funds. Our funds generally pay or otherwise bear all legal, accounting, filing, and other expenses incurred in connection with organizing and establishing the funds and the offering of interests in the funds. Such determinations often require subjective judgment and may result in the management company, rather than our funds, being allocated certain fees and expenses. In addition, our funds generally pay all expenses related to the operation of the funds and their investment activities, in certain cases subject to caps. We also determine, in our sole discretion, the appropriate allocation of investment-related expenses, including broken deal expenses, incurred in respect of unconsummated investments and expenses more generally relating to a particular investment strategy, among our funds, vehicles and accounts participating or that would have participated in such investments or that otherwise participate in the relevant investment strategy, as applicable. That often requires judgment and could result in one or more of our funds bearing more or less of these expenses than other investors or potential investors in the relevant investments or a fund paying a disproportionate share, including some or all, of the broken deal expenses or other expenses incurred by potential investors. Any dispute regarding such allocations could lead to our having to bear some portion of these costs as well as reputational risk. In addition, for funds that do not pay or otherwise bear the costs and expenses described above because of the application of caps or otherwise, such amounts may be borne by the applicable management company, which will reduce the amount of net fee income we receive for providing advisory services to the fund.
Allocation of expenses relating to Dyal’s Business Services Platform
Dyal has developed a Business Services Platform that provides strategic services to entities that advise, manage or sponsor investment funds, including partner managers, in five key areas: client development and marketing support, business strategy, product development, talent management, and operational advisory. Expenses associated with the Business Services Platform (the “BSP Expenses”) are expected to be allocated among, and payable by, each of the Dyal Equity Funds. Those Dyal Equity Funds will generally be allocated an amount equal to their pro rata allocation of BSP Expenses based on the relative number of partner managers in which investments are held from time to time by each of those funds; provided that the amount of BSP Expenses borne by a particular Dyal Equity Fund is subject to certain caps specified in its respective governing documents. In addition, Dyal Fund V provides for a minimum payment for BSP Expenses, which to the extent such minimum exceeds Dyal Fund V’s otherwise allocable share of such expenses, will reduce the amounts of BSP Expenses borne by the other Dyal Equity Funds. It is expected that any successor fund to Dyal Fund V would similarly share in BSP Expenses.
Upon the consummation of the Business Combination, Blue Owl does not receive services from the Business Services Platform and therefore Dyal Fund IV is treated as not holding an interest in Blue Owl for purposes of allocating Business Services Platform expenses.
In certain instances we may determine not to allocate or charge certain BSP Expenses to a particular fund in response to regulatory, fund investor relations, governance or other applicable considerations and determine instead for those BSP Expenses to be borne by us. Any such determination may have the effect of materially reducing the reimbursement payments received by us with respect to the Business Services Platform or result in
 
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losses attributable to certain activities thereof. Further, we will be required to bear any BSP Expenses allocated to a Dyal fund that exceeds that fund’s cap on those expenses. The allocation methodology for allocating BSP Expenses is complex and subject to interpretation. Accordingly, there can be no assurance that any conflict arising from the activities of the Business Services Platform and the allocation of expenses will be resolved in a manner responsive to the interests of all of our clients, which could damage our reputation.
The activities of the Business Services Platform have in the past been subject to an SEC order and may in the future be subject to regulatory scrutiny.
Existing and future relationships between or among our partner managers, our funds and their limited partners could give rise to actual or perceived conflicts of interest.
Certain of Dyal’s partner managers directly or through their investment funds, own securities in Blue Owl or its subsidiaries. Additionally, Dyal Fund IV has a passive minority equity interest in Owl Rock Feeder and became an indirect equityholder in Blue Owl upon consummation of the Business Combination. As a result, Dyal Fund IV will, to the extent it holds shares of Blue Owl, be entitled to vote on matters submitted to stockholders of Blue Owl generally, including with respect to the election of directors. In addition, a controlled affiliate of Blue Owl will serve as investment manager to Dyal Fund IV. Dyal Fund IV may have different interests, including different investment horizons, than Blue Owl generally or the Dyal Principals specifically. However, any decision made with respect to holding or disposing of Dyal Fund IV’s interest in Blue Owl will be determined by such Blue Owl affiliate, as investment manager to Dyal Fund IV, in a manner consistent with its statutory and contractual duties to Dyal Fund IV. Because those decisions will be made independent from consideration of Blue Owl’s interests, they may, due to a range of factors, conflict with Blue Owl’s own interests at such time.
The Dyal Equity Funds hold minority,
non-controlling
interests in a broad range of partner managers. Those partner managers may, from time to time, directly or through their funds, enter into transactions or other contractual arrangements with us or our funds outside of the GP Minority Equity Investments strategy, including Owl Rock Funds, or between or among one another in the ordinary course of business, which may result in additional conflicts of interest. None of those transactions or other contractual arrangements are believed to be currently material to our operations or performance but there may be material transactions entered into in the future.
The Dyal Financing Fund is a lender to Owl Rock under a
ten-year
loan facility, and following the transaction this will become debt of the combined company. In the event that Owl Rock were to seek a waiver or consent under the facility, we would be obligated to act in the best interests of the Dyal Financing Fund in determining whether to grant such waiver or consent. Moreover, in the event of a default by Blue Owl under the loan facility, the Dyal Financing Fund may declare a default under the loan and seek any and all remedies thereunder.
Even if those relationships do not create actual conflicts, the perception of conflicts in the press or the financial community generally could create negative publicity with respect to Blue Owl, which could adversely affect the relationships of Owl Rock and Dyal with their fund clients.
Debt investments in partner manager portfolio companies by the funds.
Portfolio companies of funds managed by our partner managers may also be borrowers under debt facilities or instruments owned, arranged or managed by our BDCs or funds. In its capacity as agent or lender under such facilities or instruments, a BDC or fund is required to act in the best interests of its shareholders or investors. In certain circumstances, a BDC or fund may be required to take actions that may be adverse to the portfolio
 
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companies owned by funds managed by partner managers, which could adversely affect our relationships with the partner managers, or potentially impact the value of a Dyal fund’s investment in such partner manager. As a result, although we believe that the Business Combination will potentially enhance our ability to source investment opportunities for our BDC and funds through, among other things, our enhanced relationships with partner managers, it also may result in additional conflicts of interest.
Additional and unpredictable conflicts of interest may arise in the future.
In addition to the conflicts outlined above, we may experience conflicts of interest in connection with the management of our business affairs relating to and arising from a number of matters, including the amounts paid to us by our investment funds; services that may be provided by us and our affiliates to portfolio companies in which our investment funds invest (including the determination of whether or not to charge fees to our portfolio companies for our provision of such services); investments by our investment funds and our other clients, subject to the limitations of the Investment Company Act; our formation of additional investment funds; differing recommendations given by us to different clients; and our use of information gained from an investment funds’ portfolio companies used to inform investments by other clients, subject to applicable law.
Our Dyal HomeCourt Fund does not have any control over the ownership rules of the NBA, and any changes to the ownership rules or additional restrictions which the NBA imposes on ownership could adversely affect our business.
The ownership rules of the NBA (the “NBA Rules”) impose significant restrictions on the Dyal HomeCourt Fund and its investment activities. For example, the NBA has approval rights over acquisitions and sales by the Dyal HomeCourt Fund as well as approval over admission of new investors. The NBA Rules and their application to equity holders like the Dyal HomeCourt Fund are subject to revision from time to time, without prior notice to or the consent of Dyal HomeCourt Fund. Any such revisions would be binding on the Dyal HomeCourt Fund, and could adversely affect Dyal HomeCourt Fund’s ability to implement its investment program, as well as the ability of Dyal HomeCourt Fund to conduct its operations and achieve its objectives. The NBA is charged with enforcing the NBA Rules. In interpreting the NBA Rules, the NBA may take positions or reach conclusions adverse to Dyal HomeCourt Fund and Blue Owl.
The NBA Rules also apply in certain respects to Blue Owl’s activities in addition to the operation of the Dyal HomeCourt Fund. Revisions to the NBA Rules may have an adverse impact on Blue Owl or prevent Blue Owl from forming other funds or engaging in certain activities. Should the NBA Rules impede the Dyal HomeCourt Fund from successfully conducting its business or otherwise adversely impact Blue Owl, Blue Owl may determine to discontinue Dyal HomeCourt Fund’s operations and cause Dyal HomeCourt Fund to wind-down or liquidate, which could have an adverse economic and reputational impact on Blue Owl.
Our funds hold and make investments in partner managers and there may be provisions within our arrangements with partner managers that could affect our business including our ability to undertake
follow-on
investments.
The terms of our Dyal funds’ investments in partner managers generally include provisions relating to competitors of the partner managers, access to information about the partner managers and their business, and affirmative and negative confidentiality obligations regarding the partner managers. While we expect to implement a robust information control policy with restrictions regarding the sharing of a partner manager’s confidential information, such policy and related procedures may not reduce a partner manager’s concern over the sharing of confidential and competitively sensitive information. Certain partner managers that are engaged in managing funds focused on credit investments may consider Owl Rock to be a competitor with respect to their business and may seek to invoke remedies available to them under the investment agreements or pursue other remedies. Potential remedies available to them under the investment agreements, as applicable, include limiting
 
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the rights of our funds to receive confidential information from the partner manager regarding its business, requiring us to sequester confidential information received from the partner manager, or requiring us to sell our interests in the partner manager for fair value as determined under the relevant investment agreement. A forced sale of a partner manager interest may reduce the amount of fees we receive with respect to the applicable Dyal fund, and any reduction in information may impede our ability to supervise our funds’ investments. Further, the Dyal funds becoming affiliated with Owl Rock may hinder the Dyal funds’ ability to make future investments in partner managers who are in the credit space and who may consider Owl Rock a competitor, including
follow-on
investments in existing partner managers and investments with new partner managers.
The Business Combination and related transactions may affect our reputation and relationship with our partner managers.
We are reliant upon our strong relationships with our partner managers for the continued growth and development of business. As a result of the Business Combination, we may compete with existing or prospective partner managers, which could negatively impact our ability to attract new partner managers to our funds who may seek relationships with
non-competitors
over concerns of sharing information with competitors or other potential conflicts, including the ability to exercise our fiduciary duties. Additionally, our investments in partner managers may affect our relationships with other sponsors that are key relationships for our lending businesses, because of similar concerns around information sharing or other reasons. While we intend to implement robust procedures to address any such conflict, such procedures may not reduce the perception that such conflicts exist and may make us a less attractive partner/investor.
Our entitlement and that of certain of our stockholders, principals and employees to receive performance income from certain of our Dyal funds may create an incentive for us to make more speculative investments and determinations on behalf of our funds than would be the case in the absence of such performance income.
Some of our Dyal funds are subject to carried interest or incentive fees. With respect to the Dyal Equity Funds and their related
co-investment
vehicles, none of the carried interest will be allocated to us. Further, we will be allocated only a limited portion of the incentive fees attributable to the GP Debt Financing strategy, Dyal HomeCourt Fund and of the carried interest attributable to future Dyal and Owl Rock funds. If a Dyal fund is formed to facilitate a secondary transaction with respect to a Dyal Equity Fund (which would include, without limitation, any continuation fund or other new fund whose primary purpose is to acquire directly or indirectly all or a portion of the assets of or interests in the existing Dyal Fund), any carried interest generated by such fund will not be allocated to us, notwithstanding that such secondary vehicle is formed in the future. Carried interest and incentive fees not allocated to us are allocated to certain of our stockholders, principals and employees. Carried interest and performance based fees or allocations may create an incentive for us or our investment professionals to make more speculative or riskier investments and determinations, directly or indirectly on behalf of our funds, or otherwise take or refrain from taking certain actions than it would otherwise make in the absence of such carried interest or performance-based fees or allocations. It may also create incentives to influence how we establish economic terms for future funds. In addition, we may have an incentive to make exit determinations based on factors that maximize economics in favor of certain of our stockholders, principals and employees (e.g., to maximize carried interest allocations or incentive fees) relative to us and our
non-participating
stockholders (i.e., to maximize management fees by retaining the investments). The conflict is particularly relevant with respect to our raising a fund to engage in a secondary transaction with an existing Dyal Equity Fund, since it is possible that the transaction may reduce the overall amount of management fees received by us but trigger or accelerate the payment of carried interest that does not accrue to our benefit. In connection therewith, any clawback obligation may create an incentive for us to defer disposition of one or more investments if the disposition would result in a realized loss or the finalization of dissolution and liquidation of a fund where a clawback obligation would be owed. Our failure to appropriately deal with any actual, potential or perceived conflicts of interest resulting from our entitlement to receive performance income from many of our funds could have a material adverse effect on our reputation,
 
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which could materially and adversely affect our business in a number of ways, including an inability to raise additional funds, attract new clients or retain existing clients.
Our business is currently focused on two separate investment strategies.
We currently pursue, through our funds, two separate investment strategies: direct lending and GP Capital Solutions. While we believe that there may be certain synergies with respect to these strategies, there can be no assurance that the benefits will manifest or that there will not be unanticipated consequences resulting therefrom. Although we are seeking additional investment strategies, including as described below with respect to “HomeCourt”, relative to more diversified asset managers, our funds’ limited and specialized focus also leaves us more exposed to risks affecting the dual sectors in which our funds invest. As our investment management program is not broadly diversified, we may be uniquely exposed to market, tax, regulatory and other risks affecting the sectors in which we invest. There can be no assurance that we will be able to take actions necessary to mitigate the effect of such risks or otherwise diversify our investment program to minimize such exposure.
Rising interest rates could have a substantial adverse effect on our business.
Rising interest rates could have a dampening effect on overall economic activity, the financial condition of our customers and the financial condition of the end customers who ultimately create demand for the capital we supply, all of which could negatively affect demand for our capital. Additionally, an increase in interest rates could make it difficult for us to obtain financing at attractive rates, impacting our ability to execute on our growth strategies or future acquisitions.
The anticipated benefits of the Business Combination may not be realized or may take longer than expected to realize.
Historically, Dyal and Owl Rock have operated independently. The future success of the Business Combination, including anticipated benefits, depends, in part, on our ability to optimize our operations. The optimization of our operations following the Business Combination will be a complex, costly and time- consuming process and if we experience difficulties in this process, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, which could have an adverse effect on us for an undetermined period. There can be no assurances that we will realize the potential operating efficiencies, synergies and other benefits currently anticipated from the Business Combination.
The integration of Dyal and Owl Rock may present material challenges, including, without limitation:
 
   
combining the leadership teams and corporate cultures of Dyal and Owl Rock;
 
   
the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the businesses as a result of the devotion of management’s attention to the Business Combination or integration of the businesses;
 
   
managing a larger combined business;
 
   
maintaining employee morale and retaining key management and other employees at the combined company, including by offering sufficiently attractive terms of employment;
 
   
retaining existing business and operational relationships, and attracting new business and operational relationships;
 
   
the possibility of faulty assumptions underlying expectations regarding the integration process;
 
   
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
 
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managing expense loads and maintaining currently anticipated operating margins given that our two businesses are different in nature and therefore may require additional personnel and compensation expenses, which expenses may be borne by us, rather than our funds;
 
   
difficulty replicating or replacing functions, systems and infrastructure provided by Neuberger or certain of its affiliates or the loss of benefits from Neuberger’s global contracts; and
 
   
unanticipated issues in integrating information technology, communications and other systems.
In addition, prior to the Business Combination, Owl Rock benefited from the services provided (at no cost to Owl Rock) of the Business Services Platform; however, those services are no longer available to Blue Owl following the consummation of the Business Combination. Some of those factors are outside of our control, and any one of them could result in delays, increased costs, decreases in the amount of potential revenues or synergies, potential cost savings, and diversion of management’s time and energy, which could materially affect our financial position, results of operations, and cash flows.
We may enter into new lines of business and expand into new investment strategies, geographic markets and businesses, each of which may result in upfront costs and additional risks and uncertainties in our businesses.
We intend, if market conditions warrant, to grow our businesses by increasing FPAUM in existing businesses and expanding into new investment strategies, geographic markets (including in both U.S. and
non-U.S.
markets) and businesses. Subject to the consent rights of Neuberger as set forth in the Investor Rights Agreement (as described below), we may pursue growth through acquisitions of other investment management companies, expansion into new markets, acquisitions of critical business partners or other strategic initiatives, in each case, which may include entering into new lines of business.
Attempts to expand our businesses involve a number of special risks, including some or all of the following:
 
   
the required investment of capital and other resources;
 
   
the diversion of management’s attention from our core businesses;
 
   
the assumption of liabilities in any acquired business;
 
   
the disruption of our ongoing businesses;
 
   
entry into markets or lines of business in which we may have limited or no experience, and which may subject us to new laws and regulations which we are not familiar, or from which we are currently exempt;
 
   
increasing demands on our operational and management systems and controls;
 
   
compliance with or applicability to our businesses or our funds’ portfolio companies of regulations and laws, including, in particular, local regulations and laws (for example, consumer protection related laws) and the impact that noncompliance or even perceived noncompliance could have on us and our funds’ portfolio companies;
 
   
conflicts between business lines in deal flow or objectives;
 
   
we may be dependent upon, and subject to liability, losses or reputational damage relating to, systems, controls and personnel that are not under our control;
 
   
potential increase in fund investor concentration; and
 
   
the broadening of our geographic footprint, increasing the risks associated with conducting operations in foreign jurisdictions where we currently have little or no presence, such as different legal, tax and regulatory regimes and currency fluctuations, which require additional resources to address.
 
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Because we have not yet identified these potential new investment strategies, geographic markets or lines of business, we cannot identify all of the specific risks we may face and the potential adverse consequences on us and their investment that may result from any attempted expansion.
Rapid growth of our businesses may be difficult to sustain and may place significant demands on our administrative, operational and financial resources.
Our combined AUM has grown significantly in the past, and we intend to pursue further growth in the near future, possibly through acquisitions. Our rapid growth has placed, and future growth, if successful, will continue to place, significant demands on our legal, compliance, accounting and operational infrastructure and will result in increased expenses. In addition, we are, and will continue to be, required to continuously develop our systems and infrastructure in response to the increasing sophistication of the investment management market and legal, accounting, regulatory and tax developments.
Our future growth will depend in part on our ability to maintain an operating platform and management system sufficient to address our growth and may require us to incur significant additional expenses and to commit additional senior management and operational resources. As a result, we may face significant challenges in:
 
   
maintaining adequate financial, regulatory (legal, tax and compliance) and business controls;
 
   
providing current and future fund investors and shareholders with accurate and consistent reporting;
 
   
implementing new or updated information and financial systems and procedures; and
 
   
training, managing and appropriately sizing our work force and other components of our businesses on a timely and cost-effective basis.
We may not be able to manage our expanding operations effectively and may not be ready to continue to grow because of operational needs, and any failure to do so could adversely affect our ability to generate revenue and control our expenses. In addition, if we are unable to consummate or successfully integrate development opportunities, acquisitions or joint ventures, we may not be able to implement our growth strategy successfully.
Our partnership with the NBA is new, subject to significant risk and uncertainty and may be terminated for a range of reasons outside of our control.
We are actively establishing a new relationship with the NBA in furtherance of our Professional Sports Minority Investments strategy. Our Dyal HomeCourt Fund is expected to make minority investments in NBA franchises. The NBA will provide certain services with respect to the Dyal HomeCourt Fund and will receive a share of management fees and incentive allocations attributable to the fund. This is a new asset class and we have not yet closed on any capital for this strategy. There is no assurance that we will be able to raise sufficient funds to execute this strategy. As advisor to the Dyal HomeCourt Fund, we may be exposed to liability to the NBA in a range of circumstances including as a result of a violation of rules applicable to NBA franchise owners by us or investors in our Dyal HomeCourt Fund or, in certain circumstances, by our
co-owners
of a team (regardless of whether such persons were acting under our direction or control), the departure of certain Dyal key persons or the occurrence of certain events constituting cause. Any failure of the Professional Sports Minority Investments strategy could result in a decrease in our FPAUM growth potential and have an adverse effect on our reputation.
We depend on our senior management team, senior investment professionals and other key personnel, and the loss of their services would have a material adverse effect on us and our funds.
Our success depends on the efforts, judgment and personal reputations of our senior management team, senior investment professionals and other key personnel. Their reputations, expertise in investing, relationships
 
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with fund investors and with other members of the business communities on whom we and our funds depend on for investment opportunities and financing are each critical elements in operating and expanding our business. The loss of the services of our senior management team, senior investment professionals or other key personnel could have a material adverse effect on us and our funds, and on the performance of our funds, including on our ability to retain and attract fund investors and raise capital.
The departure of some or all of those individuals could also trigger certain provisions tied to the departure of, or cessation of committed time, by those persons (known as “key person” provisions) in the documentation governing certain of our funds, which could permit the investors in those funds to suspend or terminate those funds’ investment periods. We do not carry any “key person” insurance that would provide us with proceeds in the event of the death or disability of any of our senior professionals, and we do not have a policy that prohibits our senior professionals from traveling together.
In addition, each of our Key Individuals is entitled to significant compensation payments and under certain circumstances (including the Key Individual’s death or disability), the Key Individual (or his estate) is entitled to retain those payments for up to five years following such person’s ceasing to be employed by us. While we continue to make such payments, we may need to find or promote new employees to replace the former Key Individual, which may require additional significant compensation to be paid by us, which could adversely affect our earnings.
Employee misconduct could harm us by impairing our ability to attract and retain fund investors and subjecting us to significant legal liability, regulatory scrutiny and reputational harm.
Our ability to attract and retain fund investors and to pursue investment opportunities for our clients depends heavily upon the reputation of our professionals, especially our senior professionals as well as third-party service providers. We are subject to a number of obligations and standards arising from our investment management business and our authority and statutory fiduciary status over the assets managed by our investment management business. Further, our employees are subject to various internal policies including a Code of Ethics and policies covering conflicts of interest, information systems, business continuity and information security. The violation of those obligations, standards and policies by any of our employees or misconduct by one of our third-party service providers could adversely affect investors in our funds and us. Our businesses often require that we deal with confidential matters of great significance to companies in which our funds may invest. If our employees, former employees or third-party service providers were to use or disclose confidential information improperly, we could suffer serious harm to our reputation, financial position and current and future business relationships. Employee or third-party service provider misconduct could also include, among other things, binding us to transactions that exceed authorized limits or present unacceptable risks and other unauthorized activities or concealing unsuccessful investments (which, in either case, may result in unknown and unmanaged risks or losses), or otherwise charging (or seeking to charge) inappropriate expenses or inappropriate or unlawful behavior or actions directed towards other employees.
It is not always possible to detect or deter misconduct by employees or third-party service providers, and the extensive precautions we take to detect and prevent this activity may not be effective in all cases. If one or more of our employees, former employees or third-party service providers were to engage in misconduct or were to be accused of such misconduct, our businesses and our reputation could be adversely affected and a loss of fund investor confidence could result, which would adversely impact our ability to raise future funds. Our current and former employees and those of our funds’ portfolio companies as well as our third-party service providers may also become subject to allegations of sexual harassment, racial and gender discrimination or other similar misconduct, which, regardless of the ultimate outcome, may result in adverse publicity that could harm our and such portfolio company’s brand and reputation.
 
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Our future growth depends on our ability to attract, retain and develop human capital in a highly competitive talent market.
The success of our business will continue to depend upon us attracting, developing and retaining human capital. Competition for qualified, motivated, and highly-skilled executives, professionals and other key personnel in asset management firms is significant. Turnover and associated costs of rehiring, the loss of human capital through attrition, death, or disability and the reduced ability to attract talent could impair our ability to implement our growth strategy and maintain our standards of excellence. Our future success will depend upon our ability to find, attract, retain and motivate highly-skilled and highly-qualified individuals. We seek to provide our personnel with competitive benefits and compensation packages. However, our efforts may not be sufficient to enable us to attract, retain and motivate qualified individuals to support our growth. Moreover, if our personnel join competitors or form businesses that compete with ours, that could adversely affect our ability to raise new or successor funds.
We are subject to risks related to corporate social responsibility.
We and our funds face increasing public scrutiny related to environmental, social and governance (“ESG”) activities, including diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency. Before making an investment on behalf of our funds, we analyze a wide array of considerations, risks, and potential rewards related to the prospective investment. Among the pecuniary considerations we analyze are the present and future material ESG implications of investments. It is expected that investor demands and the prevailing legal environment will require us to spend additional resources and place increasing importance on ESG matters in our review of prospective investments and management of existing ones. Devoting additional resources to ESG matters could increase the amount of expenses we or our portfolio companies are required to bear. Further, emphasis on ESG criteria in evaluating an investment by us or our funds could lead to reduced profits.
ESG matters have been the subject of increased focus by certain regulators, including in the United States and the European Union. A lack of harmonization globally in relation to ESG legal and regulatory reform leads to a risk of fragmentation in group level priorities as a result of the different pace of sustainability transition across global jurisdictions. This may create conflicts across our global business and funds in which we invest which could risk inhibiting our future implementation of, and compliance with, rapidly developing ESG standards and requirements.
The European Commission has proposed legislative reforms, which include, without limitation: (a) Regulation 2019/2088 regarding the introduction of transparency and disclosure obligations for fund investors, funds and asset managers in relation to ESG factors, for which most rules are proposed to take effect beginning on March 10, 2021; (b) a proposed regulation regarding the introduction of an
EU-wide
taxonomy of environmentally sustainable activities, which is proposed to take effect in a staggered approach beginning on January 1, 2022; and (c) amendments to existing regulations including MiFID II and the European Union (“EU”) Alternative Investment Fund Managers Directive (the “AIFMD”) to embed ESG requirements. As a result of these legislative initiatives, we may be required to provide additional disclosure to investors in our funds with respect to ESG matters. This exposes us to increased disclosure risks, for example due to a lack of available or credible data, and the potential for conflicting disclosures may also expose us to an increased risk of misstatement litigation or miss-selling allegations. Failure to manage these risks could result in a material adverse effect on our business in a number of ways.
We are subject to risks in using custodians, counterparties, administrators and other agents.
Many of our funds depend on the services of custodians, counterparties, administrators and other agents to carry out certain transactions and other administrative services, including compliance with regulatory requirements in U.S. and
non-U.S.
jurisdictions. We are subject to risks of errors and mistakes made by these
 
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third parties, which may be attributed to us and subject us or our funds’ investors to reputational damage, penalties or losses. We depend on third parties to provide primary and back up communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, portfolio monitoring, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control.
The terms of the contracts with third-party service providers are often customized and complex, and many of these arrangements occur in markets or relate to products that are not subject to regulatory oversight. Accordingly, we may be unsuccessful in seeking reimbursement or indemnification from these third-party service providers.
Cybersecurity risks and cyber incidents could adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and confidential information in our possession and damage to our business relationships, any of which could negatively impact our business, financial condition and operating results.
There has been an increase in the frequency and sophistication of the cyber and security threats we face, with attacks ranging from those common to businesses generally to those that are more advanced and persistent, which may target us because, as an alternative asset management firm, we hold confidential and other price sensitive information about existing and potential investments. Cyber-attacks and other security threats could originate from a wide variety of sources, including cyber criminals, nation state hackers, hacktivists and other outside parties. As a result, we may face a heightened risk of a security breach or disruption with respect to sensitive information resulting from an attack by computer hackers, foreign governments or cyber terrorists.
The efficient operation of our business is dependent on computer hardware and software systems, as well as data processing systems and the secure processing, storage and transmission of information, which are vulnerable to security breaches and cyber incidents. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. In addition, we and our employees may be the target of fraudulent emails or other targeted attempts to gain unauthorized access to proprietary or sensitive information. The result of these incidents may include disrupted operations, misstated or unreliable financial data, fraudulent transfers or requests for transfers of money, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships, causing our business and results of operations to suffer. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided by third-party service providers. We have implemented processes, procedures and internal controls designed to mitigate cybersecurity risks and cyber intrusions and rely on industry accepted securities measures and technology to securely maintain confidential and proprietary information maintained on our information systems; however, these measures, as well as our increased awareness of the nature and extent of a risk of a cyber-incident, do not guarantee that a cyber-incident will not occur and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident, especially because the cyber-incident techniques change frequently or are not recognized until launched and because cyber-incidents can originate from a wide variety of sources. SEI Global Services, Inc. (“SEI”) serves as the third-party administrator for certain of the Dyal funds. M.J. Brunner, a third-party vendor of SEI, was the victim of a ransomware attack on its corporate network on May 17, 2020. SEI has completed its investigation of the matter and indicated that the attack did not impact any of SEI’s networks and the compromised information was limited to the user profile data of Dyal fund investors with access to SEI’s investor dashboard. Dyal’s investors were notified of the matter on July 21, 2020 and September 9, 2020.
 
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Those risks are exacerbated by the rapidly increasing volume of highly sensitive data, including our proprietary business information and intellectual property, and personally identifiable information of our employees, our clients and others, that we collect and store in our data centers and on our networks. Our funds may also invest in strategic assets having a national or regional profile or in infrastructure assets, the nature of which could expose them to a greater risk of being subject to a terrorist attack or security breach than other assets or businesses. The secure processing, maintenance and transmission of this information are critical to our operations. A significant actual or potential theft, loss, corruption, exposure, fraudulent use or misuse of fund investor, employee or other personally identifiable or proprietary business data, whether by third parties or as a result of employee malfeasance (or the negligence or malfeasance of third party service providers that have access to such confidential information) or otherwise,
non-compliance
with our contractual or other legal obligations regarding such data or intellectual property or a violation of our privacy and security policies with respect to such data could result in significant remediation and other costs, fines, litigation or regulatory actions against us and significant reputational harm.
Increased data protection regulation may result in increased complexities and risk in connection with the operation of our business and our funds.
We operate in businesses that are highly dependent on information systems and technology. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Cybersecurity has become a priority for regulators in the U.S. and around the world. Many jurisdictions in which we operate have laws and regulations relating to data privacy, cybersecurity and protection of personal information, including, the California Consumer Privacy Act that went into effect on January 1, 2020, and the New York SHIELD Act, which went into effect on March 1, 2020. In addition, the SEC announced that one of the 2019 examination priorities for the Office of Compliance Inspections and Examinations was to continue to examine cybersecurity procedures and controls, including testing the implementation of these procedures and controls. Further, the new European General Data Protection Regulation (the “GDPR”) came into effect in May 2018. Data protection requirements under the GDPR are more stringent than those imposed under prior European legislation. There are substantial financial penalties for breach of the GDPR, including up to the higher of 20 million Euros or 4% of group annual worldwide turnover.
Non-compliance
with any of the aforementioned laws or other similar laws, therefore represents a serious risk to our business. Some jurisdictions have also enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data. Breaches in security could potentially jeopardize our, our employees’ or our fund investors’ or counterparties’ confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our employees’, our fund investors’, our counterparties’ or third parties’ operations, which could result in significant losses, increased costs, disruption of our business, liability to our fund investors and other counterparties, regulatory intervention or reputational damage. Furthermore, if we fail to comply with the relevant laws and regulations, it could result in regulatory investigations and penalties, which could lead to negative publicity and may cause our fund investors and clients to lose confidence in the effectiveness of our security measures.
We are currently subject to and may be subject in the future to litigation risks, and consequently, we may face liabilities and damage to our professional reputation as a result.
Legal liability could have a material adverse effect on our businesses, financial condition or results of operations or cause reputational harm to us, which could harm our businesses. We depend to a large extent on our business relationships and our reputation for integrity and high-caliber professional services to attract and retain fund investors and to pursue investment opportunities for our funds. As a result, allegations of improper conduct asserted by private litigants or regulators, regardless of whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our investment activities or the investment industry in general, whether or not valid, may harm our reputation, which may be damaging to our businesses.
In addition, the laws and regulations governing the limited liability of such issuers and portfolio companies vary from jurisdiction to jurisdiction, and in certain contexts the laws of certain jurisdictions may provide not
 
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only for carve-outs from limited liability protection for the issuer or portfolio company that has incurred the liabilities, but also for recourse to assets of other entities under common control with, or that are part of the same economic group as, such issuer. For example, if any of our funds’ portfolio companies is subject to bankruptcy or insolvency proceedings in a jurisdiction and is found to have liabilities under the local consumer protection, labor, tax or bankruptcy laws, the laws of that jurisdiction may permit authorities or creditors to file a lien on, or to otherwise have recourse to, assets held by other portfolio companies (including assets held by our funds) in that jurisdiction. There can be no assurance that we will not be adversely affected as a result of the foregoing risks.
We may not be able to maintain sufficient insurance to cover us for potential litigation or other risks.
We may not be able to obtain or maintain sufficient insurance on commercially reasonable terms or with adequate coverage levels against potential liabilities we may face in connection with potential claims, which could have a material adverse effect on our business. We may face a risk of loss from a variety of claims, including related to securities, antitrust, contracts, cybersecurity, fraud and various other potential claims, whether or not such claims are valid. Insurance and other safeguards might only partially reimburse us for our losses, if at all, and if a claim is successful and exceeds or is not covered by our insurance policies, we may be required to pay a substantial amount in respect of such successful claim. Certain losses of a catastrophic nature, such as losses arising as a result of wars, earthquakes, typhoons, terrorist attacks or other similar events, may be uninsurable or may only be insurable at rates that are so high that maintaining coverage would cause an adverse impact on our business, our investment funds and their portfolio companies. In general, losses related to terrorism are becoming harder and more expensive to insure against. Some insurers are excluding terrorism coverage from their
all-risk
policies. In some cases, insurers are offering significantly limited coverage against terrorist acts for additional premiums, which can greatly increase the total cost of casualty insurance for a property. As a result, we, our investment funds and their portfolio companies may not be insured against terrorism or certain other catastrophic losses.
Our use of leverage to finance our businesses exposes us to substantial risks. Any security interests or negative covenants required by a credit facility we enter into may limit our ability to create liens on assets to secure additional debt.
As of the date of this prospectus, we do not have any outstanding borrowings under our $150 million revolving credit facility (the “Revolving Credit Facility”) with MUFG Union Bank, N.A. as the collateral agent and MUFG Bank, Ltd., as the administrative agent, and we have $700 million in aggregate principal amount, face value, of outstanding senior unsecured indebtedness. We may choose to finance our businesses operations through further borrowings under our Revolving Credit Facility or by issuing additional debt. Our existing and future indebtedness exposes us to the typical risks associated with the use of leverage. The occurrence or continuation of any of these events or trends could cause us to suffer a decline in the credit ratings assigned to our debt by rating agencies, which would cause the interest rate applicable to borrowings under the Revolving Credit Facility or any future credit facility to increase and could result in other material adverse effects on our businesses. We depend on financial institutions extending credit to us on terms that are reasonable to us. There is no guarantee that such institutions will continue to extend credit to us or renew any existing credit agreements we may have with them, or that we will be able to refinance outstanding facilities when they mature. In addition, the incurrence of additional debt in the future could result in potential downgrades of our existing corporate credit ratings, which could limit the availability of future financing and/or increase our cost of borrowing. Furthermore, our Revolving Credit Facility contains certain covenants with which we need to comply.
Non-compliance
with any of the covenants without cure or waiver would constitute an event of default, and an event of default resulting from a breach of certain covenants could result, at the option of the lenders, in an acceleration of the principal and interest outstanding. In addition, if we incur additional debt, our credit rating could be adversely impacted.
 
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Borrowings under the Revolving Credit Facility will mature in April 2024. As these borrowings and other indebtedness mature (or are otherwise repaid prior to their scheduled maturities), we may be required to either refinance them by entering into new facilities or issuing additional debt, which could result in higher borrowing costs, or issuing equity, which would dilute existing stockholders. We could also repay these borrowings by using cash on hand, cash provided by our continuing operations or cash from the sale of our assets. We may be unable to enter into new facilities or issue debt or equity in the future on attractive terms, or at all. Borrowings under the Revolving Credit Facility are LIBOR-based obligations. As a result, an increase in short-term interest rates will increase our interest costs if such borrowings have not been hedged into fixed rates.
The risks related to our use of leverage may be exacerbated by our funds’ use of leverage to finance investments.
Risks Related to Legal and Regulatory Environment
Our businesses are subject to extensive domestic and foreign regulations that may subject us to significant costs and compliance requirements, and our failure to comply with such regulations could have a material adverse effect on our business.
Our businesses, as well as the financial services industry, generally are subject to extensive regulation, including periodic examinations, by governmental agencies and self-regulatory organizations or exchanges in the U.S. and foreign jurisdictions in which we operate relating to, among other things, securities, antitrust, anti-money laundering, anti-bribery, tax and privacy. Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many aspects of financial services, including the authority to grant, and in specific circumstances to cancel, permissions to carry on particular activities. We believe financial regulation and regulatory oversight of our business may increase when the new administration assumes office in January 2021. In particular, in recent periods members of the U.S. Congress have also proposed amendments to the Code and the rules and regulations thereunder that, if enacted, would raise the tax on carried interest and treat carried interest as ordinary income.
The SEC oversees the activities of certain of our subsidiaries that are registered investment advisers under the Investment Advisers Act of 1940 (the “Advisers Act”) and the activities of our BDCs that are regulated under the Investment Company Act.
Investment Advisers Act of 1940:
The Advisers Act imposes specific restrictions on an investment adviser’s ability to engage in principal and agency cross transactions. Our registered investment advisers are subject to additional requirements that cover, among other things, disclosure of information about our business to clients; maintenance of written policies and procedures; maintenance of extensive books and records; restrictions on the types of fees we may charge, including incentive fees and carried interest; solicitation arrangements; maintaining effective compliance programs; custody of client assets; client privacy; advertising; and proxy voting. Failure to comply with the obligations imposed by the Advisers Act could result in investigations, sanctions, fines, restrictions on the activities of us or our personnel and reputational damage.
Under the Advisers Act, an investment adviser (whether or not registered under the Advisers Act) has fiduciary duties to its clients. The SEC has interpreted those duties to impose standards, requirements and limitations on, among other things, trading for proprietary, personal and client accounts; allocations of investment opportunities among clients; execution of transactions; and recommendations to clients.
Investment Company Act:
Our subsidiaries are the advisers to our BDCs, which are subject to the rules and regulations under the Investment Company Act. Our BDCs are required to file periodic and annual reports with the SEC and may also be required to comply with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Furthermore, advisers to our BDCs have a fiduciary duty under the Investment Company Act not to charge excessive compensation, and the Investment Company Act grants shareholders of mutual funds and BDCs a direct private right of action against investment advisers to seek redress for alleged violations of this fiduciary duty.
 
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While we exercise broad discretion over the
day-to-day
management of our BDCs, each of our BDCs is also subject to oversight and management by a board of directors, a majority of whom are not “interested persons” as defined under the Investment Company Act. The responsibilities of each of our BDC’s boards include, among other things, approving our advisory contract with the applicable BDC that we manage; approving certain service providers; determining the valuation and the method for valuing assets; and monitoring transactions involving affiliates; and approving certain
co-investment
transactions. The advisory contracts with each of our BDCs may be terminated by the stockholders or directors of such BDC on not more than 60 days’ notice, and are subject to annual renewal by each respective BDC’s board of directors after an initial
two-year
term.
Generally, BDCs are prohibited under the Investment Company Act from knowingly participating in certain transactions with their affiliates without prior approval of the BDC’s disinterested directors and, in some cases, prior approval by the SEC. The SEC has interpreted the prohibition on transactions with affiliates to prohibit “joint transactions” among entities that share a common investment adviser. Pursuant to the
Co-investment
Exemptive Order, however, our funds affiliated with our BDCs are generally permitted to
co-invest
with our BDCs if a “required majority” (as defined in Section 57(o) of the Investment Company Act) of such BDC’s independent directors make certain conclusions in connection with a
co-investment
transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to such BDC and its shareholders and do not involve overreaching in respect of such BDC or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of the BDC’s shareholders and with its investment objective and strategies, and (3) the investment by our BDCs and other affiliates of investment funds would not disadvantage any other of our BDCs, and our BDC’s participation would not be on a basis different from or less advantageous than that on which other of our funds are investing.
The Dodd-Frank Act authorizes federal regulatory agencies to review and, in certain cases, prohibit compensation arrangements at financial institutions that give employees incentives to engage in conduct deemed to encourage inappropriate risk-taking by covered financial institutions. In 2016, federal bank regulatory authorities and the SEC revised and
re-proposed
a rule that generally (1) prohibits incentive-based payment arrangements that are determined to encourage inappropriate risks by certain financial institutions by providing excessive compensation or that could lead to material financial loss and (2) requires those financial institutions to disclose information concerning incentive-based compensation arrangements to the appropriate federal regulator. The Dodd-Frank Act also directs the SEC to adopt a rule that requires public companies to adopt and disclose policies requiring, in the event the company is required to issue an accounting restatement, the contingent repayment of obligations of related incentive compensation from current and former executive officers. The SEC has proposed but not yet adopted such rule. To the extent the aforementioned rules are adopted, our ability to recruit and retain investment professionals and senior management executives could be limited.
Other Securities Laws:
In addition, we regularly rely on exemptions from various requirements of the Securities Act, the Exchange Act, and the Commodity Exchange Act. Those exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. The revocation, challenge or unavailability of these exemptions could increase our cost of doing business or subject us to regulatory action or third-party claims, which could have a material adverse effect on our businesses. For example, Rule 506 of Regulation D under the Securities Act includes “bad actor” disqualification provisions that ban an issuer from offering or selling securities pursuant to the safe harbor in Rule 506 if the issuer, or any other “covered person,” is the subject of a criminal, regulatory or court order or other “disqualifying event” under the rule which has not been waived by the SEC. The definition of a “covered person” under the rule includes an issuer’s directors, general partners, managing members and executive officers and promoters and persons compensated for soliciting investors in the offering. Accordingly, our ability to rely on Rule 506 to offer or sell our funds and therefore a significant portion of our business would be impaired if we or any “covered person” is the subject of a disqualifying event under the rule and we are unable to obtain a waiver or, in certain circumstances, terminate our involvement with such “covered person”.
 
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Compliance with existing and new regulations subjects us to significant costs. Any changes or other developments in the regulatory framework applicable to our businesses and changes to formerly accepted industry practices, may impose additional costs on us, require the attention of our senior management or limit the manner in which we conduct our businesses. We may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. Additional legislation, increasing global regulatory oversight of fundraising activities, changes in rules promulgated by self-regulatory organizations or exchanges or changes in the interpretation or enforcement of existing laws and rules, either in the United States or elsewhere, may directly affect our mode of operation and profitability. Moreover, our failure to comply with applicable laws or regulations, including labor and employment laws, could result in fines, censure, suspensions of personnel or other sanctions, including revocation of the registration of our relevant subsidiaries as investment advisers or our broker-dealer affiliate as a registered broker-dealer.
Even if a sanction is imposed against us, one of our subsidiaries or our affiliates or our personnel by a regulator for a small monetary amount, the costs incurred in responding to such matters could be material. The adverse publicity related to the sanction could harm our reputation, which in turn could have a material adverse effect on our businesses, making it harder for us to raise new and successor funds and discouraging others from doing business with us or accepting investments from our funds.
Heightened scrutiny of the financial services industry by regulators may materially and adversely affect our business.
The financial services industry has been the subject of heightened scrutiny by regulators around the globe. In particular, the SEC and its staff have focused more narrowly on issues relevant to alternative asset management firms, including by forming specialized units devoted to examining such firms and, in certain cases, bringing enforcement actions against the firms, their principals and employees. In recent periods there have been a number of enforcement actions within the industry, and it is expected that the SEC will continue to pursue enforcement actions against asset managers. This increased enforcement activity may cause us to reevaluate certain practices and adjust our compliance control function as necessary and appropriate.
While the SEC’s recent lists of examination priorities include such items as cybersecurity compliance and controls and conducting risk-based examinations of investment advisory firms, it is generally expected that the SEC’s oversight of alternative asset managers will continue to focus substantially on concerns related to fiduciary duty transparency and investor disclosure practices (See “—
Conflicts may arise in our allocation of costs and expenses, and we are subject to increased regulatory scrutiny and uncertainly with regard to those determinations—Allocation of expenses relating to Dyal’s Business Services Platform”
). Although the SEC has cited improvements in disclosures and industry practices in this area, it has also indicated that there is room for improvement in particular areas, including fees and expenses (and the allocation of such fees and expenses) and
co-investment
practices. To this end, many firms have received inquiries during examinations or directly from the SEC’s Division of Enforcement regarding various transparency-related topics, including the acceleration of monitoring fees, the allocation of broken-deal expenses, outside business activities of firm principals and employees, group purchasing arrangements and general conflicts of interest disclosures. While we believe we have made appropriate and timely disclosures regarding the foregoing, the SEC staff may disagree.
Further, the SEC has highlighted BDC board oversight and valuation practices as one of its areas of focus in investment adviser examinations and has instituted enforcement actions against advisers for misleading investors about valuation. If the SEC were to investigate and find errors in our methodologies or procedures, we and/or members of our board and management could be subject to penalties and fines, which could harm our reputation and our business, financial condition and results of operations could be materially and adversely affected.
 
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Regulations governing the operations of our BDCs as business development companies affect their ability to raise, and the way in which they raise, additional capital.
Our BDCs have elected to be regulated as business development companies under the Investment Company Act. Many of the regulations governing business development companies restrict, among other things, leverage incurrence,
co-investments
and other transactions with other entities within Blue Owl. Certain of our funds may be restricted from engaging in transactions with our BDCs and their subsidiaries. As business development companies regulated under the Investment Company Act, our BDCs may issue debt securities or preferred stock and borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the Investment Company Act.
BDCs are not generally able to issue and sell their common stock at a price below net asset value per share. BDCs may, however, issue and sell their common stock, or warrants, options or rights to acquire such common stock, at a price below the then-current net asset value of such common stock if (1) the applicable BDC’s board of directors determines that such sale is in the BDC’s best interests and the best interests of the BDC’s shareholders, and (2) the applicable BDC’s shareholders have approved a policy and practice of making such sales within the preceding
12-months.
In any such case, the price at which the securities of BDCs are to be issued and sold may not be less than a price which, in the determination of the applicable board of directors, closely approximates the market value of such securities.
In addition, as business development companies that are subject to regulations under the Investment Company Act, our BDCs are currently permitted to incur indebtedness or issue senior securities only in amounts such that their asset coverage ratio equals at least 150% after each such issuance, except in the instance of ORCC II, which is required to maintain an asset coverage ratio of at least 200%. Our BDCs’ ability to pay dividends will be restricted if such BDC’s asset coverage ratio falls below the required asset coverage ratio and any amounts that it uses to service its indebtedness are not available for dividends to its common stockholders. Any of the foregoing circumstances could have a material adverse effect on our BDCs, and as a result, on our financial condition, results of operations and cash flow.
For U.S. federal income tax purposes, our BDCs have elected to be treated as regulated investment companies (“RICs”) under Subchapter M of the Code. To maintain their status as RICs, our BDCs must meet, among other things, certain source of income, asset diversification and annual distribution requirements. Each of our BDCs is required to generally distribute to its stockholders at least 90% of such BDC’s investment company taxable income to maintain its RIC status.
Changes to the method of determining the London Interbank Offered Rate (“LIBOR”) or the selection of a replacement for LIBOR may affect the value of investments held by our funds and could affect our results of operations and financial results.
LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending transactions between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. Our funds, and in particular our BDCs, typically use LIBOR as a reference rate in term loans they extend to portfolio companies such that the interest due to us pursuant to a term loan extended to a portfolio company is calculated using LIBOR. The terms of our debt investments generally include minimum interest rate floors which are calculated based on LIBOR.
The United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it will not compel panel banks to contribute to LIBOR after 2021. It is unclear if at that time LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.
Central banks and regulators in a number of major jurisdictions (for example, United States, United Kingdom, European Union, Switzerland and Japan) have convened working groups to find, and
 
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implement the transition to, suitable replacements for interbank offered rates (“IBORs”). To identify a successor rate for U.S. dollar LIBOR, the Alternative Reference Rates Committee (“ARRC”), a U.S.-based group convened by the Federal Reserve Board and the Federal Reserve Bank of New York, was formed. The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. In addition, on March 25, 2020, the FCA stated that although the central assumption that firms cannot rely on LIBOR being published after the end of 2021 has not changed, the outbreak of
COVID-19
has impacted the timing of many firms’ transition planning, and the FCA will continue to assess the impact of the
COVID-19
outbreak on transition timelines and update the marketplace as soon as possible. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, at this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere or, whether the
COVID-19
outbreak will have further effect on LIBOR transition plans.
The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to our portfolio companies or on our overall financial condition or results of operations. In addition, if LIBOR ceases to exist, our funds, borrowers of our funds and our partner managers and their respective portfolio companies may need to renegotiate the credit agreements extending beyond 2021 that utilize LIBOR as a factor in determining the interest rate, in order to replace LIBOR with the new standard that is established, which may have an adverse effect on our overall financial condition or results of operations. Following the replacement of LIBOR, some or all of these credit agreements may bear interest at a lower interest rate, which, to the extent our funds are lenders, could have an adverse impact on their performance, could have an adverse impact on our funds’ and their portfolio companies’ results of operations. Moreover, if LIBOR ceases to exist, our funds and their portfolio companies may need to renegotiate certain terms of their credit facilities. If our funds and their portfolio companies are unable to do so, amounts drawn under their credit facilities may bear interest at a higher rate, which would increase the cost of their borrowings and, in turn, affect their results of operations.
Failure to comply with “pay to play” regulations implemented by the SEC and certain states, and changes to the “pay to play” regulatory regimes, could adversely affect our businesses.
Since 2010, states and other regulatory authorities have begun to require investment managers to register as lobbyists. Owl Rock has registered as a lobbyist in California. These registration requirements impose significant compliance obligations on registered lobbyists and their employers, which may include annual registration fees, periodic disclosure reports and internal record keeping, and may also prohibit the payment of contingent fees.
Under applicable SEC rules, investment advisers are required to implement compliance policies designed, among other matters, to track contributions by certain of the adviser’s employees and engagements of third parties that solicit government entities and to keep certain records to enable the SEC to determine compliance with the rule. In addition, there have been similar rules on a state level regarding “pay to play” practices by investment advisers. FINRA adopted its own set of “pay to play” regulations, which went into effect on August 20, 2017, that are similar to the SEC’s regulations.
As we have public pension plans that are investors in our funds, these rules could impose significant economic sanctions on our businesses if we or one of the other persons covered by the rules make any prohibited contribution or payment, whether or not material or with an intent to secure an investment from a public pension plan. We may also acquire other investment managers or hire additional personnel who are not subject to the same restrictions as us, but whose activity, and the activity of their principals, prior to our ownership or employment of such person, could affect our fundraising. Any failure on our part to comply with these rules could cause us to lose compensation for our advisory services or expose us to significant penalties and reputational damage.
 
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Failure to comply with regulations regarding the prevention of money laundering or terrorism or national security could adversely affect our business.
As part of our responsibility for the prevention of money laundering under applicable laws, we may require detailed verification of a prospective investor’s identity and the source of such prospective investor’s funds. In the event of delay or failure by a prospective investor to produce any such information required for verification purposes, we may refuse to admit the investor to our funds. We may from time to time request (outside of the subscription process), and our funds’ limited partners will be obligated to provide to us as appropriate upon such request, additional information as from time to time may be required for us to satisfy our obligations under these and other laws that may be adopted in the future. Additionally, we may from time to time be obligated to file reports with regulatory authorities in various jurisdictions with regard to, among other things, the identity of our funds’ limited partners and suspicious activities involving the interests of our funds. In the event it is determined that any investor, or any direct or indirect owner of any investor, is a person identified in any of these laws as a prohibited person, or is otherwise engaged in activities of the type prohibited under these laws, we may be obligated, among other actions to be taken, to withhold distributions of any funds otherwise owing to such investor or to cause such investor’s interests to be cancelled or otherwise redeemed (without the payment of any consideration in respect of those interests).
The Bank Secrecy Act of 1970 and the USA PATRIOT Act require that financial institutions (a term that includes banks, broker-dealers and investment companies) establish and maintain compliance programs to guard against money laundering activities. Laws or regulations may presently or in the future require us, our funds or any of our affiliates or other service providers to establish additional anti-money laundering procedures, to collect information with respect to our funds’ limited partners, to share information with governmental authorities with respect to our funds’ limited partners or to implement additional restrictions on the transfer of the interests.
Economic sanction laws in the U.S. and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and companies, which could negatively impact our business, financial condition and operating results.
Economic sanction laws in the U.S. and other jurisdictions may restrict or prohibit us or our affiliates from transacting with certain countries, territories, individuals and entities. In the U.S., the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) administers and enforces laws, executive orders and regulations establishing U.S. economic and trade sanctions, which restrict or prohibit, among other things, direct and indirect transactions with, and the provision of services to, certain
non-U.S.
countries, territories, individuals and entities. These types of sanctions may significantly restrict or completely prohibit lending activities in certain jurisdictions, and violation of any such laws or regulations, may result in significant legal and monetary penalties, as well as reputational damage. OFAC sanctions programs change frequently, which may make it more difficult for us or our affiliates to ensure compliance. Moreover, OFAC enforcement is increasing, which may increase the risk that we become subject of such actual or threatened enforcement.
Additionally, Section 2019 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (the “ITRA”) amended the Exchange Act to require companies subject to SEC reporting obligations under Section 13 of the Exchange Act to disclose in their periodic reports specified dealings or transactions involving Iran or other individuals and entities targeted by OFAC during the period covered by the relevant periodic report. In some cases, the ITRA requires companies to disclose these types of transactions even if they were permissible under U.S. law. Companies that currently may be or may have been at the time considered our affiliates, may have from time to time publicly filed and/or provided to us such disclosures. We do not independently verify or participate in the preparation of these disclosures. We and our publicly traded funds are required, either periodically or annually to separately file with the SEC a notice when such activities have been disclosed, and the SEC is required to post such notice of disclosure on its website and send the report to the President and certain U.S. Congressional committees. Disclosure of such activity, even if such activity is not subject to sanctions under
 
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applicable law, and any sanctions actually imposed on us or our affiliates as a result of these activities, could harm our reputation and have a negative impact on our business, financial condition and results of operations, and any failure to disclose any such activities as required could additionally result in fines or penalties.
We are subject to laws and regulations in the EEA, including the Alternative Investment Fund Managers Directive, which may increase our regulatory costs and burdens.
The AIFMD regulates the activities of certain private fund managers undertaking fund management activities or marketing fund interests to investors within the EEA.
To the extent any one of our funds is actively marketed to investors domiciled or having their registered office in the EEA: (i) we and such fund will be subject to certain reporting, disclosure and other compliance obligations under the AIFMD, which will result in such funds incurring additional costs and expenses; (ii) we and such fund may become subject to additional regulatory or compliance obligations arising under national law in certain EEA jurisdictions, which would result in such fund incurring additional costs and expenses or may otherwise affect the management and operation of such fund; (iii) we will be required to make detailed information relating to such fund and its investments available to regulators and third parties; and (iv) the AIFMD will also restrict certain activities of such fund in relation to EEA portfolio companies, including, in some circumstances, such fund’s ability to recapitalize, refinance or potentially restructure an EEA portfolio company within the first two years of ownership, which may in turn affect operations of such fund generally. In addition, it is possible that some EEA jurisdictions will elect to restrict or prohibit the marketing of
non-EEA
funds to investors based in those jurisdictions, which may make it more difficult for our funds to raise their targeted amount of commitments. We rely on a third party provider to ensure our compliance with these regulations, including required registrations, which may increase our compliance costs and risk of
non-compliance.
In the future, it may be possible for
non-EEA
alternative investment fund managers (“AIFMs”) to market an alternative investment fund (“AIF”) within the EEA pursuant to a
pan-European
marketing “passport”, instead of under national private placement regimes. Access to this passport may be subject to the
non-EEA
AIFM complying with various additional requirements under the AIFMD, which may include one or more of the following: additional conduct of business and organizational requirements; rules relating to the remuneration of certain personnel; minimum regulatory capital requirements; restrictions on the use of leverage; additional disclosure and reporting requirements to both investors and EEA home state regulators; independent valuation of an AIF’s assets; and the appointment of an independent depositary. Certain EEA Member States have indicated that they will cease to operate national private placement regimes when, or shortly after, the passport becomes available, which would mean that
non-EEA
AIFMs to whom the passport is available would be required to comply with all relevant provisions of the AIFMD in order to market to professional investors in those jurisdictions. As a result, if in the future
non-EEA
AIFMs may only market in certain EEA jurisdictions pursuant to a passport, we may not seek to market interests in our funds in those jurisdictions, which may lead to a reduction in the overall amount of capital invested in our funds. Alternatively, if we sought to comply with the requirements to use the passport, this could have adverse effects including, amongst other things, increasing the regulatory burden and costs of operating and managing certain of our funds and their investments, and potentially requiring changes to compensation structures for key personnel, thereby affecting our ability to recruit and retain these personnel.
Certain of the funds or accounts we advise or manage are subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code, and our businesses could be adversely affected if certain of our other funds or accounts fail to satisfy an exception under the “plan assets” regulation under ERISA.
A number of investors in our funds are subject to the fiduciary and prohibited transaction provisions of Title I of ERISA and the parallel provisions of the Internal Revenue Code; however the substantial majority of our
 
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funds rely on the “insignificant participation” exception under the “plan assets” regulation under ERISA. We are not, therefore subject to the requirements of ERISA (or the parallel provision of the Internal Revenue Code) with respect to the management of those funds. However, if those funds fail to satisfy that exception for any reason and if no other exception is available, that failure could materially interfere with our activities in relation to those funds or expose us to risks related to our failure to comply with the applicable requirements. For example, the governing documents of a fund generally impose certain obligations on the general partner or manager of the fund to cause the assets of the fund to not be treated as “plan assets” and a breach of that obligation could create liability for us. Further, if the assets of a fund become plan assets (whether because of our breach, a change in law or otherwise), the application of ERISA-related requirements on our fund may prevent us from operating the fund as intended and may cause the fund to breach its obligations with partner managers or other portfolio companies, which would create significant liabilities for our funds and could significantly impact the fund’s ability to make any further investments. Further, we have formed a small number of holding vehicles to facilitate
co-investments
alongside our funds by ERISA investors, the assets of which holding vehicles constitute “plan assets” and with respect to which we serve as a fiduciary. While we may be required to satisfy applicable fiduciary standards and avoid the prohibited transaction provisions of ERISA with respect to such holding vehicles and their assets, in each case, our authority with respect to the management and control of those vehicles is limited by contract with the relevant fund investor. Accordingly, we do not anticipate any liabilities with respect to our serving as a fiduciary with respect to such vehicles.
Risks Related to Our Funds
The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our Class A Shares.
The historical performance of our funds is relevant to us primarily insofar as it is indicative of performance income we have earned in the past and may earn in the future and our reputation and ability to raise new funds. The historical and potential returns of the funds we advise are not, however, directly linked to returns on shares of our Class A Shares. Therefore, holders of our Class A Shares should not conclude that positive performance of the funds we advise will necessarily result in positive returns on a return on investment in our Class A Shares. However, poor performance of our funds we advise would likely cause a decline in our revenues and would therefore likely have a negative effect on our operating results, returns on our Class A Shares and a negative impact on our ability to raise new funds. Also, there is no assurance that projections in respect of our funds or unrealized valuations will be realized.
Moreover, the historical returns of our funds should not be considered indicative of the future returns of these or from any future funds we may raise, in part because:
 
   
market conditions during previous periods may have been significantly more favorable for generating positive performance than the market conditions we may experience in the future;
 
   
our funds’ rates of returns, which are calculated on the basis of net asset value of the funds’ investments, reflect unrealized gains, which may never be realized;
 
   
our funds’ returns have previously benefited from investment opportunities and general market conditions that may not recur, including the availability of debt capital on attractive terms and the availability of distressed debt opportunities, and we may not be able to achieve the same returns or profitable investment opportunities or deploy capital as quickly;
 
   
the historical returns that we present in this proxy statement derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed, which may have little or no realized investment track record;
 
   
our funds’ historical investments were made over a long period of time and over the course of various market and macroeconomic cycles, and the circumstances under which our current or future funds may make future investments may differ significantly from those conditions prevailing in the past;
 
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the attractive returns of certain of our funds have been driven by the rapid return on invested capital, which has not occurred with respect to all of our funds and we believe is less likely to occur in the future;
 
   
in recent years, there has been increased competition for investment opportunities resulting from the increased amount of capital invested in alternative funds and high liquidity in debt markets, and the increased competition for investments may reduce our returns in the future; and
 
   
our newly established funds may generate lower returns during the period that they take to deploy their capital.
The future internal rate of return for any current or future fund may vary considerably from the historical internal rate of return generated by any particular fund, or for our funds as a whole. Future returns will also be affected by the risks described elsewhere in this proxy statement, including risks of the industries and businesses in which a particular fund invests.
Valuation methodologies for certain assets of our funds can be subject to significant subjectivity.
Many of the investments in our funds are illiquid and thus have no readily ascertainable market prices. We value these investments based on our estimate, or an independent third party’s estimate, of their value as of the date of determination. The determination of fair value, and thus the amount of unrealized appreciation or depreciation our funds may recognize in any reporting period, is to a degree subjective. Our funds generally value their investments quarterly at fair value, as determined in good faith by our funds’ respective boards or a valuation committee, as applicable, based on, among other things, the input of third party valuation firms and taking into account the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company operates, comparison to publicly traded companies, discounted cash flow, current market interest rates and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, the valuations may fluctuate significantly over short periods of time due to changes in current market conditions. A fund’s net asset value could be adversely affected if the determinations regarding the fair value of the investments were materially higher than the values that are ultimately realized upon the disposal of such investments. These valuations could, in turn, affect the management fees or performance income that our business receives.
In addition, our private funds’ valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information, which often involves significant subjectivity. These factors may also cause the valuation of our investments to differ materially from the values that our funds may ultimately realize.
The use of leverage by our funds may materially increase the returns of such funds but may also result in significant losses or a total loss of capital.
Our funds, particularly our BDCs and private funds in the Direct Lending products, may choose to use leverage as part of their respective investment programs and certain funds regularly borrow a substantial amount of their capital. The use of leverage poses a significant degree of risk and enhances the possibility of a significant loss in the value of the investment portfolio. A fund may borrow money from time to time to purchase or carry securities or may enter into derivative transactions with counterparties that have embedded leverage. The use of leverage by our funds increases the volatility of investments by magnifying the potential for gain or loss on invested equity capital. If the value of a fund’s assets were to decrease, leverage would cause net asset value to decline more sharply than it otherwise would if the fund had not employed leverage. Similarly, any decrease in the fund’s income would cause net income to decline more sharply than it would have if it had not borrowed and
 
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employed leverage. Such a decline could negatively affect the fund’s ability to service its debt, which could have a material adverse effect on our funds, and as a result, on our financial condition, results of operations and cash flow.
Our Dyal funds generally rely on obtaining credit facilities secured principally by the undrawn capital commitments of their investors. These credit lines are an important part of managing the cash flow of the funds, including facilitating a fund’s acquisition or funding of investments, enhancing the regularity of cash distributions to investors and facilitating the payment of management fees to us. The inability to secure or maintain these lines of credit would have an adverse impact on our funds and their returns and on us, including increasing administrative costs associated with managing a fund. In addition, Dyal Fund III and Dyal Fund IV each entered into a securitization financing transaction pursuant to which the rights to the cash flows from the fund’s investments were securitized into fixed rate notes.
Risks Related to our Structure and Governance
Blue Owl has elected to be treated as, a “controlled company” within the meaning of the NYSE listing standards and, as a result, our stockholders may not have certain corporate governance protections that are available to stockholders of companies that are not controlled companies.
So long as more than 50% of the voting power for the election of directors of Blue Owl is held by an individual, a group or another company, Blue Owl will qualify as a “controlled company” under the NYSE listing requirements. The Owl Rock Principals and the Dyal Principals control a majority of the voting power of our outstanding capital stock. As a result, Blue Owl qualifies as, and has elected to be treated as, a “controlled company” under the NYSE listing standards and will not be subject to the requirements that would otherwise require us to have: (i) a majority of “independent directors,” as defined under the listing standards of the NYSE; (ii) a nominating committee comprised solely of independent directors; (iii) compensation of our executive officers determined by a majority of the independent directors or a compensation committee comprised solely of independent directors; and (iv) director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee comprised solely of independent directors.
The Owl Rock Principals and the Dyal Principals may have their interest in Blue Owl diluted due to future equity issuances or their own actions in selling Class A Shares, in each case, which could result in a loss of the “controlled company” exemption under the NYSE listing rules. Blue Owl would then be required to comply with those provisions of the NYSE listing requirements.
The multi-class structure of Blue Owl common stock will have the effect of concentrating voting power with the Owl Rock Principals and Dyal Principals, which will limit an investor’s ability to influence the outcome of important transactions, including a change in control.
Following the consummation of the Business Combination, entities controlled by the Owl Rock Principals and the Dyal Principals hold all of the issued and outstanding Class B and Class D Shares. Accordingly, until the Sunset Date, the Owl Rock Principals and the Dyal Principals will hold 90% of the voting power of Blue Owl’s capital stock on a fully- diluted basis and will be able to control matters submitted to our stockholders for approval, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions. The Owl Rock Principals and the Dyal Principals may have interests that differ from our shareholders and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of Blue Owl, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of Blue Owl, and might ultimately affect the market price of Class A Shares. For information about our dual class structure, see the section titled “
Description of Blue Owl’s Capital Stock.
 
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Potential conflicts of interest may arise among the holders of Class B and Class D Shares and the holders of our Class A, Class C and Class E Shares.
The Owl Rock Principals and Dyal Principals (and certain Dyal employees) hold all of the Class B and Class D Shares. As a result, conflicts of interest may arise among the Owl Rock Principals and Dyal Principals, on the one hand, and us and our holders of our Class A, Class C and Class E Shares, on the other hand. The Owl Rock Principals and Dyal Principals have the ability to influence our business and affairs through their ownership of the high vote shares of our common stock, their general ability to appoint our board of directors, and provisions under the Investor Rights Agreement and our certificate of incorporation requiring their approval for certain corporate actions (in addition to approval by our board of directors). If the holders of our Class A, Class C and Class E Shares are dissatisfied with the performance of our board of directors, they have no ability to remove any of our directors, with or without cause.
Further, through their ability to elect our board of directors, the Owl Rock Principals and the Dyal Principals have the ability to indirectly influence the determination of the amount and timing of our investments and dispositions, cash expenditures, indebtedness, issuances of additional partnership interests, tax liabilities and amounts of reserves, each of which can affect the amount of cash that is available for distribution to holders of Common Units.
In addition, conflicts may arise relating to the selection, structuring and disposition of investments and other transactions, declaring dividends and other distributions and other matters due to the fact that the Owl Rock Principals and the Dyal Principals hold their Owl Rock Operating Group Units directly or through pass-through entities that are not subject to corporate income taxation.
Delaware law, our certificate of incorporation and our bylaws contain certain provisions, including anti- takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our certificate of incorporation and the DGCL contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by the Board and therefore depress the trading price of Blue Owl’s Class A Shares. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the Board or taking other corporate actions, including effecting changes in management. Among other things, our certificate of incorporation and bylaws include provisions regarding:
 
   
a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board;
 
   
the ability of the Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
 
   
the limitation of the liability of, and the indemnification of, our directors and officers;
 
   
the right of the Board to elect a director to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Board;
 
   
the requirement that directors may only be removed from the Board for cause;
 
   
the inability of stockholders to act by written consent following the Sunset Date;
 
   
the requirement that a special meeting of stockholders may be called only by the Board, the chairman of the Board of directors or Blue Owl’s chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors;
 
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controlling the procedures for the conduct and scheduling of the Board and stockholder meetings;
 
   
the ability of the Board of directors to amend the bylaws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and
 
   
advance notice procedures with which stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the composition of the Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Board or management.
In addition, as a Delaware corporation, Blue Owl is generally subject to provisions of Delaware law, including the DGCL, although Blue Owl has elected not to be governed by Section 203 of the DGCL.
Any provision of our certificate of incorporation, our bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for stockholders to receive a premium for their shares of Blue Owl’s capital stock and could also affect the price that some investors are willing to pay for Blue Owl’s common stock.
In addition, the provisions of the Investor Rights Agreement, as described below, provide the stockholders party thereto with certain board representation and other consent rights that could also have the effect of delaying or preventing a change in control.
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Blue Owl’s stockholders, which could limit Blue Owl’s stockholders’ ability to obtain a favorable judicial forum for disputes with Blue Owl or its directors, officers or other employees.
Our certificate of incorporation provides that, unless Blue Owl consents in writing to the selection of an alternative forum, (a) any derivative action or proceeding brought on behalf of Blue Owl, (b) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee, agent or stockholder of Blue Owl to Blue Owl or Blue Owl’s stockholders, or any claim for aiding and abetting such alleged breach, (c) any action asserting a claim against Blue Owl or any current or former director, officer, other employee, agent or stockholder of Blue Owl (i) arising pursuant to any provision of the DGCL, our certificate of incorporation (as it may be amended or restated) or our bylaws or (ii) as to which the DGCL confers jurisdiction on the Delaware Court of Chancery or (d) any action asserting a claim against Blue Owl or any current or former director, officer, other employee, agent or stockholder of Blue Owl governed by the internal affairs doctrine of the law of the State of Delaware shall, as to any action in the foregoing clauses (a) through (b), to the fullest extent permitted by law, be solely and exclusively brought in the Delaware Court of Chancery; provided, however, that the foregoing shall not apply to any claim (1) as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Delaware Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (2) which is vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or (3) arising under federal securities laws, including the Securities Act as to which the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum. Notwithstanding the foregoing, the provisions of Article XIII of our certificate of incorporation does not apply to suits brought to enforce any liability or duty created by the Exchange Act, or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum.
 
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This
choice-of-forum
provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with Blue Owl or its directors, officers, stockholders, agents or other employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of management and our board of directors.
Our certificate of incorporation does not limit the ability of Altimar Sponsor to compete with us.
Altimar Sponsor and its affiliates engage in a broad spectrum of activities, including investments in the financial services and technology industries. In the ordinary course of their business activities, Altimar Sponsor and its affiliates may engage in activities where their interests conflict with Blue Owl’s interests or those of its stockholders. Our certificate of incorporation provides that none of Altimar Sponsor, any of its affiliates or any director who is not employed by Blue Owl (including any
non-employee
director who serves as one of its officers in both his director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which Blue Owl operates. Altimar Sponsor and its affiliates also may pursue, in their capacities other than as directors of Blue Owl, acquisition opportunities that may be complementary to Blue Owl’s business, and, as a result, those acquisition opportunities may not be available to Blue Owl. In addition, Altimar Sponsor may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you.
Blue Owl is a holding company and its only material asset are its indirect interest (held through Blue Owl GP) in the Blue Owl Operating Partnerships, and it is accordingly dependent upon distributions made by its subsidiaries to pay taxes, cause Blue Owl GP to make payments under the Tax Receivable Agreement, and pay dividends.
Blue Owl is a holding company with no material assets other than its indirect ownership of the Common Units through Blue Owl GP. As a result, Blue Owl has no independent means of generating revenue or cash flow. Blue Owl’s ability to pay taxes, cause Blue Owl GP to make payments under the Tax Receivable Agreement, and pay dividends will depend on the financial results and cash flows of the Blue Owl Operating Partnerships and the distributions it receives (directly or indirectly) from the Blue Owl Operating Partnerships. Deterioration in the financial condition, earnings or cash flow of the Blue Owl Operating Partnerships for any reason could limit or impair the Blue Owl Operating Partnerships’ ability to pay such distributions. Additionally, to the extent that Blue Owl or Blue Owl GP needs funds and the Blue Owl Operating Partnerships are restricted from making such distributions under applicable law or regulation or under the terms of any financing arrangements, or the Blue Owl Operating Partnerships are otherwise unable to provide such funds, it could materially adversely affect Blue Owl’s liquidity and financial condition.
Subject to the discussion herein, the Blue Owl Operating Partnerships will continue to be treated as partnerships for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to holders of Common Units. Accordingly, Blue Owl GP will be required to pay income taxes on its allocable share of any net taxable income of the Blue Owl Operating Partnerships. Under the terms of the Blue Owl Limited Partnership Agreements, the Blue Owl Operating Partnerships are obligated to make tax distributions to holders of the Common Units (including Blue Owl GP) calculated at certain assumed tax rates. In addition to tax expenses, Blue Owl will also incur expenses related to its operations, including Blue Owl GP’s payment obligations under the Tax Receivable Agreement, which could be significant, and some of which will be reimbursed by the Blue Owl Operating Partnerships (excluding payment obligations under the Tax Receivable Agreement). Blue Owl intends to cause Blue Owl GP to cause the Blue Owl Operating Partnerships to make ordinary distributions and tax distributions to holders of the Common Units on a pro rata basis in amounts sufficient to cover all applicable taxes, relevant operating
 
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expenses, payments by Blue Owl GP under the Tax Receivable Agreement and dividends, if any, declared by Blue Owl. However, as discussed above, the Blue Owl Operating Partnerships’ ability to make such distributions may be subject to various limitations and restrictions including, but not limited to, retention of amounts necessary to satisfy the obligations of the Blue Owl Operating Partnerships and restrictions on distributions that would violate any applicable restrictions contained in the Blue Owl Operating Partnerships’ debt agreements, or any applicable law, or that would have the effect of rendering the Blue Owl Operating Partnerships insolvent. To the extent that Blue Owl GP is unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments under the Tax Receivable Agreement, which could be substantial.
Additionally, although the Blue Owl Operating Partnerships generally will not be subject to any entity- level U.S. federal income tax, they may be liable under recent U.S. federal tax legislation for adjustments to prior year tax returns, absent an election to the contrary. In the event the Blue Owl Operating Partnerships’ calculations of taxable income are incorrect, the Blue Owl Operating Partnerships and/or their partners, including Blue Owl or Blue Owl GP, in later years may be subject to material liabilities pursuant to this legislation and its related guidance.
If either of the Blue Owl Operating Partnerships were treated as a corporation for U.S. federal income tax or state tax purposes, then the amount available for distribution by such Blue Owl Operating Partnerships could be substantially reduced and the value of Blue Owl shares could be adversely affected.
An entity that would otherwise be classified as a partnership for U.S. federal income tax purposes (such as either of the Blue Owl Operating Partnerships) may nonetheless be treated as, and taxable as, a corporation if it is a “publicly traded partnership” unless an exception to such treatment applies. An entity that would otherwise be classified as a partnership for U.S. federal income tax purposes will be treated as a “publicly traded partnership” if interests in such entity are traded on an established securities market or interests in such entity are readily tradable on a secondary market or the substantial equivalent thereof. If either of the Blue Owl Operating Partnerships were determined to be treated as a “publicly traded partnership” (and taxable as a corporation) for U.S. federal income tax purposes, such Blue Owl Operating Partnership would be taxable on its income at the U.S. federal income tax rates applicable to corporations and distributions by such Blue Owl Operating Partnership to its partners (including Blue Owl) could be taxable as dividends to such partners to the extent of the earnings and profits of such Blue Owl Operating Partnership. In addition, we would no longer have the benefit of increases in the tax basis of the Blue Owl Operating Partnership’s assets as a result of exchanges of Common Units. Pursuant to the Exchange Agreement, certain Owl Rock Equityholders and Dyal Equityholders may, from time to time, subject to the terms of the Exchange Agreement, exchange their interests in the Blue Owl Operating Partnerships and have such interests redeemed by Blue Owl Operating Partnerships for cash or Blue Owl stock. While such exchanges could be treated as trading in the interests of the Blue Owl Operating Partnerships for purposes of testing “publicly traded partnership” status, the Exchange Agreement contains restrictions on redemptions and exchanges of interests in the Blue Owl Operating Partnerships that are intended to prevent either of the Blue Owl Operating Partnerships from being treated as a “publicly traded partnership” for U.S. federal income tax purposes. Such restrictions are designed to comply with certain safe harbors provided for under applicable U.S. federal income tax law. Blue Owl GP may also impose additional restrictions on exchanges that Blue Owl or Blue Owl GP determines to be necessary or advisable so that neither of the Blue Owl Operating Partnerships is treated as a “publicly traded partnership” for U.S. federal income tax purposes. Accordingly, while such position is not free from doubt, each of the Blue Owl Operating Partnerships is expected to be operated such that it is not treated as a “publicly traded partnership” taxable as a corporation for U.S. federal income tax purposes and we intend to take the position that neither of the Blue Owl Operating Partnerships is so treated as a result of exchanges of its interests pursuant to the Exchange Agreement.
 
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Pursuant to the Tax Receivable Agreement, Blue Owl GP will be required to make payments to certain Owl Rock Equityholders and Dyal Equityholders for certain tax benefits Blue Owl and Blue Owl GP may claim and those payments may be substantial.
The Owl Rock Equityholders and the Dyal Equityholders will sell or exchange certain partnership interests pursuant to the transactions contemplated by the Business Combination Agreement and may in the future exchange their Common Units, together with the cancellation of an equal number of Class C Shares or Class D Shares, for Class A Shares or Class B Shares of Blue Owl, respectively, or cash pursuant to the Blue Owl Operating Partnership Agreements and the Exchange Agreement, subject to certain conditions and transfer restrictions as set forth therein and in the Investor Rights Agreement. Additionally, in connection with the closing of the Business Combination Agreement, Blue Owl GP may acquire from certain Owl Rock Equityholders corporations formed by such Owl Rock Equityholders to hold partnership interests in Owl Rock. Such transactions are expected to result in increases in Blue Owl’s (and Blue Owl GP’s) allocable share of the tax basis of the tangible and intangible assets of the Blue Owl Operating Partnerships. These increases in tax basis may increase (for income tax purposes) depreciation and amortization deductions and therefore reduce the amount of income or franchise tax that Blue Owl or Blue Owl GP would otherwise be required to pay in the future had such sales and exchanges never occurred.
In connection with the Business Combination, Blue Owl GP entered into the Tax Receivable Agreement, which generally provides for the payment by it of 85% of certain tax benefits, if any, that Blue Owl GP realizes (or in certain cases is deemed to realize) as a result of these increases in tax basis and certain other tax attributes of Blue Owl GP, the corporations acquired from certain Owl Rock Equityholders in the transaction, and tax benefits related to entering into the Tax Receivable Agreement. Those payments are the obligation of Blue Owl (including Blue Owl GP) and not of Blue Owl Operating Partnerships. The actual increase in Blue Owl GP’s allocable share of the Blue Owl Operating Partnerships’ tax basis in their assets, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges, the market price of the Class A Shares at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of the recognition of Blue Owl’s (and Blue Owl GP’s) income. While many of the factors that will determine the amount of payments that Blue Owl GP will make under the Tax Receivable Agreement are outside of its control, Blue Owl GP expects that the payments it will make under the Tax Receivable Agreement will be substantial and could have a material adverse effect on Blue Owl’s financial condition. Any payments made by Blue Owl GP under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to Blue Owl and Blue Owl GP. To the extent that Blue Owl GP is unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid; however, nonpayment for a specified period may constitute a breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement, as further described below. Furthermore, Blue Owl GP’s future obligation to make payments under the Tax Receivable Agreement could make Blue Owl a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be realized or deemed realized under the Tax Receivable Agreement. See the section entitled “
Certain Relationships and Related Party Transactions—Tax Receivable Agreement
.”
In certain cases, payments under the Tax Receivable Agreement may exceed the actual tax benefits Blue Owl or Blue Owl GP realizes or be accelerated.
Payments under the Tax Receivable Agreement will be based on the tax reporting positions that Blue Owl or Blue Owl GP determines, and the IRS or another taxing authority may challenge all or any part of the tax basis increases, as well as other tax positions that Blue Owl or Blue Owl GP takes, and a court may sustain such a challenge. In the event that any tax benefits initially claimed by Blue Owl or Blue Owl GP are disallowed, the Owl Rock Equityholders and Dyal Equityholders will not be required to reimburse Blue Owl or Blue Owl GP for any excess payments that may previously have been made under the Tax Receivable Agreement, for example, due to adjustments resulting from examinations by taxing authorities. Rather, excess payments made to such
 
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holders will be netted against any future cash payments otherwise required to be made by Blue Owl GP under the Tax Receivable Agreement, if any, after the determination of such excess. However, a challenge to any tax benefits initially claimed by Blue Owl or Blue Owl GP may not arise for a number of years following the initial time of such payment or, even if challenged early, such excess cash payment may be greater than the amount of future cash payments that Blue Owl GP might otherwise be required to make under the terms of the Tax Receivable Agreement and, as a result, there might not be future cash payments against which to net. As a result, in certain circumstances Blue Owl GP could make payments under the Tax Receivable Agreement in excess of Blue Owl’s or Blue Owl GP’s actual income or franchise tax savings, which could materially impair Blue Owl’s financial condition.
Moreover, the Tax Receivable Agreement provides that, in certain events, including a change of control, breach of a material obligation under the Tax Receivable Agreement, or Blue Owl GP’s exercise of early termination rights, Blue Owl GP’s obligations under the Tax Receivable Agreement will accelerate and Blue Owl GP will be required to make a
lump-sum
cash payment to the Owl Rock Equityholders, Dyal Equityholders and other applicable parties to the Tax Receivable Agreement equal to the present value of all forecasted future payments that would have otherwise been made under the Tax Receivable Agreement, which
lump-sum
payment would be based on certain assumptions, including those relating to Blue Owl GP’s future taxable income. The
lump-sum
payment could be substantial and could exceed the actual tax benefits that Blue Owl or Blue Owl GP realizes subsequent to such payment because such payment would be calculated assuming, among other things, that Blue Owl and Blue Owl GP would have certain tax benefits available to it and that Blue Owl and Blue Owl GP would be able to use the potential tax benefits in future years.
There may be a material negative effect on Blue Owl’s liquidity if the payments required to be made by Blue Owl GP under the Tax Receivable Agreement exceed the actual income or franchise tax savings that Blue Owl (or Blue Owl GP) realizes. Furthermore, Blue Owl GP’s obligations to make payments under the Tax Receivable Agreement could also have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control.
Adverse developments in U.S. and
non-U.S.
tax laws could have a material and adverse effect on our business, financial condition and results of operations. Our effective tax rate and the amount of “tax distributions” that the Blue Owl Operating Partnerships are required to make to equityholders could also change materially as a result of various evolving factors, including changes in income tax law resulting from the most recent U.S. presidential and congressional elections or changes in the scope of our operations.
Blue Owl is subject to U.S. federal income taxation, and Blue Owl and the Blue Owl Operating Partnerships and their subsidiaries are subject to income taxation by certain states and municipalities and certain foreign jurisdictions in which they operate. In addition, the Blue Owl Operating Partnerships are required to make tax distributions to their partners pursuant to the Blue Owl Limited Partnership Agreements. In determining our tax liability and obligation to make tax distributions, we must monitor changes to the applicable tax laws and related regulations. While our existing operations have been implemented in a manner we believe is in compliance with current prevailing laws, one or more taxing U.S. or
non-U.S.
jurisdictions could seek to impose incremental, retroactive, or new taxes on us. As a result of the most recent Presidential and Congressional elections in the United States, there could be significant changes in tax law and regulations. For example, the U.S. government may enact significant changes to the U.S. federal income taxation of business entities including, among others, a permanent increase in the corporate tax rate, an increase in the tax rate applicable to carried interest, an increase in the tax rate applicable to the global
low-taxed
income and the imposition of minimum taxes or surtaxes on certain types of income. Any such tax rate increase will generally result in a corresponding increase in the amount of payments under the Tax Receivable Agreement and/or a corresponding increase in the tax distributions that the Blue Owl Operating Partnerships will be required to make. In addition, there may be changes in law related to the Base Erosion and Profit Shifting Project of the Organization for Economic
Co-Operation
and Development (“OECD”), the European Commission’s state aid investigations and other initiatives. Such changes may include (but are not limited to) the taxation of operating income, investment
 
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income, dividends received or (in the specific context of withholding tax) dividends paid, or the taxation of partnerships and other passthrough entities. Any adverse developments in these and other U.S. or foreign laws or regulations, including legislative changes, judicial holdings or administrative interpretations, could have a material and adverse effect on our business, financial condition and results of operations. Finally, changes in the scope of our operations, including expansion to new geographies, could increase the amount of taxes to which we are subject, and could increase our effective tax rate, which could similarly adversely affect our financial condition and results of operations.
We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A Shares held by
non-affiliates
exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being re