CS Insights: A Bird in the Hand

Blue Owl and the private credit story are intertwined to an unusual extent. The growth of the asset class has been a staple of financial news over the past few years, and hardly a piece has been written or broadcast that didn’t mention Blue Owl as one of its central figures. As co-chief executives, Marc Lipschultz and Doug Ostrover did their bit – conferences, business TV, podcasts, op-eds, more conferences, and so on – to shape the narrative. Now, the company is enduring the first blip of that story.

I’ve written before about media fascination with private credit, and while Blue Owl exudes main character energy it isn’t reasonable to hold one firm responsible for an industry’s coverage. Rather, I think the private credit story is partly a big story because it gets covered a lot. That may sound daft, but pattern recognition exists in newsrooms – perhaps, because of deadlines, more than in most workplaces – and that means ideas or themes able to drive engagement go through a process where the scope of what fits into them widens. There is, to borrow from Dickens, a tendency to fit the circumstances to the ideas instead of trying to extract ideas from the circumstances.

If you want a sharp take on where private credit is heading, stop reading now. In short: I think this will turn out to be more growing pain than reckoning¹. Instead, I am interested in the current wobble as illustrating what happens when a story outweighs the reality beneath it. The private credit narrative hasn’t so much lost momentum as engorged itself. Running out of hype, it now takes every rumble as a sign of impending structural catastrophe - and Blue Owl as a leveraged bet on that possibility.

It isn’t the first. Proximity to a media-friendly theme has informed the fortunes of many. 3G Capital and zero-based budgeting, Chamath “SPAC Jesus” and SPACs, Valeant Pharmaceuticals and R&D-stripping, pre-fraud revelations FTX and crypto, Thoma Bravo and SAAS investing. Vogue association is a big sail: helpful when the wind is behind you, burdensome when it turns.

How then, when the spotlight shines on your field, can you command the right amount of attention without becoming the go-to proxy for the reputation of that field?

It starts with thinking through the benefits and costs of a public profile and your ability to affect it, then building a strategy to deliver it. That means understanding the currencies you have – information, access, current profile – and knowing how to use them. It means understanding how a story is taking shape, how much your engagement versus that of your peers is informing it, how and when you want to push in or pull back from the conversation. It means being deliberate about what messaging you want out there, and how it sounds today and might in the future. It means taking a view on which platforms or individuals can best convey which information, and how that information might proliferate.

Active media engagement is an excellent strategy for many and maybe most consequential businesses. If the story of your company, industry, or individual verve is worth telling, you are better off having some agency in how it is told. But that participation should be married to risk-weighted and regularly reconsidered goals, not held as an intrinsic good.

I don’t advise Blue Owl and didn’t cover them as a reporter, but assuming the attention the firm got was at least partly due to a deliberate media relations effort, let’s consider its goals. I would guess attracting more money from LPs, seeing investment opportunities, and competing for talent were among them. Maybe fame too, but that’s usually a byproduct (albeit an addictive one) of pursuing a more rational objective. It is hard to conclude Blue Owl hasn’t had a good return of those ambitions: it is extraordinarily well-known, has ballooned in AUM and headcount, and has had a loud voice in the story of its industry.

A sympathetic observer might conclude that the Blue Owl is a victim of iterative journalism, a successful exponent of an idea that got sucked into a frenzy of coverage about said idea. There is probably some truth to that. But regardless of whether the result of an overly zealous media or an overly enthusiastic media relations effort, Blue Owl’s is a story that shows how easily flight can become plight. It should make other companies think harder about how to tell their own.

¹ While the mismatch between retail money(🥰liquidity) and event-driven corporate lending (🤷liquidity) was kind of obvious, it is hard to see a crisis in debt without a worse crisis in the equity under it - and that isn’t happening yet.