Key Sections
Public markets will continue to play a large role in investors’ portfolios, but private market assets can help investors reduce the overall volatility of their portfolios, especially as public markets become increasingly unpredictable.
Allocating to direct lending has historically enhanced returns and reduced volatility.
Private real estate has historically provided diversification with lower volatility and correlation to public markets.
Private equity has historically provided greater returns with less volatility.
Public markets are susceptible to global events, news cycles, and short-term investor sentiments. Private market strategies, on the other hand, are designed to protect capital in times of turbulence. While public markets will continue to play a large role in an investor’s portfolio, allocating to private markets can help investors reduce their exposure to volatility.
Empirical evidence has supported this. For instance, during the Great Financial Crisis and COVID-19 pandemic, private equity demonstrated a more muted returns response (as well as a less-volatile response during COVID-19) compared to public equity.
Reduced correlation to the volatility in public markets is one factor leading to a smoother ride for private market investors, but it is not the only piece to the puzzle. Many private market strategies also deliver returns to investors in the form of regular distributions, removing the need to time the market and helping to smooth out portfolio performance as equities move up and down.
The permanent capital advantage
By Marc Lipschultz, Co-CEO, Blue Owl Capital
Blue Owl is built on a foundation of permanent capital, a key differentiator that shapes how we operate and the value we bring to our investors.
Unlike traditional financial institutions that rely on more transient sources of capital, the funds we manage are here for the long term.
This permanent capital structure provides us with the flexibility to make strategic decisions without the pressure of short-term capital cycles, enabling us to focus on delivering long-term value for both our investors and the users of our capital.
The stability of permanent capital allows us to avoid the asset-liability mismatches that can create liquidity problems in other financial institutions. In fact, our approach helps us deliver predictable, long-term solutions, which are essential in managing assets that require careful, sustained oversight.
By focusing on permanent capital, we can offer our investors stable returns over extended periods, ensuring that they benefit from a consistent and reliable approach to asset management.
This commitment to long-term capital is a cornerstone of Blue Owl’s ability to provide enduring value and create differentiated investment opportunities in the market.
Private markets' stability advantage in three charts
Blue Owl is focused on three specific areas in private markets: direct lending, real assets, and GP strategic capital. In each case, these markets have proven to be less volatile than public markets.
In volatile market environments, strategically allocating to direct lending within a portfolio that also contains public stocks and bonds can fill a diversification gap, as direct lending has historically delivered reduced volatility and enhanced returns for illustrative portfolios.
Private real assets funds are primarily based on a portfolio of long-term (10-year+) leases. These lease terms can provide income clarity to navigate uncertainty in a volatile economic environment.
100% of leases held by Blue Owl's net-lease business are triple-net (NNN) with annual rent growth. Tenants are responsible for bearing 100% of the associated expenses including real estate taxes, insurance, utilities, maintenance costs, capital expenditures, and all other operating costs associated with the assets.
In an environment where costs may rise and rental growth is expected to be challenged by economic headwinds, the predictable net operating income growth that net lease contracts can help provide is compelling.
A key component of Blue Owl’s GP Strategic Capital return profile is the built-in downside protection provided by contractual, recurring management fee income. Anchored by billions of dollars of long-dated, visible capital, these distributions help to deliver steady income and yield, even in volatile markets. The strategy’s broad diversification, across asset class, geography, enterprise value, and vintage, further reduces market correlation, creating a resilient portfolio designed to perform across economic cycles.
Public markets will continue to respond to policy changes, geopolitical uncertainty, and other exogenous factors. While they will—and should—continue to be a large part of investors’ holdings, innovation continues to democratize access to private markets may be a way to diversify—and stabilize—a modern portfolio.
Important information
Past performance is not indicative of future results.
This article is for informational purposes only and is not an offer or a solicitation to sell or subscribe for any fund and does not constitute investment, legal, regulatory, business, tax, financial, accounting, or other advice or a recommendation regarding any securities of Blue Owl, of any fund or vehicle managed by Blue Owl, or of any other issuer of securities.
The views expressed and, except as otherwise indicated, the information provided are as of the report date and are subject to change, update, revision, verification, and amendment, materially or otherwise, without notice, as market or other conditions change. Since these conditions can change frequently, there can be no assurance that the trends described herein will continue or that any forecasts are accurate. In addition, certain of the statements contained in this material may be statements of future expectations and other forward-looking statements that are based on the current views and assumptions of Blue Owl and involve known and unknown risks and uncertainties (including those discussed below) that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements. These statements may be forward-looking by reason of context or identified by words such as “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential or continue” and other similar expressions. Neither Blue Owl, its affiliates, nor any of Blue Owl’s or its affiliates' respective advisers, members, directors, officers, partners, agents, representatives or employees or any other person (collectively the “Blue Owl Entities”) is under any obligation to update or keep current the information contained in this document.
This material contains information from third party sources which Blue Owl has not verified. No representation or warranty, express or implied, is given by or on behalf of the Blue Owl Entities as to the accuracy, fairness, correctness or completeness of the information or opinions contained in this material and no liability whatsoever (in negligence or otherwise) is accepted by the Blue Owl Entities for any loss howsoever arising, directly or indirectly, from any use of this material or its contents, or otherwise arising in connection therewith.
Copyright© Blue Owl Capital Inc. 2025. All rights reserved. All individual charts, graphs and other elements contained within the information are also copyrighted works and may be owned by a party other than Blue Owl. By accepting the information, you agree to abide by all applicable copyright and other laws, as well as any additional copyright notices or restrictions contained in the information.