With every major private markets firm, and many smaller ones, racing to offer their products to wealthy retail investors, it’s easy to forget that this was once anathema for the industry. Just ten years ago, most money invested in the private markets came from institutional investors, and the only way for regular people to get exposure was to be lucky enough to have a pension.
Doug Ostrover, the co-CEO of Blue Owl and co-founder of GSO, now Blackstone Credit, is one of the private markets industry’s private wealth pioneers. At an industry conference on Monday, he cautioned that gaining traction with this investor base can be costly — and slow.
“We’re spending tens of millions of dollars a year and not getting any traction,” Ostrover recalled of the firm’s efforts to sell to retail investors back in 2016. “Everybody’s like, Doug, this seems like a big mistake,” he said at the Barclays 23rd Annual Global Financial Services Conference in New York City.
Ostrover’s comments come as the industry turns its focus on 401(k) investors, buoyed by a recent Trump administration executive order that stands to give private equity access to millions of Americans and their retirement accounts. Meanwhile, companies continue to look to sell funds to wealthy investors, a sales strategy that requires access to financial advisors.
The largest players in the industry have invested millions of dollars into reaching these potential clients: whether through technology investments and education for financial advisors, like Apollo, or by hiring wealth management veterans to head up businesses, like Ares’s Raj Dhanda, a 26-year Morgan Stanley vet.
Ostrover had the idea to bring private wealth to private markets right around the time he left Blackstone to found Owl Rock in 2016, which would later become Blue Owl in 2021. Blackstone actually beat him to the private wealth market around that same time, but Owl Rock also launched with an in-house retail team.
“We had our investment team, and we had primarily institutional money,” he told the conference crowd. “At the time we were ramping in retail, the wealth channel, and we must have had 50, 60 people, and we had no inflows.”
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Ostrover joked that his partners, including CFO Alan Kirshenbaum, who was in the audience, were among those worried that it was a “big mistake.”
It eventually paid off, and Ostrover said that he believes his firm is the second in the wealth channel today. But the slow pace is just inherent to the business.
“It takes a long while because, if you think about it, you’re going into people’s offices, you might be making a sale, it could be $50,000, and you have to go get the next advisor and the next advisor,” Ostrover said.
