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HOTS, in Wall Street Journal, defends Blue Owl


 In finance journalism, the acronym HOTS stands for "Heard on the Street," the somewhat opinionated and somewhat gossipy column made famous, and made into a mover of markets, by Dan Dorfman in the 1960s.  Someone would advance the history of this branch of journalism if he could only write a comprehensive history of this column, from its earliest days in the 1930s to and through Dorfman's day to the notorious reign there of Foster Winans in the 1980s. 

Anyway, Jonathan Weil writes it now. Weil, whose expertise as a forensic accountant has long given an edge to his journalism, defends the management of Blue Owl, a large alternative asset manager that specializes in private credit. 

Private credit funds typically act as non-bank lenders to mid-market businesses. Blue Owl in particular has become controversial of late for its relative illiquidity. Specifically, it has lent a lot of money to firms on the software-as-a-service (SaaS) business, also known as the app economy. 

SaaS companies market quite specific sorts of software for various specific tasks, and they co-exist as icons on the screen of your phone.

Blue Owl looks like an iffy bet now because many of the companies to which it has been lending look like iffy bets, BECAUSE ... general artificial intelligence could soon become sufficiently powerful to render a wide range of apps obsolete.   

 Related but distinct from the issue of a coming SaaSpocalypse (I did not make that up, it has become a common term) there is the matter of alleged conflicts of interest in the valuation of those loans and BlueOwl's other assets. 

In the weekend edition of the WSJ for March 28-29, Heard on the Street waded into this controversy, defending Blue Owl from at least some of the charges against it on the valuation front.  

Personally, I suspect that Weil/HOTS is right.  Much of the conflict-of-interest stuff is overblown.  But the skeptics about the continued viability of BlueOwl re also right.  It is too dependent on the continued viability of the app economy, and THAT has become quite dubious. 

Isn't it great when everyone is right? 

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