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Investors in two Blue Owl private credit vehicles asked to withdraw almost a quarter of their money.
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These $5.4 billion in first-quarter redemption requests are the highest yet in an industry wave.
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Here are six things to know about Blue Owl, the epitome of the retail credit market turmoil.
The rush to exit the private credit sector has reached a whole new level.
Blue Owl received a record $5.4 billion in redemption requests from two of its retail funds on Thursday – the largest withdrawals yet in a wave of many that have hit the industry’s biggest players over the past five weeks.
They confirm how private credit has quickly gone from one of the hottest assets on Wall Street to a growing source of fear.
Blue Owl, like Blackstone and Apollo, is seeing higher requests in the first quarter of the year, but the size of Blue Owl’s redemption requests, nearly a quarter of the value of the two funds, has cemented its status as an example of the turmoil in the private credit market.
Pressure is mounting as investors rethink the trade-off they made in investing in these private credit funds: higher returns in exchange for limited liquidity, especially as concerns grow about rising defaults and exposure to vulnerable sectors like software.
Blue Owl was a major player in providing private credit to wealthy individuals through their financial advisors, often through these types of investments called non-traded business development companies.
As investors look to get their money out, they often run into ceilings that limit how much they can withdraw. The industry says this is a feature, not a bug, that protects assets from a liquidity crisis.
“The market needs to understand that this circuit breaker was put in place for a reason,” Blue Owl co-CEO Doug Ostrover told the Financial Review about the withdrawal limits.
The tension has put Blue Owl at the center of a broader debate over private credit, with regulators, critics and Wall Street insiders wondering whether the sector could pose a more systemic danger to the economy.
Here’s an introduction to the private lending firm that has investors gritting their teeth.
Investors asked to withdraw nearly a quarter of their allocation, about $5.4 billion, from Blue Owl’s two retail-focused funds.
The broader $20 billion Blue Owl Credit Income Corp. saw its requests rise to 21.9% of the fund’s total value, or nearly $4.4 billion, while Blue Owl’s $3 billion software loan fund, Blue Owl Technology Income Corp. saw shareholders holding 40.7% of the value asking to sell their shares back to the company, amounting to just over $1 billion.
The company said in shareholder letters on Thursday that each fund was limiting outflows to 5% of its value. These are by far the largest refund requests among major industry players.
BDCs are contractually able to limit “tender offers” or withdraw requests at 5%, and Blue Owl joins peers Apollo, Ares, BlackRock’s HPS Lending Fund and Morgan Stanley’s North Haven Fund in limiting redemptions.
“This decision has been made in accordance with the fund structure and reflects our commitment to balancing the interests of both subscribing and remaining shareholders,” the letter said.
Others, such as Cliffwater and Blackstone, chose to exceed their 5% commitment and, in Blackstone’s case, had senior employees and the company itself buy into the fund.
New investments in the first quarter resulted in net outflows of just 1% of the value of OCIC and the general fund, and 2% of OTIC, the technology fund.
Blue Owl is a relative newcomer among the alternative asset management giants. The company was formed from the 2021 merger of Dyal Capital Partners and Owl Rock, while rivals such as KKR and Blackstone go back decades.
However, its roots in private credit run deep. Owl Rock was founded in 2015 by Doug Ostrover after leaving Blackstone, where he had helped build its lending business through another company he founded, GSO Capital Partners. He founded Owl Rock with former KKR executive Marc Lipschultz, now co-CEO of Blue Owl, and Craig Packer, current co-president of Blue Owl and former credit exec of Goldman Sachs.
Owl Rock pioneered the new wave of BDCs and grew rapidly as a result of its lower fees than the competition (although it has since increased them) and the illustrious pedigrees of its founders. It managed $23.7 billion in private credit loans at the time the merger was announced in late 2020.
Dyal Capital Partners, meanwhile, was founded in 2011 as a division of Neuberger Berman by Michael Rees, now co-founder and co-president of Blue Owl. He helped launch a strategy within Lehman Brothers that involved acquiring stakes in other financial companies.
Rees brought the strategy to Neuberger after Lehman’s collapse and grew it to $23.3 billion before the merger. The company is now Blue Owl’s GP Strategic Capital strategy.
Since the two companies merged, the company has expanded beyond its original operations. It bought Oak Street Real Estate Capital to add a third pillar, ‘Real Assets’, to its investment strategies, Hong Kong-based Ascentium Group to grow its Asian business, and IPI Partners to expand into digital infrastructure. It is also being pushed into specialist finance and insurance.
Before Blue Owl was the example of private credit fear, it was the example of private credit opportunities. The company’s success in quickly becoming a multi-strategic retail market giant was fueled by the explosive growth of its retail lending business.
The company has since grown to $307 billion in assets under management, more than half of which are in loans. With a credit AUM of $157 billion, it is one of the largest players in the market.
The success supported the company’s push for retail investors through listed and non-traded BDCs, and led Lipschultz to join Ostrover as co-CEO of the company.
But that model started to gain more attention in late 2025, as credit failures elsewhere in the market raised questions about the opaque world of private credit.
For Blue Owl, concerns mounted when it proposed a merger between privately held BDC, Blue Owl Capital Corp, known as OBDC II, and its flagship, publicly traded OBDC, which was trading at a discount of about 20% to net worth. Because the privately held OBDC II did not write down the assets in the same way, the deal would have resulted in losses for investors in the privately held company if the merger went through.
Unsurprisingly, investors in OBDC II were not happy and the merger was scrapped. Months later, Blue Owl put redemptions into the fund and said it would sell its assets to absorb OBDC II.
The difference between public and private market valuations of loans had once been a selling point for the sector’s investors, but now there were concerns that private valuations were too generous, causing some investors to flee to the exits. However, Blue Owl sold some assets that appeared to validate the pricing, selling $1.4 billion of direct credit assets at 99.7% of value, of which $600 million returned to OBDC II.
In addition to Blue Owl’s leading role in questions about private credit valuations, it has also fallen victim to the “SaaS pocalypse,” a sell-off of software assets in the public and private markets due to concerns that generative AI could cannibalize previously successful software companies.
The OTIC vehicle is largely focused on making loans to technology companies, a selling point at the start of the decade that has now become a concern for investors. As the only major technology-focused non-traded BDC, OTIC had the highest percentage of withdrawal requests among major BDCs in the fourth quarter of last year.
Blue Owl decided not to limit withdrawals in that quarter, allowing 15.4% of the fund, or $527 million, to be withdrawn.
In February, Blue Owl’s CFO told analysts that software loans made up just 8% of the company’s total assets under management. S&P Global found that software and related industrial loans accounted for nearly a third of all assets owned by BDCs and related vehicles at the end of the third quarter of last year.
Blue Owl closed trading Thursday at $8.57 per share, down nearly two-thirds from its all-time high of just over $25 in late January 2025.
The stock is even down from its initial price of $10 per share when it went public in 2021. By comparison, the S&P 500 is up about 57% since Blue Owl’s IPO.
Blue Owl’s peers in alternative asset management have also seen their own price declines, but none have been as steep as Blue Owl’s. Both Blackstone and Apollo are down about 40% from their late-2024 share price highs.
While much of the fear around Blue Owl and retail lending more broadly stems from the valuations of software companies, Blue Owl has joined its peers in investing heavily in data centers that power generative AI. The acquisition of IPI Partners has made them one of the larger investors in digital infrastructure, and they have been increasingly invested in it.
The biggest example of this bet is Blue Owl’s $30 billion data center joint venture with Meta. announced the largest single-site AI infrastructure deal last October.
While much of Blue Owl’s investments in data centers involve equity stakes in the underlying real estate, the company has also become a prolific lender to data centers. Business Insider recently reported on three major loans that Blue Owl has made for AI infrastructure deals.
Investments in the “guns and shovels” that power the generative AI boom, and the credit that powers these investments, could act as a hedge if the AI boom blows up software deals.
The CEO of Ares explained how this diversification works at the beginning of last month.
“So when software disrupts a sector of our portfolio, our digital infrastructure and data center development benefits,” said Michael Arougheti, CEO of Ares. “When software disrupts the portfolio, our renewable energy sector benefits.”
Read the original article on Business Insider
