Shares of major private investment managers declined sharply on Thursday following Blue Owl’s decision to restrict investor withdrawals from one of its retail-focused debt funds, raising concerns across the private credit sector, according to a report by the Financial Times.
The move, which affects Blue Owl Capital Corp II, comes amid growing scrutiny of private credit markets that have expanded rapidly in recent years, attracting hundreds of billions in investor capital and creating several new Wall Street power players. Blue Owl’s shares dropped nearly 6% on the news, while peers including Ares Management, Apollo Global Management, KKR, Blackstone, and TPG also fell, as investors reassessed growth and profitability expectations for private credit businesses.
Blue Owl’s fund had previously called off a merger with a larger publicly traded credit vehicle, which had drawn scrutiny after reports indicated potential losses of 20% for investors based on the acquiring fund’s trading price at the time. In recent months, private credit managers have faced heightened redemption requests, as well as pressure from asset revaluations, including a BlackRock private credit fund that recently marked down some holdings. Additionally, concerns that artificial intelligence could disrupt the business models of companies backed by private credit have dampened investor sentiment.
Blue Owl responded to the redemptions by selling roughly $600m of OBDC II assets to new buyers near par value and distributing proceeds to investors. This was part of a broader $1.4bn divestiture of loans at 99.7% of their stated value.
