Key Takeaways
- • Blue Owl Capital received redemption requests equal to 41 percent of a $6 billion private credit fund and 22 percent of a $36 billion fund, according to The New York Times.
- • Blue Owl will immediately fulfill only about 5 percent of requests in each vehicle, with the remainder expected to take years to pay out.
- • Blue Owl's stock fell to its lowest level since becoming a public company on Thursday, before recovering much of the intraday loss by late morning.
- • Blue Owl executives blamed AI-related disruption to software companies and certain wealth channels for the withdrawals, while the firm said the fund documents permit delayed redemptions.
- • The record withdrawal tally signals waning investor confidence in the quality of Blue Owl's loans and tests the broader private credit industry's liquidity model.
Summary
Blue Owl Capital, once considered the hottest name in private credit, disclosed on Thursday that it received notice from investors seeking to withdraw 41 percent of the money in a $6 billion fund and 22 percent from another $36 billion fund, according to The New York Times. The firm said it would immediately fulfill only about 5 percent of those requests in each investment vehicle, with the remaining requests likely to take years to pay out. The Times described the withdrawal tally as a record and said it reflects waning confidence across Wall Street in the quality of Blue Owl's loans.
In letters to backers, Blue Owl executives attributed the pressure to external factors. They cited "concerns around A.I.-related disruption to software companies," which they said had "weighed meaningfully on investor perception," and alluded to "certain wealth channels and regions" that disproportionately sought to cash out. The firm said its legal documents permit it to delay withdrawals and that it could eventually borrow money or sell investments to meet such requests, arguments similar to those made by other firms in the space.
Other struggling private credit lenders have recently disclosed redemption requests of around 15 percent, though some have indicated they will pay out more than the 5 percent Blue Owl has committed to. The Times noted that the broader private credit industry has collected trillions of dollars from large and small investors to lend to companies that could not easily obtain traditional bank financing, with loans typically spanning three or four years. Some investors remain skeptical, noting that the industry has been buoyed by relatively low interest rates among other factors.
Blue Owl's stock, already in a prolonged monthslong decline, fell to its lowest level since it became a public company on Thursday. Shares were down as much as 8 percent at the open but had recovered those losses by late morning amid broader market swings. A company spokeswoman declined to comment. Founded by veterans of Wall Street firms including Goldman Sachs, Blue Owl grew rapidly over the past decade.
In letters to backers, Blue Owl executives attributed the pressure to external factors. They cited "concerns around A.I.-related disruption to software companies," which they said had "weighed meaningfully on investor perception," and alluded to "certain wealth channels and regions" that disproportionately sought to cash out. The firm said its legal documents permit it to delay withdrawals and that it could eventually borrow money or sell investments to meet such requests, arguments similar to those made by other firms in the space.
Other struggling private credit lenders have recently disclosed redemption requests of around 15 percent, though some have indicated they will pay out more than the 5 percent Blue Owl has committed to. The Times noted that the broader private credit industry has collected trillions of dollars from large and small investors to lend to companies that could not easily obtain traditional bank financing, with loans typically spanning three or four years. Some investors remain skeptical, noting that the industry has been buoyed by relatively low interest rates among other factors.
Blue Owl's stock, already in a prolonged monthslong decline, fell to its lowest level since it became a public company on Thursday. Shares were down as much as 8 percent at the open but had recovered those losses by late morning amid broader market swings. A company spokeswoman declined to comment. Founded by veterans of Wall Street firms including Goldman Sachs, Blue Owl grew rapidly over the past decade.
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