Key Takeaways
- • Blue Owl Capital permanently restricted quarterly withdrawals from Blue Owl Capital Corporation II (OBDC II), a semi-liquid private credit fund marketed to U.S. retail investors, after selling $1.4 billion of loan assets across three private debt funds.
- • Blue Owl shares fell nearly 6% on Thursday following the asset sales, reigniting debate over stress in the private credit market.
- • Dan Rasmussen of Verdad Capital told CNBC, "This is a canary in the coal mine," arguing the private markets bubble "is finally starting to burst."
- • Private credit, roughly a $3 trillion global market, has grown as retail investors increasingly fund publicly traded BDCs; Duke's Fuqua School found institutional ownership of BDC shares fell to about 25% on average by 2023.
- • Concerns are compounded by AI-driven disruption fears for enterprise software borrowers, rising leverage, opaque valuations, and lingering fallout from the First Brands Group collapse.
Summary
Blue Owl Capital has permanently restricted withdrawals from one of its retail-focused debt funds, a development that has renewed scrutiny of the private credit boom. According to CNBC, the alternative asset manager sold $1.4 billion of loan assets held in three of its private debt funds, and its shares fell nearly 6% on Thursday. The largest portion of the sale came from Blue Owl Capital Corporation II, a semi-liquid vehicle marketed to U.S. retail investors, which will stop offering quarterly redemption options. Blue Owl did not immediately respond to CNBC's request for comment.
Market participants described the move as an early warning. Dan Rasmussen, founder and adviser at Verdad Capital, told CNBC: "This is a canary in the coal mine. The private markets bubble is finally starting to burst." Rasmussen attributed the risk build-up to years of ultra-low interest rates and thin yield spreads, which encouraged lenders to finance smaller, more leveraged companies at yields that looked attractive relative to public markets. He characterized the situation as a classic "fool's yield" case, in which high yields failed to translate into high returns because borrowers were too risky.
Private credit, generally direct loans made by non-bank lenders, has grown to roughly $3 trillion globally. Publicly traded business development companies (BDCs), which lend to small and mid-sized private companies, are increasingly funded by retail investors. Duke University's Fuqua School of Business, in research published last September, found institutional ownership of BDC shares has steadily declined, reaching about 25% on average by 2023. In 2025, the eight largest members of the S&P BDC Index offered dividend yields of up to 16%, with Blue Owl's exceeding 11%, compared with roughly 7.7%, 9% and 4% one-, three- and five-year returns on the S&P Global U.S. high yield corporate bond index. Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, noted that loans held by individual investors in these funds are high yield and inherently risky, and that "over the course of the cycle, you can anticipate some material defaults."
Concerns have resurfaced on several fronts. Investors have grown uneasy that AI tools could disrupt traditional enterprise software, a major borrower group for the industry. The collapse of First Brands Group last September exposed how aggressive debt structures had built up during years of easy financing, prompting JPMorgan CEO Jamie Dimon to warn that private credit risks were "hiding in plain sight" and that "cockroaches" would likely emerge once economic conditions deteriorate. Michael Shum, CEO of Cascade Debt, pointed to the structural mismatch between multi-year private market commitments and quarterly redemptions: "When times are good, cashflows cover normal redemption requests. When times are bad, requests surge and it becomes a race to the bottom."
Market participants described the move as an early warning. Dan Rasmussen, founder and adviser at Verdad Capital, told CNBC: "This is a canary in the coal mine. The private markets bubble is finally starting to burst." Rasmussen attributed the risk build-up to years of ultra-low interest rates and thin yield spreads, which encouraged lenders to finance smaller, more leveraged companies at yields that looked attractive relative to public markets. He characterized the situation as a classic "fool's yield" case, in which high yields failed to translate into high returns because borrowers were too risky.
Private credit, generally direct loans made by non-bank lenders, has grown to roughly $3 trillion globally. Publicly traded business development companies (BDCs), which lend to small and mid-sized private companies, are increasingly funded by retail investors. Duke University's Fuqua School of Business, in research published last September, found institutional ownership of BDC shares has steadily declined, reaching about 25% on average by 2023. In 2025, the eight largest members of the S&P BDC Index offered dividend yields of up to 16%, with Blue Owl's exceeding 11%, compared with roughly 7.7%, 9% and 4% one-, three- and five-year returns on the S&P Global U.S. high yield corporate bond index. Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, noted that loans held by individual investors in these funds are high yield and inherently risky, and that "over the course of the cycle, you can anticipate some material defaults."
Concerns have resurfaced on several fronts. Investors have grown uneasy that AI tools could disrupt traditional enterprise software, a major borrower group for the industry. The collapse of First Brands Group last September exposed how aggressive debt structures had built up during years of easy financing, prompting JPMorgan CEO Jamie Dimon to warn that private credit risks were "hiding in plain sight" and that "cockroaches" would likely emerge once economic conditions deteriorate. Michael Shum, CEO of Cascade Debt, pointed to the structural mismatch between multi-year private market commitments and quarterly redemptions: "When times are good, cashflows cover normal redemption requests. When times are bad, requests surge and it becomes a race to the bottom."
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