Key Takeaways
- • Blue Owl Capital permanently gated OBDC II, a $1.6 billion private credit fund, halting quarterly withdrawals and selling roughly one-third of the fund's loans to return 30% of investor capital over the next 45 days.
- • Blue Owl shares fell as much as 10% on Thursday and have dropped about 60% over 13 months, with the OBDC II gating alone wiping out roughly $2.4 billion of market value.
- • Investors redeemed about $527 million, or roughly 15% of net assets, from the OTIC technology-focused fund last month, versus the typical 5% quarterly cap.
- • Blue Owl sold $1.4 billion of loans at close to par, which Evercore ISI read as modest positive for private credit, while critics such as Senator Elizabeth Warren and Fourier Asset Management's Orlando Gemes cited systemic risk.
- • Concerns center on AI disruption of private equity-backed software borrowers, lending standards, and deepening ties between private credit managers and affiliated insurers.
Summary
Blue Owl Capital Inc. has permanently closed the gates on OBDC II, a $1.6 billion private credit fund that had previously allowed investors to withdraw cash every three months. According to the firm, it is selling roughly one-third of the fund's loans and returning 30% of investors' money to all shareholders over the next 45 days. Blue Owl said the approach returns six times as much capital as its previously planned 5% quarterly tender. Investors in OBDC II had already been gated for months after the firm pursued and then abandoned a plan to merge the vehicle with another of its funds. Bank of America analysts led by Craig Siegenthaler said the fund should not be deemed gated given the capital return, and noted that the abandoned merger could have forced some investors into losses of about 20%.
The move has weighed heavily on Blue Owl's equity. Shares fell as much as 10% on Thursday and triggered declines across listed alternative managers including Ares Management, Blackstone and Apollo Global Management. Blue Owl's shares have fallen roughly 60% over the past 13 months even as revenue continued to rise. Separately, the firm's OTIC technology-focused fund saw investors redeem about $527 million, roughly 15% of net assets, according to a regulatory filing, far above the usual 5% cap. Blue Owl says OTIC's performance has held and that it has honored all tender requests.
The selloff reflects broader anxiety across the $1.8 trillion private credit market, which has become central to global finance, including data-center financing and large software buyouts. Orlando Gemes, chief investment officer of Fourier Asset Management, said the risks were "strikingly familiar to those of 2007," pointing to weaker lender protections and liquidity terms that obscure mismatches. Mohamed El-Erian questioned whether the episode was a "canary-in-the-coalmine moment." Senator Elizabeth Warren criticized the sector and called for greater oversight, urging the administration to stop directing retirement savings into such investments. Hedge fund manager Boaz Weinstein offered to buy OBDC II stakes at an estimated 20% to 35% discount.
Analysts were divided. Evercore ISI said the $1.4 billion loan sale at close to par added modest positive sentiment, and a UBS analyst said the sales validated Blue Owl's loan book. Barclays flagged that loan sales to affiliated insurers such as Kuvare could deepen non-bank ties and make risk harder to track. Blue Owl's exposure to AI-disrupted software borrowers, which it described as among the largest lenders to private equity-backed software companies, has also drawn scrutiny, alongside its acquisitions including IPI Partners and a data-center platform with the Qatar Investment Authority.
The move has weighed heavily on Blue Owl's equity. Shares fell as much as 10% on Thursday and triggered declines across listed alternative managers including Ares Management, Blackstone and Apollo Global Management. Blue Owl's shares have fallen roughly 60% over the past 13 months even as revenue continued to rise. Separately, the firm's OTIC technology-focused fund saw investors redeem about $527 million, roughly 15% of net assets, according to a regulatory filing, far above the usual 5% cap. Blue Owl says OTIC's performance has held and that it has honored all tender requests.
The selloff reflects broader anxiety across the $1.8 trillion private credit market, which has become central to global finance, including data-center financing and large software buyouts. Orlando Gemes, chief investment officer of Fourier Asset Management, said the risks were "strikingly familiar to those of 2007," pointing to weaker lender protections and liquidity terms that obscure mismatches. Mohamed El-Erian questioned whether the episode was a "canary-in-the-coalmine moment." Senator Elizabeth Warren criticized the sector and called for greater oversight, urging the administration to stop directing retirement savings into such investments. Hedge fund manager Boaz Weinstein offered to buy OBDC II stakes at an estimated 20% to 35% discount.
Analysts were divided. Evercore ISI said the $1.4 billion loan sale at close to par added modest positive sentiment, and a UBS analyst said the sales validated Blue Owl's loan book. Barclays flagged that loan sales to affiliated insurers such as Kuvare could deepen non-bank ties and make risk harder to track. Blue Owl's exposure to AI-disrupted software borrowers, which it described as among the largest lenders to private equity-backed software companies, has also drawn scrutiny, alongside its acquisitions including IPI Partners and a data-center platform with the Qatar Investment Authority.
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