Key Takeaways
- • Blue Owl Capital cut its redemption cap from 15% to 5% on two private credit funds after receiving redemption requests for about 21.9% of shares outstanding at its flagship OCIC fund and 40.7% at its tech-focused fund in the first quarter, according to Investopedia.
- • Apollo Global Management, Ares Management and BlackRock have recently imposed similar redemption limits on non-traded private credit funds sold to retail investors as requests accelerated.
- • Private credit experts describe the wave of withdrawals as a stress test of the roughly $3 trillion market, though gating alone does not necessarily signal that the market is broken.
- • Blue Owl shares fell about 3% after dropping as much as 9% intraday and are down more than 40% year to date, while Apollo and Ares have each lost more than a quarter of their value.
- • The debate has intensified over whether "semi-liquid" private credit funds should be sold to retail investors, with legal scrutiny of disclosures and a proposed Trump administration rule that would open 401(k) plans to private equity and private credit.
Summary
Blue Owl Capital has capped withdrawals from two of its private credit funds after a surge in redemption requests, lowering the limit from 15% to 5% of shares, according to Investopedia. Redemption requests reached about 21.9% of shares outstanding at the OCIC fund and 40.7% at its tech-focused fund during the first quarter. Investopedia reports that Apollo Global Management, Ares Management and BlackRock have recently taken similar steps on non-traded private credit funds offered to retail investors.
The pressure on the sector reflects broader concern about the roughly $3 trillion private credit market, which consists of loans from non-bank lenders such as private funds, asset managers and insurance companies. Concerns surfaced late last year when JPMorgan CEO Jamie Dimon and Jeffrey Gundlach of DoubleLine Capital said they were monitoring the sector for signs of strain. Goldman Sachs Asset Management's global co-head of private credit, Vivek Bantwal, said market fundamentals "remain strong," and a Goldman report cited relatively low levels of defaults and overdue loans in public and private credit. LPL chief fixed income strategist Lawrence Gillum described the redemptions as private credit's "first real stress test" and said "gating isn't a signal that something is breaking," noting that managers use gates to avoid selling at lower prices and to protect existing investors.
Market reaction has been negative. Shares of Blue Owl were down about 3% recently after falling as much as 9% earlier in the session, and have lost more than 40% so far this year. Apollo and Ares shares have each declined by more than a quarter over the same period. The episode has also raised legal scrutiny over disclosures and questions about whether such strategies belong in retail-oriented funds. Some firms argue that retail investors misunderstood liquidity, as funds marketed as "semi-liquid" may have given the impression they were more liquid than they are. Investopedia notes that Apollo president Jim Zelter and Blue Owl co-chief Doug Ostrover said at a financial symposium in Australia that distribution channels "failed to clearly explain liquidity restrictions to investors." Meanwhile, the Trump administration this week proposed a rule that would allow 401(k) and other retirement plans to invest in private equity and private credit.
The pressure on the sector reflects broader concern about the roughly $3 trillion private credit market, which consists of loans from non-bank lenders such as private funds, asset managers and insurance companies. Concerns surfaced late last year when JPMorgan CEO Jamie Dimon and Jeffrey Gundlach of DoubleLine Capital said they were monitoring the sector for signs of strain. Goldman Sachs Asset Management's global co-head of private credit, Vivek Bantwal, said market fundamentals "remain strong," and a Goldman report cited relatively low levels of defaults and overdue loans in public and private credit. LPL chief fixed income strategist Lawrence Gillum described the redemptions as private credit's "first real stress test" and said "gating isn't a signal that something is breaking," noting that managers use gates to avoid selling at lower prices and to protect existing investors.
Market reaction has been negative. Shares of Blue Owl were down about 3% recently after falling as much as 9% earlier in the session, and have lost more than 40% so far this year. Apollo and Ares shares have each declined by more than a quarter over the same period. The episode has also raised legal scrutiny over disclosures and questions about whether such strategies belong in retail-oriented funds. Some firms argue that retail investors misunderstood liquidity, as funds marketed as "semi-liquid" may have given the impression they were more liquid than they are. Investopedia notes that Apollo president Jim Zelter and Blue Owl co-chief Doug Ostrover said at a financial symposium in Australia that distribution channels "failed to clearly explain liquidity restrictions to investors." Meanwhile, the Trump administration this week proposed a rule that would allow 401(k) and other retirement plans to invest in private equity and private credit.
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