Key Takeaways
- • Blue Owl Capital (OWL) said investors in one of its private credit funds would have to wait to get their money back as it sells about $1.4 billion of its lending investments, effectively halting customer redemptions and triggering concern about the sector.
- • Shares of alternative asset managers fell this week, with Blue Owl down almost 12% and the VanEck Alternative Asset Manager ETF (GPZ) off more than 3%.
- • Mohamed El-Erian asked whether Blue Owl's fund was a private credit "canary in the coalmine" similar to August 2007, while saying systemic risk was "nowhere near the magnitude" of subprime but a substantial valuation hit was looming.
- • Warnings from Jeff Gundlach, Jamie Dimon, and the BlackRock TCP Capital net asset value cut of almost 20% suggest stress is building across private credit.
Summary
Alternative asset manager Blue Owl Capital (OWL) said this week that investors in one of its private credit funds would have to wait to return their money as the firm sells portions of its loan book. The company said it planned to "opportunistically" sell about $1.4 billion of lending investments to "provide substantial liquidity" to shareholders. The move raised concerns about broader problems in the U.S. credit market, according to Investopedia.
The concern spread to public markets. Shares of the VanEck Alternative Asset Manager ETF (GPZ), which tracks Brookfield, Blackstone (BX), KKR (KKR), Apollo Global Management (APO), and Ares Management (ARES), fell more than 3% during the week, while Blue Owl shares were down almost 12%. Blue Owl is one of the largest U.S. managers of business development companies (BDCs), which raise capital from public investors, lend it to companies, and distribute interest income as dividends.
Investors have moved into private credit in recent years for higher yields than the rest of the bond market. Market experts cited murky lending standards, limited liquidity, and significant leverage as risks that could contribute to a broader financial crisis. Mohamed El-Erian, former chief of Pimco, asked in a social media post whether the episode was a "canary-in the-coalmine" moment similar to August 2007. He said systemic risk from private credit was "nowhere near the magnitude" of subprime mortgages, but warned that a substantial valuation hit to certain assets was looming.
Other market figures have also flagged stress. Jeff Gundlach, founder and chief of DoubleLine Capital, pointed to BlackRock TCP Capital's cut of its net asset value by almost 20% as another sign of strain, writing in January, "New Year, new bad developments in private credit." JPMorgan CEO Jamie Dimon previously cited the bankruptcies of specialized lenders Tricolor Holdings and First Brands Group as signs of potential defaults, comparing them to "cockroaches." Investopedia noted that whether Blue Owl's move proves to be a one-off or a sign of more trouble remains unresolved, with particular relevance for retail investors in semiliquid private-market funds.
The concern spread to public markets. Shares of the VanEck Alternative Asset Manager ETF (GPZ), which tracks Brookfield, Blackstone (BX), KKR (KKR), Apollo Global Management (APO), and Ares Management (ARES), fell more than 3% during the week, while Blue Owl shares were down almost 12%. Blue Owl is one of the largest U.S. managers of business development companies (BDCs), which raise capital from public investors, lend it to companies, and distribute interest income as dividends.
Investors have moved into private credit in recent years for higher yields than the rest of the bond market. Market experts cited murky lending standards, limited liquidity, and significant leverage as risks that could contribute to a broader financial crisis. Mohamed El-Erian, former chief of Pimco, asked in a social media post whether the episode was a "canary-in the-coalmine" moment similar to August 2007. He said systemic risk from private credit was "nowhere near the magnitude" of subprime mortgages, but warned that a substantial valuation hit to certain assets was looming.
Other market figures have also flagged stress. Jeff Gundlach, founder and chief of DoubleLine Capital, pointed to BlackRock TCP Capital's cut of its net asset value by almost 20% as another sign of strain, writing in January, "New Year, new bad developments in private credit." JPMorgan CEO Jamie Dimon previously cited the bankruptcies of specialized lenders Tricolor Holdings and First Brands Group as signs of potential defaults, comparing them to "cockroaches." Investopedia noted that whether Blue Owl's move proves to be a one-off or a sign of more trouble remains unresolved, with particular relevance for retail investors in semiliquid private-market funds.
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