- Blue Owl Capital froze investor withdrawals from a retail-focused debt fund on Thursday
- Shares of Blue Owl and other private credit firms fell amid concerns over fund liquidity
- Blue Owl’s Capital Corp II fund had dropped a merger after potential investor losses surfaced
Shares of several major private investment managers on Wall Street plunged on Thursday after Blue Owl Capital Inc. moved to permanently block investor withdrawals from one of its retail-focused debt funds, as per reports. The decision rattled confidence across the fast‑expanding private credit sector, which has attracted hundreds of billions of dollars in recent years and elevated a number of firms into new industry powerhouses.
Ares Management Corp., Apollo Global Management Inc., KKR & Co., Blackstone Inc., TPG Inc. and Blue Owl all saw their stocks fall, signalling that investors are reconsidering profitability expectations tied to private credit's rapid growth. Blue Owl suffered the steepest decline, with its shares dropping more than 8%. The firm had announced the redemption freeze a day earlier.
The fund at the centre of the turmoil, Blue Owl Capital Corp II, had previously abandoned a planned merger with a larger publicly traded Blue Owl credit fund. The proposed deal had faced intense scrutiny after reports revealed that investors in the smaller fund stood to face losses of about 20% based on market pricing at the time, a Financial Times report said.
Private credit managers have been navigating rising challenges in recent months, including increased redemption requests across their flagship lending vehicles. Investor sentiment was further shaken after a BlackRock Inc. private credit fund marked down the value of some of its holdings, coupled with concerns that rapid advances in artificial intelligence could disrupt the business models of borrowers that rely on private credit financing.
Mohamed El‑Erian, former CEO of Pimco, questioned whether Blue Owl's move might undermine broader confidence in credit funds. Many such vehicles allow withdrawals at quarterly intervals, leaving funds that hold relatively illiquid loans vulnerable to shifts in investor mood.
Several major credit funds have already seen higher-than‑usual withdrawals, according to prior reports, signalling a buildup of unease. Blue Owl itself has experienced notable net redemptions in both its Capital Corp II and its separate Technology Income fund. Despite this pressure, most credit funds continue to see positive net inflows overall.
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