Blue Owl Limits Redemptions on Private Credit Funds After Massive Exit Requests

(Bloomberg) -- Blue Owl Capital Inc. will limit redemptions from two of its private credit funds after facing a surge in withdrawal requests that is unprecedented among major firms in the $1.8 trillion market.

Investors in its $36 billion Blue Owl Credit Income Corp. fund, one of the industry’s largest, asked to pull 21.9% of shares in the three months ended March 31, according to an investor letter, up from 5.2% in the prior period. The smaller Blue Owl Technology Income Corp. saw shareholders ask for 40.7% back, compared with 15.4% three months earlier, according to a separate letter.

Both funds had previously met the requests in excess of its 5% tender offer. This time, though, Blue Owl said it would join industry peers in capping redemptions at that level, “in accordance with the fund structure, reflecting our commitment to balancing the interests of both tendering and remaining shareholders.”

For the bigger fund, OCIC, that amounts to $988 million of redemptions honored and about $3.2 billion remaining in the fund, while for OTIC it means redeeming $179 million and keeping roughly $1 billion of investors’ cash.

Explainer: Why Private Credit Is Facing a Sudden Investor Exodus

While Blue Owl joins industry peers including Apollo Global Management Inc., Ares Management Corp. and BlackRock Inc. in sticking to their redemption threshold on non-traded business development companies, the magnitude of the requests underscores how Blue Owl has found itself squarely in the middle of worries about private credit.

Blue Owl shares fell as much as 8.7% on Thursday to a record intraday low of $7.95.

Skittish Investors

Investors have grown skittish about private credit after some high-profile collapses and concerns over AI disrupting software companies that relied heavily on direct lenders. But Blue Owl found itself particularly in the spotlight after a scrapped merger between two BDCs in November and then outsized withdrawal requests from its tech-focused BDC in January. In February, it was scrutinized over a move to sell $1.4 billion of assets while restricting quarterly withdrawals entirely from one of its retail-focused funds, instead returning capital to investors in the finite life vehicle.

Both Blue Owl funds, which have returned more than 9% annualized since inception, said they’re in a “strong position” to meet the 5% redemption requests and future tenders. OCIC and OTIC had $11.3 billion and $1.3 billion, respectively, across cash, available borrowing and liquid Level 2 assets as of the end of February, according to the letters.

Story Continues

The funds also said the percentages were preliminary and could still change. OTIC had allowed for redemptions of more than 17% last quarter, though ended up redeeming 15.4% of shares.

In the letters, OCIC said 90% of its shareholders chose not to tender, reflecting concentrated withdrawal demands. OTIC said its redemption pressure “was amplified by the fund’s more concentrated shareholder base, particularly within certain wealth channels and regions, and its specialized investment mandate.”

Asset managers have diverged in how they have dealt with redemption requests, with some going to great lengths to cash out investors, while others have stuck to their limit. Still, no major manager has disclosed facing the percentage that Blue Owl’s BDCs were asked to pay back.

(Updates with share prices falling to an intraday record low in sixth paragraph.)

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