Blue Owl Capital moved to limit withdrawals from two of its biggest private-credit funds after investors sought to redeem roughly $5.4 billion in the first quarter.
Investors sought to pull roughly 22% of shares from Blue Owl Credit Income Corp., its flagship $36 billion private-credit fund, and 41% from a smaller, technology-focused vehicle.
Blue Owl said it would honor only 5% of those requests in each fund.
The two funds invest in private loans, or debt made outside of banks, that can take time to sell. That means when many investors want their money back at once, the manager may have to sell assets at a loss, creating a “fund run” similar to a bank run.
The size of those requests was among the largest seen in the non-traded BDC, or business development company, market and sent Blue Owl shares down sharply. Other publicly traded alternative-asset managers also fell.
Redemption caps slow withdrawals and give funds time to raise cash without dumping loans into a weak market.
Private credit grew rapidly after the 2008 financial crisis as Dodd-Frank pushed banks to pull back from riskier lending. Asset managers stepped in, building a market that more than quadrupled to $1.6 trillion from $357 billion between 2016 and 2024.
AI fears hit first
The biggest pressure showed up in OTIC, Blue Owl’s $6.2 billion technology-focused fund. Investors have grown concerned that artificial intelligence could upend the software business models many of these loans are tied to.
In the prior quarter, the fund had already faced elevated withdrawals. At the time, Blue Owl allowed investors to redeem 15.4% of shares, well above the usual 5% cap adopted by most firms.
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The flagship fund also drew an unusually large wave of redemption requests.
Blue Owl attributed the increasing amount of withdrawal requests to “heightened market concerns around AI-related disruption to software companies.”
Redemption caps may buy time
Blue Owl’s flagship fund currently holds $11.3 billion in cash, credit lines and liquid assets. Under the 5% cap, it expects to pay out about $988 million this quarter while receiving $872 million in new investments, leaving net outflows of roughly $116 million.
Blue Owl said that in the most recent quarter, 90% of investors chose not to redeem, and a small group made up most of the requests.
“We continue to observe a meaningful disconnect between the public dialogue on private credit and the underlying trends in our portfolio,” the firm wrote in the letter to investors.
Related: Moody’s warning on private credit is the loudest one yet