Key facts
- Blue Owl Capital's flagship private credit fund saw withdrawal requests slow in the third quarter.
- Investors sought to withdraw $4.2 billion from two Blue Owl funds, down from $4.7 billion in the prior quarter.
- The funds will repurchase 5% of shares, a customary threshold.
- Withdrawal requests at the $35.1 billion Blue Owl Credit Income Corp (OCIC) fell to 16.8% in the third quarter from 18.8% in the previous quarter.
- Investors in Blue Owl Technology Income Corp (OTIC) sought to pull $1.1 billion, or 39% of shares, in the third quarter.
- Blue Owl manages five BDCs across strategies and had $319 billion in assets as of June 30.
Blue Owl Capital's flagship private credit fund experienced a further slowdown in withdrawal requests during the third quarter, according to shareholder letters released on Friday. This trend suggests that redemption pressures are easing across the broader private credit industry.
Investors sought to withdraw $4.2 billion from two Blue Owl funds in the latest tender offers, a decrease from the $4.7 billion requested in the prior quarter. The funds are set to repurchase 5% of shares, which is the customary threshold for such investment vehicles.
These developments align with broader industry signs that private credit may be moving past its most intense redemption pressures. This improvement is attributed to a more positive investor sentiment and asset managers working through their existing backlogs of unfulfilled withdrawal requests.
Market participants view the direction of withdrawal requests as encouraging, even though some of the largest private credit funds are still navigating significant redemption backlogs. Private credit funds have faced substantial redemption pressures this year, driven by concerns over lending standards and the potential impact of artificial intelligence on software companies, a key sector for direct lenders.
Top asset management executives have argued that the industry has been unfairly scrutinized, suggesting that redemption pressures stem more from perceived concerns about private credit rather than the actual performance of the funds.
At the $35.1 billion Blue Owl Credit Income Corp (OCIC), withdrawal requests decreased to 16.8% in the third quarter from 18.8% in the previous quarter. OCIC, the second-largest non-traded business development company (BDC), noted that new tender participation remained limited, with most requests being resubmissions of previously unfulfilled tenders.
Major private credit funds have consistently applied the 5% redemption cap this year, contributing to elevated withdrawal requests as investors resubmit them in subsequent tender offers. Blue Owl executives have previously stated that the strong performance of their products has helped reduce redemption requests in their non-traded funds. The third-quarter tender offers for Blue Owl funds concluded on September 30.
Funds like OCIC are considered well-positioned in a tightening interest-rate environment due to their portfolios largely comprising floating-rate assets. Blue Owl itself was at the center of this year's private credit turmoil, with negative headlines regarding its handling of private credit funds fueling significant anxiety.
However, withdrawal requests at the $5 billion Blue Owl Technology Income Corp (OTIC) remain elevated compared to the broader industry, attributed to its concentrated shareholder base and specialized investment mandate, with software representing a significant portion of its portfolio. Investors in OTIC sought to pull $1.1 billion, or 39% of shares, in the third quarter, a slight increase from $1.1 billion, or 38.1%, in the prior quarter. The fund indicated that the vast majority of these requests were also resubmissions of unfulfilled tenders.
While most of Blue Owl's wealth products are US-focused, OTIC is an exception, with its launch timing leading to narrower distribution and concentration in Asia. OTIC's repurchase requests at 39% were substantially higher than the 10% to 17% seen at other large non-traded BDC managers in their third-quarter tender offers.
Blue Owl, formed in 2021 by merging Owl Rock Capital and the Dyal Capital Partners division of Neuberger Berman, currently manages five BDCs across various strategies and held $319 billion in assets as of June 30. The company's stock has declined approximately 45% over the past year.