Investors are rushing to pull money out of two large private-credit funds run by Blue Owl Capital. The funds have returned more than 9% annualized since inception. Yet the flood of redemption requests is so big that Blue Owl is again capping how much investors can take out.
Blue Owl joins other big private credit companies - including Apollo Global Management, Ares Management, BlackRock, and Blackstone - in applying a 5% withdrawal limit, as many investors try to pull money from the $1.8 trillion market.
These are not new. In the first quarter, OCIC received $4.2 billion in requests, and OTIC got $1.2 billion. For two quarters in a row, Blue Owl has received the largest redemption requests in the private-credit industry.
In a letter to OCIC investors, co-president Craig Packer and OCIC president Logan Nicholson wrote: "OCIC does not need to sell a single private loan to satisfy the tender offer."
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The fund had $11.6 billion in liquidity - cash and available borrowings - as of May 31. OTIC had $1.3 billion. That gives Blue Owl what it calls "ample dry powder" to pay out the remaining capped requests without being forced to sell loans at a bad time.
Blue Owl also said it was "encouraged to see OCIC's modestly lower quarter-over-quarter tender requests broadly across channels and geographies." That suggests the pace of redemptions might be slowing.
At the same time, Blue Owl sees an opportunity. When other funds sell loans under pressure, new loans often come with wider spreads - meaning higher interest payments for the lender - and better protections. According to a person familiar with the situation, Blue Owl executives have been on a global roadshow to reassure investors, underscoring that private credit remains a strong performing asset class and that their funds have posted positive returns.
Blue Owl is not alone. This has become the standard way to manage investor withdrawals in a corner of finance that promises steady returns but locks up money for years.
Despite the rush to exit, about 90% of investors remain in OCIC. The fund even received approximately $1.2 billion of inflows this year. So while some are leaving, others are still putting money in.
Blue Owl described "limited new participation" in its investor letter, meaning not many new investors are joining either fund. But the existing investors who stay are collecting returns of more than 9% annualized since inception - a solid payout in today's market.
The firm believes it has enough cash and borrowing room to handle future requests without selling loans at a loss. Private credit funds like these are designed to hold illiquid loans, making rapid withdrawals difficult without selling assets at a discount.
The 5% quarterly cap is meant to prevent a fire-sale scenario, protecting remaining investors. Redemption pressure has been building across the industry as interest rates remain elevated and some institutional investors seek to rebalance portfolios.
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