What happened
Blue Owl again limited withdrawals to 5% at two of its private credit vehicles as sell requests remained high at its tech-focused fund. The firm pointed to a gap between market anxiety about artificial intelligence disintermediating software and the portfolio's credit strength. As Blue Owl put it, "These results underscore the disconnect between the market's fears of AI disintermediating software and OTIC's resilient credit fundamentals," noting many submissions came from investors rejoining redemption queues.
The scale of redemptions
At Blue Owl Technology Income Corp. (OTIC) - about $5 billion and the biggest vehicle of its type with a primary focus on technology lending - investors sought to redeem 39% of shares during the third quarter, edging up from 38.1%. After the most recent distribution, OTIC said total liquidity delivered will reach about $446 million - representing 35% of the initial tender requests - over a six-month span.
Blue Owl Credit Income Corp., at $35 billion and among the biggest non-traded business development companies, saw requests come down to 16.8% in the third quarter from 18.8% previously, according to a Friday investor letter.
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How the wider private credit market looks
Blue Owl was among the final major managers in the $1.8 trillion direct lending arena to brief investors on BDC redemption queues. These partially liquid vehicles have come under strain this year as capital left private credit amid concerns over asset quality and how secure software loans are as AI progresses.
Across the largest funds, withdrawal pressure mostly flattened or eased in the third quarter. Blackstone Private Credit Fund reported redemption demand of 10%, unchanged from the previous period. Apollo Debt Solutions BDC recorded requests of 14.7%, a decline from 16.8% in the second quarter. Ares Strategic Income Fund said investors aimed to cash in 13.1% of shares, compared with 14.4% previously.
What this means for your portfolio
Both Blue Owl funds state they have delivered returns of more than 9% annualized since inception and anticipate higher base rates will lift earning power. Translation: performance can hold up even when gates are on, but liquidity comes in rations. If you own or are eyeing similar funds, the tradeoff is simple to understand if not always fun to live with - higher income potential while you wait your turn in the queue.
Even as funds face heavy outflows, small regular contributions compound, so download the free Always Be Buying E-Book and keep the E-Book
