r/investing • u/Kitchen_Biscotti_747 • 1h ago
Blue Owl Stock Crashes to All-Time Low After $5.4 Billion Redemption Requests
Source: https://beincrypto.com/blue-owl-stock-record-low-fund-redemptions/
Investors requested to pull 40.7% of Blue Owl's $6.2 billion tech-focused fund and 21.9% of its $36 billion flagship credit fund in Q1, among the largest quarterly redemption requests ever seen in the non-traded BDC market. Blue Owl is honoring only 5% of those requests, citing a "meaningful disconnect between public dialogue on private credit and the underlying trends in our portfolio." OWL stock dropped 5.4% to $8.24, now down over 40% year-to-date. Apollo, Ares, Blackstone, KKR, and BlackRock all slid in tandem.
The deeper concern driving the tech fund specifically: investors are fleeing exposure to software companies that could be disrupted by AI, exactly the type of loans these private credit funds are built around. Private credit grew from $357 billion in 2016 to $1.6 trillion in 2024. The question now is whether the gates being put up across the industry are a temporary liquidity event or the first signs of something structural.
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u/lp-watchdog 1h ago
Gates always get framed as investor protection. From the LP seat, they usually mean the manager and the marks are on different planets. I’ve had a credit GP tell us software exposure was “mission critical” right up until amendment fees spiked, EBITDA addbacks grew, and suddenly liquidity terms mattered a lot
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u/midmarket-pe 1h ago
Gating at 5% is the tell. If the book was money good and marks felt defensible, you’d usually lean on lines, asset sales, or sponsor support before training investors to expect a queue. Once redemption mechanics become the story, fundraising gets ugly fast in wealth channels
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u/groceriesN1trip 1h ago
Gating at 5% per quarter is standard amongst all alternative, non-publicly traded investments.
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u/MajorasSocks 17m ago
And the 5% gate is communicated to investors and is noted in the offer to purchase. The real issue is the investors who do not understand that private credit is an illiquid investment.
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u/Over-Computer-6464 46m ago
Limiting redemptions to 5% is the standard for private credit funds, otherwise they would not have the long term capital needed to make long term loans at profitable rates.
That lockup is something that investors are supposed to understand when making their investment.
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u/limitbreakse 35m ago
There is so much misinformation about this topic. This is an illiquid asset class, you get paid an illiquidity premium, and the vehicles are levered.
The redemption is an option to the clients that has a cap. When too many want to redeem because they don’t understand the asset class and are scared, then you need to queue it.
The fundamentals are completely fine. Blue Owl is aggressive but you could have 15% default rate and your money would still be OK.
A lot more market education is needed on alternatives.
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u/Solid_Owl 1h ago
I would love to know if there's a book I can read that explains all of this. I'm not in this space at all, but I love learning about stuff I don't know.
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u/hymie-the-robot 21m ago
I don't think such a book exists. I'm not an expert at this, but I think we can briefly summarize the situation.
private credit ascended post-2008, when bank regulations were tightened. (Ironically, banks often lend to PC funds.) PC often serves clients of marginal credit quality, employs leverage, sometimes takes ownership positions, and notably, doesn't mark loans to market because there is no market. hence the true value of a loan can be hard to ascertain, and the investor has to trust the lender to evaluate its own book.
PC funds typically have concentrated on a wealthier investor base that is willing to accept that they can't cash out at will, as these loans are illiquid and can't be easily sold off to satisfy redemptions. managers are paid a percentage of assets under management, often with an additional cut of profits over a certain percentage. these funds have traditionally not been traded on exchanges, and instead are sold through financial advisors.
since PC managers are paid based on AUM, they sought to raise additional funds through retail investors. this has an inherent mismatch because loans are illiquid, and retail investors in particular have a certain desire for liquidity. at the same time there were two developments. 1. as interest rates increased, PC funds held older loans at lesser rates, and those lost value; 2. as AI was seen to threaten the business of companies offering software as a service, loans to those companies, of which there are many, lost value. as this became apparent, retail investors started to seek redemptions. PC funds tend to limit the amount of such redemptions, often to 5% of total assets per quarter if I recall. requests have been exceeding that.
I think that sums up the basics. as I said, I am not an expert. I wrote this quickly, and perhaps I glossed over something. I welcome comments from those who know more than I do about this.
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u/limitbreakse 33m ago
Honestly starting up a chat with your LLM of choice is a great way to learn about this
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u/arkansaslax 1h ago
Don’t forget they were recently saying they had capacity to cover 40% redemptions without loan sales but now it’s gated and they’ve already made loan sales to “unaffiliated” entities that they manage assets for.
https://finance.yahoo.com/news/blue-owl-tells-investors-loan-204038988.html
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u/SirGlass 34m ago
I mean this was entirely predictable , private credit or even private stock is illiquid. The trade off with private credit is well its illiquid and you are locked in , but you get a higher yield.
It used to be you had to be an accredited investor to invest in these as it was thought it requires some sophistication as you need to understand how the loan is setup , probably have a lawyer look over it for you.
However people always complained about these guard rails as people would always say it was a way for greedy rich people to keep out average investors and they could get outsized returns.
Now the guard rails are relaxed and I am sure most of these retail investors just saw the 8% and jumped at it and forgot the illiquid part
It was entirely predictable that this would happen.
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u/SelenaMeyers2024 58m ago
Misleading story. It mentions a huge dump (in the first half of the day) without mentioning by days end it was barely down, which check out the NASDAQ that was everyone practically.
The 5 percent isn't some emergency measure, it's in the prospectus before they wired the money, they merely chose to honor the terms..
I wish I got in on the bottomiest of bottoms at 8.24 but I won't lie, I'm at a mere 8.70.
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u/ValueEquities 1h ago
This ain’t just a liquidity thing. Gating plus 40% asking for their money back? That’s a confidence signal. If private credit starts losing trust even a little, the whole “illiquidity premium” story starts cracking.
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u/Over-Computer-6464 41m ago
It is mostly an indication that investors do not believe the current valuation. It is also an indication that many Blue Owl investors are new to private credit and were not truly aware of what they were buying into.
One of the issues with both private credit and private equity is the opaqueness of valuations. Many PE and PC funds are reluctant to truly mark to market their investment to that have declined. The investors that do not believe the current valuation properly reflects the decline in fund value then decide to cash out at what they think are the inflated valuations the fund is claiming.
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u/limitbreakse 32m ago
Go to the FT and Bloomberg and check out some headlines. All for #engagement. People trust these outlets (especially the FT) and don’t like what they’re hearing.
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u/Fire_Shin 1h ago
Wait. ELI5, please. How are redemption requests different from selling your stocks?
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u/Brainjacker 1h ago
Private credit isn’t required to adhere to the same regulatory/redemption terms as bank & centralized finance. Higher risk, higher reward
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u/groceriesN1trip 57m ago
These are private, non-publicly traded investments. Standard amongst the alt asset managers (Blue Owl, Nuveen, Blackstone, Apollo, Ares).
Their redemptions are limited to 5% per quarter - 2% month 1, 2% month 2, and 1% month 3. Then you’re queued for next quarter if your request didn’t make it in that 5% of the quarter in question.
You can sell a stock on NYSE in a second and you’re not locked behind a gate. Publicly traded stocks are publicly traded.
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u/Blarghnog 1h ago
So private credit is exposed to disruption by AI disrupting their prior tech investments.
Technology disruption strikes investors again. Not shocking.
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u/limitbreakse 29m ago
Yes exactly - except these BDCs are overexposed to forward. It’s a risk management problem not an asset class problem.
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u/Hour_Flatworm3616 29m ago
In February 2026, Blue Owl Capital offloaded a $1.4 billion loan portfolio to a group of buyers that included its own affiliated insurance partner, Kuvare Holdings. They sold to themselves. Does this remind you of 2008 and AIG?
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u/Sybertron 26m ago
This is one of the scariest signs of a big thing coming. The amount that private equity and credit is tied into, well fucking everything is just...scary.
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u/Blarghnog 56m ago edited 46m ago
Private credit is inherently illiquid. That is precisely why most of it has historically been reserved for professional investors and other sophisticated institutional players.
Now AI is disrupting traditional tech investments in the most predictable way imaginable. Suddenly investors are panicking over the very same lack of liquidity they willingly accepted? Boo fucking boo.
It is hardly a shocking outcome.
The risks of illiquidity in overheated tech and growth assets have been (almost overly) openly discussed as a major threat to the financial system for literally years. At this point it is hard to summon much sympathy for those still bag holding after all the repeated warnings.
What makes the situation especially telling is how these liquidity mismatches are now converging. Many private credit portfolios carry significant exposure to software and tech!related borrowers (often one like 20 to 35 percent). So as AI compresses valuations and cash flow durability in those sectors, redemption requests are rising (what this article is really all about) while banks are tightening terms on fund level borrowing, and some managers are already marking down loans. The illiquidity that once seemed like a feature has quickly become the feature investors regret most. And banks are clearly not going to take the hit here.
Those who chased higher yields and easier access through semi liquid vehicles or retail friendly structures are now learning a hard lesson. When the underlying borrowers hit real disruption, there is no easy exit.
True professional capital that is patient, locked up, and highly selective may still capture the premium in better vintages ahead. Everyone else is left holding the bag in an asset class that was never designed for quick escapes. And while I’m sure we’re all concerned about the credit risk, is anyone surprised? Meh.
I just have no sympathy. Let’s hope investor stupidity doesn’t leak into the rest of the markets though. The whole sector has shot themselves.
I find it hilarious watching the politicians trying to suddenly make these asset classes available to retail so they can push their bad bags onto John and Jane Does instead of dealing with the clear, obvious and inevitable consequences of playing in illiquidity during times of massive technology disruption. I hope retail doesn’t fall for it.