The US market is facing renewed instability, as pressure that previously hit software and transport stocks now spreads to the private investment fund sector. At the center stands Blue Owl Capital, whose difficulties have quickly impacted major competitors.
The sharp decline in private creditor shares followed the company’s decision to change investor withdrawal rules. The backdrop involves heavy exposure to artificial intelligence and the use of high financial leverage to finance AI-related investments.
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Forced asset sales and redemption suspension
Blue Owl faces declining loan yields and concerns over overheating credit markets. The company announced the sale of $1.4 billion in assets from three credit funds to return capital to investors and repay debt. At the same time, it imposed a permanent suspension of redemptions in one fund exposed to direct lending and software equities.
Blue Owl shares closed down about 6%, dragging down rivals including Apollo Global Management, Ares, Blackstone, KKR, and Carlyle Group, which recorded losses between 4% and over 6%.
Economist Mohamed El-Erian compared the situation to the early stages of the 2008 financial crisis: “Is this a ‘canary in the coal mine’ moment, similar to August 2007?” He warned that blocking redemptions raises questions about systemic risks and a potential “significant – and necessary – decline in the value of certain assets.”
Blue Owl decided to sell stakes in a portfolio of 128 companies across 27 sectors, with 13% exposure to software. The affected funds include Blue Owl Capital Corp II ($600 million), Blue Owl Technology Income Corp ($400 million), and Blue Owl Capital Corp ($400 million).
The company estimates it can return up to 30% of the net asset value of the Obdc II fund, equivalent to approximately $268 million. “We are not stopping redemptions; we are simply changing the method by which we provide them,” said Craig Packer, co-president of Blue Owl.
Photo: CNN Business
