American asset management firm Blue Owl Capital triggered a sharp sell-off in the private credit sector after announcing restrictions on withdrawals by retail investors. The company decided to liquidate $1.4 billion in assets to finance redemptions, undermining confidence in the stability of instruments offered to retail clients and causing declines in the share prices of major Wall Street players.

Restrictions on fund redemptions

Blue Owl Capital radically changed the redemption rules for retail investors, raising concerns about the liquidity of the entire private credit sector.

Sale of loan portfolio

The firm liquidated assets worth $1.4 billion to obtain cash for debt repayment and to satisfy investor claims.

Pressure on the AI sector

Investors fear that artificial intelligence will threaten the stability of companies in the software sector, which constitute a significant portion of the fund's debtors.

The $1.8 trillion private credit sector has come under intense pressure following Blue Owl Capital's decision to limit redemptions in a fund aimed at retail investors. The company's management, led by Doug Ostrover and Marc Lipschultz, decided to suspend quarterly redemption windows, replacing them with payouts funded by the sale of its loan portfolio. The firm has already announced the divestment of assets worth $1.4 billion, which is intended to return capital to investors and reduce debt. This decision hit not only Blue Owl's share price, which fell over 9%, but also those of competitors such as Blackstone, Apollo, and KKR. After the 2008 financial crisis, tightened banking regulations created a gap that was filled by credit funds, becoming a key source of financing for the mid-market business sector.The market situation is worsened by concerns about the funds' exposure to the software sector, which could be destabilized by the development of artificial intelligence. Investors fear that technology companies, which are debtors to private credit funds, will not cope with competition from generative AI, leading to a wave of defaults. An additional warning signal is the drastic drop in the value of structured bonds linked to Blue Owl, which are being valued on the secondary market at as low as 47 cents on the dollar. Democratic Senator Elizabeth Warren has already called for tighter regulations and increased disclosure requirements for private lenders, pointing to systemic risks. „The growth of the private credit market requires increased oversight and data transparency to protect investors and the stability of the financial system.” — Elizabeth WarrenExperts indicate that the business model based on offering liquidity backed by inherently illiquid assets, such as private loans, is now facing its most serious test in years. The problem of "liquidity mismatch" is becoming a key argument for critics of democratizing private equity, i.e., making complex financial products available to the average saver. Markets are now watching to see if Blue Owl's actions are an isolated case or the beginning of a broader capital retreat from the non-bank sector.1.4 bn USD — value of assets sold by Blue OwlBlue Owl Capital: -9.4, Apollo Global Mgmt: -6.2, Blackstone Inc: -4.8, KKR & Co: -5.1Liberal media emphasize the need to protect retail investors and increase state regulation over the opaque credit market. | Conservative business outlets highlight the natural market correction and deleveraging process as a necessary element of the economic cycle.

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