Blue Owl caps withdrawals again as investors seek to pull $4.7 billion from flagship funds

Blue Owl's two largest non-traded business development companies reported a slight dip in redemption requests for the second quarter, yet the numbers remain high enough to keep the 5% quarterly cap in place. Investors sought to withdraw $4.7 billion from the $33.8 billion Blue Owl Credit Income Corp (OCIC) and the $4.9 billion Blue Owl Technology Income Corp (OTIC), compared with $5.4 billion in the first quarter. The request rates fell to 18.8% at OCIC and 38.1% at OTIC, from 21.9% and 40.7% respectively, still far above the 5% tender offer limit built into the funds.

The numbers

OTIC's 38.1% repurchase request rate, while down sequentially, remains well above the 9% to 17% range seen at other large non-traded BDCs. Blue Owl attributes the fund's outsized requests to a concentrated shareholder base and a specialised technology mandate, with a notable concentration of investors in Asia. At OCIC, roughly 90% of investors stayed put, and the firm said the shareholder base seeking redemptions was largely unchanged, with limited new participation.

Industry-wide squeeze

The pressure extends beyond Blue Owl. Across 20 private credit funds tracked by the Financial Times, investors asked to pull $22 billion in the second quarter, the second consecutive quarter above $20 billion. The median redemption request rose to 8.7% of assets, up from 7.1% in the previous quarter. Managers honoured less than 40% of those requests, leaving more than $14 billion of capital locked inside the vehicles. The Wall Street Journal reported that across all private credit funds, investors sought $15.6 billion and received only $5.9 billion back.

Executives' guarded optimism

Blue Owl's Craig Packer and Logan Nicholson wrote that they were "encouraged" by the modestly lower tender requests and said the fund's performance over the past three months had "contributed to improved investor sentiment". The firm, which manages $315 billion and has raised more than $72 billion from wealthy individuals since its 2016 founding, earned over $570 million in management and performance fees last year from three non-traded private credit vehicles, including OCIC and OTIC.

We believe OCIC's strong performance over the past three months has reflected the quality of portfolio fundamentals and contributed to improved investor sentiment.

The 'freak out' persists

Despite the sequential decline, investors remain wary. Marc Lipschultz, co-chief executive of Blue Owl, said in late May that the "freak out" moment had passed, but the latest figures show persistent anxiety. Apollo and Blackstone have also reported large withdrawal requests and are capping redemptions at the same 5% quarterly threshold, creating queues that analysts expect could take up to eight quarters to clear. Critics say the industry expanded too quickly into software-adjacent lending, and nervousness about defaults continues to drive the exits.

It's a vicious cycle. Everyone on earth is running for the same bright red exit sign.

Capital in limbo

As long as redemption requests exceed the 5% cap, the gap between what investors want and what they get will widen. For Blue Owl, the modest drop in tender levels offered a glimmer of relief, but the overall picture is one of an industry still struggling to convince its retail and wealth clients that the loans are sound. The queue of locked-up capital and the steady drip of withdrawal demands set the stage for a prolonged period of pressure on the once-envied private credit sector.