Blue Owl Capital is holding firm on its 5% quarterly withdrawal cap for two of its private credit funds, even after investor redemption requests edged lower in the second quarter — though they remained far above that limit.
In letters to shareholders released Thursday, the New York-based investment firm disclosed that investors requested to pull $4.7 billion from the two funds during the second quarter, a decrease from the $5.4 billion in withdrawal requests seen the prior quarter.
Blue Owl shares climbed roughly 2% in premarket trading following the news, though the stock has still lost about 56% of its value over the past year.
Wealthy investors have been withdrawing billions of dollars from these types of non-traded private credit funds in recent months, driven by concerns over lending standards and fears that artificial intelligence could disrupt software companies that have borrowed from direct lenders.
Market watchers expect withdrawal requests to stay above the 5% threshold for several more quarters, but some analysts on Wall Street say the underlying trends point to the second quarter potentially being the high point for redemption pressure.
At the $4.9 billion technology-focused Blue Owl Technology Income Corp fund, known as OTIC, redemption requests dropped to 38.1% in the second quarter, down from 40.7% in the previous quarter.
The firm’s flagship $33.8 billion Blue Owl Credit Income Corp fund, known as OCIC, saw withdrawal requests decline to 18.8% from 21.9% in the prior quarter.
OCIC, the second-largest non-traded business development company of its kind, reported “modestly lower” tender requests coming from a broad range of investor types across different parts of the world.
About 90% of OCIC investors chose to remain in the fund. The fund noted that the group of shareholders seeking to exit remained largely the same, with only a “limited” number of investors making redemption requests for the first time.
“We believe OCIC’s strong performance over the past three months has reflected the quality of portfolio fundamentals and contributed to improved investor sentiment,” Blue Owl’s Craig Packer and Logan Nicholson wrote in the shareholder letter.
Non-traded business development companies, or BDCs, offer investors a way into private credit markets and typically allow investors to cash out through quarterly tender offers capped at 5% of shares.
Withdrawal levels at OTIC have stayed well above the broader industry average, something Blue Owl has attributed to the fund’s concentrated shareholder base and its specialized investment focus. While most of Blue Owl’s wealth products are centered on U.S. investors, the smaller OTIC fund has significant concentration in Asia, according to company executives.
At 38.1%, OTIC’s repurchase requests were considerably higher than the 9% to 17% range reported by the largest non-traded BDC managers that have released second-quarter tender offer results. Oaktree and Goldman Sachs were among the funds that went against the broader trend, reporting lower repurchase requests in the second quarter.
Blue Owl was formed through a 2021 merger between Owl Rock Partners and the Dyal Capital division of Neuberger Berman. The firm currently manages five BDCs and had $315 billion in assets under management as of March 31.
The company had previously announced plans to merge two of its private credit funds late last year but later scrapped the idea after the announcement triggered investor anxiety and sent the company’s stock into a sharp decline.
