Blue Owl Capital (NYSE: OWL) shares climbed nearly 5% in Thursday trading after the alternative asset manager reported a decline in redemption requests at its two largest non-traded business development companies during the second quarter. The figures offer early indications that the wave of investor withdrawals that has pressured the private-credit sector may be starting to recede.
Investors requested withdrawals totaling $4.7 billion from Blue Owl's flagship funds in the three months ended June 30, down from $5.4 billion in the first quarter. While still elevated, the quarter-over-quarter decline was welcomed by the market, with the stock rising sharply on the news. Despite the rally, Blue Owl shares remain down more than 40% year to date.
Redemption Requests Remain Above Payout Caps
Withdrawal requests decreased at both Blue Owl Credit Income Corp (OCIC) and Blue Owl Technology Income Corp (OTIC), though they continued to exceed the funds' quarterly repurchase limits. OCIC, which manages $33.8 billion in assets, saw investors seek to redeem 18.8% of outstanding shares, down from 21.9% in the prior quarter. OTIC, a $4.9 billion technology-focused fund, recorded a decline to 38.1% from 40.7%.
Both funds cap quarterly redemptions at 5% of outstanding shares, a common feature in non-traded private-credit vehicles designed to prevent forced sales of illiquid corporate loans. Blue Owl noted that roughly 90% of OCIC investors remained invested, and the group of shareholders requesting redemptions was largely unchanged from previous quarters, with minimal participation from new investors.
Signs of Stabilization Emerge
Analysts view the moderation in redemption requests as a potential sign that withdrawal activity may be approaching its peak. While requests are expected to stay above the 5% threshold for several more quarters, the gradual decline suggests improving investor confidence in the underlying portfolios.
“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 executives Craig Packer and Logan Nicholson wrote in a letter to shareholders. The firm also reported that borrower fundamentals remained healthy, with credit quality resilient amid solid operating performance across portfolio companies.
Blue Owl attributed the improvement partly to the funds' recent performance and said it was encouraged by the modest quarter-over-quarter decline in tender requests.
Private Credit Under Scrutiny
Blue Owl has become one of the most closely watched firms in the private-credit industry due to its early success in marketing these products to wealthy individual investors. That strategy helped the firm grow assets under management to roughly $300 billion, but it also exposed the company to swings in retail investor sentiment.
Persistent redemption requests have raised concerns that slower asset growth and capped withdrawals could weigh on fee income if investor demand remains subdued. The pressure is not unique to Blue Owl. Other large private-credit managers, including Ares Management, Blackstone, and BlackRock, have also experienced elevated redemption activity in recent quarters, weighing on their share prices. In late June, withdrawals from an Apollo Global Management private-credit fund climbed to 17% of assets from 11% in the prior quarter, intensifying investor concerns.
Industry executives have maintained that concerns surrounding private credit are exaggerated, though many acknowledge that elevated redemption activity is likely to persist in the near term. Blue Owl said its largest credit fund is well positioned to meet future requests, reporting that OCIC holds $11.6 billion in cash, cash equivalents, and available borrowing capacity—enough to fund approximately 12 quarters of payouts at the current 5% quarterly redemption limit.
While withdrawal requests remain well above the level funds are willing to meet each quarter, the latest figures suggest investors may be becoming more comfortable with private-credit portfolios after a turbulent period for the industry. For broader market context, see our coverage of Dow Rises 256 Points as Weak June Jobs Data Dims Fed Rate Hike Prospects and Gold Rises 0.7% to $4,461 as Dollar Weakness, Lower Oil Prices Fuel Demand.
This article is for informational purposes only and does not constitute financial advice.
