Investors sought to withdraw less money from two of Blue Owl Capital’s flagship private-credit funds in the second quarter, providing early signs that redemption pressures across the sector may be beginning to moderate after months of elevated withdrawals.
The New York-based alternative asset manager said investors requested withdrawals totaling $4.7 billion during the quarter, down from $5.4 billion in the previous three months.
The easing in withdrawal requests was welcomed by investors, with Blue Owl OWL shares rising by nearly 5% in Thursday trading.
The figures come as private-credit managers continue to grapple with heightened redemption activity following several high-profile borrower defaults last year that sparked concerns over the health of private-credit portfolios.
Blue Owl’s stock has fallen by over 40% this year.
Redemptions remain above payout limits
Withdrawal requests declined across both of Blue Owl’s largest non-traded business development companies, though they remained substantially above the quarterly redemption limits built into the funds.
At the $33.8 billion Blue Owl Credit Income Corp (OCIC), investors requested to redeem 18.8% of outstanding shares during the quarter, down from 21.9% in the first quarter.
The firm’s technology-focused Blue Owl Technology Income Corp (OTIC), which manages $4.9 billion in assets, also recorded lower withdrawal requests.
Investors sought to redeem 38.1% of shares during the quarter compared with 40.7% in the previous period.
Like many non-traded private-credit vehicles, both funds limit quarterly repurchases to 5% of outstanding shares.
The mechanism is designed to avoid forcing managers to sell relatively illiquid corporate loans to meet investor withdrawals.
Blue Owl said roughly 90% of investors in OCIC remained invested, while the group of shareholders requesting redemptions was largely unchanged from previous quarters, with little participation from new investors.
Signs of stabilization emerge
Although redemption requests remain elevated, analysts believe recent trends suggest withdrawal activity may be nearing its peak.
Market participants still expect requests to stay above the 5% quarterly threshold for several more quarters, but some Wall Street analysts argue that the gradual moderation seen in the second quarter points to improving investor confidence.
“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 said in a letter to shareholders.
The firm also said borrower fundamentals remained healthy, adding that “credit quality remained resilient,” supported by solid operating performance across its portfolio companies.
Blue Owl said it was encouraged by the modest quarter-over-quarter decline in tender requests, attributing the improvement partly to the funds’ recent performance.
Private credit remains under scrutiny
Blue Owl has become one of the industry’s most closely watched firms because it was among the earliest alternative asset managers to successfully market private-credit products to wealthy individual investors.
That strategy helped the firm rapidly expand assets under management to roughly $300 billion, but it has also made the company particularly exposed 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.
Pressure has not been limited to Blue Owl.
Several large private-credit managers, including Ares Management, Blackstone and BlackRock, have also experienced higher redemption activity in recent quarters, weighing on their share prices.
Investor concerns intensified in late June after withdrawals from a major Apollo Global Management private-credit fund climbed to 17% of assets from 11% in the previous quarter.
Executives across the industry have maintained that concerns surrounding private credit are exaggerated, though many acknowledge that elevated redemption activity is likely to continue in the near term.
Blue Owl said its largest credit fund remains well positioned to meet future redemption requests.
The company reported 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.
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