Blue owl is seeing increased redemption requests for two of its private credit funds, according to letters to shareholders Thursday.
The company’s flagship OCIC fund, with about $36 billion in assets under management, received redemption requests for about 21.9% of outstanding shares in the first quarter, the company said. Blue Owl’s smaller, technology-focused fund, OTIC, received redemption requests of 40.7% over the same period, it said.
For both funds, Blue Owl has chosen to limit inquiries to 5%. Blue Owl attributed the higher-than-average requests to “increased market concerns about AI-related disruptions among software companies.”
“We continue to observe a significant disconnect between the public dialogue on private credit and the underlying trends in our portfolio,” Blue Owl said in letters to shareholders.
The private lending industry has been rocked in recent months by concerns that it is too reliant on the software industry – an area that has come under pressure amid fears that artificial intelligence may no longer be an intermediary.
According to Jefferies, software accounts for about 20% of the portfolio exposure of business development companies known as BDCs (a publicly traded retail lending proxy). Headlines about the risk of default in this sector have led a small but wealthy group of institutional investors to exit many of these funds.
“As public market dislocations and AI-related uncertainties shift sentiment, dispersion across the sector is increasing, providing experienced lenders with the opportunity to selectively deploy capital on improved terms,” the technology-focused letter said.
Blue Owl, which is the only company to have two of these unlisted private debt funds, is also among the latest to report redemptions. The company’s return rate is many times higher than that of its competitors.
Most companies have opted for the 5% cap, but some including Cliff water And Blackstone allowed slightly more withdrawals.
Blue Owl’s OTIC technology fund saw redemption requests fulfilled at a rate of 17% in the fourth quarter. OCIC’s inquiries were 5% in the fourth quarter.
The two funds had previously attracted the interest of hedge funds Saba and Cox, which made purchase offers at a steep discount to the blocked holders.
Blue Owl said last quarter that its technology fund’s redemption requests were boosted by a more concentrated shareholder base, particularly within certain asset channels and geographies. At its flagship fund, the firm said activity was driven by a “small minority of the investor base” and 90% of shareholders chose not to make an offer.
Both funds experienced gross inflows, which, combined with the 5% limits, resulted in modest net outflows.
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