For the past few months, some of the biggest asset managers on Wall Street have engaged in a full-press effort to persuade wealthy investors and financial advisers to keep money in so-called private credit funds that invest in risky loans.
It’s not working.
The latest evidence of this was revealed on Thursday when Blue Owl Capital, once the hottest name in private credit, disclosed that it received notice that investors were seeking to withdraw 41 percent of the money out of a $6 billion fund, and 22 percent from another $36 billion fund. Blue Owl said it would only immediately fulfill a fraction of those requests — 5 percent in each investment vehicle — while the remaining requests would take years to pay out.
The record withdrawal tally reflects a waning confidence across Wall Street about the quality of Blue Owl’s loans.
Blue Owl’s executives, in letters to backers on Thursday, blamed a litany of external factors for its troubles. They said “concerns around A.I.-related disruption to software companies” had “weighed meaningfully on investor perception,” and they alluded to “certain wealth channels and regions” that had disproportionately tried to cash out.
Other struggling private credit lenders in recent weeks have revealed redemption requests of around 15 percent but some of those other firms have indicated that will pay out more than the 5 percent that Blue Owl has said it would pay.
In its letters to investors, Blue Owl said it was permitted under the fund’s legal documents to delay withdrawals, and said it could eventually borrow money or sell investments to fulfill any such requests. Those are similar arguments to what has been made by others in the space.
Blue Owl’s stock, already in a deep monthslong spiral, spun down further on Thursday’s news to its lowest ever level as a public company. The stock was down as much as 8 percent at the start of trading but had recovered its losses by late morning amid broader market swings. A spokeswoman declined to comment.
Founded by veterans of Wall Street firms like Goldman Sachs, Blue Owl exploded in size over the past decade. The private credit industry has collected trillions of dollars from large and small investors alike to lend to fledgling companies that either could not or would not find funding from traditional banks.
These loans are relatively short-term, spanning three or four years, which private credit firms have said helps make them safe and predictable.
Some investors are less convinced, noting that the industry has so far been buoyed by relatively low interest rates, among other factors.
Rob Copeland is a finance reporter for The Times, writing about Wall Street and the banking industry.
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