- Blue Owl announced last week that it has stepped up the plans to return capital to investors, stating that it has reached an agreement to sell $1.4 billion of its direct lending assets from three funds to four institutional investors.
- However, the private credit player also announced a change in the redemption policy in the Blue Owl Development Corporation II (OBDC II) fund.
- Instead of allowing investments to be redeemed on a quarterly basis, Blue Owl stated that it would sell the assets and pay investors back, without specifying a timeline.
Blue Owl Capital Inc. (OWL) Co-CEO Doug Ostrover reportedly admitted that the fallout from halting redemptions in one of the company’s funds is causing headaches.
According to a report by The Wall Street Journal citing people familiar with the matter, Ostrover and Co-President Craig Packer made the acknowledgement during a call on Monday that included thousands of financial advisors who distribute the company’s funds.
Ostrover and Packer also walked these financial advisors through an explanation of the firm’s decision to permanently halt the redemptions at one of its funds.
Blue Owl shares were up more than 1% in Wednesday’s pre-market trade. Retail sentiment on Stocktwits around the company trended in the ‘extremely bullish’ territory at the time of writing.
What Did Blue Owl Do?
Blue Owl announced last week that it has stepped up the plans to return capital to investors, stating that it has reached an agreement to sell $1.4 billion of its direct lending assets from three funds to four institutional investors.
However, the private credit player also announced a change in the redemption policy in the Blue Owl Development Corporation II (OBDC II) fund. Instead of allowing investments to be redeemed on a quarterly basis, Blue Owl stated that it would sell the assets and pay investors back, without specifying a timeline.
Bessent Expresses Concern
Treasury Secretary Scott Bessent expressed concern following Blue Owl’s announcement, according to a Yahoo Finance report.
“If there is something rotten, it is not going to be handed to the individual investors," Bessent said.
Reacting to the development, Mohamed El-Erian, Chief Economic Advisor at Allianz, wondered if this were a “canary-in-the-coalmine” moment.
“There’s plenty to think about here, starting with the risks of an investing phenomenon in advanced (not developing) markets that has gone too far overall (short answer: yes), to the approaches being taken by specific firms (lots of differences, yet subject to the “market for lemons” risk). There’s also the ‘elephant in the room’ question regarding much larger systemic risks,” he said in a post on X.
OWL stock is down 28% year-to-date and 51% over the past 12 months.
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