Blue Owl caps private credit funds redemptions at 5% after steep request levels

Summary

• Blue Owl Capital (OW) experienced elevated redemption requests for two private credit funds in Q1: OCI C (21.9% of shares outstanding) and OTIC (40.7%).
• The firm capped redemptions at 5%, meaning investors could only redeem a fraction of their requests (e.g., one-fourth for OCI C, one-eighth for OTIC).
• Blue Owl attributes high redemptions to market concerns about AI-related disruption to software companies.
• Redemption rates at Blue Owl are multiples higher than peers, though most firms also use a 5% cap; some like Blackstone and Cliff Water allowed slightly more.
• Hedge funds Saba and Cox offered tender offers to locked-up holders at a steep 30% discount, seeing long-term opportunity and are long OW equity.
• Despite redemptions, gross inflows kept net outflows modest, which is crucial for the firm's revenue impact.
• OW stock is down over 6% this morning and 42% year-to-date, reflecting investor sentiment.
• Private credit managers may find opportunities due to widening spreads from market turmoil, if they maintain liquidity.
• Retail investors face liquidity risks as these funds are not as liquid as perceived, highlighting a learning lesson in fund structures.