Blue Owl is experiencing elevated redemption requests for 2 of its personal credit score funds, in accordance with letters to shareholders issued Thursday.
The agency’s flagship OCIC fund, with about $36 billion in belongings beneath administration, acquired redemption requests of about 21.9% of shares excellent in the course of the first quarter, the agency mentioned. Blue Owl’s smaller, tech-oriented fund, OTIC, acquired redemption requests of 40.7% throughout the identical interval, it mentioned.
In each of the funds, Blue Owl opted to cap requests at 5%. Blue Owl attributed the higher-than-usual requests to “heightened market issues round AI-related disruption to software program firms.”
“We proceed to watch a significant disconnect between the general public dialogue on personal credit score and the underlying developments in our portfolio,” Blue Owl mentioned within the shareholder letters.
Shares of Blue Owl fell roughly 7% in morning buying and selling Thursday.
The personal credit score business has been roiled in latest months by issues that it’s overexposed to the software program business – an space that is been beneath strain over fears of disintermediation from synthetic intelligence.
Software program represents about 20% of portfolio publicity amongst enterprise improvement firms, generally known as BDCs (a publicly traded proxy for personal credit score), in accordance with Jefferies. Headline fears about default danger within the sector have pushed a small however rich group of institutional traders to hunt the exits from many of those funds.
“As public market dislocations and AI-related uncertainty reshape sentiment, dispersion is rising throughout the sector, creating alternatives for skilled lenders to deploy capital selectively at improved phrases,” the technology-focused letter reads.
Blue Owl, which is exclusive in having two of those nontraded personal credit score funds, can be among the many final to report redemptions. The agency’s proportion of redemptions is multiples larger than its friends.
Most corporations have opted to make use of the 5% cap, however some, together with Cliffwater and Blackstone allowed barely extra redemptions.
Blue Owl’s OTIC expertise fund noticed redemption requests of 17% within the fourth quarter, which it fulfilled. OCIC’s requests have been 5% within the fourth quarter.
The 2 funds beforehand drew curiosity from hedge funds Saba and Cox, which prolonged tender provides to locked-up holders at a steep low cost.
Blue Owl mentioned in the latest quarter, its tech fund’s redemption requests have been amplified by a extra concentrated shareholder base, significantly inside sure wealth channels and areas. For its flagship fund, the agency mentioned the exercise was pushed by a “small minority of the investor base,” with 90% of shareholders electing to not tender.
Each funds noticed gross inflows, which mixed with the 5% gates resulted in modest internet outflows.