Blue Owl is significantly raising the redemption cap for one of its private credit funds to handle a surge in investor withdrawal requests, highlighting the mounting pressures within the once highly sought-after private credit market.
According to prior reports, Blue Owl had been in negotiations with lenders and Oracle to invest in a planned 1-gigawatt data center in Michigan. However, the talks stalled, preventing the advancement of a deal where Blue Owl originally planned to arrange up to $10 billion in financing and make a substantial equity investment.
Newly disclosed regulatory filings show the company will permit investors to withdraw up to 17% of the net asset value from the fund. This proportion equates to approximately $685 million, far exceeding the firm's previously set quarterly cap of 5%. Additionally, the company has extended the deadline for investors to submit redemption requests from December 31st to January 8th.
In an interview, Blue Owl co-founder Craig Packer stated that while funds typically prorate redemptions when requests exceed 5%, given this fund's $2.4 billion in liquidity, the company decided to prioritize meeting investors' liquidity needs. Despite this, the large-scale investor withdrawals represent one of the most extreme signs of rising anxiety in the private credit sector, an asset class now under scrutiny due to concerns over losses, declining return expectations, and heightened regulatory examination.
This incident is not an isolated case but reflects a broader trend across the industry. The non-traded Business Development Company (BDC) structure, popular with individual investors, is taking a significant hit, with data showing redemption volumes have substantially exceeded historical averages.
Craig Packer emphasized in the interview that OTIC currently has $2.4 billion in available liquidity, including $1.2 billion in liquid loans, providing the firm flexibility to manage the redemption wave. He stated that the fund honored all tender offers submitted by investors.
Although the company expressed confidence in handling the pressure, the source of the outflows reveals specific investor sentiment. Citing an informed source, media reports indicate that the larger redemptions faced by OTIC were primarily driven by wealthy individual investors in Asia, a group that constitutes a significant part of the fund's investor base.
Concurrently, Blue Owl's largest direct lending vehicle, Blue Owl Credit Income Corp., has also been affected. According to regulatory filings and informed sources, the fund saw investor withdrawals of about 5% this quarter, totaling approximately $966 million, a level comparable to the industry average.
Blue Owl's situation reflects a broader cooling in the private credit market. Data from Goldman Sachs Group analysts shows that non-traded BDCs (like this Blue Owl fund) experienced average redemptions amounting to 5% of net assets in the fourth quarter, compared to a historical average of around 2%.
Data from boutique investment bank Robert A. Stanger & Co., which specializes in tracking the industry, further corroborates this trend: in the last three months of 2025, redemption volumes for funds with assets over $1 billion surged by 200% compared to the previous period. Investors are utilizing quarterly windows to pull out capital, making this a key barometer of market sentiment.
Non-traded BDCs typically set quarterly redemption limits to balance clients' liquidity needs with the illiquid nature of the fund's investments. However, current market conditions are intensifying the pressure on this structure. Unlike their publicly traded counterparts, investors in non-traded BDCs can redeem shares at full net asset value.
In contrast, publicly traded BDCs have recently performed poorly, recording their worst annual performance relative to the S&P 500 since 2020. In recent months, several public BDCs have traded at double-digit discounts to their NAV, meaning investors selling on the secondary market would recoup less than the book value of the fund's investments. This valuation discrepancy further incentivizes investors in non-traded funds to exit via redemption windows.
This is not the first time Blue Owl has faced scrutiny recently. Last November, the company canceled plans to merge two of its private credit funds, a move that would have forced investors in the non-traded fund Blue Owl Capital Corp. II to absorb losses of approximately 20%. Prior to that merger attempt, that fund also experienced a surge in redemptions exceeding its 5% preset limit; at that time, Blue Owl honored only about $60 million (or 6%) and temporarily halted investor withdrawals. The manager has indicated it will resume redemptions this quarter.
