No wonder they refused to invest in Oracle! Blue Owl is in trouble: facing a crazy run on the fund, redemption limits have soared to 17%

Blue Owl is significantly raising the redemption limit for one of its private credit funds to address the influx of withdrawal requests from investors, highlighting the increasing pressure faced by the once-popular private credit market. According to a previous article from Wall Street Insight, Blue Owl had been in discussions with lenders and Oracle to invest in a planned 1 gigawatt data center in Michigan. However, negotiations have stalled, and the agreement that Blue Owl had originally planned to arrange for up to $10 billion in financing and large equity investments could not move forward. The latest regulatory filings show that the company will allow investors to withdraw up to 17% of net assets from Blue Owl. This percentage amounts to approximately $685 million, far exceeding the company's previously set quarterly limit of 5%. Additionally, the company has extended the deadline for investor redemptions from December 31 to January 8. Craig Packer, co-founder of Blue Owl, stated in an interview that while funds typically allocate proportionally when redemption requests exceed 5%, given that the fund has $2.4 billion in liquidity, the company decided to prioritize meeting investors' liquidity needs. Nevertheless, the large-scale withdrawal behavior of investors remains one of the most extreme signs of increasing anxiety in the private credit sector, which is under scrutiny due to concerns over losses, declining return expectations, and heightened regulatory scrutiny. This incident is not an isolated case but reflects a broader trend across the industry. The non-listed business development company (BDC) structure, which is popular among individual investors, is facing significant challenges, with data showing that redemption levels have significantly exceeded historical averages. Liquidity Pressure and Strategic Adjustments Craig Packer emphasized in the interview that OTIC currently has $2.4 billion in available liquidity, including $1.2 billion in liquid loans, which gives the company flexibility to respond to the wave of redemptions. He stated that the fund has honored all bid requests made by investors. Although the company has shown confidence in handling the pressure, the sources of capital outflow reveal specific investor sentiments. According to media reports citing an informed source, the larger-scale redemptions faced by OTIC are primarily driven by wealthy individual investors from Asia, who constitute an important part of the fund's investor base. Meanwhile, Blue Owl's largest direct lending vehicle, Blue Owl Credit Income Corp., has also not been spared. According to regulatory filings and informed sources, the fund experienced approximately 5% in investor withdrawals this quarter, totaling about $966 million, which is in line with the industry average. Widespread Anxiety in the Private Credit Market Blue Owl's experience reflects the cooling of the entire private credit market. According to data from Goldman Sachs analysts, non-listed BDCs (like this fund from Blue Owl) had an average redemption amount in the fourth quarter that accounted for 5% of net assets, while the historical average was only around 2%. ** Data from the boutique investment bank Robert A Stanger & Co., which specializes in tracking the industry, further corroborates this trend: In the last three months of 2025, the redemption volume of funds with assets exceeding $1 billion surged by 200% compared to the previous period. Investors are taking advantage of the quarterly window to withdraw funds, which has become a key barometer for measuring market sentiment. Valuation Discrepancies and Structural Challenges Non-public BDCs typically set quarterly redemption limits to balance clients' liquidity needs with the illiquid nature of fund investments. However, the current market environment has intensified the pressure on this structure. Unlike publicly traded BDCs, investors in non-public BDCs can receive the full book value upon redemption. In contrast, publicly traded BDCs have recently underperformed, recording their worst annual performance relative to the S&P 500 index since 2020. In recent months, several publicly listed BDCs have seen their trading prices at double-digit discounts, meaning that if investors sell in the secondary market, the funds they recover will be below the book value of the fund investments. This valuation discrepancy further incentivizes investors in non-public funds to exit through the redemption window. This is not the first time Blue Owl has faced scrutiny recently. Last November, the company canceled the merger plan for two of its private credit funds, which could have forced investors in the non-public fund Blue Owl Capital Corp. II to incur losses of about 20%. Prior to this merger attempt, the fund also experienced a surge in redemptions exceeding the preset limit of 5%, at which point Blue Owl only honored about $60 million (or 6%) and temporarily stopped allowing investors to withdraw. The manager has stated that redemptions will resume this quarter