By Elsie Kamsiyochi
Shares of Blue Owl Capital fell sharply for a second consecutive session on Friday, extending a steep selloff that has erased more than half the firm’s market value over the past year.
The renewed decline came as investors digested the asset manager’s decision to sell a large portfolio of loans, return capital to investors in one of its flagship debt vehicles, and permanently alter redemption terms — moves that have reignited broader concerns about private credit valuations and liquidity risks.
Blue Owl stock dropped more than 5% in early trading, following a 6% fall the previous day. The two-day slide reflects mounting skepticism over the firm’s strategy at a time when private lending markets are under intense scrutiny from investors wary of potential stress beneath the surface.
Asset sales raise governance and valuation questions
Earlier this week, the New York-based alternative asset manager announced plans to sell $1.4 billion in assets across three funds and distribute the proceeds to investors in a nine-year-old private credit vehicle.
According to a Bloomberg News report, the portfolio of loans was sold to three major North American pension funds as well as to Kuvare, an insurance company owned by Blue Owl itself.
That detail proved unsettling for some investors. “A lot of pushback this morning is focusing on the fact that one of the four buyers of the loans was Kuvare, Blue Owl’s own insurance asset manager,” said Brian Finneran, managing director at Truist Financial.
The involvement of an affiliated buyer has raised questions about potential conflicts of interest, even as Blue Owl defended the transaction.
The firm said the loans — spanning 128 portfolio companies across 27 industries — were sold at 99.7% of par value, matching its internal valuations. Blue Owl argued that this pricing validates the accuracy of its marks at a time when investors are increasingly suspicious of how private credit assets are valued.
Liquidity changes rattle investors
Adding to the unease, Blue Owl permanently removed a quarterly redemption option for investors — primarily wealthy individuals — in the debt fund known as Blue Owl Capital Corp II. Previously, investors could withdraw up to 5% of their capital each quarter through a tender-offer process.
Instead, the firm said it would return about 30% of the fund’s net asset value to all shareholders within roughly 45 days. Blue Owl insisted this move should not be interpreted as a freeze on liquidity.
“We are not halting investor liquidity in non-traded debt fund Blue Owl Capital Corp II,” the company said, emphasizing that the new plan would return significantly more capital than the old redemption mechanism and do so on a faster timeline.
Still, the decision has fueled broader anxieties about whether private credit funds — which often invest in illiquid loans — can meet investor demands for cash during periods of market stress.
Broader private credit jitters spread
The selloff in Blue Owl has rippled across the sector, weighing on larger alternative-asset peers such as Apollo Global Management and KKR. Investors are increasingly wary of the private credit industry’s exposure to the software and technology sectors, which have relied heavily on private lenders as traditional banks pulled back following post-financial-crisis regulations.
Recent advances in artificial intelligence have further unsettled confidence in software valuations, raising fears that some borrowers may struggle to adapt — and repay their debts — if established business models are disrupted.
The sector has already been on edge following the high-profile bankruptcies of auto-parts maker First Brands and subprime auto lender Tricolor last year.
Those collapses intensified scrutiny of private credit portfolios and whether asset managers have been too optimistic in their valuation assumptions.
“This is indicative of a bigger issue in the private alternative world,” said Steve Wyett, chief investment strategist at BOK Financial. “It’s about the mismatch between the liquidity investors want and what managers can realistically deliver based on the assets they hold.”
Data center setback adds to pressure
Compounding Blue Owl’s challenges, Business Insider reported on Friday that the firm was unable to secure financing for a $4 billion data-center project in Pennsylvania that it is co-developing with CoreWeave. Blue Owl did not immediately respond to a request for comment on the report.
The setback comes just months after Blue Owl announced a $27 billion financing deal for Meta Platforms’ largest data-center project, underscoring the contrast between recent ambitions and emerging obstacles.
“And then the hits keep coming,” Finneran said, noting that the data-center financing news added to the negative sentiment already surrounding the firm.
A test case for private credit
For investors, Blue Owl’s struggles have become emblematic of deeper questions facing the private credit industry: how resilient valuations really are, how conflicts of interest are managed, and whether funds built on illiquid assets can continue to promise meaningful liquidity to investors.
While some analysts stress that Blue Owl’s issues are not necessarily systemic, the sharp reaction in its shares suggests that confidence in the sector is fragile — and that any sign of strain can quickly cascade into broader market anxiety.
Source Reuters
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