Blue Owl is experiencing elevated redemption requests for 2 of its non-public credit score funds, in response to letters to shareholders issued Thursday.
The agency’s flagship OCIC fund, with about $36 billion in belongings beneath administration, obtained redemption requests of about 21.9% of shares excellent throughout the first quarter, the agency stated. Blue Owl’s smaller, tech-oriented fund, OTIC, obtained redemption requests of 40.7% throughout the identical interval, it stated.
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 non-public credit score and the underlying tendencies in our portfolio,” Blue Owl stated within the shareholder letters.
The non-public credit score trade has been roiled in current months by issues that it’s overexposed to the software program trade – an space that is been beneath strain over fears of disintermediation from synthetic intelligence.
Software program represents about 20% of portfolio publicity amongst enterprise growth firms, referred to as BDCs (a publicly traded proxy for personal credit score), in response to Jefferies. Headline fears about default threat within the sector have pushed a small however rich group of institutional buyers to hunt the exits from many of those funds.
“As public market dislocations and AI-related uncertainty reshape sentiment, dispersion is growing 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 non-public credit score funds, can also be among the many final to report redemptions. The agency’s proportion of redemptions is multiples increased 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 gives to locked-up holders at a steep low cost.
Blue Owl stated 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 stated 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.
