Blue Owl redemption requests ease

Withdrawal requests from Blue Owl Capital’s flagship private credit vehicles declined in the third quarter, providing further evidence that redemption pressures across the sector may be beginning to ease, according to a report by Reuters.

Investors sought to withdraw $4.2bn from two Blue Owl funds during the three months to the end of September, down from $4.7bn in the previous quarter, according to shareholder letters. Both funds will repurchase 5% of their shares, in line with the standard quarterly limit for such vehicles.

The decline comes after private credit managers faced intense redemption demand earlier this year as investors questioned lending standards and the potential impact of artificial intelligence on software companies, an important source of borrowers for direct lenders.

Blue Owl has been among the firms most closely associated with the redemption pressures. Combined withdrawal requests at its two funds reached a record $5.4bn in the first quarter, forcing the vehicles to maintain their redemption limits and leaving some investors to resubmit unfulfilled requests in subsequent quarters.

At Blue Owl Credit Income Corp (OCIC), the firm’s flagship $35.1bn non-traded business development company, withdrawal requests fell to 16.8% of shares in the third quarter from 18.8% in the second.

The company said participation in the latest tender remained limited, with most requests coming from investors who had previously sought to withdraw capital but had not been able to do so because of the redemption cap.

Blue Owl executives have previously pointed to strong fund performance as one factor behind the decline in withdrawal demand. The vehicles could also benefit from changes in interest rates because much of their underlying portfolios consist of floating-rate investments.

Technology-focused Blue Owl Technology Income Corp (OTIC), however, continued to see substantially higher redemption demand. Investors sought to withdraw about $1.1bn, equivalent to 39% of shares, broadly unchanged from the $1.1bn, or 38.1%, requested in the previous quarter.

Most of the requests at the roughly $5bn vehicle were also resubmitted tenders that had not previously been fulfilled. OTIC’s technology exposure and concentrated investor base have contributed to its unusually high redemption levels, with the vehicle also having a more significant Asian shareholder base than Blue Owl’s other wealth-management products.

The 39% request rate was well above the roughly 10% to 17% range recorded by the largest non-traded BDC managers during the third quarter.

The figures nevertheless point to a gradual improvement in the broader private credit redemption environment. Managers are continuing to work through accumulated withdrawal requests while investor sentiment towards the asset class stabilises.