On Thursday, Blue Owl reported significant investor withdrawal requests from some of its private credit funds. Over the past few months, the company’s executives have engaged in a global campaign to retain their backers.
For months, the private credit industry has faced concerns regarding the stability of its loans. Marc Lipschultz, co-chief executive of Blue Owl, expressed optimism in late May that the worries had subsided. However, the latest results indicate that investor anxiety remains high.
Blue Owl revealed that 38 percent of investors requested withdrawals from a fund focused on software and technology companies. Another, larger fund experienced withdrawal requests amounting to 19 percent. These figures are only slightly lower than the previous quarter’s 41 percent and 22 percent, despite the firm’s efforts to reassure investors.
Private credit, once a highly-regarded sector of Wall Street, originated from the ‘junk bonds’ of the 1980s and ’90s. After the 2008 financial crisis, new regulations reduced bank lending for high interest loans. This led to the growth of private credit firms, which raised money from global institutions like insurers and university endowments to lend directly to companies that traditional banks wouldn’t support. The industry is now valued at approximately $3 trillion.