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Shares in Blue Owl Capital tumbled below their listing price amid a sell-off for private capital groups triggered by investor redemptions and fears over their exposure to software companies that are vulnerable to AI disruption.
Blue Owl’s shares fell as much as 9 per cent to $9.73 on Tuesday — pulling them below the $10 at which they were priced when the asset manager went public in 2021 through a Spac deal — before recovering somewhat. The shares are down about 50 per cent over the past 12 months.
The accelerating drop for Blue Owl underscores mounting investor concerns about private capital companies, which have lent heavily to groups whose businesses are exposed to advances in AI.
Blue Owl last month permanently restricted cash withdrawals from its inaugural private retail debt fund, reneging on a plan to reopen to redemptions this quarter as part of a plan to instead return capital to investors.
While Blue Owl was able to sell about a third of the fund’s assets close to their face value, the U-turn underscored the risks to individual investors who have piled into vehicles with limited liquidity.
Investor redemptions from some Blue Owl funds and those managed by industry rivals, including Blackstone, have jumped in recent months. On Monday, Blackstone’s $82bn private credit fund Bcred said it had been hit with $1.7bn in net outflows in the month to March 2.
Blackstone shares dropped almost 9 per cent on Tuesday, while rival Apollo Global Management fell 6 per cent and KKR declined 4 per cent. The falls were all steeper than the decline for the broader market.
Apollo chief Marc Rowan warned on Tuesday of a looming “shake-out” in private markets, echoing his recent remarks that there will be dispersion in performance going forward among managers.
“There’s always going to be underwriting mistakes,” Rowan said at a conference hosted by Bloomberg on Tuesday. “But the question is, who’s a good risk manager and who’s not a good risk manager? If 30 per cent of your portfolio is in one industry and that one industry is being impacted by technology, you have not been a good risk manager.”
Publicly traded private credit funds managed by KKR, Apollo Global and BlackRock also fell last week after they reported rising troubled loans in their portfolios and were forced to cut their dividends to account for falling interest earnings and asset writedowns.
The industry tumult has highlighted deep unease in unlisted markets with the value of loans firms made to midsize technology companies, often backed by private equity groups.
Such deals accounted for nearly a third of all private loans over the past decade and as much as 40 per cent of total private equity dealmaking, Apollo has estimated.
Blue Owl’s stock was pummelled this autumn after its retail credit fund, called Blue Owl Capital Corp II (OBDC II), closed itself to redemptions as part of a plan to merge it with a larger listed vehicle. The deal, which would have saddled investors with immediate paper losses, was quickly halted following reporting by the FT.
Last month, Blue Owl said the fund now “intends to prioritise delivering liquidity ratably to all shareholders through quarterly return of capital distributions, which are intended to replace future quarterly tender offers and may be funded by earnings, repayments, other asset sale opportunities or strategic transactions”.
The announcement came as part of a $1.4bn sale of credit assets across three of Blue Owl’s funds, including $600mn for its retail credit fund.
