Blue Owl Capital shares continued their downward spiral for a second straight trading session on Friday, deepening investor unease about the private credit sector. The selloff follows the firm’s decision to return capital from one of its debt funds and sell a significant portion of assets — moves that have intensified scrutiny over liquidity and lending standards across alternative asset managers.
The stock dropped another 4% after sliding 6% the previous day. Over the past year, Blue Owl’s share price has plunged more than 50%, reflecting mounting investor skepticism toward the broader private lending market.
Concerns escalated earlier in the week when the New York-based asset manager announced plans to offload approximately $1.4 billion in assets across three funds. The company said it would distribute the proceeds back to investors while also using part of the capital to reduce debt. While the firm framed the move as a proactive financial adjustment, many market participants interpreted it as a signal of potential stress within private credit portfolios.
Asset Sale Raises Questions
According to a report by Bloomberg News, Blue Owl sold a portfolio of loans to three major North American pension funds, along with its affiliated insurance company, Kuvare. The involvement of Kuvare, an insurer based in Chicago and connected to Blue Owl, drew particular attention from analysts and investors.
Brian Finneran, managing director at Truist Financial, noted that some pushback centered on the fact that one of the buyers of the loans was Blue Owl’s own insurance arm. For critics, this raised concerns about whether the transaction represented a genuine external validation of asset values.
Adding to the pressure, investment firms Saba Capital and Cox Capital said they had offered to purchase shares in three Blue Owl funds at a 20% to 25% discount to their latest reported valuations — a move that underscored doubts about pricing transparency in private markets.
Management Pushes Back
In an interview with CNBC, Blue Owl Co-President Craig Packer defended the firm’s strategy. He emphasized that all four institutional buyers involved in the loan transaction had expressed interest in acquiring more assets.
Responding to criticism about Kuvare’s participation, Packer questioned why the involvement of one affiliated buyer should cast doubt on the remaining 75% of the sales. He also stressed that the loans were sold at 99.7% of their face value, aligning closely with the firm’s internal valuations — which he described as evidence of pricing integrity.
The debt portfolio included 128 companies spanning 27 industries, with roughly 13% exposure to software and services. Packer noted that Blue Owl has been particularly selective in lending to software firms, a sector increasingly under pressure as rapid advances in artificial intelligence disrupt traditional business models.
Shares of industry heavyweights like Apollo Global Management and KKR also faced pressure amid broader concerns about private credit valuations tied to software-related investments.
Liquidity Debate Intensifies
Investor anxiety deepened after Blue Owl announced it would permanently remove a withdrawal option for investors in Blue Owl Capital Corp II, a non-traded debt fund primarily held by wealthy individuals. The firm said it would instead return 30% of the fund’s net asset value and discontinue quarterly redemptions.
A day later, Blue Owl clarified that it was not eliminating liquidity entirely but restructuring how redemptions would occur. Rather than allowing investors to redeem 5% of capital through a tender offer, the company said its revised plan would return six times as much capital — distributing funds to all shareholders over a 45-day period.
Packer reiterated that the firm was modifying the redemption mechanism to accelerate capital returns, not restricting access altogether. “We think this is a difficult short-term patch,” he said, adding that the company’s long-term performance remains solid.
Despite these reassurances, skepticism persists. Data from Ortex shows that nearly 12.5% of Blue Owl’s publicly traded shares are currently sold short, with short interest climbing over the past three months. Rising bearish bets suggest that many traders remain cautious about the firm’s outlook.
Broader Industry Scrutiny
Analysts say Blue Owl’s challenges reflect deeper concerns across private markets. The private credit industry has been under heightened examination following high-profile bankruptcies, including auto-parts manufacturer First Brands and subprime auto lender Tricolor.
Investors are increasingly wary of how private asset managers value illiquid holdings — especially when redemption pressures rise. Steve Wyett, chief investment strategist at BOK Financial, described the situation as emblematic of a broader mismatch between investor liquidity demands and the long-term nature of private investments.
Oppenheimer analyst Chris Kotowski, however, suggested that fears may be overblown. He pointed out that alternative asset managers oversee diverse portfolios composed of numerous funds and strategies, meaning stress in one segment does not necessarily signal systemic trouble.
Financing Report Adds to Volatility
Separately, Blue Owl pushed back against a report from Business Insider claiming it had struggled to secure financing for a $4 billion data-center project in Pennsylvania being developed with CoreWeave.
The company stated that its only obligation under the agreement is to provide approximately $500 million in bridge financing through March 2026 — a commitment it says remains fully intact.
Nevertheless, market reaction was swift. CoreWeave shares dropped 8.6% in late-afternoon trading, reflecting broader jitters tied to the unfolding developments.
A Turning Point for Private Credit?
The recent turbulence underscores a pivotal moment for private credit markets. As liquidity pressures grow and valuation transparency comes under sharper focus, alternative asset managers like Blue Owl are facing heightened expectations from investors.
Whether the company’s capital return strategy ultimately restores confidence or fuels further skepticism remains to be seen. For now, the market’s verdict is clear: volatility is far from over, and the debate over liquidity, valuation discipline, and risk management in private credit is only intensifying.
