Blue Owl Capital (OWL) stock fell sharply after the firm disclosed a massive wave of investor redemption requests totaling $5.4 billion from its two largest private credit funds in the first quarter of 2026. The stock dropped 5.4% to $8.24 on Thursday, extending its year-to-date decline to over 40%.
Investors requested to withdraw $5.4 billion combined from the Blue Owl Credit Income Corp. fund and the Blue Owl Technology Income Corp. (OTIC) fund. This represents 21.9% of the $36 billion Credit Income fund's assets and a striking 40.7% of the roughly $3 billion OTIC fund. In response, Blue Owl is enforcing a pre-existing contractual cap, limiting quarterly redemptions to 5% of total assets per fund.
Under this 5% cap, the Credit Income fund will pay out approximately $988 million, while OTIC will redeem $179 million in Q1. Despite these outflows, new capital continued to enter the funds. Credit Income received $872 million in fresh investments, resulting in a net outflow of $116 million. OTIC brought in $127 million, leaving a net outflow of around $52 million, or about 2% of its net asset value.
Blue Owl management pushed back against bearish sentiment, highlighting the health of its underlying portfolios. The OTIC fund, heavily concentrated in loans to software companies, reported its borrowers have mission-critical products with revenue growing at 10% and cash operating profits up 14%. The fund has delivered an annualized return of 9.6% since its 2022 launch. Similarly, the Credit Income fund's borrowers are reportedly seeing 9% revenue growth and 10% cash operating income growth, with bad loans remaining low.
The redemption pressure reflects broader stress across the $1.8 trillion private credit sector, which has seen over $11 billion in outflows over the past two quarters. Rival firms like Ares Management (ARES) also saw their stock fall, dropping 4.6%. Different asset managers are handling the strain differently: Blackstone and Cliffwater have paid out 7%–8% to signal confidence, while Apollo, Ares, and BlackRock have held to the standard 5% cap.
Adding to the sector's challenges, the U.S. Treasury Department called a meeting with regulators on Wednesday to discuss risks in private credit. Furthermore, the sentiment shift was underscored by an offer from Saba Capital founder Boaz Weinstein in February to buy out Blue Owl fund investors at just 65%–80% of net asset value.
