Blue Owl limits withdrawals from two funds after historic surge in redemption requests

By Isla Binnie

NEW YORK, April 2 (Reuters) - Blue Owl OWL.N told investors Thursday that it is limiting withdrawals from two of its funds after a historic level of redemption requests came in for the first quarter, with AI-related worries driving an investor exodus from its technology-focused fund.

Private credit firms like Blue Owl have been feeling strain from the market's recent downturn, prompting some investors to pull back from these investments due to worries about valuations and lending standards following a handful of high-profile bankruptcies. Founded in 2021, Blue Owl has become the poster child for private credit funds that are struggling with a high level of redemptions.

Jittery investors are indiscriminately selling off anything heavily exposed to the software sector as advancements in AI threaten to upend entire sectors of the economy. About 8% of the firm's roughly $300 billion in assets was invested in software, it previously said.

Blue Owl investors asked to withdraw $5.4 billion in shares between the two funds during the first quarter, according to Reuters' calculations.

It is the latest in a growing list of firms that have limited redemptions in recent weeks, including KKR , Apollo and BlackRock .

Thursday's news sent Blue Owl's shares to a new all-time low in mid-day trading. The stock has been losing ground for months, shedding nearly half of its market value since the start of 2026.

Other managers of private assets, including Ares ARES.N, Apollo Global APO.N, Blackstone BX.N, and Carlyle CG.O also slid.

UNPRECEDENTED WITHDRAWALS

Investors asked to withdraw 40.7% of shares in the $6.2 billion technology-focused Blue Owl Technology Income Corp (OTIC) fund, and 21.9% of shares in the $36 billion Blue Owl Credit Income Corp (OCIC) fund, according to preliminary data released by the company. Those percentages rank among the highest quarterly redemption requests the industry has ever seen, a person familiar with the matter said.

The firm said it plans to only fill 5% of the requests, saying there was a "meaningful disconnect" between public sentiment on private credit funds and the underlying performance of its portfolio.

“It’s another reminder about how illiquid this sector is," said Sam Stovall, chief investment strategist of CFRA Research in New York. He said retail investors thinking about investing in private equity may want to think twice. “It is a sector that is meant for professionals.

"Don't try this at home. Private credit does not have the kind of liquidity that public markets would have and it’s very difficult to get the money out as quickly as you might want it," Stovall said.

The funds, structured as what are known as business development companies (BDCs), raise equity and pair it with leverage to finance loans, mainly to mid-sized companies. Some of them trade on public markets, where investors can buy and sell shares. Non-traded funds like Blue Owl's give investors quarterly opportunities to withdraw a portion of their holdings, which is usually capped at 5% of shares.

PAST REDEMPTION LIMITS

Last quarter, Blue Owl opted to allow holders of OTIC to redeem 15.4% of their shares.

"Tender activity was elevated across the non-traded BDC industry in the first quarter of 2026, reflecting a period of heightened negative sentiment toward the asset class that intensified as peers have reported tender results," the funds' CEO Craig Packer said in two shareholder updates.

Blue Owl said the downturn in software is creating opportunities to add to its portfolio.

Markets have balked at some of Blue Owl's previous plans for its BDCs, including a proposal last year to merge a public vehicle with a private version, and to sell assets to fund payouts instead of quarterly redemptions.

The concentration of redemption requests among a small number of investors - with 1% of OCIC shareholders representing the majority of tender requests - suggests the exodus may be driven by institutional investors or wealth management clients rather than broad retail panic.

Blue Owl said negative sentiment has been more acute in its tech fund, which has a smaller shareholder base and is more exposed to the software sector.

"Heightened market concerns around AI-related disruption to software companies have weighed meaningfully on investor perception of software-related credit exposures," the company said.