Shares of Blue Owl Capital Inc. extended their decline on Thursday, closing approximately 1% lower at $8.94 after touching an intraday low of $8.54. The drop reflects mounting investor apprehension regarding the valuation of loans within the expansive private credit sector, where Blue Owl is a prominent player.
Valuation Dispute Intensifies Scrutiny
Pressure on the stock intensified following a Financial Times report, cited by Reuters, indicating that Glendon Capital Management has raised objections to the assigned values of assets within one of Blue Owl's largest funds. Glendon's critique suggested that lenders, including Blue Owl, may be obscuring underlying weaknesses and carrying larger unrealized losses than have been publicly disclosed. Blue Owl has firmly denied these allegations of hidden losses.
The firm concluded 2025 with over $307 billion in assets under management, as stated on its investor relations page. In a move to demonstrate market confidence, Blue Owl announced on February 18 that a group of four public pension and insurance investors purchased $1.4 billion in loans at 99.7% of their par value. Craig W. Packer, head of Blue Owl's BDCs, noted that demand for the offering "far exceeded" the amount made available.
Broader Sector Under Pressure
The challenges are not confined to Blue Owl. Skepticism is permeating the entire listed credit fund universe. Business development companies (BDCs), which provide public market access to private loans, are now trading at an average of just 78 cents on the dollar, a decline from 85 cents at the start of the year, according to data from Reuters and Morningstar. Morningstar analyst Jack Shannon told Reuters that investors are growing increasingly convinced the sector's "best days are behind it."
Other major asset managers are facing similar headwinds. Morgan Stanley reported that investors sought to redeem nearly 11% of the shares from its North Haven Private Income Fund. Blackstone noted that withdrawal requests from its BCRED fund totaled $3.7 billion in the first quarter, while KKR highlighted pressure on near-term returns for its listed private-credit fund. These developments underscore the stress rippling through the industry's leading firms.
Investor Reaction and Liquidity Shifts
Blue Owl's recent strategic moves have elicited a negative market response. The company's updated liquidity plan for its OBDC II fund, a non-traded credit vehicle, involved replacing standard quarterly redemption rights with a return-of-capital distribution. This shift unsettled shareholders, with Truist Securities analyst Brian Finneran observing that the market interpreted the preceding loan sale as a signal of accelerating withdrawal requests. The stock has already lost more than half its value over the preceding twelve-month period.
Part of the capital from the February loan sale is earmarked for a return-of-capital payout at OBDC II, amounting to up to $2.35 per share, or roughly 30% of the fund's net asset value.
Market Risks and Counterpoints
The underlying risk for the sector is clear: if valuations for portfolios heavy with software and technology loans deteriorate further, or if an economic slowdown triggers higher default rates, discounts to net asset values could deepen. This may force funds to restrict investor exits or sell assets into a market with limited buyers. Glenn Schorr of Evercore ISI pointed out that current market discounts already price in concerns about a potential recession and rising loan losses. For now, markdowns by banks like JPMorgan have not led to significant margin calls, Reuters reported.
Despite the turmoil, some industry leaders offer a counter-narrative. Morgan Stanley maintains that the credit fundamentals of its fund remain stable. Blackstone President Jon Gray has pointed to consistent inflows from pension funds and large institutions into private credit strategies. Nevertheless, Blue Owl's stock price has become a daily barometer for investor confidence in the valuations that private lenders assign to their portfolios.
