No wonder they rejected Oracle! Blue Owl is plagued by trouble: facing massive withdrawals, with the redemption cap soaring to 17%.

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Blue Owl is significantly increasing the redemption cap on one of its private credit funds in response to a surge in investor withdrawal requests, highlighting the mounting pressures facing the once highly sought-after private credit market.

According to a previous article by Wallstreetcn, Blue Owl had been in talks with lenders and Oracle, planning to invest in a data center in Michigan with a planned capacity of 1 gigawatt. However, negotiations stalled and Blue Owl's original plan to arrange up to $10 billion in financing and make a large equity investment could not proceed.

The latest regulatory filings show that the firm will allow investors to withdraw up to 17% of Blue Owl’s net assets. This amount equates to about $685 million, far exceeding the company’s previous 5% quarterly cap. Additionally, the company has extended the deadline for investor redemptions from December 31 to January 8.

Craig Packer, Blue Owl’s co-founder, said in an interview that although the fund usually prorates redemption requests above 5%, the firm decided to prioritize meeting investors’ liquidity needs given that the fund has $2.4 billion in liquidity. Nonetheless, the large wave of investor withdrawals remains one of the clearest signs of intensifying anxiety in the private credit sector, an asset class now under scrutiny due to concerns about losses, lower return expectations, and increased regulatory oversight.

This event is not isolated; rather, it reflects a widespread trend across the industry. The unlisted Business Development Company (BDC) structure—popular among individual investors—has been hit hard, with data showing redemptions far exceeding historical averages.

Liquidity Pressure and Strategic Adjustments

During the interview, Craig Packer emphasized that OTIC currently has $2.4 billion in available liquidity, including $1.2 billion in liquid loans, giving the company flexibility to weather the redemption wave. He said the fund had fulfilled all investor redemption requests.

Despite the company’s confidence in coping with the pressure, the sources of the outflows reveal specific investor sentiment. According to media reports citing a person familiar with the matter, the larger redemptions faced by OTIC have been primarily driven by wealthy individual investors from Asia, who form a key component of the fund’s investor base.

Meanwhile, Blue Owl’s largest direct-lending vehicle, Blue Owl Credit Income Corp., has not been spared. According to regulatory filings and people familiar with the matter, the fund saw investor redemptions of roughly 5% this quarter, amounting to about $966 million— in line with the industry average.

Broad Anxiety in the Private Credit Market

Blue Owl’s experience reflects a cooling in the broader private credit market. According to analysts at Goldman Sachs, the average redemption for unlisted BDCs (such as Blue Owl’s fund) in the fourth quarter was 5% of net assets, while the historical average is only about 2%.

Data from boutique investment bank Robert A Stanger & Co., which tracks the sector, further corroborates this trend: in the last three months of 2025, redemption volumes at funds with more than $1 billion in assets surged by 200% compared to the previous period. Investors are making use of quarterly windows to pull out their money, which has become a key barometer of market sentiment.

Valuation Gaps and Structural Challenges

Unlisted BDCs usually set quarterly redemption limits to balance client liquidity needs with the illiquid nature of underlying investments. However, the current market environment has heightened the strain on these structures. Compared with publicly traded BDCs, investors in unlisted BDCs can redeem at full book value.

In contrast, publicly traded BDCs have underperformed recently, posting their worst relative annual performance against the S&P 500 since 2020. In recent months, several listed BDCs have traded at double-digit discounts, meaning investors who sell in the secondary market recover less than the book value of their investments. This valuation gap further encourages investors in unlisted funds to use redemption windows to exit.

This is not the first time Blue Owl has faced scrutiny in recent months. In November last year, the company canceled a merger plan for two of its private credit funds, a move that could have forced investors in the unlisted Blue Owl Capital Corp. II fund to take a loss of around 20%. Before the failed merger, the fund also faced a redemption surge that exceeded the preset 5% limit; at the time, Blue Owl fulfilled only about $60 million (6%) in withdrawals and temporarily halted further redemptions. Management has said they will resume redemptions this quarter.

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