The stock prices of major PE firms continue to plummet, with Blue Owl at the "eye of the storm" seeing its share price halved over the past year and now below its IPO price.

The stock prices of major PE firms continue to plummet, with Blue Owl at the "eye of the storm" seeing its share price halved over the past year and now below its IPO price.

Dragged down by intensified redemption pressure from investors and concerns about potential AI-driven impacts on software companies, the share price of private credit giant Blue Owl Capital, which manages over $300 billion in assets, has continued to plunge, falling below its IPO price and highlighting a severe liquidity test faced by the private capital market.

On Tuesday, March 4th, Blue Owl’s stock price tumbled 9% to $9.73, dropping below the $10 IPO price set during its 2021 SPAC listing. Over the past 12 months, the asset manager’s stock has fallen about 50%, with a sharp contraction in market value.

Panic quickly spread in the industry, leading to collective declines among private equity giants. On Tuesday, Blackstone Group’s shares plunged nearly 9% and closed down almost 4%, Apollo Global Management fell 6%, and KKR dropped 4%, all significantly underperforming the broader market. Earlier, Blackstone’s $82 billion private credit fund Bcred disclosed a $1.7 billion net outflow in the month ending March 2nd.

Blue Owl positions itself as “one of the largest lenders to software companies backed by private equity.” Its flagship tech fund, Blue Owl Technology Finance (OTIC), concentrates up to 56% of its assets in software and technology service companies, far exceeding the average of peer funds.

Amid the AI disruption, risk of software defaults is rising. With Blue Owl permanently restricting cash withdrawals from its first private retail debt fund, concerns are soaring in the market over investment vehicles heavily exposed to tech loans and facing liquidity constraints.

Redemption Wave Spreads, Industry Giants Under Pressure

Investor redemption requests for private credit funds have surged in recent months. In addition to Blue Owl, industry competitors including Blackstone have not been spared. The accelerating outflows directly reflect deep market unease about the value of loans to tech companies in private markets.

According to Apollo estimates, in the past decade, loans to mid-sized tech companies have accounted for nearly a third of all private loans, and a staggering 40% of private equity transactions. These loans are typically backed by private equity groups, but now these software firms are facing direct threats from AI advancements.

Last week, listed private credit funds managed by KKR, Apollo, and BlackRock also saw declines. The Financial Times reported these funds have seen rising default rates in their portfolios and have been forced to cut dividends to cope with falling interest income and asset impairment.

Liquidity Crisis, Blue Owl Forced to “Cut Off Arm to Survive”

Blue Owl’s crisis first emerged in early autumn last year. At that time, its retail credit fund named OBDC II closed its redemption channel and planned to merge with a larger listed vehicle. However, this deal reportedly would have subjected investors to direct book losses, and was quickly called off after media exposure.

Last month, Blue Owl made a shocking decision to the market, permanently restricting cash withdrawals from this fund and abandoning plans to reopen redemptions for the quarter. The company announced it would prioritize providing liquidity to shareholders proportionally through quarterly capital distributions.

To respond to the crisis, Blue Owl carried out a $1.4 billion credit asset sale across three funds, with $600 million from its retail credit fund. Although the company managed to sell about a third of the fund’s assets near face value, this policy reversal fully exposed the huge risks faced by individual investors entering liquidity-constrained vehicles.

Wall Street Warns of Approaching “Shake-Up” Moment

Blue Owl was founded by Wall Street veterans Doug Ostrover and Marc Lipschultz, and its managed assets once soared to $307 billion. Now, this previously hot institution is being seen as a market bellwether. Economist Mohamed El-Erian compared Blue Owl’s crisis to a “canary in the coal mine” before the 2008 financial crisis. Orlando Gemes, CIO of hedge fund Fourier Asset Management, also warned: “The alarm bells we see in private credit are eerily similar to 2007.”

Facing industry turmoil, Apollo CEO Marc Rowan delivered a stern warning at a Bloomberg-hosted conference on Tuesday, stating that the private market is about to undergo a “shake-up.” He emphasized that fund manager performance will become highly polarized in the future.

“There will always be underwritings gone wrong,” Marc Rowan said bluntly. “But the question is, who are good risk managers and who are not? If 30% of your portfolio is concentrated in a sector that’s being impacted by technology, you are not a good risk manager.”

Risk Warning and Disclaimer ClauseThe market carries risks, and investment must be approached with caution. This article does not constitute individual investment advice, nor does it take into account the unique investment objectives, financial situation, or needs of any specific user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their personal circumstances. You invest based on this at your own responsibility.