Blue Owl Restricts Redemptions in Private Credit Fund

Shares of the alternative asset manager drop as it halts withdrawals from one of its funds amid concerns over private credit risks.

Published on Feb. 25, 2026

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Blue Owl Capital Inc. (OWL) shares fell after the firm announced it would restrict withdrawals from one of its private credit funds, Blue Owl Capital Corp II (OBDC II). The move highlights the risks facing retail investors in the fast-growing private credit market, where payouts can be curtailed if withdrawal requests exceed set limits. Blue Owl said it had sold about $1.4 billion in direct-lending investments across three funds to provide investors with promised liquidity.

Why it matters

The decision to restrict redemptions in OBDC II raises concerns about the broader risks in the $1.8 trillion private credit market, which has attracted increasing scrutiny in recent months over valuations and the quality of lending to heavily indebted firms. The news also rekindled fears that the private credit industry could be facing a 'canary in a coalmine moment'.

The details

Blue Owl said investors in OBDC II will no longer be able to redeem shares on a quarterly basis. Instead, the fund will return capital through periodic distributions funded by loan repayments, asset sales or other transactions. The firm said it had sold about $1.4 billion in direct-lending investments across three funds to provide investors with promised liquidity. The move comes as redemption requests had already exceeded the standard 5% quarterly cap at OBDC II.

  • On Wednesday, Blue Owl announced the decision to restrict withdrawals from OBDC II.
  • In the most recent quarter, redemption requests exceeded 5% at both of Blue Owl's non-traded business development companies.

The players

Blue Owl Capital Inc.

An alternative asset manager based in New York.

Blue Owl Capital Corp II (OBDC II)

One of Blue Owl's private credit funds that is restricting redemptions.

Mohamed El-Erian

Former chief executive officer at Pacific Investment Management Co., who questioned whether the news was a 'canary in a coalmine moment' for private credit.

Craig Packer

A co-founder of Blue Owl, who defended the decision to sell the loans.

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What they’re saying

“There's skepticism about marks. There's skepticism about valuation. We've always been saying we feel really good about the quality of our portfolio and the quality of our marks, but just saying it in some ways doesn't seem to have done enough. So we're putting our money where our mouth is.”

— Craig Packer, Co-founder of Blue Owl (Bloomberg)

“OBDC II has been exploring options to either create a liquidity event for investors or wind down the legacy vehicle and ultimately return capital to shareholders. We believe this is an important step forward for the fund as it creates an efficient process around returning capital to these investors.”

— Analyst, Citizens Financial Group (Bloomberg)

What’s next

Blue Owl said the OBDC II fund could return half of investors' capital by the end of this year, and the firm will look for repayments, earnings, and potential additional asset sales to continue returning capital to investors.

The takeaway

The decision by Blue Owl to restrict redemptions in its private credit fund OBDC II highlights the growing concerns over the risks in the fast-expanding $1.8 trillion private credit market, where payouts can be curtailed if withdrawal requests exceed set limits. This move raises questions about the broader industry's valuations and lending practices, and whether it could be a 'canary in a coalmine moment' for the sector.