Blue Owl Capital Faces Investor Anxiety Amid Asset Sale

Blue Owl Capital is selling $1.4 billion in assets from three credit funds to return capital to investors and reduce debt. This move follows a halted merger plan and has led to a significant selloff, raising concerns about broader market trends and systemic risks in the industry.

Blue Owl Capital announced the sale of $1.4 billion in assets across three of its credit funds, aiming to reimburse investors and alleviate debt amidst mounting pressure on direct lending and software stocks. This decision marks a reversal from a halted merger plan, which had temporarily paused redemptions.

The company's abrupt about-face regarding redemptions provoked a significant revolt among shareholders, resulting in a nearly 10% drop in Blue Owl's stock during intraday trading. The broader private equity sector experienced turbulence as well, with several major firms witnessing notable declines.

Economist Mohamed El-Erian deemed the developments reminiscent of the early stages of the 2008 financial crisis, raising systemic risk concerns. The sale spans over 128 portfolio companies, with a significant portion rooted in the struggling software sector, highlighting ongoing challenges due to substantial valuation losses.

(With inputs from agencies.)