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The direct lending firm Blue Owl will indefinitely bar investors from pulling funds from its initial private retail debt fund, reversing course on a prior intention to allow withdrawals this quarter.
On Wednesday, the New York-based financial firm announced that investors in Blue Owl Capital Corp II would no longer be able to retrieve their capital in quarterly intervals. Instead, the company plans to disburse shareholder funds through periodic installments as it divests holdings in subsequent periods.
This decision highlights the perils confronting retail investors, who have allocated hundreds of billions of dollars to funds with restricted access to their money.
The company stated the fund “aims to give precedence to distributing capital proportionally to all shareholders via quarterly capital repatriation payments, which are intended to supersede future quarterly buyback programs and may be financed through profits, loan settlements, other divestment prospects or strategic corporate dealings”.
Blue Owl’s disclosure was made alongside a $1.4bn divestiture of loan portfolios across three of its funds, encompassing $600mn from its retail credit fund. This sale represents 30 per cent of its overall holdings, which will be paid out to investors.
Blue Owl Capital Corp II, also identified as OBDC II, has been unavailable for withdrawals since November, following its cessation of attempts to combine with a larger publicly traded credit fund managed by Blue Owl.
That transaction attracted examination after an FT report revealed that OBDC II investors would incur a 20 per cent loss based on the market value of the purchasing fund at the time. Blue Owl scrapped the fund consolidation days later.
As OBDC II is unlisted, it had previously provided shareholders the option to withdraw capital every three months at the fund’s declared worth, typically up to 5 per cent of its total holdings.
A source familiar with the situation indicated that the company was convinced that if it had resumed the buyback offer, the 5 per cent limit would have been reached, necessitating a cap on withdrawals. This led Blue Owl to initiate a divestment plan for a segment of OBDC II’s credit portfolio.Blue Owl’s canceled fund consolidation coincided with an increase in redemptions in 2025 to a point where it would ultimately have been compelled to curtail shareholder redemptions.
Shareholders in OBDC II withdrew $150mn from the fund during the initial three quarters of 2025, marking a 20 per cent rise from the preceding year, according to regulatory disclosures. Withdrawals in the third quarter of 2025 almost doubled to $60mn, or 6 per cent of its NAV.
The company mentioned it had also consented to $800mn in credit portfolio divestitures from two other funds, including its unlisted tech-centric fund Blue Owl Technology Income Corp and its publicly traded $16.5bn entity Blue Owl Capital Corporation, identified by the stock symbol OBDC.
It stated that pension funds and insurance companies would acquire the credit assets at approximately 99.8% of their book value, utilising fresh entities to be overseen by Blue Owl.
Wednesday’s transaction occurs amidst increased examination into the soundness of direct lending assets, following a number of prominent payment failures and growing concerns regarding the vulnerability of holdings to software companies susceptible to AI-driven changes.
Blue Owl portrayed the asset sale as an endorsement of the robustness of its holdings and highlighted the prices it was able to obtain in the divestment. The company affirmed its funds would retain substantial interests in the loans after the $1.4bn in divestments conclude.
The firm stated the deal “demonstrates the thoroughness of Blue Owl Credit’s loan assessment, asset compilation, and appraisal methodologies”.
The $1.4bn portfolio comprises credit extended to 128 companies spanning 27 sectors, with 13 per cent of the loans directed towards digital and tech firms.