Blue Owl Capital said it will sell $1.4 billion in loans to raise cash for investors who want out of its funds|@BlueOwlCapital|X

Blue Owl Capital grabbed headlines after announcing it would sell $1.4 billion in loans to raise cash for investors who want out of its funds. The firm hoped the move would steady confidence. 

Instead, it sparked fresh worries. Blue Owl’s stock dropped as much as 10% Thursday and closed nearly 6% lower. Shares of Apollo Global Management and Blackstone also fell about 5%.

Redemptions rise, inflows slow
Private-credit funds use client money to lend to risky, junk-rated companies. In return, they collect high interest and pay investors strong dividends. Fund managers are expected to raise trillions from wealthy individuals and even tap 401(k) retirement accounts.

But cracks are showing. Fitch Ratings said inflows into semiliquid business development companies fell an average 15% over the past three months. 

Blackstone’s largest BDC saw monthly inflows drop to $600 million in January from $1.1 billion in November.

Investors question valuations
Blue Owl sold some loans at 99.7 cents on the dollar, including $600 million, about 30% of one fund’s value. While that price looks solid, investors now question the value of the remaining assets and worry that more redemptions could slow future growth.