Moody's has worsened its outlook on the Blue Owl fund due to record withdrawal requests

Moody's has downgraded the outlook on private credit giant Blue Owl Capital's flagship fund, Blue Owl Credit Income, from "stable" to "negative," another indication of the growing liquidity crisis in the private credit sector, Bloomberg writes. The decision was part of a broader revision of Moody's outlook on private investment funds to negative, the agency points out.

Moody's worsened its outlook on Blue Owl Credit Income Corp. (a non-public business development company, business development companies, BDC) due to "a surge in withdrawal requests that was significantly higher than its peers in the first quarter," the rating company said in a statement. In early April, Blue Owl said investors in that fund (Blue Owl Credit Income's $36 billion) requested a 21.9% withdrawal in the three months through March 31 and another 40.7% from the smaller Blue Owl Technology Income fund. Bloomberg called such a volume of investor demands "unprecedented" for the $1.8 trillion private credit market.

Moody's change of outlook on one of Blue Owl's flagship funds to "negative" reflects the agency's overall pessimistic assessment of the outlook for the private credit sector, Bloomberg points out.

While the unit redemption limits have helped contain net outflows, "we expect the elevated level of withdrawal requests to persist in the coming quarters, and capital inflows may slow further," Ma added, noting that against this backdrop, "Blue Owl Credit Income's current strong capital and liquidity positions, which are its relative strengths, may begin to weaken." The situation, the agency said, will continue as the company "struggles with net outflows of funds over the forecast period."

Blue Owl representatives responded to Moody's decision by saying that the company "remains confident Blue Owl Credit Income <...> remains well positioned to benefit from current market conditions" (quoted by Bloomberg). The company emphasized that the fund has "one of the most conservative financial profiles in the industry with leverage as low as 0.8x and strong credit portfolio performance."

The downgrade of Blue Owl Capital's flagship fund was part of a broader revision of Moody's outlook on private credit investment vehicles to negative. Specifically, on April 7, Moody's generally worsened its outlook on U.S. business development companies (BDCs). The decision was due to a surge in withdrawal requests, increased debt burden and difficult access to financing, Reuters wrote. According to Moody's, the conditions for raising capital in the sector have deteriorated markedly: after a strong inflow of funds in the third quarter of 2025, already in the first quarter of 2026 companies faced a net outflow of investments.

In early April, it was reported that Blue Owl's $36 billion private credit fund, Blue Owl Credit Income, received requests from investors to repurchase 21.9% of its outstanding shares in the first quarter of 2026, but the company limited distributions to a 5% limit in the first three months of 2026.

The shares of the fund management company itself, Blue Owl Capital, have become a tool for traders to bet on a prolonged downturn in the private credit sector, Blloomberg specifies. Due to the high share of software companies in the portfolio, vulnerable to AI, the company's securities have been under powerful pressure: only since the beginning of 2026, they have lost more than 43% of the market value. Earlier this week, quotes updated the historical minimum, closing at $ 8.45, which is almost three times lower than the peak values of last year.

The $1.8 trillion private credit industry as a whole has seen massive capital outflows in recent months. Investors are concerned about relaxed lending standards and opaque share repurchase rules. In the first quarter of 2026 alone, withdrawal requests from more than a dozen funds totaled about $13 billion, according to data compiled by Bloomberg and Robert A. Stanger & Co. Against this background, such market giants as Apollo Global Management, Ares Management, BlackRock and Cliffwater were forced to activate mechanisms to limit redemptions. In early April, it became known that in a smaller, technology-oriented investment fund Blue Owl the number of withdrawal requests exceeded 40%.

This article was AI-translated and verified by a human editor