"The canary in the mine" for the fintech sector: what the Blue Owl money lockup means for the marketplace

Blue Owl, one of the world's largest U.S. alternative asset managers, permanently restricted quarterly investor withdrawals from its $1.6 billion private credit fund focused on retail market participants, Blue Owl Capital Corp II (BOCCII), on Feb. 18. The news caused Blue Owl's own shares to plunge 10% on February 19, dropping its market value by $2.4 billion, and triggering declines in other asset managers, including Ares Management, Blackstone, and Apollo Global Management.

The situation was one sign of turmoil in the $1.8 trillion private-lending market, gripped by anxiety over excessive spending on AI and declining lending standards in general, Bloomberg writes. "The troubling signals we're seeing in private credit today are strikingly similar to those we saw in 2007," said Fourier Asset Management Chief Investment Officer Orlando Jemez(quoted by Bloomberg). Deteriorating lender protections and confusing liquidity conditions "mask a mismatch between what investors think they own and what they can actually get out of," he notes.

The private lending market is part of a vast opaque industry known as "shadow banking," CNN writes. Private lending firms act as intermediaries between companies (most often non-public) that need capital but can't go to standard banks for it - because they don't meet standards or need specialized financing - and investors willing to provide it. The investors are usually institutional investors - large organizations like pension funds or insurance companies - who can generally afford some risk in their large portfolios and seek higher returns than they can get from bonds.

Private lenders, meanwhile, can charge customers higher interest rates and lend outside of strict regulations - the terms of the loans are often known only to the parties involved.

The market has become particularly popular since 2008, when the global financial crisis prompted regulators to impose tighter restrictions on bank lending. As a result - when banks restricted lending, the "gap" in the credit market was filled by private funds.

Since then, the private lending market has grown to $1.8 trillion, Bloomberg points out. Blue Owl Capital( formed in 2021 as a result of the merger of Dyal Capital Partners and Owl Rock) has become a major player in it.

The Blue Owl fund is unique in that it is designed primarily not for institutional investors, but for retail investors - high net worth individuals - rather than, for example, a pension fund managed by a team of professionals, CNN points out. The participation of retail investors in transactions helps to increase the flow of money, which is certainly beneficial for business, but creates certain problems. Such market participants tend to behave differently than institutional players: they are used to selling their investments whenever they want, The Wall Street Journal writes. Therefore, when markets panic, the situation in private lending with retail investors, which does not have the same protection mechanisms as banking, can only worsen, says the Financial Times (FT).

The Blue Owl Capital Corp II (BOCCII) fund was unlisted and designed with individual investors in mind; it offered its shareholders quarterly distributions of up to 5% of the fund's value. This was in marked contrast to private loan funds for institutional investors, where liquidity may only be available after a few years, the FT writes.BOCCII was very popular and had many unit redemption requests (the fund was worth $1.7 billion as of November 2025), but last fall stopped accepting new investments and restricted withdrawals from the fund - Blue Owl announced it was merging the fund with its own larger, publicly traded fund, Blue Owl Capital Corporation (OBDC).

At the same time, the market value of public OBDC, which was determined by the stock market, at that time was 20% lower than the net asset value of the BOCCII fund, the FT calculated. Blue Owl's shares fell on the back of the news. The company then decided to abandon its merger plans. In early 2026, Blue Owl announced that it would resume redemptions of BOCCII units, but last week it suddenly restricted withdrawals from the fund again and announced the sale of assets of three of its credit funds totaling $1.4 billion in order to return capital to investors and pay off debts.

"The worrying signals we are seeing in private credit today are strikingly reminiscent of 2007," says Fourier Asset Management chief investment officer Orlando Jemez(quoted by Bloomberg). Financial Times (FT) analyst Robert Armstrong adds that the current Blue Owl crisis is not just a special case of bad investments, but a failure of the very concept of selling "private credit" to retail investors.

Blue Owl announced the sale of loans worth about $1.4 billion (about a third of the fund's portfolio). These funds - about 30% of investors' capital - according to the company's announcement, are planned to be returned within the next 45 days (CNN, however, writes that in fact the debts will be returned to investors "in an unspecified timeframe"). Blue Owl's management presents it as "accelerated return of capital," but for the market it sounded as a sign that the model of semi-liquid funds for retail investors has failed, explains Bloomberg.

The situation is complicated by the specifics of Blue Owl's loan portfolio. In 2023, Craig Packer, head of Blue Owl Capital's lending division, called the firm "the largest lender to software companies," whose viability came into question in February 2026 due to the rapid development of AI, Bloomberg adds. Notably, about 13% of the loans Blue Owl sold were to software and services companies - and that's just weeks after the market for lending to those companies suffered severe losses, the WSJ writes.

"They [Blue Owl] sold 30% of the portfolio at par, and that's great," says Evercore senior analyst Glenn Schorr, "but it also made people question and wonder: how much is the rest of the fund's portfolio really worth?"(quoted in The Wall Street Journal).

Former PIMCO CEO Mohamed El-Erian wonders if the Blue Owl case is the "canary in the coal mine" for the entire financial sector - the very moment when hidden problems in private lending begin to come out, signaling a systemic failure, Bloomberg writes. The private credit industry is facing a systemic crisis of confidence, adds the FT, citing Armstrong's view. Even if the loans themselves are of high quality, the mechanism for selling them to retail customers has "broken down", and this could cause a chain reaction throughout the market.

Over the past year, Blue Owl Capital securities traded on the New York Stock Exchange have lost more than 50% of their value. Shares of other asset managers, including Ares Management, Blackstone and Apollo Global Management, fell by 31.6%, 26.8% and 22.6%, respectively, over the same time.

The Blue Owl situation is not the first in the private lending market in recent memory, CNN recalls. The market was rattled last fall by the successive bankruptcies of auto parts supplier First Brands and Tricolor, a company that provides auto loans to borrowers with low credit ratings, after it was revealed that major U.S. banks were linked to their loans.Moody's estimated that they had made about $300 billion in loans to private lending institutions. JPMorgan Chase later admitted it would take a $170 million loss on the loans made to Tricolor. JPMorgan CEO Jamie Dimon hinted afterward that problems in the financial sector could come from the private lending market as well: "If you see one cockroach, there are probably many more," he warned.

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