Private Credit Is Having a Rough Spring

Two of Blue Owl Capital's largest funds gated investor withdrawals in early April after redemption requests overwhelmed available liquidity. Investors sought to pull 40.7% of shares from one fund and nearly 22% from another. The firm said the gating mechanism was working as designed, but markets took note.

The episode is part of a wider pattern. Private credit funds, which boomed over the past three years as banks pulled back from corporate lending, are now facing their first real redemption test. Software companies alone account for about 20% of the direct lending market, and many are under pressure as AI threatens to reshape parts of their business. Inflows into private credit have slowed considerably, and investors who expected easy exits are discovering that these instruments are far less liquid than they assumed.

Bank of America's chief investment officer described the situation as a sign that credit markets broadly are being tested by the confluence of rising oil prices, a softening job market, and the growing possibility that the Federal Reserve holds rates higher for longer. For context, equity ETF inflows hit a nine-month low in the first quarter of 2026, suggesting that investor caution extends well beyond private credit.

Blue Owl OTIC redemption requests: 40.7% of share – withdrew access to limit outflow

Blue Owl OCIC redemption requests: 21.9% of shares — Second fund gated in same period

Software cos. share of direct lending: ~20% — Facing AI disruption risk

Equity ETF inflows (Q1 2026): 9-month low — Reflecting broad investor caution