Blue Owl caps two private credit funds at 5% as tech fund requests hit 39%

Blue Owl Capital capped redemptions at 5% again at two of its private credit funds, so the number that matters sits behind the cap rather than inside it. In the roughly $5 billion Blue Owl Technology Income Corp., shareholders moved to pull 39% of shares in the third quarter, a slight increase on the 38.1% requested the period before, according to a shareholder letter reported by Financial Advisor Magazine. The $35 billion Blue Owl Credit Income Corp., described by the article as one of the largest non-traded business development companies, saw requests ease to 16.8% of shares from 18.8%.

Requests and payments are two different measurements, and the gap between them—how many investors want out versus how few the vehicle will let leave—is the figure an allocator should carry. At OTIC this quarter the first ran roughly eight times the second, an orderly queue that is not clearing.

Blue Owl has paid something, and the letter puts a figure on it: following the latest payment, OTIC will have provided approximately $446 million of liquidity within six months, or 35% of original tender requests. Run that ratio backwards and the original requests stood near $1.3 billion, a total the letter does not state and one that holds only if the same pool of requests is being measured. The more useful disclosure concerns who is asking—submissions came largely from investors rejoining queues, so a share of that 39% is money that has asked before rather than new investors heading for the exit.

Blue Owl's framing of the gap deserves quoting, if not quite accepting: the letter points to a "disconnect between the market's fears of AI disintermediating software and OTIC's resilient credit fundamentals." OTIC is the largest fund of its kind mainly focused on technology lending, per the article, which is why the AI question lands on it rather than on a diversified middle-market book. In this vehicle only 5% of shares can act on either view in a given quarter.

Queue mechanics reward patience in a way investors rarely price. An unfilled request does not expire; it waits, and per the letter the same investors can and did file again, so a headline request rate can stay high even after the underlying pool of sellers stops growing. Next to the 5% paid, the 39% describes a shareholder register turning over slowly and a remaining holder base made up of the people still willing to hold.

The biggest funds in the industry generally saw withdrawal pressure level off or decline slightly in the third quarter, and the five funds the article compares bear that out.

OTIC is the outlier on both counts: the highest request rate in the comparison and the only one that moved up, if only marginally, from the prior period. Blue Owl is also among the last firms in the $1.8 trillion direct lending market to update its queue this quarter, which suggests peers had set the tone before its letter landed. Pressure across large non-traded credit funds is steadying, and the fund with concentrated software exposure is the one still carrying it.

A non-traded BDC is sold on partial liquidity, and partial liquidity is a term sheet that gets enforced once a quarter; the 5% cap is where that document becomes an operating decision, because investors get a door and the manager decides how wide. This publication made the case in August that in private credit the wrapper is the product, and that the first redemption test would be the one to watch. The queue is where the wrapper is now being audited.

For an endowment, foundation or OCIO committee, the diligence question this quarter is what the subscription documents actually promise: a cap, a queue, a suspension right. Those are three different instruments, and the committee that approved the allocation should be able to name the one it bought rather than the one it was pitched. The August review of redemptions across public alternative managers found requests easing in the second quarter, and the same month Neuberger Berman's buyback halt and a run of private-credit bond issuance tested the semi-liquid pitch at the gateways. The third quarter the article describes continues that direction, with the software sleeve as the exception.

Both Blue Owl funds have returned more than 9% annualized since inception and both said they expect higher base rates to bolster earning power—a real argument about the loan book, though it does not shorten a queue. The variable to watch into the fourth quarter is the request rate itself: whether OTIC holds near 39%, whether a larger share comes from re-filers, and whether the 5% cap is held again. The next shareholder letter is where it gets settled.