Investment Firm Blue Owl Unloads $1.4B in Assets Amid Market Pressures

Private investment company Blue Owl Capital announced Wednesday it's selling $1.4 billion worth of assets from three credit funds to pension and insurance buyers. The move comes as the firm faces mounting pressure from declining software stocks and investor concerns about asset valuations.

Private investment company Blue Owl Capital announced Wednesday it’s offloading $1.4 billion worth of assets from three credit funds to major pension and insurance buyers, as the firm grapples with mounting market pressures and declining stock values.

The transaction allows Blue Owl to return money to investors and reduce debt obligations during a challenging period for direct lending firms and software-related investments. The company’s stock price has dropped by half over the past 12 months.

Blue Owl is receiving 99.7% of the loans’ original value, matching how the company values these assets internally. This pricing has drawn increased scrutiny as investors demand greater transparency from firms managing alternative investments beyond traditional stocks and bonds.

“This is an extremely strong statement,” Blue Owl co-President Craig Packer told Reuters, particularly when “investors are asking questions about marks and quality of portfolio, risk about software, all the questions are being asked.”

The asset sale occurs as software companies face significant market declines, creating ripple effects for private credit firms like Blue Owl that have heavily financed the sector’s expansion. While artificial intelligence spending surges, sectors vulnerable to AI disruption are experiencing selloffs, affecting private credit, real estate, data analytics, legal services and insurance industries.

The debt being sold spans 128 different companies across 27 industries, with software and services representing the largest portion at 13%. The S&P 500 Software & Services index has shed approximately $2 trillion in value since its October peak, with roughly half those losses occurring this month alone.

Market response to the sale will indicate how concerned wealthy private credit investors have become given recent software stock declines and ongoing credit worries.

Blue Owl’s shares gained 1.9% during regular trading Wednesday, closing at $12.31, but dropped about 1.6% in after-hours trading following the announcement.

The assets come from three credit funds: $600 million from Blue Owl Capital Corp II, $400 million from Blue Owl Technology Income Corp, and $400 million from Blue Owl Capital Corp. Proceeds will partially fund investor payouts for Blue Owl Capital Corp II, which the company failed to merge with its publicly traded fund last year, and reduce debt across all three funds.

The publicly traded fund’s shares jumped approximately 4% in after-hours trading.

Blue Owl abandoned its previous merger proposal after investor backlash that hammered the company’s share price.

Packer explained that executives began seeking potential buyers after the merger fell through, looking for ways to return capital to shareholders. He noted this type of transaction aligned with the fund’s original vision when it launched eight years ago.

The company declined to identify the buyers, describing them only as “leading North American public pension and insurance investors” purchasing equal stakes.

The transaction enables Blue Owl Capital Corp II to return up to 30% of its current net asset value to investors, equivalent to $2.35 per share. Based on the most recent share count, the total distribution could reach approximately $268 million.

Citizens analyst Brian McKenna wrote that the deal validated the firm’s valuations as “marked-to-market,” calling Blue Owl “prudent” for addressing the smaller retail fund since “the investor experience, specifically in private wealth, is by far the biggest driver of success in the channel longer-term.”

Moving forward, Blue Owl Capital Corp II will implement quarterly shareholder payouts instead of tender offers.

Blue Owl co-CEO Marc Lipschultz disclosed last week that software represents 8% of the firm’s total assets.

Investors pulled 15.4% of assets from Blue Owl Technology Income Corp in January after the company increased the redemption limit from 5%. Software companies comprise 46% of that fund’s holdings, according to Packer.

“We like running that fund with a lot of liquidity,” Packer stated.

“People have pressed us on this and we have acknowledged a sector like health care, information technology is mostly software,” Packer added.