Mr. Owl, how many licks can private credit take?
It was a rough couple of days for the private credit industry.
• less than 3 min read
Many cultures consider owls to be a bad omen. Apparently, Wall Street is one of them. On Wednesday, Blue Owl Capital announced it was liquidating $1.4 billion in assets to compensate investors looking to cash out. Markets found the news about as popular as a dissected pellet, and the entire private-credit industry has been paying the price.
Who-who is Blue Owl?
It’s an alternative asset manager that, in part, helps connect private investors with businesses that need loans. But a lot of those loans went to software companies that could be threatened by AI, so private investors got a little antsy.
Blue Owl decided to quell concerns by selling some of its assets to pay back investors. But concerns were not quelled:
- Blue Owl shares are down about 12% since Wednesday.
- Multiple analysts suggested that Blue Owl was a “canary in the coal mine” for broader problems in the private credit industry (e.g., liquidity). Some even started throwing around the b-word (bubble).
- Private equity firms like Blackstone, KKR, and Apollo all took a stock hit.
Bird’s-eye view: Private credit is a roughly $3 trillion market globally, per CNBC. And it has increasingly attracted retail investors, as opposed to institutions, which often have a longer time horizon and a different appetite for risk.
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