The outlook on Blue Owl Capital’s flagship fund has been downgraded to negative by a leading ratings firm in the latest blow to the industry as it continues to be plagued by investors pulling money from funds.
Moody’s Ratings changed its outlook from stable to negative after “significantly higher-than-peer redemption requests in the first financial quarter of 2026, as part of the firm’s broader revision of its outlook for private credit investment vehicles.
Blue Owl’s $36bn (£26.8bn) private credit fund received requests from investors to cash in on 21.9 per cent of outstanding shares, but ultimately capped redemption at five per cent during the first three months of the year.
While this kept net outflows contained during the period, Moody’s expects “elevated redemptions to persist in coming quarters” as well as inflows potentially slowing further from already reduced levels.
The ratings firms predicted this could cause the company’s “currently strong capital and liquidity positions” to erode.
Moody’s said it could return the firm’s outlook to stable if net flow trends improve and “we gain greater comfort around shareholder concentrations” and asset quality performance “continues to be solid”, but acknowledged that this was unlikely.
Share price pressures
The firm’s shares have also come under fire amid the private credit crisis, tumbling 44.6 per cent this year to date, trading at $8.4.
The fall comes despite Blue Owl initially being favoured by investors who wished to gain exposure to private credit and capitalise on its ability to generate high yields.
Investors were also attracted to the firm’s niche specialisation in high-growth technology and software firms which were initially viewed as non-cyclical and resilient.
This view was shattered in early 2026 as retail investors opted to withdraw their money, throwing the sector into chaos.
What caused the crunch?
Funds chose to tighten their purse strings amid the wave of investors choosing to flee, spiking anxiety, and leading some industry figures to warn the situation could potentially lead to a financial crisis.
Firms opened the door to wealthy retail investors, after years of being dominated by institutional investors, with the promise of regular withdrawals.
But troubles began in September 2025, following the back-to-back bankruptcies of Tricolor and Firstbrands, and were compounded by recent fears that AI could uproot the business models of traditional software firms, a staple of the private credit market.
Investors are instead hurrying to the safety of liquid assets, such as stocks or bonds, while others are being even more cautious and retreating altogether into cash or fixed-income products.
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