Blue Owl Closed a Gate. Yes, That’s a Red Flag

“We don’t have red flags,” Blue Owl Capital Inc.’s Marc Lipschultz said on the private asset manager’s earnings call this month. “In point of fact we don't have yellow flags,” the co-chief executive officer continued somewhat tortuously. “We actually have largely green flags.”

Investors don’t see it that way and have been pulling money from the firm’s various private credit vehicles. Blue Owl’s decision this week to block redemptions from one of those funds looks like a huge red flag. By closing the gates on this fund and selling $1.4 billion of loans held by three of its vehicles, the firm is shoring up cash holdings to reassure institutional and individual investors. But this is a febrile moment for private credit, and every move can be read as good or bad by supporters and naysayers. More than anything, this episode renews doubts about whether such private funds are suitable for retail investors at all.