Moody's Ratings on Tuesday revised the outlook for a $36 billion Blue Owl fund to negative, citing redemption requests in the first quarter that it described as "significantly higher" than those seen at comparable funds. The move is the latest ratings action tied to a wave of withdrawals that has put pressure on parts of the private credit market.
The fund named by Moody's is Blue Owl Credit Income Corp (OCIC), one of the firm's larger vehicles. Moody's said the outlook change was driven not only by elevated redemption levels but also by the fact that the majority of those redemptions were initiated by a very limited number of investors - a pattern the agency said exposed concentration in OCIC's equity holder base.
Last week Blue Owl disclosed it would restrict withdrawals from two of its funds after receiving what it described as a historic volume of redemption requests during the first quarter. The firm reported that investors asked to withdraw an unspecified 21.9% of their OCIC shares, while Blue Owl intends to satisfy only 5% of those requests.
Moody's noted that the decision to honor redemptions for just 5% of shares would keep net outflows contained in the first quarter. However, the ratings agency said it expects elevated redemption activity to continue into future quarters and anticipates that new inflows will slow. Moody's warned this combination could erode OCIC's currently strong capital and liquidity positions over time.
Blue Owl did not immediately respond to a request for comment outside regular business hours.
In a related step earlier on Tuesday, Moody's revised its outlook on U.S. business development companies - known as BDCs - to negative from stable. The change was attributed to rising redemption pressures, increased leverage, and weakening access to funding markets.
The move by Moody's follows other rating reviews in the private credit sector. In March, S&P Global revised the outlook on Cliffwater LLC's $33 billion flagship private credit fund to negative, citing higher investor redemption requests.
Context and implications
Ratings actions such as Moody's change in outlook reflect investor and market concerns about liquidity management in closed-end and private credit structures when faced with sudden, large-scale withdrawal demands. Measures that restrict redemptions can limit near-term outflows but also raise questions about access to cash for investors and the resilience of funds' capital and liquidity buffers if pressure persists.
What was disclosed by the firm
- Blue Owl said it will satisfy 5% of OCIC redemption requests despite investors seeking to redeem an unspecified 21.9% of their shares.
- Moody's said the concentration of redemption requests among a small group of investors was a key factor in revising OCIC's outlook.
- Moody's also adjusted its outlook on U.S. BDCs to negative from stable, citing redemption pressure, higher leverage, and weaker funding access.