Blue Owl BDCs limit client buybacks after customers seek to cash out

The private loan and private credit selloff continues, as customers of financial advisors who bought the high-risk, high-yield funds were running for the exits in the first three months of the year.

Two Blue Owl nontraded business development companies on Thursday reported that investors in the first quarter asked to sell back 40.7% of the shares in ​technology-focused Blue Owl Technology Income Corp, and 21.9% of shares in larger fund Blue Owl Credit Income Corp, the funds reported in letters to investors.

And on Wednesday, nontraded BDC KKR FS Income Trust limited buybacks after requests ​for withdrawals increased, according to a letter to ‌shareholders.

The fund’s investors asked for buybacks of roughly 6.3% of outstanding shares in the first quarter of 2026; the fund said it plans to satisfy about ​80%, per the letter dated Tuesday.

Clients looking to sell 20% or 40% of a fund’s shares is well beyond the limit most funds have in place each quarter when buying back shares in nontraded BDCs. The typical limit is a 5% buyback per quarter, or 20% a year.

After years of record fund flows or investments by customers into private credit funds, the market turned last year when the market began questioning what the loans in many funds, particularly those in private software businesses, were really worth.

“This is really rolling right now,” said one senior industry executive who spoke privately about the matter to InvestmentNews. “Clients are getting off the bus.”

Blue Owl said it would limit payouts ​to 5% of the shares in each fund.

"Tender activity ​was elevated ⁠across the non-traded BDC industry in the first quarter of 2026, reflecting a period of heightened ​negative sentiment toward the asset class that ​intensified as ⁠peers have reported tender results," the fund's CEO Craig Packer said in the updates.

So far, the private credit and nontraded BDC managers have held up well under the pressure of clients dumping shares, noted Robert A. Stanger & Co. Inc., an alternative investment fund tracker for the retail financial advice marketplace.

Investors are moving to sell back their shares, those funds are buying a substantial portion, if not all those shares.

According to a note Thursday from Stanger, with approximately 96% of the market reporting, so-called net asset value BDC managers have delivered more than $7.4 billion in liquidity to investors so far in the first quarter, up from the $5.8 billion previously reported.

That’s a record for such illiquid BDCs, Stanger noted.

"Total redemption requests reached approximately $13.9 billion this quarter, reflecting significant investor demand,” according to Stanger. “The fact that sponsors were able to deliver this level of liquidity within the defined program limits demonstrates exactly what these structures were built to do.”