Stockholder sues Blue Owl adviser, alleges $414M in excessive fees

A Blue Owl Capital Corporation stockholder is suing the BDC's investment adviser, alleging it inflated portfolio marks to pull in $414 million in fees last year. 

The lawsuit, filed April 27 in the Southern District of New York by Richard Delman on behalf of OBDC, targets Blue Owl Credit Advisors LLC, a wholly owned subsidiary of Blue Owl Capital Inc. (Delman v. Blue Owl Credit Advisors LLC, No. 7:26-cv-03468). Delman alleges the adviser breached its fiduciary duty under Section 36(b) of the Investment Company Act of 1940 by collecting fees so disproportionate to the services provided that they could not have come out of arm's-length bargaining. 

The numbers, as the filing lays them out, are eye-catching. OBDC paid the adviser $414.4 million in 2025, made up of $252 million in management fees and $162.4 million in incentive fees. That's a 47% jump over five years, even though the fund's portfolio grew about 30% in the same window, from $13.3 billion to $17.2 billion. Delman alleges the increase was not matched by any proportionate rise in services or costs. 

At the core of the case is how OBDC's private credit assets get valued. Because the portfolio is made up of so-called Level 3 assets, which don't trade publicly, the adviser itself sets the marks. Delman claims that creates a built-in conflict: higher marks mean higher fees. He points to OBDC shares trading at a 20% or more discount to net asset value since at least November 2025 as a sign the market doesn't buy the adviser's numbers. 

The filing leans on outside reporting too. It cites Glendon Capital Management, an investment firm with $5 billion in assets under management, which flagged that OBDC marked $235 million in junior preferred stock and second-lien debt in Cornerstone OnDemand, Inc. at about 90 cents on the dollar at the end of 2025, while the same company's most senior tranche of debt recently traded at just 78 cents. Similar gaps are alleged in OBDC's loans to Barracuda, Peraton Corp. and Conair Holdings. 

Delman also takes aim at payment-in-kind interest, which started showing up in OBDC's portfolio in the second quarter of 2024. Roughly $26 million of the 2025 management fee was tied to PIK income, the filing says, and the adviser isn't required to give that money back even if the underlying interest is later determined to be uncollectible in cash. Unlike about half of the 43 publicly traded BDCs the filing analyzed, OBDC's advisory agreement has no clawback provision.

The filing also questions OBDC's reported 11.1% exposure to "Internet Software & Services," arguing the real figure is likely in the 20% to 30% range once companies categorized under other labels are counted. That matters, the filing says, because Morgan Stanley analysts expect above-average defaults of 8% in private credit loans to software companies between the second half of 2026 and the first half of 2027. 

Delman is asking for damages, disgorgement, a clawback of incentive fees on deferred income not ultimately realized by the fund, and rescission of the advisory agreement. A jury trial has been demanded. 

The allegations have not been tested in court. Blue Owl Credit Advisors has not yet filed a response, and no ruling has been issued.