This is a ramping up of an investment crisis which is growing in the USA but thankfully not in the UK and Europe.
Private credit group Blue Owl will permanently restrict investors from withdrawing their cash from its inaugural private retail debt fund, backtracking from an earlier plan to reopen to redemptions this quarter.
This is a spectacular about return from one of America’s largest private equity fund managers
The New York investment group on Wednesday said investors in Blue Owl Capital Corp II would no longer be able to redeem their investments in quarterly intervals but that the company would instead return investors’ capital in episodic payments as it sells down assets in coming quarters and years.
And the FT is making its readers just what this means
The decision underlines the risks facing retail investors, who have ploughed hundreds of billions of dollars into funds with limited liquidity rights.
It’s also a big problem for Blue Owl which is suffering a loss of confidence from its shareholders and the market.
This is not good for shareholders and it certainly isn’t good for retail customers
So where is Blue Owl going to be able to sell its private bond assets to get the liquidity to satisfy its retail customers?
It [Blue Owl]said pension funds and insurance companies would buy the loans at an average of 99.8 per cent of their carrying value using new vehicles to be managed by Blue Owl.
Surely they don’t mean the pension and insurance companies that have been buying into and buying out our UK pension schemes?
If I was the PRA, I would be looking long and hard at what is happening with Blue Owl because if these private market bonds are being relied on to pay UK pensions , they should be very worried indeed.
The lock in of Blue Owl’s Capital Corp II’s retail investors, comes at a bad time
Wednesday’s deal comes amid heightened scrutiny into the quality of private credit loans after a number of high-profile defaults and rising fears over the exposures portfolios have to software companies vulnerable to AI disruption.
We have been selling UK insurers to American insurers. They include PIC, Just and Utmost. American buy-out money is cheap but is it backed by private credit that will never be repaid? Blue Owl worries me a lot.