Private Market in 2026: Blue Owl Capital

In the past few months Blue Owl Capital stock prices fell impressively - 40%.

Blue Owl is dealing with big issues - they had to stop letting investors take their money out, a merger that fell apart, and a lawsuit alleging that management knew about the problems earlier than it let on.

What Blue Owl actually does

Blue Owl was created in 2021 when two firms merged.

• One half, Owl Rock, lent money to mid-sized companies that were too small or too risky to borrow easily from banks.
• The other half, Dyal Capital, bought small ownership stakes in other private equity firms, becoming a silent investor in fund managers themselves.

The combination gave Blue Owl a way to generate steady predictable fees.

When a private equity firm closes a deal and sells a company years later, it earns a big payout once. Blue Owl earns smaller amounts continuously, year after year, from managing these pools of capital, this model is considered lower-risk and more valuable by investors and it is why the company grew so fast, from $166 billion in assets at the end of 2023 to $307 billion by 2025.

Revenue followed: $2.87 billion in 2025, up 25% from the year before.

But…

Inside Blue Owl's lending business, the firm sold a product called OBDC II - a fund that let ordinary retail investors put money into the same kind of corporate loans that are normally only available to large institutions like pension funds.

The appeal: Higher returns than bank accounts or government bonds, and now smaller investors can get in on the action too.

The problem was always liquidity.

The loans inside the fund, made to private companies, cannot be sold quickly. They are not traded on an exchange. If you need cash, you cannot just sell them the way you could sell a share of Apple. Blue Owl promised investors they could request withdrawals periodically, but the fund always reserved the right to limit how much it paid out at any one time.

In late 2025 and early 2026, rising concerns about the economy, credit markets, and interest rates, prompted a wave of investors to request their money back simultaneously. Withdrawal requests surged 200% above normal levels. Blue Owl could not return that much cash without selling loans at distressed prices, which would hurt everyone who stayed in the fund. So it did what the rules allowed - no more withdrawals.

When Blue Owl did sell some of the loans to raise cash, it received nearly full book value (which is quite good under the circumstances of such a rush). But the distinction was largely lost on the market and investors saw a fund that had promised semi liquidity and then refused to return money…

The failed merger and why it made things worse

Blue Owl had a plan to solve the problem: merge OBDC II with a larger, publicly-traded fund. If it worked, investors in OBDC II would receive shares in the public fund, which trades on a stock exchange, giving them the liquidity they were after.

The plan failed, when investors looked at the merger terms, they realised they would be converting their holdings at roughly a 20% loss, public fund's shares implied a lower value for the assets than what was on the books, so shareholders voted it down. Once the problem became public, Blue Owl was and is seen as unable to save its own product.

The lawsuit

Shortly after, a class action securities lawsuit was filed against Blue Owl. A class action brought on behalf of shareholders who bought Blue Owl stock during a specific period and lost money.

The allegation is that management knew that withdrawal pressure was building, that liquidity was becoming a problem and continued making optimistic public statements without disclosing those problems. The lawsuit covers statements made between February and November 2025.

Regardless of how the lawsuit resolves, it creates a serious cloud hanging - any investor who buys the stock today is also buying exposure to potential legal liability, regulatory scrutiny, and months or years of damaging court filings.

The software question

What kinds of companies Blue Owl has been lending to?

Press reports suggested that more than 70% of the loans in Blue Owl's lending portfolio went to software companies and that the software sector is under significant stress, with rising defaults.

Management pushed back and said software exposure represents about 8% of the firm's total assets, a much smaller number. The discrepancy comes partly from how you measure it: 70% of one specific lending portfolio is very different from 8% of the whole firm.

The problem is that investors do not yet fully trust the 8% figure because the company's credibility has already taken a hit from the OBDC II situation.

Until Blue Owl provides detailed, independent verification of its sector exposure, the market will discount whatever management says.

The crisis spread

One month after Blue Owl gated withdrawals, Morgan Stanley and BlackRock did the same thing at their own private credit funds.

• This means the problem is not unique to Blue Owl's management. Multiple firms selling similar products to retail investors all ran into the same structural conflict: the underlying loans cannot be sold quickly, but the investors expected to be able to exit. When everyone wants out at once, no fund can honour that expectation.
• Plus, Blue Owl is just one of the first and largest victims of a broader loss of confidence in this entire category of product. That contagion makes recovery harder, because even if Blue Owl resolves its specific issues, retail investors may avoid the asset class altogether for a period.