Blue Owl Capital Inc. Halted redemptions from its $1.7 billion retail-focused private credit fund, Blue Owl Capital Corporation II (OBDC II), on February 18, 2026, triggering a selloff in the broader private credit market and raising concerns about liquidity within the $1.8 trillion industry. The move, which effectively prevents investors from withdrawing funds on a quarterly basis, followed the sale of $1.4 billion in direct lending investments to North American pension and insurance investors at 99.7% of par value.
The decision to permanently restrict withdrawals came after investors pulled more than 15% of net assets from the tech-focused fund in recent weeks, according to Blue Owl co-chief Marc Lipschultz. While Lipschultz characterized such investor behavior as typical during periods of market uncertainty, the permanent halt to redemptions marks a significant departure from the fund’s previous liquidity terms. Blue Owl will now distribute capital through periodic payouts generated from asset sales, earnings, and repayments.
Craig Packer, co-President of Blue Owl Capital, insisted the move wasn’t a halt to redemptions, but rather an acceleration of the process, noting the fund had been tendering for 5% of shares for eight years. “Instead of resuming 5% a quarter, we are in fact accelerating redemptions,” Packer stated during an earnings call. However, the market reacted negatively, with Blue Owl shares plummeting to their lowest level in two and a half years.
The fallout extended beyond Blue Owl, impacting shares of other major players in the private credit space, including Apollo, Blackstone, KKR, Ares, and TPG. The situation has prompted comparisons to the conditions preceding the 2008 financial crisis, with Orlando Gemes, chief investment officer of Fourier Asset Management, pointing to “worsening lender protections and convoluted liquidity terms that obscure the mismatch between what investors believe they own and what they can actually exit.”
The move by Blue Owl comes amid growing anxieties about the potential impact of artificial intelligence on the private credit market. The firm’s decision to block withdrawals from the tech fund specifically reflects concerns about overspending and disruption related to AI technologies. The halting of redemptions also follows the collapse of a merger between Blue Owl Capital Corp II and a larger publicly traded credit fund managed by Blue Owl last year.
Industry observers have suggested Blue Owl’s actions could serve as a “canary in the coal mine,” signaling broader liquidity issues within the private credit sector. The incident has raised questions about the risks associated with the increasing retail investor participation in what has traditionally been an institutional market. As of February 23, 2026, Blue Owl shares continued to experience losses, marking the 11th consecutive day of declines for the firm.
