Private equity firm Blue Owl Capital (OWL) saw its stock tumble nearly 15% this week after announcing it would liquidate $1.4 billion in assets to meet investor redemptions, sparking concerns among analysts of a potential echo of the 2008 financial crisis. The asset manager also faces questions regarding permanently halting redemptions in one of its funds.
The sell-off triggered comparisons to the collapse of two Bear Stearns hedge funds in 2007, widely considered a precursor to the global financial crisis. Mohamed El-Erian, former chief executive of Pimco, described the situation as a potential “canary-in-the-coalmine” moment, referencing the early warning signs of instability that preceded the 2008 meltdown.
While Blue Owl denies halting all redemptions, the company confirmed the $1.4 billion asset sale, impacting investors in a retail-focused private credit fund. The move comes as other major private equity firms, including Blackstone (BX), Apollo Global (APO), and Ares Management (ARES), have also experienced significant declines in their stock prices this week.
The events of August 2007 saw the collapse of two Bear Stearns hedge funds due to losses on subprime mortgage-backed securities, followed by BNP Paribas freezing withdrawals from three funds due to difficulties in valuing U.S. Mortgage assets. These events led to a tightening of credit markets and a subsequent liquidity crisis.
The potential implications for Bitcoin, currently trading around $68,379.61, are complex. While tighter credit conditions could initially hurt risk assets, including cryptocurrencies, a significant government response – similar to the bank bailouts and quantitative easing implemented after 2008 – could prove bullish for the digital asset. Bitcoin was created in the wake of the 2008 crisis, with its genesis block containing the headline “Chancellor on brink of second bailout for banks,” reflecting the disillusionment with traditional financial institutions that fueled its creation.
The original intent behind Bitcoin was to establish a peer-to-peer electronic cash system independent of central control, offering an alternative to a fragile banking system. However, the cryptocurrency landscape has evolved significantly since 2009, with large institutional investors now holding substantial amounts of Bitcoin and exchange-traded funds offering access to the asset.
Whether Blue Owl’s situation will trigger a similar resurgence in Bitcoin’s original ethos and drive another bull run remains to be seen. The firm, formed in 2021 through the merger of Owl Rock Capital and Dyal Capital Partners, specializes in private credit, direct lending, and general partner capital solutions.
