Robert Hendricks reached out to his wealth adviser as soon as he saw posts on X claiming that Blue Owl Capital had suspended redemptions in one of its private-credit funds.
His adviser reassured him that he was invested in a different Blue Owl vehicle and that the alarming headlines were exaggerated. Still, Hendricks said he intends to withdraw the roughly $75,000 he has invested.
“As an investor, the last thing you want to hear is that the door might be closing,” said Hendricks, an Ohio resident who began allocating money to private credit about two years ago.
He is among many individual investors who poured money into private-credit funds in recent years and are now questioning that decision. The latest spark for concern came after Blue Owl, a major player in private credit, announced it would sell $1.4 billion in loans to return capital to investors in certain older funds and suspend quarterly redemptions in one of them.
The firm expected the move to be seen as constructive. Instead, its stock — along with shares of other private-credit lenders — declined.
The situation has become an early stress test for wealth advisers who channel client money into such products.
As growth from traditional institutional clients like pension funds and endowments has slowed, private-markets heavyweights including Blue Owl, Apollo Global Management and Blackstone have increasingly targeted individual investors, from affluent households to mass-market millionaires. They are now also working to place these strategies inside 401(k) retirement plans. Critics argue that such funds may not be ideal for everyday investors, citing higher fees and limited liquidity.
Despite the turbulence, many advisers say they remain confident in private credit and are urging clients to stay invested. In their view, concerns about Blue Owl stem more from misunderstanding than from evidence of credit losses or weak underwriting.
On Monday, Blue Owl held a call with thousands of financial advisers who distribute its funds to individual investors, according to people familiar with the matter. Co-Chief Executive Doug Ostrover and Co-President Craig Packer were joined by Sean Connor, head of private wealth.
During the call, the executives acknowledged that the episode had created challenges and outlined their rationale for the recent actions. They addressed pre-submitted questions from advisers, including whether the firm had selectively sold its strongest loans to boost performance.
Blue Owl said it sold portions of 130 different loans — keeping a stake in each — to a buyer group that included an affiliated insurance company and several pension funds, at 99.7 cents on the dollar. About 13% of the loans were tied to software companies, a sector facing heightened investor scrutiny due to concerns about disruption from artificial intelligence.
One bank adviser who joined the call said he had been considering recommending that clients trim their holdings in another Blue Owl fund, worried it might eventually restrict withdrawals. After hearing management’s explanation, however, he felt reassured about the firm’s portfolio valuations and now plans to advise clients to stay invested.
“We’re still very comfortable with private credit,” said Monish Verma, CEO of Vardhan Wealth Management in Farmington Hills, Michigan. He added that Blue Owl provided advisers with talking points over the weekend to help address client concerns.
Verma has long advocated using alternative assets to diversify portfolios and reduce equity-market risk. His clients typically entrust him with between $5 million and $70 million, he said.
The fund at the center of the controversy was launched under an older structure requiring it to be wound down or merged after 10 years. In November, Blue Owl attempted to merge it with a publicly traded vehicle but abandoned the plan due to valuation concerns.
Now, instead of continuing quarterly tender offers, the fund will use proceeds from its recent loan sale to return a substantial amount of capital to investors and then distribute cash on a quarterly basis going forward.
Advisers caution that selling during a period of panic can be costly. “A panic is the worst time to offload private-credit exposure,” said David Sadkin, president of Bel Air Investment Advisors, who expects default rates in the sector to remain low.
He noted that if private-market borrowers begin defaulting in large numbers, equity markets would likely suffer as well. “If you’re worried about private credit, you should be even more worried about your stocks,” Sadkin said. “If private credit collapses, the broader economy is in serious trouble.”
Sadkin’s clients have an average net worth of about $25 million, and he typically recommends allocating around 5% of portfolios to private credit. He doesn’t plan to change that guidance.
Some investors are leaning in rather than pulling back. Chris Paladino, 58, had initially committed roughly a quarter of his portfolio to private credit, targeting yields near 9%. After seeing last week’s headlines, he briefly questioned that decision. Instead of retreating, he increased his investment by $200,000, saying these funds are designed for long-term holding.
He also added shares of private-credit heavyweight Ares Management, which had fallen about 8% last week.
Others remain uneasy.
Hendricks, the Ohio investor, allocated about $75,000 — a conservative slice of his portfolio — to a Blue Owl fund in search of steady income. While the fund has paid dividends and generally performed as expected, the value of his stake has dipped to around $72,600.
Even before the recent developments, Hendricks had reservations about private credit.
“I tend to think where there’s smoke, there’s fire,” he said.
