Surging investor withdrawals from two major Blue Owl Capital funds are colliding with a major policy shift in Washington: the Trump administration’s move to open the $10 trillion U.S. retirement market to private investments, including private credit, an asset class now showing signs of strain, The Financial Times reports.

A Blue Owl filing disclosed that investors sought to withdraw roughly $5.4 billion in the first quarter from two flagship vehicles that together manage more than $42 billion in assets.

The heaviest pressure hit the firm’s tech-focused lending vehicle, Blue Owl Technology Income Corp, where redemption requests surged to 40.7% of the fund’s roughly $3 billion value. Meanwhile, its larger Blue Owl Credit Income Corp, a $20 billion direct-lending fund, faced withdrawal requests equal to 21.9% of its assets.

Both funds were forced to cap redemptions at 5%, a common liquidity gate in private credit structures that allows managers to restrict outflows during periods of stress.

The scale of withdrawal requests underscores mounting investor anxiety around private credit — particularly among wealthy individuals who had been drawn to non-traded funds promising higher yields in exchange for limited liquidity.

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The timing is notable. The Trump administration said this week it will introduce new rules to make it easier for 401(k) retirement accounts to invest in private markets, including private credit, private equity, and alternative investments.

That effort targets the vast, multi-trillion U.S. retirement industry, long viewed by private asset managers as their next major growth channel.

At the same time, regulators are signaling caution. The Treasury Department said last Wednesday it plans to convene with insurance regulators to better understand the risks embedded in private credit, particularly as the asset class expands beyond traditional corporate lending.

REDEMPTIONS RISING

Blue Owl’s experience reflects a broader trend. Across the private credit sector, investors attempted to withdraw about $19 billion from direct lending funds in the first quarter, according to FT calculations.

Those funds — managing approximately $275 billion in assets — met just over half of redemption requests.

Peers, including KKR, Ares, Apollo, and BlackRock’s HPS, have also imposed withdrawal limits, suggesting liquidity pressures are spreading across the industry.

Private credit funds like Blue Owl’s often use leverage to amplify returns, increasing both potential gains and risks. Their structure — offering periodic liquidity rather than daily access — can become a flashpoint during periods of market stress.

The surge in redemptions highlights a key vulnerability: investors may seek to exit simultaneously, forcing funds to gate withdrawals and exposing the mismatch between asset liquidity and investor expectations.

Blue Owl’s stock has reflected those concerns, falling more than 47% this year, including a sharp drop following the redemption announcements.

Craig Packer, Blue Owl’s co-president, pushed back on the negative sentiment, attributing the spike in withdrawals to market perception rather than underlying performance.

“While we believe market perception has driven elevated tender activity, underlying credit fundamentals across our portfolio have remained resilient,” Packer said. “We continue to observe a meaningful disconnect between the public dialogue on private credit and the underlying trends in our portfolio.”

BOTTOM LINE

The juxtaposition is stark: just as Washington moves to expand retail investor access to private credit through retirement accounts, the sector is grappling with rising redemptions, liquidity constraints, and questions about risk.

For policymakers and investors alike, the Blue Owl episode may serve as an early stress test of what broader adoption inside 401(k)s could look like under pressure.