Is Private Credit’s 2007 Moment Here? Blue Owl’s Move Draws Comparison To Early Financial Crisis Signs

In the wake of Blue Owl’s redemption restrictions, Senator Elizabeth Warren called for tighter oversight of private credit.

• Private credit came under pressure after Blue Owl Capital permanently restricted redemptions in a retail fund.
• Mohamed El-Erian questioned whether the episode is a “canary-in-the-coal-mine” moment, warning that a valuation reset for certain private credit assets could be looming.
• George Noble likened Blue Owl’s move to the first domino in 2007, as the firm sold $1.4 billion in loans to fund payouts.

Private credit markets came under renewed scrutiny on Friday after Blue Owl Capital Inc. (OWL) restricted investor withdrawals from a retail fund, reviving comparisons to early 2007 warning signs ahead of the global financial crisis and raising concerns about potential stress in the sector.

El-Erian Warns Of Looming Valuation Hit

Mohamed El-Erian, chief economic adviser at Allianz, questioned on X whether the episode could mark a familiar turning point. “Is this a ‘canary-in-the-coalmine’ moment, similar to August 2007?” El-Erian said, adding that the news would be on the minds of investors and policymakers as they assess risks building in private credit.

El-Erian said the situation raises several issues, including whether private credit in advanced markets has expanded too far overall and differences in risk management across firms. 

“There’s also the “elephant in the room” question regarding much larger systemic risks (nowhere near the magnitude of those which fueled the 2008 Global Financial Crisis, but a significant – and necessary – valuation hit is looming for specific assets),” he added.

‘It’s Starting’: A 2007 Parallel

Blue Owl’s restriction of redemptions also drew flak from George Noble, a former associate of Peter Lynch, who compared the current scenario on X to the early days of the last financial crisis. Noble likened Blue Owl’s decision to the collapse of New Century Financial in April 2007, which was later popularized in the movie The Big Short. “New Century wasn't the crisis. It was 1% of the problem. But it was the first domino,” he added. 

He pointed to a pattern he said seasoned market watchers recognize: rising redemption requests, public assurances that pressure is manageable, followed by asset sales and restrictions when liquidity tightens. 

Noble argued the broader issue is not Blue Owl alone, but a $3 trillion-plus private credit industry built on the premise that illiquid assets can reliably offer liquid redemptions. 

Blue Owl’s Redemption Halt Sparks Debate

Blue Owl said on Thursday that it will permanently stop allowing redemptions from Blue Owl Capital Corp. II, a semi-liquid private credit fund marketed to U.S. retail investors, abandoning an earlier plan to reopen withdrawals later this quarter. Instead, the firm said it would begin returning investor capital.

On an earnings call, co-president Craig Packer said Blue Owl plans to return roughly 30% of investors’ capital at book value over the next 45 days. To fund the payouts, the firm sold about $1.4 billion of direct-lending investments across three vehicles, including Blue Owl Capital Corp. II, Blue Owl Capital Corporation, and Blue Owl Technology Income Corp. The loans were sold at about 99.7% of par value.

However, Blue Owl said it was “not halting redemptions” but instead “changing the method” by which investors receive their cash. The firm said it remains well capitalized, with about $4 billion in total cash and borrowing capacity, and described its balance sheet as “well positioned” to support portfolio performance into 2026. 

It said credit quality remains solid, losses are low, and it does not expect broad-based credit issues across its portfolio. Blue Owl also described the $1.4 billion asset sale to institutional investors as “a really strong statement,” saying it had intentionally reduced leverage to strengthen liquidity.

Nevertheless, Blue Owl shares fell nearly 6% on Thursday, while other private credit heavyweights such as Apollo Global Management and Blackstone dropped about 5%.

Raymond James Flags ‘Overreaction’

Raymond James said the selloff in Blue Owl shares reflected an overreaction to what it described as a misleading Financial Times headline. The firm said redemptions at OBDC II had already been halted since November and that reopening a redemption window “would not make sense” if the goal is to return investors’ capital over time.

Raymond James added that OBDC II represents a relatively small portion of Blue Owl’s roughly $307 billion in assets under management and reiterated a ‘Strong Buy’ rating on the stock.

Political Pressure Builds

The developments also drew political attention. U.S. Senator Elizabeth Warren cited Blue Owl’s actions as evidence of rising risks in private credit.

“The Trump Administration needs to wake up. Stop pushing these risky investments into Americans’ retirement accounts. Increase banks’ capital requirements for private credit exposures. Compel transparent data from these firms. And run a stress test on the market now,” Warren said in a statement. 

How Did Stocktwits Users React?

On Stocktwits, retail sentiment for Blue Owl was ‘bullish’ amid ‘extremely high’ message volume. Meanwhile, sentiment toward the SPDR S&P 500 ETF Trust (SPY) was ‘neutral’ amid ‘normal’ message volume, while sentiment toward the Invesco QQQ Trust (QQQ) and SPDR Dow Jones Industrial Average ETF Trust (DIA) was ‘bearish’ amid ‘normal’ message volume.

One user said, “Halting withdraws is insane... They did reverse this decision but things aren't looking good. When there's one cockroach there's bound to be more.”

Another user said, “I think it will be fine. That said, pls note Pvt equity vs pvt CREDIT! Pvt credit is senior to equity, and will get attacked after PE, if at all”

OWL stock has declined 21% year-to-date.

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