MW This fund that now says it'll never open up for withdrawals has El-Erian making Bear Stearns parallels

By Steve Goldstein

A fund that invests in the debt of middle-market companies has abandoned plans to ever let investors withdraw their money.

A $1.6 billion fund at the center of concerns over private debt is now abandoning plans to let investors withdraw their money.

Blue Owl Capital Corp. II, a fund investing in middle-market corporate debt that is not listed on an exchange but does have retail investors, said Wednesday it intends to make quarterly returns of capital distributions.

That's after its investment manager, Blue Owl, agreed to sell $1.4 billion of loans to four big public pension and insurance investors. Of the $1.4 billion, some $600 million of loans were in the Blue Owl Capital Corp. II fund.

Former Pimco CEO Mohamed El-Erian, in a post on X, raised the question of whether it was a "canary in the coal mine" moment, similar to the collapse of two Bear Stearns funds in 2007.

"There's plenty to think about here, starting with the risks of an investing phenomenon in advanced (not developing) markets that has gone too far overall (short answer: yes), to the approaches being taken by specific firms (lots of differences, yet subject to the 'market for lemons' risk). 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 wrote.

Blue Owl highlighted that the loan sales were for 99.7% of par value, which it said was evidence of the confidence that large, experienced buyers have in its direct lending platform. It's planning to return 30% of the net asset value of the frozen fund in the first quarter.

Blue Owl's publicly traded funds, the $16.5 billion Blue Owl Capital Corporation (OBDC) and the $6.2 billion Blue Owl Technology Finance $(OTF)$, each sold $400 million in loans as part of the transaction.

In November, plans to merge Blue Owl Capital Corp. and Blue Owl Capital Corp. II were abandoned. At the time, it said it would reinstate withdrawals in the first quarter.

The OBDC fund trades at 81% of its net asset value, while Blue Owl Technology Finance trades at 73% of its net asset value. Both funds, so-called business development companies, have lent heavily to software companies, a sector where investors have grown skeptical of their growth prospects due to advancements in artificial intelligence.

Blue Owl Capital (OWL), the investment adviser, has seen its stock tumble 47% over the last 52 weeks.

-Steve Goldstein

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February 19, 2026 06:16 ET (11:16 GMT)

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