Blue Owl Capital Scraps Fund Merger Amid Private Credit Jitters

Blue Owl Capital (OWL) abruptly canceled a plan to merge a $1.7 billion private fund with a larger $17.1 billion public vehicle, a move that WOULD have given investors liquidity but crystallized nearly 20% in paper losses. The decision underscores mounting unease in private credit markets despite co-CEO Craig Packer's insistence that both funds remain fundamentally sound.

The scrapped merger—first reported by the Financial Times—triggered a 7% stock plunge, extending OWL's year-to-date decline to 38%. Analysts attribute the selloff not to credit quality concerns but to deteriorating market sentiment toward private debt, which has ballooned to $1.7 trillion globally.

Paradoxically, Blue Owl continues to expand its footprint, recently financing a $27 billion Meta (META) data center deal. The firm now ranks among private credit's fastest-growing players, with exposure spanning tech infrastructure to consumer lending. Yet the aborted transaction reveals cracks in the facade—investors are increasingly wary of illiquid assets as volatility persists.