Although the recommendation of UBS to clients with large positions in private credit to curb their investments did not target specifically the technology fund of Blue Owl, the high exposure of the latter to the bank's clients meant that it was significantly affected
A general guidance from UBS to its wealthy private clients to reduce their exposure to private credit was enough to "drain" the flagship technology fund of Blue Owl. Specifically, investors began withdrawing large sums of money from the Blue Owl Technology Income (OTIC), a 3 billion dollar direct lending fund distributed primarily through the wealth management of UBS, during the final quarter of 2025. According to Financial Times information, the requests emerged shortly after the bank's prompting to its clients, who had an excessive allocation of capital in private credit, that they should reduce their positions, according to two people familiar with the matter. The shift in the outlook of UBS and its impact on Blue Owl's fund demonstrate how crucial wealth management channels have become for private credit firms to attract retail investors, as well as the pitfalls they face if they rely heavily on one specific distributor. It also shows how the boom in retail products has shifted power from private credit managers toward the banks and wealth management platforms that control the flow of client money. Although these agreements constitute a significant source of capital raising, they can leave fund managers vulnerable to shifting investment recommendations.
At the eye of the storm, Blue Owl
Even though concerns regarding valuations and yields in private credit have affected the entire industry, Blue Owl found itself at the eye of the storm as one of the first firms to target private investors. Blue Owl launched its technology-focused fund in 2022, following consultations with UBS to create an investment vehicle that would be suitable for the bank's clients, according to two people familiar with the matter. At least 60% of the money raised by the fund originated from clients of UBS, most of whom were based in Asia, they added. This percentage is double what some executives stated they would prefer to have from a single distributor. An executive from another large international private equity group stated that their goal was a maximum exposure of 20% to 30% on any single platform in their retail funds, aiming for risk diversification. "Both Blue Owl and UBS hoped to have a broader capital-raising footprint, and this proved to be more limited than they would have liked," said a person familiar with the situation of the fund. The advice of UBS to clients followed the dual collapse of the auto finance firm Tricolor and First Brands Group, an event that reignited fears of loose underwriting standards in the broader credit markets. UBS O'Connor, the bank's own specialized private credit arm, had 30% of exposure in one of its funds tied to the auto parts group.
UBS was also concerned that competition for purchasing new loans was pressing down interest-rate spreads and reducing future returns of private credit funds, a person familiar with the matter said. Although the recommendation of UBS to clients with large positions in private credit to curb their investments did not target specifically the technology fund of Blue Owl, the high exposure of the latter to the bank's clients meant that it was significantly affected. Investors withdrew 15.4% of the fund's assets during the fourth quarter, leading to net outflows of approximately 400 million dollars, according to the rating agency KBRA. This amount was multiple times greater than what had been requested for redemption in the previous quarter. The technology fund of Blue Owl was also highly exposed to a wave of liquidations in software groups—which constituted major private credit borrowers—after developments in artificial intelligence (AI) technology cast doubt on the long-term value of these companies. Redemption requests skyrocketed to more than 40% of the fund's value during the first quarter of the current year.
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