The Exodus From Private Credit's Most Battered Funds Is Spreading Beyond Retail Investors

• Blue Owl's Technology Income loses reinvestment funds as Columbia, Missouri officials change tack.
• Institutional investors shift away from BDCs amid rising redemption requests and market concerns.
• Some, like CalPERS, have increased private credit investments despite broader redemption pressures.

In March, a representative of Blue Owl, the embattled private-credit fund manager, dialed into a meeting with local officials in Columbia, Missouri.

The city's police and firefighters' retirement fund held a stake in one of the firm's investment funds, Blue Owl Technology Income, representing around 1.5% of its portfolio.

After a wave of negative attention tied to requests from investors to withdraw their money, the representative sought to inject calm. "There are no forced asset sales, no credit deterioration, and no disruption to normal operations," the representative said, according to the meeting minutes.

The message didn't fully land.

Officials voted to stop reinvesting future dividends from the fund, opting to direct tens of thousands of dollars in annual payments on the $3.2 million stake to a short-term bond manager.

The Columbia, Missouri decision is one of several moves made by institutional investors in recent months to reduce their exposure to business development companies, a type of investment fund that makes direct loans to small and mid-sized companies. BDCs have become a backbone of private credit's push to woo retail investors.

A Business Insider investigation found that a wave of private-credit redemption requests, largely attributed to retail investors, has now spread to include smaller institutions. This suggests that there's more to the redemption rush than flighty retail investors scared by bad headlines; rather, it reflects a change in how some institutions are investing in private credit. If both groups start to pull back, even slightly, it could further strain a market that depends on fresh capital to fund loans.

Fifteen institutional investors accounted for 17% of the $4.3 billion in redemption requests from Blue Owl's Credit Income fund, a non-traded BDC, according to a person familiar with the figures. Ares — whose Strategic Income Fund is also facing a wave of redemptions — said a majority of its redemptions were coming from smaller institutions and family offices, not retail investors.

The shift is also showing up in how industry leaders describe the outflows. Blackstone CEO Jon Gray said the recent redemption wave is being driven by larger allocators moving bigger chunks of capital.

"The great mass, by number of small investors, tends to stick with the product over a long period of time," Gray said on Blackstone's April 23 earnings call. "It's sort of the bigger boulders as opposed to the pebbles where you get more movement in terms of redemptions."

The current redemption wave is concentrated in non-traded BDCs, which let retail and institutional investors seek periodic liquidity through monthly or quarterly share repurchase programs, usually subject to caps. That is different from publicly traded BDCs, whose shares can be sold on the open market, and from closed-end funds, where investor money is locked up for years.

When repurchase requests in non-traded BDCs exceed the cap, fund managers often limit how much cash investors get back, turning what was marketed as a relatively flexible product into one with more constraints. Business Insider previously reported that investors sought to withdraw $19.5 billion from 17 of these funds in the first quarter amid mounting concerns over software loan exposure and private-market valuations in the age of AI. Firms paid out just 53% of requests — or $10.4 billion.

So far, there hasn't been a full accounting of how many institutional investors are exposed to BDCs — or how many have tried to pull money. A Business Insider review of public disclosure and separate filings of 49 pensions, foundations or endowments, including the 10 largest in the US, found at least $3 billion invested in these funds, including $2.7 billion in equity and $311 million in investment-grade bonds.

That figure is likely an undercount, as it captures only a slice of the hundreds of US pensions, and, in many cases, the size of individual investments wasn't disclosed.

The sweep included funds managed by Blue Owl, as well as Ares, Apollo, BlackRock, Blackstone, and others, and turned up the Columbia, Missouri investment as well as those of more than a dozen other pensions, foundations, and endowments.

Only a minority of the assets in the private credit industry, or about 20%, are held in public or private BDCs, Tomasz Piskorski, a finance professor at Columbia Business School, wrote in a recent paper.

And for now, the institutional cracks are small. Columbia's $205 million pension is tiny compared with more than 250 US plans managing over $5 billion.

Nonetheless, if pensions find themselves on the hook for losses, some of them may say "'Look, it's still early, and we can try to exit," Piskorski said in an interview.

Moving away from BDCs

Over the last several years, many institutional investors have changed their approach to BDCs. If they once treated them as a tactical way to deploy cash while preserving an exit, they've embraced longer-dated closed-end funds in recent years.

"We have had a couple of clients participate in these funds where they have been able to drive unique economics or terms," said Oliver Fadley, head of private debt at pension advisor NEPC, referring to nonpublic BDCs. "Where we have also seen it a little bit is in public BDCs with folks that are looking to park capital for a shorter amount of time. It's either a bridge or they're waiting to move money somewhere else."

Two other pension funds told Business Insider they were monitoring or reducing their positions in Blue Owl's publicly traded BDCs.

The Employees' Retirement System of Rhode Island told Business Insider it was evaluating its investment in Blue Owl Capital, traded publicly under the ticker OBDC. The $14.6 billion pension fund held almost $39 million at the end of April, according to a spokesperson.

"We are aware of the recent issues and criticisms facing the private credit market," the spokesperson said in a statement. "We continue to actively monitor our OBDC position and evaluate developments across the broader private credit asset class."

The Maine Public Employees Retirement System, which manages about $21 billion on behalf of state employees, initially invested in two private Blue Owl funds in 2017 and 2020 and now owns shares of OBDC, according to a spokesperson.

The pension fund has been reducing those holdings since the funds went public, in 2019 and 2025 respectively, and expects to continue "reducing our position over the next few years," the spokesperson said. It currently owns about 6.15 million shares of OBDC, valued at about $68.6 million around March 24.

MainePERS, while reducing its exposure to publicly-traded BDCs, said last year that it was increasing its overall exposure to so-called alternative credit, which includes private credit, to 15%.

Institutional fundraising continues

Maine's move reflects a broader dynamic. Institutional money has continued to flow into the private credit industry, with Blackrock saying that institutional fundraising is "stronger" in the face of recent redemptions. Blackstone's Gray said the first quarter was "one of our best quarters ever" for raising money from institutions for private credit.

The California Public Employees' Retirement System, or CalPERS, is doubling down on its Blue Owl exposure. CalPERS has increased its allocation to private credit over the last several years, and in February bought loans Blue Owl sold to meet redemption requests.

CEO Marcie Frost said at an April board meeting that CalPERS' decision to "buy loans that had good collateral," has attracted public attention because "we seem to be going against some of the current thinking."

"As long-term investors, we don't need to run scared the minute the market experiences some turmoil, whether that be in the public markets, as we've seen over the last couple of weeks, or in private credit over the last month or so," Frost said during the board meeting.

CalPERS' smaller cousin, the California State Teachers' Retirement System, or CalSTRS, counts Blue Owl as the 10th largest manager for its $390 billion fund, with a $2.9 billion total exposure.

And the State Teachers Retirement System of Ohio appears even more tightly linked to Blue Owl. In 2024, it formed a joint venture with Blue Owl's BDCs, according to filings with the Securities and Exchange Commission. At the end of December, the joint venture held $2.3 billion in investments, largely financed with debt.

Spokespeople from CalPERS and CalSTRS declined to comment, while the Ohio teachers' pension did not respond to requests for comment.

Second thoughts about private credit

Despite public votes of confidence from some large pensions and their managers, Kent Collier, CEO of credit intelligence platform Octus, said he has seen some funds reconsider their exposure to private credit. He said the broader impact of the redemptions might come when they decide to write new checks.

"Going into the end of 2025, a big pension may have said that by the end of 2026 it would target an 8% allocation of private credit," Collier said. "That has since come down."

For pension managers and the retirees who count on their investment performance, the issue is less about immediate losses but whether liquidity constraints and mounting scrutiny make private-credit funds harder to hold or explain to retirees.

Collier and Piskorski said the implications could be huge if institutional investors ultimately sour on private credit.

"My expectation is it could be, potentially if it continues, quite a few lean years at best for private credit," Piskorski said. At worst, he said, there could be a complete crisis of confidence. "I don't think we will get there, but I think there is a non-trivial risk."

Who is invested in BDCs

Here is a selection of other institutions with exposure to BDCs in the eye of the current redemption storm, or investment-grade debt issued by these funds. Business Insider did not learn of any upcoming changes to investment allocations from any of the institutions.

• The American Library Association's $67 million endowment has money invested in the Ares Strategic Income Fund, according to fund documents and a spokesperson.
• Florida's $60 billion investment pool includes a $14 million holding in Apollo Debt Solutions BDC, representing just 0.02% of its portfolio, a spokesperson confirmed to Business Insider.
• The Louisiana State Police Retirement System put $5 million into the Blackstone Private Credit Fund in 2022, and it now represents less than 0.33% of the pension's portfolio, according to a spokesperson.

• The New York State Common Retirement fund held more than $262 million of bonds issued by Blackstone Private Credit Fund, Ares Strategic Income Fund, and Apollo Debt Solutions BDC as of March 31, 2025, according to fund documents.
• The West Virginia Board of Treasury Investments held $18.7 million of its short term bond pool in debt issued by Blackstone Private Credit Fund and Ares Strategic Income at the end of February.
• The Pennsylvania State Employees' Retirement System owned $370,000 in bonds at the end of February issued by FS KKR Capital, the private credit fund that was downgraded to junk status by Moody's last month.
• The Public Employees' Retirement System of Mississippi held $323,000 in two bonds issued by Apollo business development companies at the end of September 2024. A spokesperson confirmed the pension still holds the debt, and noted that it is distinctly different from investments in non-traded funds.