\n \u201cThat doesn\u2019t mean we\u2019re set up for a private credit disaster that will unfold the same way the subprime mortgage disaster unfolded,\u201d he said. At the same time, \u201cthere are echoes\u201d of that earlier reckoning.\n <\/p>\n
Blue Owl, Blackstone and Beyond<\/p>\n
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\n In recent weeks, investors in private credit have been demanding their money back amid concerns that lenders overvalued loans tied to risky companies \u2014 many of which are software firms whose businesses may be disrupted by artificial intelligence. Some analysts expect AI to spark a wave of defaults among middle-market software and business service companies that became especially attractive to private lenders during the pandemic.\n <\/p>\n
\n Much of the anxiety on Wall Street has focused on asset manager Blue Owl<\/a>, which last month was hit with a surge of withdrawal requests, forcing it to halt redemptions and liquidate assets to repay its backers.\n <\/p>\n \n Although Blue Owl tried to reassure Wall Street that the decision was not a sign of weakness, the company\u2019s stock has taken a beating, falling 15% in the past two weeks. Bets that Blue Owl\u2019s stock will drop even more have also surged, with so-called short positions against the firm hitting an all-time high this week, according to data from analytics company S3 Partners.\n <\/p>\n \n Anxiety spiked again this week after Blackstone, the private equity giant, scrambled to meet $3.8 billion in redemption requests from its flagship private credit fund. According to Bloomberg<\/a>, at least 25 senior leaders from across the firm pitched in some $150 million from their own wallets to cover the outlay.\n <\/p>\n \n Shares of other alternative asset managers, including KKR, Ares Management and Carlyle, have also taken a hit.\n <\/p>\n \n \u201cThis is the first real test of the market,\u201d said John Bringardner, executive editor of Debtwire. \u201cPeople were lending a bit too freely in that aftermath of Covid, when the markets were flush\u2026 What you\u2019re seeing is some of that shake out.\u201d\n <\/p>\n \n For some prominent investors, the parallels to the subprime mortgage crisis seem obvious. Jamie Dimon, the head of JPMorgan Chase, said some firms are \u201cdoing dumb things\u201d and raised concerns about \u201ccockroaches\u201d<\/a> in private credit. Mohamed El-Erian wondered on X last month whether trouble at Blue Owl was a \u201ccanary in the coal mine\u201d moment reminiscent of 2007.\n <\/p>\n \n But there isn\u2019t a clear consensus on Wall Street, and some fund managers and bank analysts have dismissed the concerns as overblown.\n <\/p>\n