Blue Owl Capital’s (OWL) shares closed lower on Thursday after the alternative asset manager reported that two of its funds were hit by a record $5.4 billion in redemption requests during the first quarter ended March 31. The development forced the U.S. company to cap withdrawals at 5%, but Evercore ISI believes the earnings impact on Blue Owl “is materially more modest.”
Claim 30% Off TipRanks
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Discover top-performing stock ideas and upgrade to a portfolio of market leaders with Smart Investor Picks
The two funds are the technology-focused Blue Owl Technology Income Corp. (OTIC) and the significantly bigger Blue Owl Credit Income Corp. (OCIC), which invests in mid-sized American companies. The surge in redemption requests came amid heightened fears of AI disrupting the software industry.
Evercore Flags Modest Earnings Hit
Reacting to the update, Evercore ISI analyst Glenn Schorr maintained his Buy rating on OWL but trimmed his price target from $14 to $10, implying about 17% upside. The analyst noted that while the headline redemption figures are “undeniably large,” the two funds in question only account for 12.5% of the portion of assets under management from which Blue Owl Capital earns fees.
Schorr further noted the 5% quarterly withdrawal limit affects less than 2.5% of annualized outflows. He added that Blue Owl’s prorated redemption process means all requests are filled on a proportional basis so that, in total, only 5% of shares are repurchased.
This means that the short-term financial impact on Blue Owl “is effectively the same whether quarterly requests come in at 5%, 25%, or even 100%.”
Meanwhile, the development comes as publicly traded private credit funds have come under pressure lately. Recently, Blue Owl announced it was abandoning the quarterly withdrawal interval on one of its retail-focused funds for periodic distribution.
Is Blue Owl a Buy or Sell?
On Wall Street, analysts have a Moderate Buy consensus rating on Blue Owl Capital’s shares. This is based on nine Buys and five Holds issued over the past three months.
However, the average OWL price target of $15.31 implies about 79% upside from current trading levels.
