Two recent pieces highlight how private credit is feeling the heat, serving as a useful indicator in data center finance, our too-frequent topic here, given private credit's increasing role there.
- Private credit fears are based on four myths (Bloomberg)
- Blue Owl executives and staff bought $200mn in shares after sell-off (FT)
The Gist
Private-credit execs are in damage-control mode. Blue Owl is deploying $200mn of insider and corporate buying after a messy retail-fund merger, while Apollo’s Marc Rowan is trying to relabel the leveraged $2–3tn asset class as a benign $40tn investment-grade funding machine. Underneath it all, an industry is seeing more scrutiny and feeling the heat.
Key Facts
- Blue Owl and its staff bought $200mn of stock in November after the shares fell 35% year-to-date; most of the buying came from the firm itself via an existing buyback plan.
- Blue Owl had proposed merging a roughly $1.7bn non-traded private credit fund for wealthy investors into a $17bn listed BDC that trades at around a 20% discount to NAV, effectively imposing a ~20% loss and blocking redemptions for investors who thought they had semi-liquid access. The firm backed down after disgruntled investors and media scrutiny.
- Apollo exec Marc Rowan wrote a Bloomberg column claiming that private credit is a $40tn market, ~95% investment grade. He pulls this trick off by jacking the debt denominator: He counts all non-traded credit (including bank balance-sheet loans) as “private credit”. Independent estimates for what most call private credit put global AUM more in the $1.7–3tn range.
- Rowan argues that shifting credit from banks to companies like his reduces systemic risk and that private credit is more transparent and better underwritten than public credit. This seems, at best, mischievous, in that he is defining transparent in a novel and self-serving way.
Things That Jump Out
- Blue Owl’s “vote of confidence” is small in economic terms but big in optics: $200mn of buying is under 1% of its roughly $23–24bn equity value. This gets promoted as evidence of its tireless fondness for its investors, after trying to push a 20% haircut onto retail investors.
- Rowan’s piece hinges on definitional arbitrage: by stretching “private credit” to a $40tn, mostly investment-grade universe that includes bank loans, he shrinks the “risky” bit to a $2tn sliver, even though most debate is about that smaller, higher-yield segment.
- More broadly, semi-liquid retail products are exactly the kind of liquidity mismatch and valuation shock that raises systemic risk. And it sits awkwardly next to Rowan’s claim that private credit has made the system “more resilient and less concentrated.”
Where to From Here
- Near-term mechanics: Blue Owl’s buybacks and insider purchases don’t change that retail investors just watched a sponsor seriously explore locking them in and forcing a ~20% loss via corporate structuring.
- Plausible but assumption-heavy: If rates drift down and defaults stay contained, Rowan’s framing — private credit as a big, mostly IG funding machine — can hold for a while; insurers and pensions harvesting extra spread will look like geniuses. But semi-liquid vehicles create correlated tail risk if spreads blow out or redemptions spike.
- Wishful thinking/pressure points: What’s happening is a migration into opacity, sparse public data, and vehicles whose true liquidity only shows up under stress. For the story to break, you don’t need systemic collapse — just a moderately bad default cycle—which seems inevitable in data centers—that forces marks, gates, and distribution cuts across a few flagship products. At that point, insider-buy headlines and “four myths” op-eds will read less like reassurance and more like tells.