Pensions invested in Blue Owl funds say they have no concerns after gating
Blue Owl Capital recently gated one of its direct lending funds but pension funds which have committed money to the company say they are not worried (Reuters/Brendan McDermid)
Blue Owl Capital, which gated one of its direct lending funds, Blue Owl Capital Corporation II, has recently become something of a symbol of recent concerns about private credit.
This gating halted the quarterly withdrawals investors had previously been allowed and began an asset sale to return capital.
After years of rapid growth and enthusiasm, concerns around underwriting, transparency and liquidity within private credit generally are starting to surface—prompting what some are calling a “crisis of confidence” across parts of the market.
Even so, institutional investors which work with Blue Owl Capital aren’t rushing for the exits.
“We do not have any concerns with our recent commitments,” says Angela Miller-May, CIO of the $61.8bn Illinois Municipal Retirement Fund, which has committed more than $230mn to Blue Owl Capital.
At the $1.4bn Louisiana State Police Retirement System, the tone is similarly steady.
“We remain comfortable with our positioning,” says executive director Margaret Michel, pointing to a focus on senior, structurally protected lending.
“We differentiate carefully across strategies, particularly where public narratives may conflate distinct structures.”
LSPRS recently committed $40mn to Blue Owl Capital’s First Lien Fund II 1X, a direct lending fund.
Meketa Investment Group, which advises LSPRS, and Callan, which advises IMRF, both declined AOX’s request for comment on the ongoing discussion surrounding Blue Owl’s private credit funds.
Blue Owl Capital themselves had not responded to AOX at the time we scheduled this email.
The tension within private credit generally comes after a decade of explosive expansion.
Assets in North American direct lending have grown roughly sevenfold—from about $93bn in 2015 to $644bn in 2025—flooding the market with capital and intensifying competition for deals.
That surge has had consequences. As more money chased fewer opportunities, underwriting standards weakened and loan structures became more borrower-friendly, according to Pimco.
“It’s not just a crisis of confidence, it’s a crisis of really bad underwriting,” said Pimco’s president Christian Stracke in a recent podcast. “There is a lot of hope baked into a lot of underwriting on a lot of these loans.”
Part of the issue is that liquidity isn’t always what it seems. Semi-liquid vehicles have grown quickly in recent years, but access to capital can tighten just when investors want it most.
Still, the story isn’t all negative.
Some parts of the market—such as asset-based finance, consumer credit and specialty lending—may offer better diversification and more resilient returns.
Investors are becoming more cautious, spreads are widening and capital is getting more selective.
For now, allocators are holding their positions. But the easy narrative around private credit—steady returns, low volatility, few surprises—is starting to break down.
And as expectations adjust, the next phase of the market may depend less on access—and more on underwriting discipline.