Private Credit Turmoil Hits Blue Owl, Apollo Global and Ares As Their Stocks Sink
Apollo Global Management Inc APO | 0.00 | |
Blue Owl Capital OWL | 0.00 | |
Morgan Stanley MS | 0.00 | |
Ares Management Corporation ARES | 0.00 | |
VanEck BDC Income ETF BIZD | 0.00 |
Private credit stocks continued their downward trend last week after Morgan Stanley (NYSE:MS) became the latest company to restrict investor withdrawals.
Top Private Credit Stocks Have Plunged This Year
Blue Owl Capital (NYSE:OWL) stock tumbled to $8.47 last week, down sharply from its all-time high of $27. Meanwhile, Apollo Global (NYSE:APO) fell to $118.30 from its record high of $190, while Ares Management (NYSE:ARES) declined to $109 from its all-time high of $201.
Other top companies in the industry like KKR and Blackstone, have also dropped and underperformed the broader market. Similarly, the VanEck BDC Income ETF (NYSE:BIZD), which tracks the biggest business development companies, has slumped by 30% from its highest point last year.
The recent sell-off was triggered by a decision by Morgan Stanley, which limited redemptions at its $7 billion private credit fund. It did this for the second time as investors sought to withdraw almost 11.6% of units outstanding. It now joins other companies like BlackRock, Blackstone, Apollo, and Blue Owl that have limited withdrawals in the past few months.
This crisis started mid-last year when some prominent investors started to question private credit valuations as interest rates rose. This included people like Jeffrey Gundlach and Jamie Dimon, which led to more redemptions from investors.
The issue escalated when Blue Owl proposed merging Blue Owl Capital Corporation (OBDC) and Blue Owl Capital Corporation II (OBDC II), sparking backlash from investors, as the latter would have faced a 20% haircut. After abandoning the merger proposal, the company decided to cap withdrawals and sell about $1.4 billion worth of loans at 99.7% of par value.
Analysts Expect Private Credit AUM to Hit $3.4 Trillion by 2030
On the positive side, analysts are still optimistic about the future of private credit industry, while admitting that there will be challenges in the near term. In a recent report, PWC estimated that the industry now manages over $2 trillion in assets and will grow to $3.4 trillion by 2030. The top pressures in the industry are potential defaults, especially in the software industry, weak returns, and significant competition.
Analysts also anticipate that private credit stocks will remain under pressure in the short term before bouncing back later. For example, Benzinga data shows that the consensus target for Blue Owl stock among analysts is $17.3, much higher than the current $8.57. Apollo’s target is $148, up modestly from the current $118, while Are’s target is $166.
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