Saba Capital founder Boaz Weinstein has raised fresh concerns about the stability of the private credit sector, highlighting how recent troubles at Blue Owl Capital are exposing weaknesses in the $1.8tn industry, according to a report by Bloomberg.
The report cites the activist investor as saying at the iConnections Global Alts conference in Miami Beach, Florida, Weinstein, founder of Saba Capital Management, that: “All you need is the snowball to start going down the hill and it started. Blue Owl is right in the middle of that. I think we are in the super-early innings of the wheels coming off the car.”
Weinstein’s warning comes amid a wave of volatility in private credit markets, triggered by Blue Owl restricting withdrawals from one of its funds and selling loans to meet investor redemptions. Saba Capital, together with Cox Capital Partners, has launched cash tender offers for stakes in three Blue Owl-managed funds at discounts of 20%-35% below net asset value, aiming to provide liquidity for investors facing difficulties exiting positions.
The affected funds include Blue Owl Capital Corporation II, Blue Owl Technology Income Corp, and Blue Owl Credit Income Corp, all structured as business development companies. Blue Owl’s shares have dropped around 50% over the past year, despite revenue growth.
Weinstein highlighted a disconnect between current valuations of credit assets and related equity or fund structures, describing retail investors in the space as “less sophisticated and vulnerable to complex products.” He suggested that private debt was oversold as a high-return innovation when, in reality, it largely involved lending to small companies.
Weinstein also indicated he plans to launch a fund to capitalise on opportunities arising from these market dislocations, particularly involving semi-liquid products facing redemption pressures.
Other industry leaders have echoed concerns over the sector. JPMorgan CEO Jamie Dimon recently drew parallels between the current environment and pre-2008 conditions, warning of risks associated with aggressive lending strategies and mis-priced credit products.
