Bloomberg Businessweek: "Blue Owl Money Machine Sputters in Face of Private Credit Cracks"

Date: November 20, 2025
Hosts: Carol Massar, Tim Stenovec
Guests: Sri Nadav Rajan (Bloomberg News Chief Wall Street Correspondent), Davide Shilley (Chief Correspondent for Private Capital), Abby Roach (Empiric LT Equity, retail analyst), Lane Bass (Deep Instinct CEO), Brent Schutte (Northwestern Mutual CIO)

Episode Overview

This episode probes cracks surfacing in the private credit market, with a spotlight on Blue Owl Capital following its failed fund merger and declining share price. Carol and Tim invite Bloomberg reporters and industry analysts to delve deep into what Blue Owl’s troubles imply for private credit as a whole, retail investors’ growing role, and broader market risk. The episode then pivots to other economic barometers: Walmart and Home Depot results, AI and cybersecurity investment sentiment, and advice for investors navigating a shifting financial landscape.

Key Discussion Points & Insights

1. Blue Owl Capital and the Private Credit Crunch

(01:46–13:25)

Blue Owl’s Recent Turmoil

• Blue Owl's share price hit its lowest mark since 2023. Co-founder Craig Packer blames "negative articles" for stoking investor panic.
• Abandoned Fund Merger: Blue Owl called off merging two private credit funds (one public, one private) after investor scrutiny and concerns over potential losses (01:46).
• Investor Skepticism: Growing redemptions fueled fears that fund value marks might be unreliable.

Is Blue Owl a 'Canary in the Coal Mine'?

• Sri Nadav Rajan: “It’s now up to the Blue Owl management to prove that their marks are not illusory. ... Their publicly traded BDCs don’t quite believe the book value, and that’s why it’s trading at a big discount.” (02:59)
• He highlights that defaults are normal in a diversified credit portfolio, and that, so far, industry-wide metrics remain stable.
• Rajan recalls Jamie Dimon's warning: “There’s never just one cockroach. There will be other troubles that crop up.” (c. 04:20) — advice industry veterans took personally.

Private Credit's Liquidity Dilemma

• Davide Shilley: “How do you sell this asset class to retail investors and what is the right format to do that? ... [N]ew liquidity products are emerging, but sometimes the in-between doesn’t work as intended.” (06:06)
• Quarterly redemption limits introduce risk: if too many demand exits at once, funds may ‘gate’ redemptions, which can create panic.
• The failed merger would've forced investors to exit at a discount, fuelling outrage.

Systemic Industry Questions

• Not limited to Blue Owl: “It is an issue that everyone in the industry has to kind of deal with.” (09:24, Shilley)
• Heated competition may have led to declined lending standards during the boom years. As conditions tighten, the risk of trouble increases: “Did some people cut some corners? ... When the cycle turns, could it be problematic?” (10:53, Rajan)

Mark-to-Market Challenges

• Discussion on retail investors struggling to understand illiquidity and opaque valuation processes. (11:43)
• Markdowns and recent headlines at BlackRock suggest other giants face similar issues.

Optimism vs. Pessimism

• Rajan closes: “Skeptics often sound smart, but optimists make a lot of money.” – quoting David Solomon (13:11)

2. Retail Sector Health: Walmart & Home Depot

(15:46–23:24)

Walmart Shines Amid Consumer Bifurcation

• Abby Roach: “Walmart saw continued share gains from upper income consumers ... middle income steady, slight weakness in lower income.” (16:44)
• Walmart’s size allows it to negotiate hard with suppliers and pivot to services (e-commerce, advertising) as growth drivers (18:02).
• Shift to NASDAQ seen as messaging for “growth company” positioning (19:38).

Home Depot vs. Lowe's

• Home Depot faces headwinds: acquisition digestion, lack of hurricane-related repair spending, and tough macro/housing environment.
• Roach: “Investors are really never that enthusiastic to hear conversations around ... comping the comp when there’s a hurricane and when there’s not.” (21:40)
• In contrast, Lowe's fared better in recent results.

Consumer Takeaway

• Durable bifurcation: “Upper income consumers continue to hold in there quite well ... lower income consumers are still challenged, but they haven’t dropped off a cliff.” (22:54, Roach)

3. AI, Semiconductors, and Cybersecurity

(24:04–35:18)

AI Bubble or Real Opportunity?

• Lane Bass (Deep Instinct): “I don’t think we’re in a bubble ... The acceleration ... might make it look like a bubble, but ... we’re still at the front end of something.” (25:11)
• Forced capex by big tech players leads to explosive sector investment.

Applications Driving Growth

• Edge AI and cyber: “It is like that movement from the mainframe ... to the edge where a lot of the applications ... will be provided.” (26:07)
• Cybersecurity threat sophistication is accelerating, especially with deep learning and AI-powered attacks; Deep Instinct focuses on prediction and prevention, not just detection.

Evolving Cyber Risk Landscape

• “The biggest risk to most companies and governments is insider threat, it’s phishing attacks, it’s deepfakes ... That’s really what they focus on, is the weakest link.” (29:03, Bass)
• Multifactor authentication and constant vigilance are essential; “The consumer will continue to be under attack ... My best advice ... if it doesn’t look like anything you know or anybody you’ve heard from, don’t click on it.” (30:37, Bass)

Data Hygiene Is Critical

• “At the core ... being able to scan every byte of data, whether it’s on premise or in the cloud ... If you cannot protect your data, then you’re going to be at risk.” (32:02, Bass)

Valuation Reflections

• Bass is not worried about short-term AI market jitters, believes the “shift towards the edge ... going to be where we’re going to see additional future growth.” (34:44)

4. Diversification vs. Hype: Investment Strategy in Uncertain Times

(37:58–45:12)

Emerging Cracks and Diversification Mandate

• Brent Schutte (Northwestern Mutual): Warns of cracks emerging in crypto, private credit, and non-profitable tech: “I just think in the future the answer is going to be a broadening out across the spectrum of asset classes ... even international stocks ... Do we have a hiccup before then?” (38:30)

Market Leadership Cycles

• Refers to historic periods post-Fed tightening: “Leadership has always changed ... at the end of economic cycles ... typically ... the economy broadens back out ... and things that have been harmed become better again.” (39:59)

Behavioral Finance

• Many investors concentrate in high-fliers, ignoring risk until a sharp drawdown hits: “If you didn’t concentrate ... in the late 1990s ... you didn’t have the large drawdown that those who did, did. ... The timeless answer is diversification.” (42:55)

Notable Quotes and Moments (with Timestamps)

• Sri Nadav Rajan: “It’s now up to the Blue Owl management to prove that their marks are not illusory.” (02:59)
• Sri Nadav Rajan (on Jamie Dimon's critique): “There’s never just one cockroach. There will be other troubles that crop up.” (04:20)
• Davide Shilley (on liquidity pressure): “What Blue Owl really put on the map is an issue ... how do you sell this asset class to retail investors ... that liquidity ... doesn’t work as intended sometimes.” (06:06)
• Davide Shilley (industry-wide issue): “It is an issue that everyone in the industry has to kind of deal with.” (09:24)
• Sri Nadav Rajan (on BlackRock turmoil): “There was a deal where the mark on that investment went from 100 cents on the dollar to zero in 34 days.” (11:41)
• Lane Bass: “Applications and the growth opportunities ... make me feel we’re still at the front end ... certainly not a bubble.” (25:11)
• Lane Bass: “You need to fight AI with better AI.” (27:17)
• Brent Schutte: “They continue until they don’t. At least historically that’s been the case.” (39:59)
• Brent Schutte: “If you didn’t concentrate ... in the late 1990s ... you didn’t have the large drawdown that those who did, did. ... The timeless answer is diversification.” (42:55)
• Sri Nadav Rajan (optimism vs. skepticism): “Skeptics often sound smart, but optimists make a lot of money.” (13:11)

Key Timestamps

• 01:46–13:25 — Blue Owl & Private Credit Discussion
• 15:46–23:24 — Retail Market: Walmart, Home Depot, Consumer Insights
• 24:04–35:18 — AI Industry, Cybersecurity, Bubble Debate
• 37:58–45:12 — Macroeconomic Risks, Diversification Advice

Tone and Takeaways

The episode’s tone is probing yet pragmatic, with healthy skepticism about market exuberance, balanced by reminders that not all critical coverage signals imminent crisis. “Cracks” in private credit, AI hype, and retail investor behaviors are dissected with an eye toward both structural vulnerabilities and the cyclical nature of risk. The speakers maintain clarity, favoring insights and caution over fear-mongering.

• For investors: Diversify. Watch for signals of broader credit and liquidity stress but don’t panic.
• For retail and tech observers: The U.S. consumer—especially at the lower end—remains under pressure, while tech investment is likely to remain strong even if valuations reset.
• Private credit: Keep an eye on redemption pressures and opacity in this 'poster child' sector.