'Eject! Eject! Eject!' Inside the Private Credit Panic

Summary

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Podcast Summary: ‘Eject! Eject! Eject!’ Inside the Private Credit Panic

Podcast: The Journal.
Hosts: Ryan Knudsen and Matt Wirtz
Date: May 6, 2026

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Episode Overview

This episode dives into the meteoric rise, sudden stress, and recent investor panic in the $3 trillion private credit market. Hosts Ryan Knudsen and reporter Matt Wirtz break down why so many investors raced to exit, why most couldn’t take their money out, and what Blue Owl—one of the sector’s leading firms—did to address the panic (and how it backfired). The discussion reveals how private credit went from Wall Street’s post-2008 workaround to a financial product now targeting regular Americans and even 401(k) savers, and why this shift comes with greater risks in times of crisis.

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Key Discussion Points and Insights

1. What is Private Credit?

• Private credit is lending money to riskier borrowers outside the traditional banking system, typically by private investment firms rather than banks.
• The market grew dramatically after the 2008 financial crisis, when banks became more regulated and left a gap for private lenders to fill. (04:05–05:32)
• Quote:

  “From day one, there’s been skepticism about private credit.”
  — Matt Wirtz [01:11]

2. Private Credit’s Boom and The Rise of Blue Owl

• Firms like Apollo, Blackstone, ARES, and especially Blue Owl catalyzed explosive growth in the sector. Institutional investors were the first wave; Blue Owl then opened the doors to “mass affluent” individuals (dentists, lawyers, etc.). (06:07–07:30)
• Blue Owl’s founders, Doug Ostrover and Marc Lipschultz, succeeded by courting financial advisors and capturing vast sums from individual investors.
• Blue Owl grew from $15 billion in 2019 to $300 billion in assets—a “hockey stick” of growth. (07:50)
• Quote:

  “I was like, oh my God, these guys are killing it…They were at 15 billion. These guys now run $300 billion.”
  — Matt Wirtz [07:50]

3. The Software Bet, AI Shock, and Triggers of Panic

• A significant share of private credit was lent to software companies, seen as safe bets due to high margins and scalability.
• The surge of AI-powered “coding tools” and products like Anthropic’s Claude dramatically altered the economics of software, leading to slumping valuations. (09:02–09:42)
• When software stocks tanked, investors realized private credit funds were highly exposed and started demanding redemptions.
• Quote:

  “AI is going to replace software…Claude can start replacing business software…”
  — Matt Wirtz [09:24]

4. The Redemption Crisis: Investor Panic and Withdrawal Limits

• Investors rushed to “eject” their funds when bad news spread, but couldn’t get their money out fast due to contractual withdrawal limits (usually 5%/quarter). (10:18–10:34)
• These restrictions exist to prevent a "bank run" scenario. They became a flashpoint of investor frustration as panic mounted.
• Blue Owl, attempting to stem the panic, increased allowable withdrawals from 5% to 15%—but this only fueled confusion and a further rush for the exits. (12:50–13:28)
• Quote:

  “People were like, wait, I thought it was 5%, but now they’re paying 15%…What’s going on? I don’t know what the rules are. There’s just a lot of confusion in the market. And one thing the market hates is uncertainty.”
  — Matt Wirtz [13:28]

5. Fallout: Industry-Wide Turmoil

• Blue Owl faced massive redemption requests:
  • 41% from its tech fund
  • 22% from its largest fund
• Only a fraction was actually paid out due to contractual limits. (14:47–15:12)
• Blue Owl’s stock price dropped about 40%, echoing through the sector as similar redemption stress hit Apollo, Blackstone, and others. (15:14–16:26)
• Panic spread socially among wealthy investors—“this was all anybody was talking about” at the golf course and in other affinity groups. (16:26)
• By quarter-end, nearly $20 billion in redemptions had been requested across the industry. (16:59)

6. Regulatory Response and the 401(k) Expansion

• Despite turmoil, U.S. regulators (under President Trump’s administration) have moved to expand private credit’s availability, especially by opening it up to 401(k) retirement accounts. (17:32–17:50)
• The move could put regular savers (who may need liquidity in an emergency) at risk if they find themselves unable to access funds in a crisis.
• Quote:

  “We all might be invested in private credit pretty soon, and we might not even know it.”
  — Matt Wirtz [18:14]

• The sector’s original design—assuming investors would lock up funds for years—conflicts with the real-world needs of individual savers. (19:01–19:52)
• Quote:

  “He feels nervous about the fact that he can’t [get out] if he wants to, if he needs to. That’s the thing. These things were built with limits on how quickly you can get out. So now it’s just this kind of like angsty waiting game.”
  — Matt Wirtz [19:52]

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Notable Quotes & Memorable Moments

• “Eject, eject, eject. Get me out right now.” — Matt Wirtz, illustrating investor panic [00:37]
• On Blue Owl’s move to loosen restrictions:

  “They were trying to show, look, we have the money, we’re going to pay you out. And instead it did the opposite.”
  — Matt Wirtz [13:28]

• Regarding 401(k) expansion:

  “It’s the biggest, concentrated piece of wealth in the country.”
  — Matt Wirtz [18:19]

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Timestamps for Crucial Segments

• Defining private credit & market history: 03:21–06:07
• Blue Owl’s pivot to mass affluent investors: 07:11–08:01
• Impact of AI on software valuations: 09:02–09:49
• Liquidity crisis & withdrawal scramble: 10:04–10:59
• Blue Owl’s failed attempt to stem panic: 12:50–13:48
• Industry-wide contagion: 15:35–16:59
• Regulatory landscape and 401(k) debate: 17:17–19:52

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Summary Tone and Takeaways

With clear-eyed, sometimes wry storytelling, Knudsen and Wirtz highlight how private credit’s explosion into the mainstream—especially into investment products for regular Americans—makes its current stress story more consequential. The episode vividly illustrates the dangers of illiquidity in volatile times, the communication missteps that can escalate panic, and the dissonance between Wall Street’s innovations and the needs of everyday investors. As regulations shift to widen access just as old problems surface, the episode ends on a cautionary note about financial products outpacing their buyers’ understanding.

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For Listeners Who Haven’t Heard the Episode:

This summary covers all the critical turns, industry context, and human consequences of the private credit panic—giving you the knowledge (and the drama) without the need for financial jargon or technical background.

Transcript

[Ryan Knudsen]

Earlier this year, trouble showed up in the hottest corner of Wall Street.

[Narrator/Reporter]

Private credit.

[Ryan Knudsen]

Private credit. The boom in private credit, the private credit craze. Suddenly a lot of investors were in a panic and they started picking up their phones. They were all asking their financial advisors the same question.

[Matt Wirtz]

They were literally calling their brokers and being like, how much money do I have in private credit?

[Ryan Knudsen]

This question, our colleague Matt Wirtz says, was often followed by an urgent request.

[Matt Wirtz]

Eject, eject, eject. Get me out right now. And you saw massive amounts of people asking for their money back.

[Ryan Knudsen]

But many of these investors couldn't get their money back, at least not right. Private credit, a world of opaque lending without much regulation is a more than $3 trillion market. It operates outside the traditional banking system and tends to offer higher returns, but also comes with higher risk.

[Matt Wirtz]

From day one, there's been skepticism about private credit.

[Ryan Knudsen]

And as private credit's grown, so has an underlying worry. What happens if investors suddenly want out?

[Matt Wirtz]

The worst thing for the is a liquidity crisis. It's when all of a sudden financial institutions are asked to pony up cash and they can't.

[Ryan Knudsen]

For years, those concerns stayed in the background because nothing went wrong. And then something finally did. Welcome to the Journal, our show about money, business and power. I'm Ryan Knudsen. It's Wednesday May. Coming up on the show, inside the private credit boom and the panic to get out.

[Matt Wirtz]

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[Narrator/Reporter]

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[Matt Wirtz]

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[Narrator/Reporter]

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[Ryan Knudsen]

Private credit is one of the biggest things on Wall street right now. If you don't work in finance, though, it can be kind of hard to wrap your head around. Our colleague Matt Wirtz writes about private credit. And when he tries bringing it up

[Matt Wirtz]

with friends, well, for a long time it was like nothing. It was just like Blank stares, You

[Ryan Knudsen]

know, they're like, oh, I'm sorry, that. That's your job.

[Matt Wirtz]

It's just like, okay, let's move on. And what'd you do this weekend? But then there's that awkward pause where it's like, what is that?

[Ryan Knudsen]

So what is private credit?

[Matt Wirtz]

Okay, what is private credit? Sorry, bear with me a second. I could try to freeball it, but, like, I came up with, like, what I think.

[Ryan Knudsen]

Actually, I think the easiest way to understand private credit is to go back in time a bit, back to the aftermath of the 2008 financial crisis. The way banks work is pretty simple. They take in deposits and then lend that money out at a higher interest rate and profit on the difference. In the years before 2008, Banks made a ton of loans that they probably shouldn't have. They were risky subprime mortgages and all that stuff. And when those loans went bad, the scope of this fall, breathtaking. It nearly brought down the financial system.

[Narrator/Reporter]

First Bear Stearns, now Lehman Brothers and Merrill Lynch. One by one, the pillars of the financial world began to fall.

[Ryan Knudsen]

After the crash, regulators passed a bunch of new laws to prevent that sort of thing from happening again.

[Matt Wirtz]

And so what that meant was those banks couldn't make a lot of the loans that they had been making that were pretty high yield but kind of risky and led to very large bonuses. For those people on Wall street, well, they didn't exist anymore.

[Ryan Knudsen]

But the market for those riskier loans didn't go away. The loans just moved.

[Matt Wirtz]

A lot of the smartest guys on Wall street and gals started to leave those banks, and they were looking for alternatives.

[Ryan Knudsen]

This is where private credit comes in. It's a system where private firms can issue loans or credit to risky borrowers without being subject to all those pesky banking regulations.

[Matt Wirtz]

When I first started doing large loans to large companies, they were called shadow banks. These days, they call it private credit.

[Ryan Knudsen]

Unlike banks that lend out money that depositors put in bank accounts, private credit firms lend out money that's given to them by investors, investors who are hungry for big returns.

[Matt Wirtz]

And it pays a pretty high yield. Like, it would pay anywhere between 8 or 9% a year on the low end, and it could pay up to like 15% on the high end annually. So everybody wanted in, and it just kind of exploded.

[Ryan Knudsen]

Over the last decade, private firms like Apollo, Blackstone, ARES and KKR built massive lending businesses, and money poured in fast. At first, it mostly came from big institutions like university endowments and sovereign wealth funds. But one firm figured out how to Grow even faster.

[Narrator/Reporter]

Live from post nine is Blue Owl Capital co CEO Mark Lipschultz.

[Matt Wirtz]

Oh, yeah, Blue Owl was like the

[Ryan Knudsen]

OG Blue Owl, the company at the center of the private credit boom.

[Narrator/Reporter]

We look at you as sort of a proxy for private credit. Direct lending, that's your business.

[Matt Wirtz]

The two founders, Doug Ostroover and Mark Lipscholz, they're rainmakers.

[Narrator/Reporter]

What's the environment right now?

[Matt Wirtz]

Fortunately, the environment is good. They're incredibly good at sales, incredibly good at raising money from insurance companies, pensions, endowments, et cetera. They wanted to prove that they could be big dogs, you know, like they could start their own thing and get really big really fast.

[Ryan Knudsen]

Blue Owl's big innovation was to go after a new kind of investor.

[Matt Wirtz]

Okay. What happened is they realized there's this whole other source of money that we can raise funds with that most of our competitors haven't really looked at yet. And that's individual investors, what's called the mass affluent.

[Ryan Knudsen]

Blue Owl started eyeballing the estimated 16 million wealthy households who comprise America's growing affluent class. People like dentists and lawyers. To reach them, Blue Owl charmed their financial advisors, pitching their services at steak dinners. And it worked. Ostroover and Lipschultz became billionaires.

[Matt Wirtz]

I was like, oh my God, these guys are killing it, right? I guess that was 2019, right? Or 2020. They were at 15 billion. These guys now run $300 billion. I mean, it was a hockey stick.

[Ryan Knudsen]

By the early 2000s, Blue Owl had become the poster child of the private credit craze. And soon the rest of the industry started copying their model, pushing private credit beyond institutions and into the hands of individuals. With its billions in cash, Blue Owl continued to do what it was built to do. Lend it out. So what kinds of companies were they lending to?

[Matt Wirtz]

The bulk of their business is making loans to companies. You know, some of them are like food companies, right? And some of them are like related to housing and consumer goods. Right? Retailers, dollar store type retailers, and high end retailers as well. Pharmaceutical companies. But what they really liked, they really liked Ryan, was software.

[Ryan Knudsen]

Because software companies are often really profitable. You make one technology, you can sell it around a bunch of places and you can scale it up and make a ton of money.

[Matt Wirtz]

That's exactly it. High margin business. Ryan.

[Ryan Knudsen]

A lot of other private credit firms were pouring money into software too. And for a while, the strategy was working and delivering solid returns. But while software can be highly profitable, it was vulnerable to a technology that a lot of people didn't see coming. AI coding tools the cost of building

[Narrator/Reporter]

custom software, it just collapsed.

[Matt Wirtz]

AI is going to replace software. Anthropic has this AI Claude that can like start replacing business software Claude raising

[Narrator/Reporter]

questions about how fast AI and cloud models could disrupt software, which is the

[Matt Wirtz]

and you start to see stocks of software companies get hit.

[Narrator/Reporter]

Shares of Adobe, which have fallen about 26% in the last year, and then their Salesforce now down 10% in 2026 on track.

[Matt Wirtz]

And so it was particularly problematic for private credit funds like Blue Owl.

[Ryan Knudsen]

Investors knew that Blue Owl was heavily concentrated in software companies whose shares were now tanking. And many of those investors,

[Matt Wirtz]

they hit eject.

[Ryan Knudsen]

But when investors asked for their money back, their money wasn't just sitting there ready to be withdrawn. It had already been lent out to companies locked up in loan contracts that weren't supposed to be paid out for years.

[Matt Wirtz]

It's in the fine print of all these funds. They only have to pay out 5% each quarter.

[Ryan Knudsen]

Ah, and so if I want all my money back, sure, you can get all your money back, but if thousands upon thousands of people ask for it at the same time, vocab it is 5% correct.

[Matt Wirtz]

You're only going to get 5% of your money back.

[Ryan Knudsen]

Private credit firms say the limits on withdrawals are there to protect the remaining investors and keep the funds stable, basically to prevent the private credit version of a bank run. But this 5% limit didn't sit well with a lot of investors, and as they raced for the exits, Blue Owl tried to calm things down. What did they do?

[Matt Wirtz]

Well, Blue Owl did what I think they thought was the right thing and something that they thought the market would appreciate. But instead it just threw gasoline on the fire and things got like way worse really fast.

[Ryan Knudsen]

That's next.

[Narrator/Reporter]

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[Ryan Knudsen]

Blue Owl needed a fix, and fast. Investors were getting nervous about the companies it had lent money to. At the same time, more people were asking for their money back and more than just the 5% that they were contractually entitled to. So in January, Blue Owl executives made a decision. They would break their own rule.

[Matt Wirtz]

And so senior management at Blue Owl are faced with this choice. We can either hold the line at 5% or we can go over 5%. And so what they decided to do was say, you know what, we'll pay triple what they would have to do under like the fine print of their contracts. And they thought that that would calm everybody down. Triple.

[Ryan Knudsen]

And so did that work?

[Matt Wirtz]

It totally backfired.

[Ryan Knudsen]

According to Matt's reporting, Blue Owl hoped that raising their redemption limits would be a show of confidence. But to investors, it was anyone's guess when the gate might come crashing down again.

[Matt Wirtz]

People were like, wait, I thought it was 5%, but now they're paying 15%. Like, should I, can I get more? I should. Okay. Oh my God. Like, what's going on? I don't know what the rules are. There's just a lot of confusion in the market. And one thing that market hates is uncertainty. You know, Blue Owl was trying to provide certainty. They were trying to show, look, we, we have the money, we're going to pay you out. And instead it did the opposite.

[Ryan Knudsen]

Requests to pull money out surged on tv. Blue Owl's co founder had been defending his firm.

[Matt Wirtz]

There's almost this kind of, this mass hysteria taking hold about, about credit in general, private credit in particular. And it's just not, not anchored in any facts. It's anchored by repeat.

[Ryan Knudsen]

Lipschultz argued that there was a gap between the negative discourse and how the loans were actually performing.

[Matt Wirtz]

The private credits not just blew out. Our, our peers are very good at what they do, the banks.

[Ryan Knudsen]

But those reassurances only went so far. By late February, financial advisors were feeling the pressure. Their clients were confused about how much money they could pull out and they didn't know what to tell them. So they started asking Blue Owl's executives what to say. The next month, some first quarter data came out.

[Matt Wirtz]

And like blammo, Blue Owl experiencing elevated

[Narrator/Reporter]

redemption requests for two of its private credit funds in the first quarter.

[Ryan Knudsen]

The numbers are pretty, are pretty shocking, I would say. Blue Owl got redemption requests of 41% for its tech focused fund.

[Matt Wirtz]

And the biggest fund investors it requested 22% back. It's massive. You know, it was $5.4 billion requested.

[Ryan Knudsen]

Requested. Meaning that's not actually how much money people got back. Right. That's just how much money they asked for.

[Matt Wirtz]

Correct.

[Ryan Knudsen]

As withdrawal requests piled up, the company reversed course and went back to its tighter 5% redemption limit. Meanwhile, the stress was showing up in Bluell's stock price. Shares had fallen hard, down about 40%. They ticked up a bit after earnings last week, but they're still far below where they were earlier this year.

[Matt Wirtz]

Okay, we've been talking about the money going out the door, but what these companies are really focused on is the money that's coming in the door. That's what their stock value is based on how much money is going into their funds. And that number has fallen. And that is really dangerous for these firms because their valuations and their ability to do business is based on raising new money.

[Ryan Knudsen]

After the latest earnings. Blue Owl said its assets actually grew even as some investors were trying to get out. While all this was playing out at Blue Owl, other private credit firms were facing similar troubles. For weeks, redemption requests were picking up at Apollo Global Management, Blackstone and Cliffwater. Jitters were building, especially because of AI's impact on software. But it was the chaos at Blue Owl that made those fears impossible to ignore.

[Matt Wirtz]

People talk to each other, like at the golf course in January, and I was told this actually by some of my sources. This was all anybody was talking about because they were hearing about it from their friends. You know, wealthy people hang out with wealthy people, and it set off a chain reaction.

[Narrator/Reporter]

So we saw investors in both retail funds from Ares and Apollo try to pull out more than 11% of assets. Barings now joins Apollo, Blackstone, Ares and Blue Owl, a business development company at the center of much of the latest redemption upheaval.

[Ryan Knudsen]

By the end of the first quarter, investors had asked to pull out nearly $20 billion from private credit funds. They got about half of that money back. This seems like a lot of chaos. Are regulators doing anything to try to rein this in at all?

[Matt Wirtz]

The craziest thing about this is, like, right now, the major governmental initiative around private credit is not to rein it in, but to, like, turbocharge it. And it's happening at the worst possible time for these firms.

[Ryan Knudsen]

That's because at the exact moment that all this stress is showing up, the push from Washington isn't to slow private credit down. It's to make it easier for the industry to reach even more people. New proposed regulation is underway to open up private credit to 401 retirement plans.

[Matt Wirtz]

This is really important, particularly if you're a retired person because President Trump signed an executive order in August instructing the Department of Labor and the SEC to find a way to make it easier for private credit and similar products to be put in 401ks. So we all might be invested in private credit pretty soon and we might not even know it.

[Ryan Knudsen]

Why, why, why? Why would private lenders be interested in retirement savings plans?

[Matt Wirtz]

Because it's massive, right? I mean, it's trillions and trillions of dollars. And as a fund manager, you get paid based on your assets under management. You get a percentage, you get a fee on that, right? So you just want to grow that as big as possible. And this is like the holy grail. It's the biggest, like, concentrated piece of wealth in the country.

[Ryan Knudsen]

There's over $14 trillion sitting in Americans retirement accounts.

[Matt Wirtz]

They have spent years, like some of them decades trying to get these funds into 401k programs. And they're almost there.

[Ryan Knudsen]

The private credit system was originally designed for big institutions that can afford to leave their money alone for years. The kind of investors who can wait until the loan gets paid off. Now it's being sold to people who maybe can't.

[Matt Wirtz]

You know, as an individual, I have life events that come up, right, And I can plan for them as best I can. But at a certain point in time, like, you know, whether it's sending a kid to college, buying a house, taking care of a loved one that has some kind of medical issue come up, losing a job, there's lots and lots of reasons why financial plans might change. And when they do, you know, I need my money back.

[Ryan Knudsen]

And this is the part that's easy to miss because as it potentially gets easier to access private credit, once your money goes into one of these funds, it might not be so easy to get it out when times are bad.

[Matt Wirtz]

I was speaking to one guy, he is in his early 70s. I think of him as like a stereotypical private credit fund investor individual. He was an engineer, then he became an executive. And now he's got these investments that he can't really get out of. And he's. To be honest, he's not even sure that he does want to get out. He just, he feels nervous about the fact that he can't if he wants to, if he needs to. That's the thing. These things were built with limits on how quickly you can get out. So now it's just this kind of like angsty waiting game.

[Ryan Knudsen]

That's all for today. Wednesday, May 6 the Journal is a co production of Spotify and The Wall Street Journal. Additional reporting in this episode by Anna Maria Andreotis, Peter Rudiger and Greg Zuckerman. Thanks for listening. I will see you tomorrow.