If you've seen recent headlines suggesting Blue Owl Capital (OWL) is halting redemptions in its private credit fund, CEO Craig Packer wants you to know that's not quite right. During the firm's fourth quarter 2025 earnings call on Thursday, Packer addressed what he called a "complete mischaracterization" of what's actually happening.

"We're not halting redemptions, we're simply changing the method by which we are providing redemptions," Packer explained.

Here's the actual story: For eight years, Blue Owl has been tendering five percent of the shares in this fund. Instead of continuing that pattern, the firm is now returning 30 percent of investor capital at book value within the next 45 days. That means investors who expected to get five percent back are getting six times that amount in cash, immediately.

"Investors are really happy with this transaction and I think they will continue to be happy with us if we continue on a path of really carefully managing it and getting their capital back at a good price," Packer said.

He reminded investors that a strategic transaction for this fund was always part of the plan. This just happens to be the path they chose.

Why the Merger Fell Apart

To understand the current situation, you need to rewind to November, when Blue Owl announced it was calling off a merger between its two private credit funds. The firm had planned to combine its smaller, non-traded Blue Owl Capital Corporation II (OBDC II) with the larger, publicly traded Blue Owl Capital Corporation (OBDC).

The setup wasn't great for OBDC II investors. They held shares in a $1.7 billion fund that was being merged into a $17.1 billion fund, and the deal implied roughly a 20 percent paper loss based on OBDC's market price. Meanwhile, investors were barred from redeeming their shares until the transaction closed.

During the February 19 call, Packer explained why they pulled the plug: "It no longer made sense."

"We believe the merger into OBDC was the most logical path due to the high asset overlap and benefits of scale. However, in light of the market reaction and in working with our board, we concluded the proposed merger no longer made sense. So we terminated it. Since then, OBDC II has been working to determine the best path forward," he said.

The Asset Sale Solution

On Wednesday, Blue Owl announced it had sold a portfolio of OBDC II assets at book value, totaling $600 million or approximately 35 percent of the fund's total assets. The firm plans to distribute most of those proceeds to OBDC II shareholders.

What started as a focused effort to sell OBDC II assets turned into something bigger when institutional investors showed strong demand. "We expanded the process to opportunistically sell modest amounts of additional assets from two other funds, including OBDC," Packer said.

In total, the firm is selling $1.4 billion in assets, including $400 million from OBDC.

Software Investments Holding Strong

Blue Owl Senior Managing Director Logan Nicholson addressed questions about the firm's software exposure, noting it's a sector "we've always liked." The portfolio focuses on noncyclical defense sectors, and all major allocations are performing well, including software.

Software accounts for just four of the top 25 investments in OBDC, Nicholson said. The firm concentrates on mission-critical, scaled enterprise software providers, and those bets are paying off.

"Borrowers in our software portfolio saw LTM revenue, and EBITDA growth of 10 percent and 16 percent, respectively, in the fourth quarter. Outpacing the average earnings growth rate of all other sectors in the portfolio," Nicholson said.

When analysts asked about appetite for new software loans, Packer said the firm believes it can "have the capacity to differentiate between a software business that's going to be well protected in an AI world, and one that's gonna be more vulnerable."

While software is the biggest sector in the OBDC fund, it remains a relatively small percentage of the overall portfolio. Blue Owl plans to take a "very discriminating" approach to future software purchases, and Packer doesn't expect that percentage to increase.

Following the earnings call, Blue Owl Capital shares dropped 10 percent. The stock is down 26 percent year to date and down 53 percent over the past year.