Never-ending stream of private credit conniptions weighs on financials
The steady drip of negative news on private credit is exacerbating the sell-off in stocks tied to the asset class and the broader financial sector.
Asset manager Blue Owl Capital is trading at its lowest level since October 2022, the month the S&P 500 bottomed. Its business development company, Blue Owl Capital Corp. — effectively its private credit arm — is likewise sinking, with a price-to-book ratio below 0.8. That suggests investors don’t think its loans are worth what the company has reported they’re worth (or are worried that they’ll be marked down in the future).
Glendon Capital Management is leveling that direct charge against the firm and others in the industry. In a presentation seen by the Financial Times, Glendon alleged that “private credit funds managed by Blue Owl and many of its rivals had ‘misrepresented’ loss rates in their portfolios and were sitting on ‘larger losses than reported.’"
This news comes after JPMorgan reportedly curbed some of its lending to private credit funds and reduced the estimated value of software loans in those portfolios, according to Bloomberg.
Other lowlights in financials:
Deutsche Bank, which revealed a $30 billion exposure to private credit in its annual report, is down nearly 8% as of 11:10 a.m. ET, on track for its biggest one-day loss since April 2025.
With this week’s losses, the SPDR S&P Regional Banking ETF has erased its year-to-date gains, which were in excess of 13% as of early February.
Jon Turek, founder of JST Advisors, flagged that the Financial Select Sector SPDR Fund is poised to deliver a Q1 drop in excess of 10%. Other years in which that fund tumbled by 10% or more in the first three months include 2001, 2008, 2009, and 2020 — a nearly comprehensive list of the most tumultuous periods for global markets in the 21st century.
