Business Development Companies (BDCs) like Blue Owl are very hard to analyze. These companies finance companies, projects in the private market. There is volatility in this name, it may look like a good setup.

This volatility is the warning. I rarely say that. This is a special case. Shareholders in Blue Owl have sold it off steeply on worries over Private Credit and especially on the news yesterday about a potential halt in redemptions, despite a denial from Blue Owl.

“We are not halting redemptions. We’ve been tendering for 5% of the shares of this fund for eight years. Instead of resuming 5% [per] quarter, we are in fact accelerating redemptions… We’re simply changing the method by which we’re providing redemptions,” said Packer on a shareholder call today.

In the eye of the storm, when shares are crashing and news is in the headlines, it is important to have done the work to know the value of what you have, and you should be able to instantaneously interpret the news accurately.

it is very hard to get there on BDCs. And when you realize you just don’t know, you sell.

As hard as it is to understand the risk in BDCs, it is impossible to get up to speed quickly. This means new steady hands might not be there for a bit.

BDCs are exposed to software, which is out of favor in the AI doom trade, and they also are helping finance the data center buildout.

In the chart below, the private credit behind data center buildout, chip financings etc and generally backing the AI boom would be represented by both Commercial Services and IT Services. It might even be in Software to an extent.