Blue Owl, HPS Join Private Credit Funds Stung by February Losses

Core Insights - Private credit funds are experiencing significant losses, with February marking the worst performance in over three years, particularly affecting retail-focused funds from Blue Owl Capital and BlackRock's HPS Investment Partners [1][2] Fund Performance - Blue Owl Credit Income Corp. reported a loss of 0.86% in February, while the HPS Corporate Lending Fund saw a decline of 0.3%, both representing their worst monthly performance since 2022 [2] - The Blue Owl fund has had its worst start to a year since its inception in 2021, with a year-to-date loss of approximately 0.75%, while the HPS fund is one of the few major peers still showing a positive return of 0.51% for the year [3] Investor Behavior - Investors are increasingly redeeming their investments from retail-focused funds due to concerns over loan quality and exposure to software businesses impacted by artificial intelligence [4] - In the last quarter, investors redeemed 5.2% of shares in the Blue Owl fund, with the current quarter's tender offer closing soon [5] Market Context - The broader leveraged loan market has also seen declines, with returns of -0.82% in February and -1.08% year-to-date through February, although the benchmark has shown signs of recovery in March with a return of 0.69% [6][7] - The largest private credit funds are still outperforming the leveraged loan market, despite the recent downturn [6]