Blue Owl Troubles Put Gulf Sovereign Wealth Funds' Private Credit Strategy to the Test

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Blue Owl's troubles spotlight how Gulf sovereign funds are reassessing private credit and buyout risks.

Blue Owl Capital's shares fell more than 5% on 20 February 2026 after the firm restructured a debt fund and altered investor withdrawal terms.
The firm liquidated around 1.4 billion dollars in assets to meet redemption requests, selling loans at near par to pension funds and insurer Kuvare.
Gulf sovereign wealth funds - including ADIA and Mubadala - are among the world's most active backers of private credit and buyout strategies.
Mubadala's private credit portfolio reached roughly 20 billion dollars by early 2025, deployed globally through partnerships with major alternative managers.
ADGM's Financial Services Regulatory Authority introduced a dedicated Private Credit Fund regime in 2023 to support local origination and governance.
UAE and GCC advisers are now pushing for tighter due diligence, manager diversification, and clearer liquidity frameworks in private credit allocations.

ADGM's Private Credit Framework and Gulf Sovereign Capital Under Scrutiny

The turmoil at Blue Owl Capital has arrived at a pivotal moment for Gulf sovereign wealth funds, which have become among the world's most consequential limited partners in private credit - the market for loans originated outside public bond markets. Abu Dhabi's sovereign investors, notably ADIA (the Abu Dhabi Investment Authority) and Mubadala Investment Company, have built substantial private credit books, with Mubadala's portfolio reaching roughly 20 billion dollars by early 2025, according to Institutional Investor. The GCC private credit market, still at an early stage, is projected by PwC to grow 15 to 30 percent annually through 2030.

This episode is drawing fresh scrutiny to the governance and liquidity frameworks underpinning these allocations - and to Abu Dhabi Global Market (ADGM), whose Financial Services Regulatory Authority (FSRA) introduced a dedicated Private Credit Fund regime in 2023 to support local origination. For UAE-based advisers to sovereigns, family offices, and institutional investors, Blue Owl Capital's liquidity management difficulties are reshaping investment committee conversations across the region.

What Happened at Blue Owl Capital

Blue Owl Capital, a New York-based alternative asset manager specialising in private credit, real assets, and GP stakes - ownership interests in other fund managers - saw its publicly listed shares drop more than 5% on 20 February 2026. The sell-off followed the firm's decision to restructure investor withdrawal terms and liquidate around 1.4 billion dollars in assets across three funds. According to Reuters, proceeds were used to pay out investors in an older credit fund that had faced heavy redemption requests during 2025.

Blue Owl sold a portfolio of direct-lending loans to a group of large North American pension funds and its affiliated insurer Kuvare, at roughly 99.7 percent of par value (face value). An earlier attempt in late 2025 to merge a smaller private fund into a larger, publicly traded vehicle had already caused friction. That vehicle was trading at a steep discount to net asset value (NAV) - a fund's per-share worth - and the proposed merger would have crystallised an immediate paper loss of around 20 percent for some investors, sparking fierce pushback.

By early 2026, redemption requests across certain Blue Owl funds had reportedly exceeded 15 percent, prompting management to combine asset sales with changes to withdrawal mechanics in at least one retail-oriented credit vehicle. Market commentators described the firm's approach to exits as ad hoc rather than guided by a predictable, rules-based framework - deepening investor unease about how private credit structures hold up under sustained redemption pressure.

Gulf Sovereign Funds in the Frame

Bloomberg reported on 23 February 2026 that sovereign investors from the UAE, Saudi Arabia, and Qatar are among the most active global backers of private credit and leveraged buyout funds managed by US and European firms, including Blue Owl, Apollo, and KKR. While these allocations represent a relatively small share of the nearly 5 trillion dollars overseen by Middle Eastern wealth funds, they have grown rapidly. A Deloitte Middle East report found that Gulf sovereign wealth funds invested around 82 billion dollars in 2023 and a further 55 billion dollars in the first nine months of 2024 - roughly two-thirds of all sovereign wealth fund deal activity worldwide in that period.

The Financial Times has reported growing concern among some of the world's largest sovereign investors about the pace of private credit expansion, citing vulnerabilities related to opaque underwriting standards, leverage, and the absence of daily price transparency found in public bond markets. Demand has nonetheless remained strong, as higher yields and flexible structuring have proved attractive against a backdrop of volatile public markets and uncertain interest-rate paths.

Abu Dhabi's Push to Become a Regional Private Credit Hub

Abu Dhabi is not content to remain simply a source of capital for Western private credit managers. Sovereign institutions are actively working to make the emirate a centre where deals are originated, structured, and managed locally. PwC estimates, cited by Institutional Investor, project the GCC plus Egypt private credit market could grow from around 5 billion dollars in 2024 to between 11 and 20 billion dollars by 2030. This ambition aligns directly with Abu Dhabi's Economic Vision 2030 and the UAE's "We the UAE 2031" agenda, both of which prioritise diversification away from hydrocarbons.

ADGM's FSRA Private Credit Fund regime is a central pillar of this strategy. The 2023 framework allows ADGM-domiciled funds to originate and invest in credit facilities directly, with targeted regulatory relief from certain licensing and capital requirements, while requiring governance, risk management, and investor protection standards. Legal experts note that the UAE's insolvency and secured-lending frameworks have been strengthened alongside this initiative, making security enforcement and sophisticated lending structures more viable for international participants.

Global managers are responding to the opportunity. Monroe Capital, a Chicago-based firm with around 25 billion dollars in assets, opened an ADGM office in October 2025, initially focused on building institutional and family-office relationships, with plans to originate regional deals in time. Homegrown managers are also emerging: Ruya Partners, an ADGM-registered firm, arranged a 15-million-dollar private credit financing for digital freight platform TruKKer in July 2025, while Shorooq Partners provides venture debt to early-stage companies in Abu Dhabi's Hub71 start-up cluster.

What This Means for UAE Advisers and Investors

For advisers working with UAE sovereigns, family offices, and institutional investors, the Blue Owl episode has sharpened conversations about downside scenarios, stress tests, and liquidity buffers in private credit allocations. Advisers are pushing for greater diversification across managers, strategies, and geographies, and for greater transparency on fund-level leverage, underlying borrower profiles, and covenant protections. Questions are also being raised about concentration risk, given that some large regional investors have built sizeable relationships with a small number of flagship private credit providers.

Governance reviews are under way at multiple levels. Sovereign wealth fund governance codes and asset-allocation policies are being revisited to ensure private credit and buyout exposures remain manageable and that stress scenarios - such as extended drawdowns from a single manager - are explicitly modelled. ADGM's regulatory framework is seen as one mechanism to embed more resilient practices as local origination grows.

Industry participants across the GCC stress that the long-term strategic case for building private credit exposure remains intact. However, the Blue Owl situation is expected to result in more stringent due diligence processes, closer monitoring of liquidity management, and more selective manager relationships - particularly around how firms handle redemption spikes, gating mechanisms, and the alignment of interests between sponsors and limited partners when portfolio sales are used to meet withdrawals.

What Clients are Asking their Advisors

What is private credit and how do Gulf sovereign funds invest in it?

Private credit refers to loans and debt instruments originated outside public bond markets, typically by specialist asset managers. Gulf sovereign funds such as ADIA and Mubadala access it through fund commitments and direct co-investments alongside global managers, focusing on sectors including infrastructure, logistics, and technology.

How does the ADGM Private Credit Fund regime work for fund managers?

The ADGM Financial Services Regulatory Authority introduced its Private Credit Fund regime in 2023. It allows ADGM-domiciled funds to originate and invest in credit facilities directly, offering targeted regulatory relief from certain licensing and capital requirements while still requiring governance, risk management, and investor protection standards to be met.

How does the Blue Owl liquidity crisis differ from risks in public bond markets?

Unlike public bond markets, where prices are transparent daily, private credit funds can have limited liquidity and opaque underwriting. Blue Owl's situation shows how redemption spikes can force hurried asset sales - a risk that is harder to manage in semi-liquid or retail-oriented private credit products than in publicly traded fixed income.

What steps should UAE investors take now with their private credit allocations?

Advisers in the region are recommending greater diversification across managers, strategies, and geographies, combined with closer scrutiny of fund-level leverage, liquidity mechanisms, and covenant protections. Governance frameworks covering secondary sales and fund restructurings are also being revisited to ensure stress scenarios are explicitly modelled.