Valuetainment - November 22, 2025


＂Give My Money Back!＂ - Investors PANIC As BlackRock Linked HPS Faces $400M FRAUD Investigation


Episode Stats


Length

10 minutes

Words per minute

195.82593

Word count

2,058

Sentence count

156

Harmful content

Misogyny

2

sentences flagged


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

BlueOwl Capital's shares have fallen almost 6% to their lowest level since December 2019 after the firm blocked investors from redeeming their capital from one of its oldest private credit funds. What does this mean for the future of the fund and the broader financial system? And what does it mean for private credit and shadow banking in general?

Transcript

Transcript generated with Whisper (turbo).
Misogyny classifications generated with MilaNLProc/bert-base-uncased-ear-misogyny .
00:00:00.000 Blue Owl, okay, plunges to 23 low after blocking exit from fund.
00:00:08.200 Okay, so let me read this to you.
00:00:09.440 I know Jeff, you, and Tom both have a lot to say about this.
00:00:12.780 I'm going to come to him.
00:00:13.420 We'll wrap up the podcast with this here.
00:00:16.180 So Blue Owl Capital, Inc., shares have fallen to their low since 2023 December
00:00:20.140 after the alternative asset manager restricted investors from redeeming capital
00:00:23.340 from one of its oldest private credit funds.
00:00:25.700 Shares dropped almost 6% on Monday, closing at 13.78.
00:00:28.860 The firm announced earlier this month that it would merge its $1.8 billion
00:00:32.420 non-traded business development company, Blue Owl Capital Corporation,
00:00:36.480 to with its $17.6 billion publicly listed vehicle, Blue Owl Capital Corp, or OBDC.
00:00:43.840 But investors in non-traded fund won't be able to redeem their capital
00:00:47.120 until the merger closes, which is expected to happen early.
00:00:49.760 Next, you're invested in the acquired vehicle, will swap their holdings for OBDC stock.
00:00:55.420 That means they could see paper losses as much as 20% if the deal closes that current share price,
00:01:02.540 given that OBDC shares are trading at much higher of a discount compared to the value of the fund business.
00:01:07.900 Jeff, thoughts on the story?
00:01:09.580 There is a growing problem in what's called private credit or shadow banking,
00:01:13.400 whatever term you want to talk about it.
00:01:15.020 It is potentially, it could, if it continues to go in this direction,
00:01:18.500 it could turn into a financial crisis.
00:01:20.780 And the reason is because a lot of this private credit,
00:01:23.480 without getting into really the deep weeds here,
00:01:25.520 it's just a source of relending in the economy.
00:01:28.040 So you have these investment funds that borrow,
00:01:30.360 they get seeded by wealthy investors, a lot of hedge funds, things like that.
00:01:33.800 They borrow in wholesale markets like repo to leverage up the returns.
00:01:37.500 And it's basically these investment funds,
00:01:40.440 these private credit shadow bank funds are blank balance sheets.
00:01:43.920 They've been heavily involved, huge volumes over the last several years
00:01:46.780 because the bank, regulated banks haven't been lending in risky sectors of the economy.
00:01:51.260 So private credit funds have been absolutely banging the table on volume, volume, volume in credit growth
00:01:57.780 without really paying a whole lot of attention to the fundamentals, to the underwriting.
00:02:03.000 Underwriting has gone by the wayside here.
00:02:04.960 There's that word again.
00:02:05.540 Yeah, exactly. And it's a very important word.
00:02:09.100 We see this in every credit cycle in human history.
00:02:11.460 You know, greed takes a hold of everybody.
00:02:12.860 You rationalize away the risk, all the kind of stuff,
00:02:15.020 all the bubble behaviors that we associated in 2008,
00:02:17.760 we're seeing it again here in 2025 in private credit.
00:02:21.920 So what that could potentially lead,
00:02:24.140 what's really happening is there's a lot of losses
00:02:26.340 because there was a lot of dumb lending that took place over the last several years
00:02:29.120 as they were voluming up and growing and whatnot.
00:02:32.360 We don't know how, because it's sort of in the shadows,
00:02:35.120 we don't have a real idea of what those losses might actually end up being.
00:02:39.360 And of course, that feeds into mistrust in the marketplace.
00:02:42.200 And it could from there potentially spill over into something bigger.
00:02:46.400 So what we're trying to figure out is how many losses there are and who has them.
00:02:50.880 And if there are enough of them, who is going to end up paying the bill?
00:02:54.280 The problem with that process of a downside of a credit cycle is that it can spill over into the general marketplace,
00:03:00.360 where if there's not enough information, and believe me, there is not,
00:03:03.880 then people just say, screw this, I want my money back.
00:03:08.180 This is what happened in the earliest stages of the 2008 crisis.
00:03:11.240 And I don't want to get, I mean, I'm not making a comparison to 2008 in any other way,
00:03:13.940 then that's just the process it takes.
00:03:15.940 What you had is you had a bunch of hedge fund investors that were earlier exposed to subprime mortgages
00:03:20.220 and really subprime mortgages that looked a lot like this, securitized structures and whatnot.
00:03:25.220 You had hedge funds investors that said, I don't know what's going on here.
00:03:28.640 I'm not getting any answers from my fund managers.
00:03:30.740 They're not telling me the truth.
00:03:32.160 All I know is that there's fund guys over here that are losing tons of money.
00:03:36.040 I don't want to be one of those.
00:03:37.720 Give me my money back.
00:03:38.620 So what you had was a bunch of hedge fund redemptions hit the marketplace,
00:03:42.300 which then created a cascade of selling that became the 2008 crisis.
00:03:47.280 So what we're seeing here with the Blue Owls story is the latest in a series of escalations
00:03:52.700 moving in that same direction.
00:03:53.960 It started with Tricolor.
00:03:55.380 Then it was First Brands.
00:03:56.860 Then it was a couple of small regional banks that were exposed to First Brands.
00:04:00.840 Then it was Primalend.
00:04:02.260 Then we started getting notice from UBS.
00:04:04.900 UBS said we're shutting down a couple of our hedge funds.
00:04:07.140 Why?
00:04:07.420 They started getting hit with redemptions.
00:04:09.900 And so this Blue Owls story is, again, the same thing.
00:04:13.120 Hedge fund investors are saying, give me my money back.
00:04:16.420 And these funds are not even exposed to the bankruptcies that we see so far.
00:04:20.960 And so what that potentially tells us is that the investors in these institutional spaces
00:04:25.920 are getting cold feet about the entire space.
00:04:29.420 And if that's the case, then you have what started out as potentially a credit crisis
00:04:33.900 starts to become a liquidity crisis.
00:04:35.320 Well, exactly.
00:04:38.160 And now for everybody that was listening to that, I'll give you an easy visual.
00:04:43.100 In the movie, The Big Short, you have the wealthy individual, I forget what his name was,
00:04:49.600 comes in and sits down with Michael Burry and says, we want to take our money out.
00:04:56.120 Oh, you can't do that right now.
00:04:57.760 I'm freezing all withdrawals.
00:05:00.480 He says, he says, Michael, you can't do this.
00:05:03.000 I want my money back.
00:05:03.760 I'm calling my attorney.
00:05:04.680 Remember that whole interchange?
00:05:06.000 That is exactly what we're talking about here.
00:05:08.100 And Blue Owl was trying to merge things together.
00:05:12.680 They were literally trying to build the Jenga that was built on the table in The Big Short,
00:05:20.400 where they talk about all this, because they were trying to take Blue Owl 1 and Blue Owl 2,
00:05:25.640 put them together so that they could have diversified risk.
00:05:29.860 And they said, you can't do a redemption while we're putting this together.
00:05:33.340 Well, then guess what?
00:05:34.420 Then the merger broke.
00:05:35.400 They couldn't get it together.
00:05:36.540 They couldn't get all the approvals they needed.
00:05:38.100 So it stopped.
00:05:39.600 Meanwhile, we covered Tricolor last week on used cars, where they found that the asset
00:05:47.140 value of all the used cars that were out there was less than the value of the subprime auto
00:05:52.800 loans here, which is why everybody was saying, oh, it's all subprime, subprime.
00:05:56.380 But it's not.
00:05:57.800 Now you have this happening.
00:05:59.160 And by the way, U.S. regulators have fired the first shot.
00:06:02.440 And it's called HPS Partners.
00:06:04.160 HPS Investment Partners, they're a private credit arm of a company called BlackRock.
00:06:12.200 And they're responsible for running highly leveraged but high returns.
00:06:18.180 So their charter, go find things that maybe might be untenable for other people, will be
00:06:24.260 smarter.
00:06:25.140 So they put $400 million back by receivables.
00:06:28.820 The receivables of the company's path appear to be fake future sales.
00:06:34.040 Wow.
00:06:34.900 So now BlackRock's got HPS going, wait a minute, these guys lied to us?
00:06:38.640 The telecom guys lied to us?
00:06:39.600 And they never checked.
00:06:40.560 So now BlackRock is like, and BlackRock's only saying, it's not us.
00:06:44.580 It was a division of us at arm's length that we call HPS.
00:06:48.200 Baloney! 0.90
00:06:48.880 It was you!
00:06:49.840 It was HPS.
00:06:50.780 You knew them, but you've deliberately set it up to keep some distance there.
00:06:54.880 But now the federal investigators are coming in here going, hey, you 18-year-old college
00:07:01.200 boys got beer in there.
00:07:03.000 Are you having a party you shouldn't be?
00:07:04.960 And so that's the knock at the door.
00:07:06.660 So what we're seeing here is some things out there, when times get good too long, Pat,
00:07:13.620 what happens?
00:07:14.260 People get sloppy.
00:07:15.520 You've talked about it.
00:07:16.400 You've talked about it so many times in the businesses that you've ran, that I've watched
00:07:22.060 you, that I've sat next to you and watched you run them.
00:07:25.180 When things get really good, sometimes that's when people get sloppy or get a little careless
00:07:29.700 or cut corners.
00:07:30.860 Ladies and gentlemen, your private capital market, and it's coming.
00:07:34.640 The problem is that the private capital market is huge.
00:07:37.980 It's gotten to be really huge, so it actually can impact a lot more than just BlackRock.
00:07:41.660 Why in 24 did BlackRock agree to acquire it?
00:07:44.540 They wanted the return.
00:07:46.000 So you guys have figured out European telco, and you've figured out how to get some of
00:07:49.800 the bonds on the equipment building they have there, and you've done this?
00:07:52.540 Yeah, I'll give you $12 billion for that whole stack.
00:07:54.560 That's what they did.
00:07:55.480 Now U.S. investigators are going back going, wait, wait, wait, wait, wait.
00:07:58.780 You're telling me some of this was fake receivables and sales that didn't exist?
00:08:02.500 So BlackRock's going to say, I didn't know that.
00:08:05.240 You were a bad underwriter.
00:08:06.880 Where's your diligence?
00:08:07.520 Nobody wanted to underwrite.
00:08:08.580 Everybody wanted to do.
00:08:09.560 It's bubble behavior.
00:08:10.620 Everybody just wants to get the deal.
00:08:11.820 I want the $12 billion because I need the return, and I ran the red light on diligence.
00:08:15.540 We know personally, we know a company that is at that seven-year mark of having raised
00:08:21.340 a ton of money, and those guys are coming and saying, hey, we need that money back.
00:08:26.400 We need that money back.
00:08:27.220 We don't care how you get it.
00:08:27.960 We need that money back.
00:08:28.860 You've reached that moment here.
00:08:30.400 Did you have any thoughts on this?
00:08:31.260 I'm going to go to the Tim Cook story.
00:08:32.560 Just quickly, I think it's crazy to me that nothing's happened in the last 15 years
00:08:36.420 where there's been this great growth in the stock market and asset prices.
00:08:39.640 So I'd be shocked if something didn't give eventually, just like he's saying.
00:08:43.300 If you've got big plans for 2026, I am telling you right now, I can't say how many conversations
00:08:47.820 we're having about business planning.
00:08:49.040 There's a reason why we went less than 22 hours to Dallas and come back because we want
00:08:54.000 to see exactly what's happening with 2026.
00:08:55.960 We're planning for our family, for our businesses ourselves, and if 2026 is a big year for you
00:09:00.880 as well, I want you to watch this clip.
00:09:02.420 Rob, can you go to the clip with the Jenga to show them what happens when it comes on to
00:09:07.420 business plan and how all of these things are necessary?
00:09:10.320 Go ahead, Rob.
00:09:11.420 Business is a lot like Jenga.
00:09:13.200 Every piece matters.
00:09:15.280 You need a vision.
00:09:16.940 Do this carefully.
00:09:17.820 Oof, oof, oof, oof. 0.67
00:09:20.040 You need capital.
00:09:21.440 You definitely need capital.
00:09:23.940 Let's put this here.
00:09:24.640 Ooh, listen, hanging on one piece here, by the way.
00:09:27.120 You need the right team.
00:09:28.780 For sure.
00:09:29.780 This almost fell off, by the way.
00:09:30.960 You need sales.
00:09:33.140 As good as this looks, if your foundation isn't built on a good business plan, you know
00:09:39.720 what happens?
00:09:40.220 The whole thing crumbles.
00:09:46.720 If you have big plans for 2026, on December 12th, I'm hosting an event called the Business
00:09:54.680 Planning Workshop, where all day we go through the 12 building blocks of writing an effective
00:10:00.900 business plan.
00:10:01.680 So this doesn't happen to you.
00:10:03.200 If you have a good register, click on the link below.
00:10:05.700 Let's spend an entire day together on December 12th.
00:10:08.860 Looking forward to seeing you there.
00:10:10.560 Folks, click on the link below.
00:10:12.100 Get registered.
00:10:13.560 You can watch it with your friends, family.
00:10:15.540 And this is going to be people watching.
00:10:17.260 It's from 100 plus countries.
00:10:18.540 And you can find a way to just get registered at the lowest level.
00:10:20.960 Or you can find a way to be on the screen so everybody can see each other.
00:10:23.300 And at the end, we'll do a Q&A for 90 minutes.
00:10:25.040 If you enjoyed this video, you want to watch more videos like this, click here.
00:10:27.780 And if you want to watch the entire podcast, click here.