“The real question is whether the Blue Owl redemption episode signals a systemic risk,” said Roberto Steri, associate professor of empirical finance at the University of Luxembourg. There are growing signs that systemic risk is being tested as Apollo, Blackstone, Ares, KKR and Blackrock, among others, have all applied some form of limited redemption.
Blue Owl’s freeze sparked redemption fears
After reaching its standard quarterly redemption cap of 5% of net asset value (Nav), Blue Owl opted earlier this year to halt further redemptions and instead froze the fund and initiated a full return of capital to investors. Although the case may have been idiosyncratic, Steri believes similar dynamics could emerge in Europe.
The race for redemptions by investors at Blue Owl appears to be driven in part by the fund’s large exposure to the technology sector. The fund’s semi-liquid structure, with redemption gates typically capped at 5% of Nav, may have contributed to amplifying the run.
Blue Owl returned to the headlines on 2 April 2026 when it was reported that investors were seeking to withdraw around $5.4bn from two flagship funds in 1Q26. These requests included withdrawals from its tech-lending fund, Blue Owl Technology Income Corp, which climbed to 40.7% of the fund’s $3bn value.
Nav lag risks triggering investor stampedes
Beyond redemption pressure, outdated net asset values can intensify redemptions during periods of market stress. When short-term investors perceive Navs to be overstated, they are incentivised to redeem early, benefiting from a first-mover advantage.
It is widely acknowledged that the PE’s Navs are way too stable to be true
This dynamic can disadvantage long-term investors in open-ended funds, as redemptions may force managers to liquidate assets under unfavourable conditions. However, when markets and regulators push for loan repricing, the impact typically shifts to the next layer of financing: equity.
Loan pricing signals private equity valuation risk
Steri noted that academic research indicates that loan prices provide a signal for equity valuations. When debt market pricing dynamics are fully discounted for, it often implies that the equity should also be marked down. PE valuations tend to be overvalued by as much as 10% on average when accounting for the credit market pricing. However, the private equity industry frequently maintains stable Navs, a practice some critics controversially describe as “volatility laundering.”
This stability is highly attractive to pension funds, but it may not reflect the “true economic value” of the underlying assets. “It is widely acknowledged that the PE’s Navs are way too stable to be true,” said Steri. This creates a controversial environment where Navs should be “updated more frequently and usually downwards.”
Valuation dynamics: the Medallia case study
The widening valuation gap between private credit and private equity is increasingly drawing scrutiny. Medallia illustrates the issue. Thoma Bravo, a private equity firm, acquired the software company for $6.4bn in 2022, funding the deal with equity, while Blackstone led the debt financing.
Earlier this year, Blackstone reportedly cut the company’s enterprise value by around 70%, marking its loan to 78 cents on the dollar. At that level, it would imply that the equity is close to zero.
During an interview on CNBC in late March 2026, Orlando Bravo, co-founder and managing partner of the firm bearing his name, admitted that they overpaid for the customer experience software company and that “the equity from our standpoint has been impaired for a long time,” raising questions whether the recent markdowns by the creditor were accounted for.
Regulatory and research challenges in Luxembourg
Steri added that regulators, including those in Luxembourg, face difficulties in assessing these valuations due to a lack of granular, portfolio-level data. While Navs are visible at the fund level, accessing individual “deal-level” data is cumbersome even for researchers. Data platforms like Preqin typically provide fund-level information, while more detailed databases at the portfolio level, like Burgiss are often restricted and difficult to use. “Very few private equity research papers have access to comprehensive portfolio-level data.”
Steri argued for a “virtuous feedback loop” where regulators share detailed data with academic researchers to create more robust valuation baselines. In this context, the lack of transparency means that both researchers and regulators are often “walking in the dark” compared to the highly transparent public markets.
Without better data access, expecting regulators to independently rebuild valuation frameworks is unrealistic. Greater collaboration could significantly strengthen Luxembourg’s financial ecosystem.
