Oaktree Capital Management's privately held credit vehicle, the Oaktree Strategic Credit Fund (OSC), said it will honor the full 8.5% of redemption requests it received during the first quarter, according to a regulatory filing. The fund will repurchase roughly 13.9 million shares, representing 6.8% of shares outstanding, and Oaktree’s parent company, Brookfield, will acquire a further 1.7% of shares so that the manager can satisfy all investor requests this quarter.
The decision places OSC among a small group of managers that chose not to enforce the standard 5% quarterly limit on redemptions for non-traded business development companies and similar funds. Several asset managers have capped withdrawals at that customary 5% threshold after a surge in redemption activity driven by negative headlines and heightened scrutiny of the approximately $2 trillion private credit industry. By contrast, some firms including Blackstone elected to honor 100% of first-quarter redemption requests to calm investor concerns.
Other funds that experienced outsized demand for liquidity in the first quarter but stuck to the 5% limit included Morgan Stanley’s North Haven Private Income Fund, Apollo Debt Solutions BDC, and Ares Strategic Income Fund, each of which saw redemption requests exceed 10% of shares and each of which capped redemptions at the typical quarterly level.
OSC noted in its communications to shareholders that non-traded business development companies like itself typically provide quarterly liquidity through tender offers capped at 5% of shares. That structural limit has been a focal point of investor attention as demands for liquidity rose across the sector in recent weeks.
The fund addressed market concerns about the state of private credit in a shareholder letter, characterizing the current market as a period of calibration after several years of rapid expansion rather than evidence of broad credit deterioration. "Ultimately, we believe the current environment represents a correction rather than a crisis. The repricing now underway in software and broader private credit was, in many respects, already in motion before recent events," the fund said. "We believe there will be growing dispersion within the asset class," it added.
The letter also referenced a wave of attention following prominent bankruptcies, noting that the industry’s confidence had shifted after the failures of First Brands and Tricolor, events that heightened investor concern that additional problem credits could surface. The fund quoted a widely reported caution from JPMorgan’s chief executive about the possibility that more "cockroaches" might emerge from parts of the credit system, language that has been used across the industry to describe the potential for further isolated bankruptcies.
In addition to meeting redemptions, OSC has elected to reset its monthly dividend to 16 cents per share from the prior level of 18 cents. The fund said the adjustment reflects the current earnings environment, which it described as characterized by lower rates and tighter credit spreads on income. In a shareholder letter the fund included a remark invoking Milton Friedman: "As Milton Friedman observed, there is no free lunch: the cost of maintaining dry powder today is accepting lower income in the short term."
On its liquidity position, the fund reported $1.8 billion of available liquidity from cash and undrawn credit facilities as of March 23.
The sequence of events surrounding OSC’s path to satisfy all Q1 redemptions underscores the tension between established liquidity mechanics for non-traded funds and acute investor demand triggered by recent sector headlines. OSC’s approach mirrors that of some peers who opted to fully satisfy early-quarter requests, while other managers prioritized preserving liquidity by enforcing the 5% quarterly tender limit.