Investor sues Blue Owl adviser over fund valuations, fees

An investor in one of Blue Owl Capital’s private credit funds has filed a lawsuit in New York, accusing the firm’s investment adviser of breaching fiduciary duties by inflating asset values to extract excessive fees.

The complaint, filed Monday in the US District Court in Manhattan, was brought by Richard Delman, a shareholder in Blue Owl Capital Corporation.

Delman alleges that fees charged by Blue Owl Credit Advisors LLC violated fiduciary obligations under the Investment Company Act of 1940.

According to the complaint, the adviser charged fees that were "so disproportionately large that they bear no relationship to the value of the services provided" and could not have resulted from arm’s-length negotiations.

Conflict of interest tied to asset valuation

At the center of the lawsuit is the adviser’s dual role in both valuing the fund’s assets and earning fees linked to those valuations, which the complaint describes as an inherent conflict of interest.

The filing states that many of the fund’s investments are illiquid and categorized as Level 3 assets under accounting rules.

These assets lack observable market prices and are instead valued using internal models, giving the adviser significant discretion.

Delman alleges that this structure created an incentive to systematically overstate asset values.

He pointed to a persistent gap between the fund’s reported net asset value and its publicly traded share price, which has declined about 22% over the past year.

The lawsuit also highlights the firm’s use of “pay-in-kind” (PIK) interest, a form of non-cash income that accrues to loan balances rather than being paid out.

The complaint claims the adviser collects fees on PIK income even when it may never be realized.

Rising fees without corresponding services

The complaint further alleges that advisory fees have increased significantly without a matching rise in services.

According to the filing, Blue Owl Capital Corporation paid $414.4 million in advisory fees in 2025, up roughly 47% from $282.4 million in 2021.

Delman is seeking to recover what he describes as excessive fees on behalf of the fund, as well as to rescind the advisory agreement.

Blue Owl Credit Advisors LLC, the defendant in the case, serves as the external manager of the fund and is an indirect affiliate of Blue Owl Capital Inc..

The lawsuit adds to ongoing scrutiny of valuation practices in private credit markets, where the absence of transparent pricing for illiquid assets has raised concerns among investors and regulators alike.

Shares of Blue Owl Capital Inc. have come under pressure this year, weighed down by rising redemptions and slowing investor inflows.

Concerns first emerged last year when the firm attempted to merge Blue Owl Capital Corporation II with Blue Owl Capital Corporation, a move that drew criticism as the larger fund was trading at a roughly 20% discount to net asset value, potentially disadvantaging OBDC II investors.

The situation intensified this week after the firm halted redemptions in a key private credit fund and sold assets to meet payouts, raising further concerns about portfolio exposure to software companies.