Is the Leveraged Loan Selloff Punishing Blue Owl Capital for Sins It Didn’t Commit?
February 2026 hit the leveraged loan market hard. Bloomberg’s US Leveraged Loan Index posted its steepest monthly decline since 2022, led by software and services credits. PitchBook reported the software sub-index down more than 7% year-to-date by early March, the most severe two-month contraction in that corner of the loan market since the onset of COVID-19.
Blue Owl Capital Corporation’s stock absorbed the same wave of selling. But the dynamics behind the index decline and the characteristics of OBDC’s portfolio diverge in ways that matter for anyone trying to assess whether the damage is earned or borrowed.
What Drove the Index Decline
Bloomberg noted that investors in the selloff were frequently dumping the loans that were easiest to sell rather than the weakest credits. Liquid, larger-cap loans got hit first because they could be sold quickly, not because their underlying borrowers were deteriorating. That’s an important distinction. Forced selling in liquid instruments tells you about market mechanics, not about credit quality.
OBDC holds private loans that don’t trade on the Bloomberg index. The fund’s credit performance isn’t captured by sector-level price movements on liquid paper. When the software sub-index drops 7%, OBDC’s software exposures don’t automatically carry the same risk profile. They aren’t the same loans and they aren’t being sold in the same market.
What OBDC’s Portfolio Actually Showed
Blue Owl Capital’s software borrowers posted 10% revenue growth and 16% EBITDA growth in trailing-12-month figures through December 2025. 90% of the software book sat in first-lien senior secured loans at approximately 30% loan-to-value (https://www.fool.com/earnings/call-transcripts/2026/02/19/blue-owl-obdc-q4-2025-earnings-call-transcript/). Non-accruals across the entire portfolio declined to 1.1% at fair value.
A market that discounts software credit broadly has to reckon with why these particular borrowers were still expanding earnings at double-digit rates while the sector selloff was pricing them as though they weren’t. The answer likely has more to do with index mechanics and liquidity-driven selling than with anything happening inside Blue Owl Capital’s lending book.
Index-level repricing spreads pain efficiently across an asset class. It’s less efficient at distinguishing between the names that deserve the markdown and those that don’t.
