Five Years, Not Five Quarters: Queue the Math!

What the April 2026 NT-BDC Filings Confirm

Prepared by Mark Goldberg | Research Note 5 of the series on this topic

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Executive Summary

In November 2025 I argued that the coming stress event in private credit would not originate from credit losses. It would originate from who funds the market and how that capital behaves when headlines turn. We have just completed a series of quarterly filings by the major semi-liquid private credit funds with the April 2, 2026, Blue Owl filings with Q1 shareholder updates for both OTIC and OCIC. The data confirms the forecast.

Both funds are now in negative replacement capital. The redemption demand - 40.7% for OTIC and 21.9% for OCIC will not clear in a few quarters as some suggest. At the normal industry rate of ongoing new redemptions, the math points to five to seven years for OTIC and nearly three years for OCIC.

I often say that “Math” has no emotions, no agenda, and no spin. It is truth. Three narratives are circulating in the market. All three are colliding with truth.  This note addresses each narrative with the underlying math and makes the case that the market is acting with precision and not irrationally.

 

What November Predicted. April Confirmed.

The research notes of November 10, 2025 “BDC stress test” identified replacement capital, not NAV percentage redeemed, as the forward indicator of balance-sheet pressure. At that time, Q4 2025 redemptions had reached approximately 71.7% of gross fundraising across the reporting NT-BDC universe, up from 15.4% in Q1 2025. I stated clearly that the ratio would not only deteriorate but accelerate as inflows tend to follow redemptions inversely. 

The April 2 filings close the loop.

OTIC (Blue Owl Technology Income Corp): Q1 2026 gross inflows of $127M against redemptions of $179M. Net outflow of $52M. NAV approximately $3.0B. Redemption queue: 40.7% of shares outstanding.

OCIC (Blue Owl Credit Income Corp): Q1 2026 gross inflows of $872M against redemptions of $988M. Net outflow of $116M - less than 1% of NAV, but negative, nonetheless. NAV approximately $19.8B. Redemption queue: 21.9% of shares outstanding.

Neither fund is in financial distress that can be identified (notwithstanding the concerns around SaaS). Both have substantial liquidity. OTIC reports 7x coverage of the current tender offer. OCIC reports 11x coverage and $2.0B in estimated quarterly portfolio repayments. The issue is not solvency. The issue is trajectory.

I have constructed the following chart which mathematically calculates how a queue builds and clears under basic assumptions. The first column sets a variable assumption of investors who have not entered a redemption request yet choose to do so in the coming quarters. The second column shows the net reduction in investor demand for liquidity after adding the prior queue plus the new queue capped at 5% redemptions. The next four columns show how long under each scenario it will take to clear the queue. Realistically speaking the new redemption demand is not likely to decelerate in the coming quarters so I view this estimate as conservative.  I’ve noted previously to Investment Managers, until and unless the disparity between the marking of the portfolio (stated NAV) and market clearing price is narrowed redemptions will likely persist as described below. There is no reason to assume investors who have not been redeemed in full in the prior quarter will not re-queue in the coming quarter.

Three Questionable Narratives

1. “The caps have solved it.”

They have not. The redemption cap limits outflows. It does not replace capital. A fund paying out $179M while raising $127M is in net outflow, full stop. The cap is a liquidity management tool, not a capital formation mechanism. Confusing the two leads to the false conclusion that stability has been restored. It has not. It is a finger in a dike. The moment has been managed the pressure has not.

The deeper problem is mechanical. Because the cap is calculated against a declining NAV base, the absolute dollar amount of permitted redemptions shrinks each quarter as assets fall. A smaller cap on a smaller NAV base means less capital returned per quarter, which extends the queue and compounds investor frustration simultaneously. The gate limits outflows. It also limits the fund’s ability to recover as the pressure undoubtedly will build.

2. “The queue will clear in a few quarters.”

This is the most consequential mathematical error in current commentary, and it is being repeated widely.

The eight-quarter estimate that circulates assumes a static, closed queue. In that model, no new investors join the redemption line while the existing queue is being serviced. That assumption has no basis in how these vehicles operate or investor behavior.

The correct model accounts for ongoing new redemption requests entering the queue each quarter. At a 5% redemption cap and 3.5% new redemption demand, only 1.5% of shares are cleared per quarter. Given the historically normal rate of 3.0–3.5% new redemptions per quarter, the net queue drain is only 1.5–2.0% of outstanding shares per quarter. At that rate:

–      OTIC’s 40.7% queue clears in 20–27 quarters — five to seven years.

–      OCIC’s 21.9% queue clears in 11–15 quarters — roughly three to four years.

At a constant elevated redemption rate (e.g., 4.5%) the queue can become effectively non-clearing over any practical investment horizon. I recommend you read my March 10^th research note which projects 5 years of net outflows for existing funds.  To be clear new funds will emerge with new opportunities in private credit, so the asset class even in private wealth will not be negative for long. But for the existing funds the outlook is dim. For Investment Managers who mismanage the communication it will be enduringly so.

The static model is not a realistic estimate. It is a structurally incorrect one.

3. “Investors are acting irrationally.”

This is to conclude that private wealth advisors are not wise. That they are overly influenced by the media and make poor decisions.  I hear this narrative, at times from Investment Managers. This framing is counterproductive and analytically incorrect. If IMs hope to have a constructive relationship and gain future allocations from Private Wealth this is surely not the path to do so. Investors pursuant to their Advisors recommendations that are redeeming from semi-liquid credit vehicles today are not panicking. They are making three specific, rational, and well-grounded (in math) portfolio decisions.

The Rational Investor: Three Reasons the Math Supports Redemptions

Reason One: The Portfolio Overlap Arbitrage

The arbitrage is not limited to a single pair of vehicles. The following matrix was sourced from ACCREDITED Investor Insights and calculated using Prismalts.com (author Leyla Kunimoto) for Q3 2025. It demonstrates, substantial portfolio overlap exists across the entire Blue Owl BDC complex, creating rational allocation incentives.

Two pairs of funds above are particularly instructive:

OTIC ↔ OTF (Blue Owl Technology Finance Corp., NYSE: OTF): OTIC and OTF share 75.1% portfolio overlap by fair market value. As of April 3, 2026, OTF trades at approximately $11.48 per share against a NAV of $17.33 - a discount of roughly 34%. A rational investor can redeem from OTIC at model-based NAV today and purchase materially the same portfolio through OTF at a 34% discount. Same strategy. Same assets. Same manager. No redemption queue.

OCIC ↔ OBDC (Blue Owl Capital Corporation, NYSE: OBDC): OCIC and OBDC share 70.4% portfolio overlap by fair market value. As of April 2, 2026, OBDC trades at approximately $10.80 per share against a NAV of $14.81 - a discount of roughly 27%. Redeem at par. Repurchase at a 27% discount. If you believe the portfolio holdings are sound and the fear is overblown, you redeem and reallocate.

This is not just a liquidity decision. It is a valuation decision. Same Strategy. Same Assets. Same Manager. Different price.

Reason Two: The Marking Convention Arbitrage

The broadly syndicated loan market prices assets continuously against actual transactions. Publicly traded BDCs reflect spread widening by discounts of their share price relative to their stated NAV.

Semi-liquid NT-BDCs and interval funds use model-based valuations - comparable spreads, discounted cash flow methodologies that are lagged, convention-dependent, and structurally resistant to real-time adjustment. Accounting marks are smoothed. Market clearing prices are earned through transactions.  In a stable or improving market, this creates modest differences. In a period of spread widening and market stress, the gap between model-based NT-BDC NAVs and where those same assets would clear in a secondary transaction becomes material. The gap between the two is where this cycle is forming.

A sophisticated investor who understands this dynamic has a clear incentive to redeem at today’s elevated model-based NAV before the marks converge downward. This is not irrational. It is informed capital allocation ahead of a predictable adjustment.

 

Reason Three: The Dilutive Impact of Redemptions

Finally, each time the outgoing investor redeems at a NAV it is the direct equivalent of a company buying back its stock. If the assumption is the price is too high relative to where that same group of assets (portfolio) can be purchased elsewhere (publicly traded BDC) it is dilutive to the value of the remaining investors. 

When these dynamics operate simultaneously, portfolio overlap with discounted public analogs, and model-based marks that have yet to fully reflect secondary market reality the rational case for redemption requires no media-driven panic to explain. The structure creates the incentive. Private Wealth is simply responding to it. Suggesting that that RIAs, financial advisors, and the investors they serve are unsophisticated has long-term implications for the Investment Manager more so than the rational investor.

NAV Trajectory: The Longer-Term Picture

The queue is one dimension of the problem. The other is what happens to inflows during a period of capped redemptions. The chart below demonstrates if OTIC experiences a 50% decline in new investor flows (which is my view is likely) total NAV falls by 57% over time. 

Note on methodology: DRIP (dividend reinvestment) proceeds are excluded from modeled inflows. DRIP adds incremental capital each quarter and would modestly improve the NAV trajectory under all scenarios. It is difficult to estimate DRIP other than to say if investors are looking to redeem and cannot, the first choice they make is to cease DRIP election.

Using Q1 2026 inflow figures as the baseline and modeling NAV under inflow decline scenarios of 10% through 50%, the trajectory is clear. Under current conditions, OTIC’s NAV converges toward approximately $2.54B at baseline inflows and as low as $1.28B if inflows decline by 50%. That is a 57% reduction from today’s starting point. OCIC converges toward $17.44B at baseline and $8.72B at a 50% reduction. As I read sell-side analyst reports I wonder what assumptions they use in their models.  The liability management during this period of contraction will be crucial. As there may be plenty of cash and credit facilities available for now but there are structural limits to leverage (3:1) and holding large portions of cash will be a drag on performance.  In addition, declining NAV reduces the absolute equity, fund’s income base, its capacity to originate, its capacity to extend credit to existing borrowers as well as reduce ability to deploy capital as spreads widen (as historically occurs in this part of the credit cycle).

What This Analysis Does Not Claim

This analysis does not assert credit impairment, distribution cuts, or current solvency stress. OTIC and OCIC most recently reported and demonstrated the highest redemption demand and are used for illustration purposes.  This follows less dramatic but high redemption numbers for ARES (11%), Blackstone (8%), Cliffwater (13.9%), Apollo (11%), Oaktree (8.5%), KKR (6.3%), and others. OTIC and OCIC may very well hold well-constructed portfolios, and their loans may be performing as underwritten.  The fund manager has reported adequate liquidity to meet current obligations.

The stress described here is structural and behavioral. It is independent of a fundamental analysis of the loan portfolios of any of the mentioned funds or companies. That distinction matters. It is also precisely the distinction that most current commentary fails to make.

Call to Action

For Managers

–      Replacement capital, redemptions less gross inflows, is the metric boards, advisors, and the media should be reviewing quarterly, not just NAV percentage redeemed. A forthright conversation is needed.

–      Address the portfolio overlap and marking convention points directly with your distribution channel. Advisors who understand the arbitrage dynamic need a coherent response. Silence on this point is not a defense.

–      Model the queue clearing timeline using a realistic ongoing redemption assumption, not a static one. Your advisors and investors deserve the accurate math.

–      More transparency is needed about portfolio holdings and valuations. The firm that does this better will be the long-term winner in private wealth.

–      Brief advisors early and often. The narrative is hardening. Every quarter of delay compounds the behavioral damage.

For Advisors and Allocators

–      Evaluate whether the current NAV in your semi-liquid holdings reflects secondary market realities or model-based convention. The spread between the two is the relevant risk exposure. If you can buy the same exposure at a 25% discount in public markets, that is your benchmark – not stated NAV.

–      If your fund has a publicly traded analog with substantial portfolio overlap, the discount at which that analog trades is a relevant data point for your own position’s fair value.

–      The queue clearing math should inform your client communication timeline. Five to seven years is a materially different conversation than two years.

–      Press Investment Managers for more information. Ask questions such as … of the PIK income on your books, how much was originated as PIK and how much was converted through amendment? And how has the overall PIK ratio shifted over the past few years? Do the research yourself or find an objective analyst to assist.

–      Every cycle mints a new vintage. When the dislocation resolves, opportunistic credit and secondaries at known prices will represent the next entry point. You may consider adding to a new unencumbered fund.

Sources and Methodology

Primary data: Blue Owl Technology Income Corp. (OTIC) and Blue Owl Credit Income Corp. (OCIC) shareholder update letters filed as 8-K Exhibit 99.1, April 2, 2026.

Queue clearing model: Static percentage-based model. Net queue drain = 5% quarterly cap minus ongoing new redemption rate entering the queue each quarter. Time to clear = initial queue percentage divided by net drain per quarter. Does not assume a closed queue.

NAV trajectory model: Dynamic quarterly model. NAV(t+1) = NAV(t) × 0.95 + inflows. Steady-state NAV = 20× quarterly inflows. Baseline inflows from Q1 2026 actuals. DRIP excluded from modeled inflows.

Portfolio overlap matrix: Source — Accredited Investor Insights / Prism. FMV overlap as of Q3 2025 per publicly available filings.

Market pricing: OTF price $11.48 (April 3, 2026), NAV $17.33 (December 31, 2025). OBDC price $10.80 (April 2, 2026), NAV $14.81 (most recently reported).

Normal industry redemption range: R.A. Stanger & Co.

Prior research and public comments in this series: November 6 & 10, 2025 (stress test and InvestmentNews Op-Ed); January 30, 2026 (replacement capital canary); March 6, 2026 (four stages of the liquidity cycle); Pitchbook March 5, 2026 “Goldberg estimates that in the second or third quarter this year, 80% of debt-focused semi-liquid funds would see net outflows of capital. Pressure from redemptions will force many of them to eventually “shrink their balance sheets by letting loans run off or selling loans.” March 11, 2026 (five-year net outflow forecast).

Mark Goldberg is the founder of Alternative Investments Market Intelligence (AltsMI). This analysis is prepared for financial professionals and institutional audiences. It does not constitute investment advice. The author has had in the past and may have at time of publication a position in the companies and/or funds mentioned above.

www.altsmi.com