Investors Shun Deep Discounts for Fund Shares

As of April 28, 2026, Saba Capital Management reported that its tender offers for shares in non-traded business development companies managed by Blue Owl Capital and Starwood Capital significantly underperformed initial expectations. The hedge fund offered liquidity to investors in Blue Owl Capital Corporation II (OBDC II) at a 35% discount and in Starwood Real Estate Income Trust (SREIT) at discounts of 24% or 29%.

Saba managed to acquire approximately $10 million in aggregate face value, with the vast majority originating from SREIT. The tender for Blue Owl shares reportedly saw very little participation, with less than 1% of offered shares tendered. This lack of investor interest in accepting deep discounts for liquidity occurs during a quarter marked by elevated redemptions across private credit and non-traded BDCs.

Blue Owl has been directly impacted, having halted quarterly redemptions for OBDC II in mid-February and instead returning capital periodically through asset sales. In the first quarter of 2026, investors sought to redeem $5.4 billion from two other Blue Owl private-credit funds, with the manager limiting these requests to 5%. Saba Capital indicated it is considering additional products for liquidity offerings, citing investor demand for their money back.

Saba expressed its intention to be a consistent bid in the market, providing liquidity for retail investors in products that often lack secondary liquidity. The firm noted that its prior activity in SREIT prompted Starwood Chairman Barry Sternlicht to commit equity capital to fund investor redemptions, a move Saba commended. Looking ahead, Saba anticipates growing opportunities for liquidity provision as credit risk accumulates into 2027 and 2028.