Blue Owl Subject Of Lawsuit Over Excessive Fees

Shareholders in publicly traded Blue Owl Capital Corporation (OBDC) recently filed a derivative lawsuit that accuses investment adviser Blue Owl Credit Advisors LLC of breaching its fiduciary duties under the Investment Company Act of 1940 by inflating asset valuations to extract excessive fees. The complaint was filed in April in the U.S. District Court in ​Manhattan. 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.

In the lawsuit, the plaintiff, Richard Delman, alleges that the adviser steadily inflated the value of these illiquid “Level 3” assets to drive up their fees. As evidence of this overstatement, Delman showed the consistent gap between the reported net asset value and publicly traded share price.

“Defendant’s fees are so disproportionately large that they bear no reasonable relationship to the services rendered and could not have been the product of arm’s-length bargaining,” the lawsuit states. The fund also failed to reduce its fees as it grew, as is the industry’s standard.

The plaintiff also alleges that the advisor collected $414.4 million in advisory fees in 2025, a 47% increase from 2021, without a proportional rise in the quality of their services for both management and administrative responsibilities.

The complaint also alleges that the advisor improperly collected fees on a “pay-in-kind” (PIK) interest, a non-cash accrued income to loan balances. The advisor still collects PIK, even though it may never be realized by the fund. The advisor also serves as the funds’ “Valuation Designee,” allowing it to set its own fees based on internal valuation that is also non-standard. This means that the assets lack observable market prices. Instead, they are valued using internal models, giving the adviser significant discretion in pricing.

This lawsuit increases the scrutiny of valuation in private credit markets, where a scarcity of transparent pricing for illiquid assets like these brought concerns for both investors and regulators.

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