LONDON: Some investors think private credit is a tempest in a teapot.

Others think it is about to spark a new financial crisis. Depending on the time horizon, both sets of views about the esoteric sector may be right.

Signs of trouble in the obscure world of private lending, which had soared in popularity with companies looking for quick bespoke debt and investors seeking high returns, have been brewing since the middle of last year.

The pace at which investors are demanding money back from some of the private credit funds, known as business development companies (BDCs), has accelerated this year on worries about competition, falling returns and fears artificial intelligence (AI) will upend software businesses financed by them.

Blue Owl Capital was the latest BDC to report it received a historic level of redemption requests this week and was limiting withdrawals, which it is allowed to do.

Other big players such as Ares Management, Apollo Global, Blackstone, KKR and private credit arms of banks such as Morgan Stanley, JP Morgan, Goldman Sachs have also capped redemptions.

Most have signalled the redemptions showed the private credit industry was going through a period of recalibration rather than a crisis.