Two major players in private credit, Ares Management and Apollo Global Management, have restricted investor withdrawals from their funds, signalling growing pressure in the US$1.8 trillion market. Ares Strategic Income Fund, managing US$10.7 billion, capped withdrawals at 5 per cent after clients requested to redeem 11.6 per cent of shares. Similarly, Apollo Debt Solutions, a US$15.1 billion business development company, implemented the same limit following redemption requests of 11.2 per cent.
The redemption requests, exceeding those previously seen from Blackstone and BlackRock, highlight increasing investor concerns about a potential liquidity crunch in the illiquid private credit market. These firms, which have been key drivers of the private credit boom, are now facing investor apprehension regarding lending practices and exposure to businesses susceptible to the impacts of artificial intelligence. Ares Management is a global alternative investment manager providing primary and secondary investment solutions. Apollo Global Management is a high-growth alternative asset manager.
The surge in redemption requests has prompted debate about the suitability of direct lending for investors seeking occasional liquidity. While some managers, like Blue Owl Capital, have sold assets or injected employee cash to meet requests, most have limited redemptions, emphasising the benefits of this approach. This wave of investor unease briefly erased US$10.2 billion in market capitalisation from Ares, Apollo, Blackstone, and KKR & Co. However, Ares closed 1 per cent lower, Apollo ended 0.7 per cent higher, Blackstone slid 1.3 per cent, and KKR remained relatively unchanged.
Weakening demand and increased investor cash-outs could further tighten liquidity for the funds, making it more challenging to underwrite new loans. Ares stated that the redemption decisions were made in the best interests of the Fund and its stakeholders. Both Apollo Debt Solutions and Ares Strategic Income Fund have indicated that they will offer withdrawals of up to 5 per cent of shares again next quarter.
