Jitters in the private credit market have spread to Wall Street, with several funds limiting withdrawals and major U.S. banks tightening lending to the $2 trillion industry. The shift in sentiment is attributed to concerns over valuations and transparency, compounded by recent high-profile bankruptcies. Alternative asset managers’ shares have also experienced sell-offs amid worries about the valuation of software companies they own or finance, influenced by the rapid advancement of artificial intelligence and its potential disruption of traditional business models.
Blue Owl Capital, a private capital firm, announced it would cap withdrawals from two retail-focused funds following a surge in redemption requests. Investors sought to withdraw 40.7% of shares in Blue Owl Technology Income Corp and 21.9% of shares in Blue Owl Credit Income Corp. Similarly, BlackRock, the world’s largest asset manager, restricted withdrawals from its flagship HPS Corporate Lending Fund after a jump in requests. Morgan Stanley also limited redemptions at one of its private credit funds after investors sought to withdraw almost 11% of shares outstanding.
Several other firms, including Apollo Global, Ares Management, and KKR, have also limited redemptions in their respective private credit funds. Blackstone, an alternative asset manager, saw a sharp rise in withdrawal requests from its flagship private-credit fund, BCRED, and let clients pull a bigger-than-usual $3.7 billion from the $82 billion fund. Oaktree Capital Management, on the other hand, decided to honor the full 8.5% in redemption requests it received in the first quarter.
JPMorgan has reportedly reduced the value of some loans to private credit funds after reviewing the impact of market turmoil around software companies. The bank went through its financing portfolio and re-marked loans with underlying software exposure. This re-marking of loans will reduce lending to the funds, according to a source familiar with the matter.
