Crisis Intensifies! Private credit giants such as Blackstone face billions in redemption: only agree to pay out 70%

Private credit funds targeting wealthy individuals are facing concentrated redemptions, with fund managers initiating redemption restrictions, agreeing to pay out only about 70% of requests. One of Wall Street's most important growth engines is under "slowdown" pressure, and the valuations of related publicly listed private capital firms are also being re-evaluated.

According to the UK Financial Times, in the first quarter of this year, some of the largest private credit funds collectively faced more than $10 billion in redemption requests, involving institutions such as Blackstone, BlackRock, Cliffwater, Morgan Stanley, and Monroe Capital.

The debt funds managed by these institutions agreed to pay out only about 70% of the $10.1 billion in redemption requests, with the remainder deferred. In the next two weeks, as institutions like Ares Management, Apollo Global, Blue Owl, Oaktree, and Goldman Sachs finish tallying statistics, this redemption amount is expected to increase further.

The withdrawal of funds quickly spread to the secondary market. The share prices of relevant private capital companies have generally fallen by 25% or more this year, with a combined market value evaporation of over $100 billion. Investors have begun to re-examine the fee-based growth and valuation premiums supported by retail private credit products.

Redemptions Exceed $10 Billion in Q1, Payouts Forced to 70 Cents on the Dollar

Financial Times calculations show that debt funds under Blackstone, BlackRock, Cliffwater, Morgan Stanley, and Monroe Capital collectively faced $10.1 billion in redemption requests in Q1 and agreed to honor about 70%.

Redemption pressure continues to spread. The report points out that in the next two weeks, Ares Management, Apollo Global, Blue Owl, Oaktree, and Goldman Sachs will successively finish compiling investor redemption requests, and the total redemption amount is expected to further rise.

From an asset scale perspective, funds that have disclosed redemption figures manage a total of about $166 billion, which is still only a small part of the nearly $1.5 trillion direct lending market. But these products are among the fastest-growing segments in the private investment industry, so capital volatility has a larger marginal impact on the managers' “growth narrative.”

From Net Inflows to Net Outflows, Wall Street's Growth Engine Faces Headwinds

This wave of redemptions has reversed the previously sustained multi-year trend of capital inflows. Over the past five years, large private debt funds have attracted nearly $200 billion of capital inflow, driving the expansion of the industry's scale and profitability. When redemptions lead to restricted withdrawals, investor expectations regarding growth sustainability immediately cool down.

Redemption restrictions themselves have become a trigger point for risk pricing. This time, many funds only agreed to honor about 70% of redemption requests, meaning investors cannot always withdraw the full amount when needed—this reality undermines the attractiveness of semi-liquid private credit products.

Goldman Sachs analysts calculate that the asset size of retail private credit funds has grown from $3.4 billion at the end of 2021 to $22.2 billion at the end of last year, but this growth has begun to reverse this year. After the redemption wave highlighted the risk that “withdrawals are not always possible at any time,” Goldman Sachs expects such funds to lose $4.5 billion to $7 billion in assets over the next two years.

Fee-Related Income Becomes a Market Focus, and Drives Valuations

For listed managers, retail private credit funds are not just about asset size, but also directly correspond to predictable management and incentive fee income.

Blackstone’s $48 billion Bcred debt fund has become its largest single fee source, accounting for about 13% of the total fee income of this $1.3 trillion asset manager.

Bcred charges Blackstone a 1.25% annual management fee, and after reaching a 5% minimum return hurdle, it charges a 12.5% performance fee. Last year this fund contributed about $1.2 billion in fee income to Blackstone.

At Blue Owl, its $35 billion private fund OCIC is likewise key to growth, having paid Blue Owl about $447 million in management and incentive fees last year.

Goldman Sachs analysts estimate Blue Owl’s reliance on these types of funds for affluent individuals is the highest among its peers, with about 21% of annual fee-related income linked to these products.

At the industry level, the report points out that private capital groups in recent years have emphasized more predictable fee-based income to boost appeal to equity investors and push their valuations up to 30 to 40 times fee-based income. The cost is that once retail capital collectively withdraws during market turmoil, expectations for fee-based growth can quickly be revised down.

Stocks Retreat Collectively, Market Reprices “Growth Certainty”

The primary market consequence of the redemption wave is that private capital stocks have suffered widespread sell-offs. The report shows that the share prices of companies such as Blackstone, KKR, Blue Owl, Ares, and Apollo have all dropped by 25% or more this year, with a combined market value shrinkage of over $100 billion.

The CEO of Vulcan Value Partners told the Financial Times that the entire industry is under significant pressure. He also pointed out that the market sell-off has not sufficiently distinguished between strong and weak business models, and some companies that rely more on relatively stable sources of capital, such as pensions and endowments, have been treated the same.

The report also emphasizes that companies like Blackstone and Blue Owl do not hold loans on their own balance sheets, so their direct credit loss exposure is not the core issue of market volatility. The main reason is that investors are re-assessing future growth, the stability of retail capital, and the sustainability of fee-based income.

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