"Redemption wave" sweeps the U.S. private credit industry, PE giants' stock prices fall across the board

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The US private credit market is facing a concentrated liquidity stress test. Ares Management and Apollo Global Management have both announced restrictions on redemption requests from their private credit funds, sparking widespread concerns in the market and causing shares of several alternative asset management giants to drop.

On Monday evening, Apollo disclosed that its $25 billion business development company, Apollo Debt Solutions, would cap quarterly redemptions at 5% after investors requested to redeem 11.2% of shares.

Ares quickly followed suit, with its $10.7 billion Ares Strategic Income Fund also hitting the 5% redemption cap after requests for that quarter soared to 11.6%. The actions of both companies have further raised doubts about the liquidity of private credit.

As a result, the shares of Ares and Apollo dropped more than 4% in New York on Tuesday. Their peers, including TPG, Blackstone, KKR, and Blue Owl Capital, also fell across the board, with the financial sector index dropping as much as 0.8% intraday. So far this year, shares of several alternative asset managers have declined by more than double digits.

Redemption wave spreads, giants successively "lock the gates"

This wave of redemption pressure is not an isolated event, but a concentrated outbreak of industry-wide trends. According to Bloomberg, Morgan Stanley, Cliffwater LLC, and BlackRock earlier this month have already implemented redemption restrictions on private credit funds worth billions, with Ares and Apollo merely the latest to follow suit.

In the first quarter of this year, the tracked funds collectively received $13 billion in redemption requests, with a total managed investment portfolio of about $211 billion. To date, only about two-thirds of requests have been met, leaving $4.6 billion in unresolved redemption applications.

Take Ares Strategic Income Fund as an example: the fund received $1.2 billion in redemption requests in Q1 but only honored $524 million, which is just over two-fifths of the total applications. Ares attributes redemption pressure to a "minority" of family offices and medium-sized institutional investors, stating that these investors represent less than 1% of over 20,000 investors but hold more than 11% of the fund’s total assets. Notably, the fund recorded $708 million in new subscriptions during the same period, so its asset size did not shrink, but analysts generally expect new capital inflows to be near their peak.

Behind the redemption wave are investors’ persistent concerns about private credit market lending practices and exposure to industries sensitive to artificial intelligence disruption. Mark Malek, Chief Investment Officer at Siebert Financial, points out in a client report that Apollo’s disclosures reveal a clear gap between its public statements and actual portfolio exposure—software remains its largest sector holding. "Such gaps, at a time when confidence is most crucial, can damage trust," he wrote.

Liquidity illusion questioned, systemic risk debate heats up

The concentration of redemption restrictions has brought to the forefront the structural mismatch and long-standing liquidity challenges in the private credit market. These non-traded private credit funds aimed at retail and high net worth investors essentially hold illiquid underlying assets, yet offer relatively flexible quarterly redemption mechanisms, and the mismatch becomes apparent under sudden redemption pressure.

There is growing industry divergence over whether this turmoil signals deeper risks. Notable financial figures such as JPMorgan CEO Jamie Dimon and former Goldman Sachs CEO Lloyd Blankfein have compared current private credit market volatility to the situation preceding the 2008 global financial crisis.

However, some voices dispute that analogy. Mark Malek said, "This is not a 2008-style systemic banking crisis, because private credit is largely outside the traditional deposit-funded banking system. The more core issues are valuation, transparency, and the creation of a liquidity illusion in an asset class that has never truly been liquid."

Looking at the longer-term impact, the spread of redemption restrictions is already dragging down the industry’s fundraising outlook. Analysts expect that new fundraising from high net worth individuals at institutions like Blackstone, Ares, and Blue Owl will noticeably slow, though this channel has been a key industry growth driver. Meanwhile, the private credit industry is actively lobbying regulators to open 401k retirement plans to private investments, but this liquidity issue may complicate policy progress.

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