The US private credit crisis spreads! The "world's largest asset manager" is also forced to "limit redemptions" on its private credit funds.

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BlackRock’s flagship private credit fund, which manages $26 billion, has announced restrictions on redemptions, capping investor withdrawals at 5%, causing the company’s stock to drop and leading financial stocks lower.

According to a statement released by BlackRock on Friday, shareholders in its HPS Corporate Lending Fund (HLEND) requested to redeem 9.3% of units, but the fund managers decided to set the repurchase limit at 5%.

According to Bloomberg’s calculations, the total value of shareholder redemption requests was about $1.2 billion, while the approved redemption amount was approximately $620 million, equivalent to 5% of the fund’s net asset value at year-end.

After the announcement, BlackRock’s stock fell as much as 8.3% that day. Alternative asset managers such as Blue Owl and Ares Management also saw their stock prices decline, marking their worst early-year performance in a decade.

The private credit industry overall is facing pressure from a wave of investor redemptions. These funds had attracted hundreds of billions from retail investors and wealthy individuals, initially drawn by high returns, but began to exit at the first sign of stress.

Redemption Requests Surge, Funds Implement "Flow Limiter"

BlackRock stated that the redemption restriction is consistent with its liquidity management principles for the flagship direct lending retail product HLEND, and is a “fundamental” feature of the investment. BlackRock said in the statement:

Without such a mechanism, there would be a structural mismatch between investor capital and the expected duration of HLEND’s private credit loans.

The company also added that previously, when attractive investment opportunities were lacking, it would restrict inflows “rather than dilute the returns for existing shareholders or compromise our underwriting standards.”

HPS executives also stated on Friday that restricting redemptions will help the fund seize “attractive investment opportunities” amid current uncertainty and market volatility.

Last month, HLEND made a routine offer to repurchase up to 5% of units, with prior redemption requests totaling about 4.1%. This time, the demand for the redemption of 9.3% of units shows a clear increase in investor willingness to exit.

In addition, another private credit fund managed by BlackRock, with assets of about $2.2 billion, disclosed on Friday that investors requested to redeem 4.5% of their units. The fund, known as BlackRock Private Credit Fund, had assets of about $2.2 billion at year-end. This fund will meet all these redemption requests.

Concerns About AI Impact Intensify, Private Credit Industry Under Pressure

Private credit funds are generally facing a new wave of redemption pressure, stemming from two core concerns: whether industry-wide lending standards are prudent, and the exposure risk of invested companies to the disruptive impact of artificial intelligence.

HPS Investment Partners, one of the world’s largest alternative credit managers, was acquired by BlackRock last year as an important part of its strategic expansion into private assets.

The redemption incident occurred amid considerable macroeconomic uncertainty for the alternative asset management industry, and the market will closely watch how private credit participants subsequently balance liquidity management and investor relations.

According to Bloomberg, Blackstone’s flagship private credit fund this week met record redemption requests for 7.9% of units, with some funding coming from the company itself and employees to offset the withdrawals.

However, analysts have questioned whether the industry can withstand prolonged high levels of redemption pressure. The reason is that most semi-liquid funds hold assets in the form of loans, which are rarely or never traded in the market.

Last month, Blue Owl announced it would permanently suspend redemption requests for one of its funds. This further increased market volatility as investors had generally lost interest in this asset class.

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