Blackstone’s flagship private credit fund faced a surge in withdrawals in the first quarter, as investor concerns over valuations and transparency in the fast-growing sector weighed on sentiment.
The New York-based investment firm allowed clients to withdraw $3.7bn from the $82bn Blackstone Private Credit Fund, known as BCRED, according to a filing on Monday. After $2bn of new commitments, net outflows totaled $1.7bn.
Blackstone’s shares fell as much as 8 per cent to a two-year low on Tuesday after it said redemption requests reached 7.9 per cent of the fund. The stock later pared losses to close down nearly 4 per cent. Shares of peers also declined before trimming losses, as broader U.S. indexes fell.
The firm said it raised its usual 5 per cent quarterly redemption cap to 7 per cent to meet demand. Blackstone and its employees invested $400m in the fund to help satisfy withdrawal requests.
More than 25 senior leaders across the firm contributed a combined $150m of that total, a person familiar with the matter said, confirming a report by Bloomberg News.
The $2tn private credit industry has expanded rapidly over the past decade, but has recently come under pressure over valuation practices and transparency. Investor jitters have also been fueled by developments at Blue Owl Capital, as well as past exposures within the sector to bankruptcies involving a US auto parts supplier and a subprime auto lender.
Wall Street lenders were further shaken by the collapse of UK mortgage lender Market Financial Solutions, reviving concerns about risks in parts of the private lending market.
Pressure builds on retail-facing credit funds
Funds such as BCRED, which cater to wealthy individuals, have faced particular strain. Like funds managed by Blue Owl, BCRED is structured as a business development company that raises capital and lends to mid-sized companies.
Analysts at JPMorgan said this marked the first quarterly outflow for BCRED, the largest non-traded fund of its kind, calling it a significant sign of weakening investor sentiment toward direct lending.
Investment bank RA Stanger, which tracks alternative assets including private equity and private credit, said it expects capital to shift away from private credit and forecasts about a 40 per cent year-on-year decline in business development company capital formation in 2026.
It compared the trend to 2023, <a href="https://jordangazette.com/uae-announces-early-spring-break-heres-when-students-get-time-off/”>when Blackstone limited withdrawals from a real estate fund aimed at wealthy investors.
About 24 per cent of Blackstone’s $1
27tn in assets under management comes from wealthy individuals, a segment asset managers have increasingly targeted as institutional investors such as pension funds moderate allocations.
Blackstone president Jon Grey told CNBC that products that allow periodic withdrawals involve a trade-off between liquidity and higher returns.
Institutional investors, who typically commit capital for longer periods, continue to allocate significant sums to private credit, he said.
Blackstone said its approach to handling redemptions was determined by the fund’s structure and not by constraints on BCRED’s liquidity.