Private Credit Funds Cap Redemptions Amid Liquidity Concerns

Several major private-credit funds have implemented redemption caps on nontraded business-development companies (BDCs), complicating efforts for wealthy investors to cash out their shares. Blackstone Group Inc, Blue Owl Capital, and the HPS Corporate Lending Fund managed by BlackRock have all capped redemptions at 5% after some request levels surged to 13%.

Fund managers maintain that liquidity remains ample, but the industry lacks a standardized reporting method. Current disclosures vary, with some funds reporting only cash and available credit, while others include Level 2 assets or undrawn credit facilities that may not be immediately accessible. For example, the Blackstone Private Credit Fund reported more than $17 billion in liquidity as of June 30.

Analysis of the funds' stability is divided. Fitch Ratings asserts that eight nontraded BDCs under its coverage possess a sufficient cushion to sustain 5% quarterly redemptions for one year. Conversely, research from Drexel University and the University of Pennsylvania suggests that cash buffers are insufficient to meet repeated redemptions, especially as new inflows to these funds decline.