Investors asked to redeem 13.3% of the value of assets in BlackRock‘s (NYSE:BLK) $25 billion private credit fund in Q1, as concerns about credit quality and how borrowers will manage AI-related disruption mount.
HPS Corporate Lending Fund plans to honor 5% of those requests, Reuters reported. The fund plans to repurchase roughly $620 million of its outstanding shares, according to a regulatory filing, which also pointed to the prospect of higher interest rates as a potential boost to future returns.
BlackRock also provided a preliminary estimate for the $2.2 billion HPS Corporate Capital Solutions Fund, saying redemption requests were about 4.7% of shares.
A separate filing for the $2.7 billion BlackRock Private Credit Fund (BDEBT), showed investors sought to redeem 5.3% of the fund's value for the quarter.
That vehicle also plans to meet 5% of requests, or roughly $83 million, according to Reuters. In its disclosure, BDEBT said it "serves the long-term interest of all BDEBT’s shareholders."
The company said its private debt accounts for $203 billion.
Other Recent Private Credit Redemptions
Other firms have recently capped redemptions on their private credit funds amidst turmoil in the $1.8 trillion private credit sector.
Monroe Capital's Income Plus Corp. capped redemptions at 5% after investors asked to redeem approximately 10% of shares.
Meanwhile, the flagship private credit fund of Cliffwater LLC capped redemptions at 5% in the second quarter after investors sought to redeem approximately 17% of the fund’s shares. Cliffwater told shareholders of Cliffwater's Corporate Lending Fund (CCLFX) in a letter that they would receive one-third of the money they requested back, Bloomberg reported.
Partners Group is restricting investor withdrawals from its $8.6 billion Global Value SICAV fund after redemption requests exceeded 5% of the net asset value, a move that rattled sentiment across private markets. The firm pointed to instability across open-ended vehicles since early last year, beginning in private credit and later affecting private equity, Reuters reported.
BlackRock Inc (NYSE:BLX), Ares Management Corp (NYSE:ARES), Morgan Stanley (NYSE:MS) and Barings (NYSE:BBDC) have also limited redemptions from private credit funds as of late.
Industry Leaders Commentary:
Some industry leaders believe that the worries surrounding artificial intelligence wiping out software-as-a-service businesses have cooled. Thoma Bravo co-founder says that new AI capabilities are lifting, not crushing many software vendors.
“The SaaSpocalyse is over. It’s finished, no more. It wasn’t a good term to begin with. A lot of people have said a lot of strange things about investing lately, and that’s one of the top ones," said Bravo.
"AI is an enormous tailwind for software companies. People were assuming that software companies just do one thing and they stay still. But software companies continue to evolve with infrastructure,” he said in an interview from the SuperReturn International conference in Berlin, CNBC reported.
While others tend to disagree, Apollo Global Management (NYSE:APO) president Jim Zelter told attendees at Bernstein's Strategic Decisions Conference in New York last month that he believes firms will continue to see investors looking to pull cash from private credit funds.
“I don’t think it was a one-shot,” he said of the redemption wave.
Zelter also warned that redemption pressure could tick higher if some investors try to time the limits. There "may be even a little bit of an increase if people want to game the system," he said, adding, "We are not through the turbulence yet."
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