Private Credit Teeters on the Edge

In our last post we wrote about the cracks in private credit that began to show in February. A large swath of semi-liquid, non-traded BDCs, that have historically ignored broader market dynamics (volatility laundering?), recorded their first negative monthly return in years. However, stress was manifesting across the biggest private credit managers not only in the form much-needed valuation adjustments (we saw losses ranging from -7 bps to -200+ bps), but more pressingly in the form of large-scale redemptions.

We noted firms like Apollo, Ares, BlackRock/ HPS gated investors; restricting redemptions to 5% of fund NAV per quarter, even as demand for share repurchases was double that amount in many cases. Others like Blackstone put in their own money to help meet surging redemptions to stave off investor panic. But, panicking they seem to be...Blue Owl, perhaps the epicenter of the private credit concern (see our prior post) shocked Wall Street today when they revealed that their flagship private credit funds were facing an unprecedented surge in withdrawal requests. Per Quote the Raven, "investors in the $36 billion Blue Owl Credit Income Corp. asked to redeem 21.9% of shares in the latest quarter (up from 5.2%), while the smaller Blue Owl Technology Income Corp. saw redemption requests spike to a staggering 40.7% (up from 15.4%)." The chart below (click to enlarge) tracks redemptions for the biggest private credit funds that collectively manage over $200 billion in gross assets.

Source: Zero Hedge and Quote the Raven 

Liquidity it is a fundamental concept in finance. Non-traded BDCs hold illiquid assets, but offer quarterly liquidity (yes, it is stated in their prospectus that it is partial liquidity; but these funds are heavily marketed to retail clients who may not fully understand the distinction). In any case, investors now realize something is amiss and are stampeding towards a very narrow exit door. That will only build pressure to try to get out quickly. Gates can help stave off the type of liquidity spiral that can rapidly wreak havoc in the public markets. But the process is still the same in private markets...only slower moving, where managers hope market dynamics will change for the better down the line and save them. So, investors face the classic prisoner's dilemma. As explained by Leyla Kunimoto at Accredited Investors Insights, actions are influenced by (i) limited information at the time of decision-making (private BDCs are notoriously opaque with limited insights about loans and portfolio exposures), (ii) there is no penalty to request a redemption, and (iii) critically, there is a potential penalty for not requesting one (losses transpire). So, under those circumstances your choices are:

What do you do? YOU REDEEM! Get out as much as you can, as quickly as you can! And hope others HOLD! When everyone has the same idea well things head south, very quickly. Private credit managers are learning that lesson painfully. Shares of public alternative asset managers are down 20-40% YTD, as shown in the chart below (click to enlarge). Shares of Blue Owl in particular have dropped more than 38% in 2026 and are down a whopping 68% from its all-time high of $26.68 on January 20, 2025.

Public Alternative Asset Manager Performances YTD

Source: Investment Research Partners, Y-Charts, as of March 31, 2026.