BlackRock Inc. curbed withdrawals from one of its biggest private credit funds after client requests for redemptions spiked, the latest sign of investor anxiety about the $1.8 trillion private credit industry.
The firm's $26 billion HPS Corporate Lending Fund, one of the largest non-traded business development companies, said in a statement Friday that shareholders requested 9.3% of their shares, but management decided to cap the repurchases at 5%. While the total value of shares would have been about $1.2 billion, according to Bloomberg calculations, investors will get back about $620 million that the fund held at year-end.
It's the clearest instance of gating withdrawals among major private credit funds since late last year, when investors grew increasingly skittish about the asset class after high-profile collapses raised concerns about lending standards. Many firms had thus far opted to meet the higher redemption requests or looked to repay investors by other means.
BlackRock said the step is in line with its existing management of liquidity for the flagship direct lending retail product, known as HLEND, and a “foundational” feature of the investment.
“Without it, there would be a structural mismatch between investor capital and the expected duration of the private credit loans in which HLEND invests,” the firm said.
Last month, the non-traded BDC offered to tender as much as 5% of its shares, as is typical for such entities. It faced withdrawals of about 4.1% in the prior period.
BlackRock shares fell as much as 8.3% on Friday, while the stocks of alternative asset managers including KKR & Co. and Ares Management Corp. also swooned, as they're off to their worst start to a year in a decade.
Private credit funds broadly are bracing for a wave of redemption requests as angst grows around the industry's lending practices and exposure to businesses that could be upended by artificial intelligence. HPS Investment Partners, among the largest alternative credit managers, was acquired by BlackRock last year as part of its effort to expand further into private assets.
HPS executives said Friday the step to restrict redemptions would help the fund buy into “compelling investment opportunities” amid uncertainty and volatility.
With redemption requests starting to surpass the typical 5% thresholds, firms such as BlackRock face tough decisions about whether to offer clients liquidity, Evercore ISI's Glenn Schorr wrote in a note.
“HPS' decision to hold the line at 5% is the right one because it preserves the integrity of non-traded vehicles, protects the fund from being a forced seller of assets, and avoids incremental leverage,” Schorr wrote. “Semi-liquid funds were designed and marketed as products offering limited liquidity, especially during times of stress.”
A separate BlackRock private credit fund, with about $2.2 billion of assets at year-end, also disclosed Friday that investors asked to redeem 4.5% of their shares. The vehicle, called BlackRock Private Credit Fund, will meet all of those requests.
Other asset managers have taken steps to avoid gating withdrawals like HLEND.
Earlier this week, Blackstone Inc.'s flagship private credit fund fulfilled requests to tender a record 7.9% of shares, partly by having the firm and employees step in to offset some of the withdrawals.
In January, Blue Owl Capital Inc. allowed investors in one of its technology-focused funds to cash in about $527 million of shares, or roughly 15% of the fund's net assets.
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