The world’s largest asset manager BlackRock has limited withdrawals from a flagship debt fund after a surge in redemption requests, amid growing investor worries over the health of the USD 2 trillion private credit industry, amid a massive market selloff after a below-par American jobs data and escalating conflict in the Middle East.
According to Greggory Warren, senior stock analyst at Morningstar, sector sentiment has soured in the last few months. Retail investors are increasingly looking to get their money back from even established entities like BlackRock’s USD 26 billion HPS Corporate Lending Fund (HLEND), which were designed to be open to wealthy individuals.
“It should serve as a warning sign for the industry and the rulemakers about the downside of illiquid funds for retail investors,” he told Reuters.
Also, developments like bankruptcies of a US auto parts supplier, First Brands Group, a subprime auto lender Tricolor, and London-based property lender Century Capital Partners, have raised questions about the lending industry and operational standards in general. In this backdrop, increasing withdrawal requests have reportedly prompted rival Blackstone to lift the usual 5% redemption limit on a USD 82 billion fund to 7%, while the asset manager and its employees invested USD 400 million to allow all requests to be met.
Alternative asset manager Blue Owl, which has a 36-million-pound (USD 48 million) exposure to Century Capital Partners, reportedly bought back 15.4% of one of its funds in January 2026, two months prior to the British property lender entering bankruptcy. In fact, as per Bloomberg, Blue Owl, which manages USD 307 billion in assets, financed the riskiest slice of loans originated by Century, a bridging lender focused on high-end central London property.
Coming back to HLEND, the latter received withdrawal requests worth USD 1.2 billion in the first quarter, roughly 9.3% of its net asset value. It has now informed the investors about paying out USD 620 million as part of the quarterly redemption, hitting the 5% threshold that is the industry standard point, at which managers of these funds can restrict further withdrawals.
“The biggest risk for the alternative asset managers is that a marked increase in loan defaults on the part of their borrowers has an adverse effect on investment performance, which impacts future fundraising and monetisations,” Warren said, while talking about the Blue Owl episode.
HLEND stated that its loans have primarily been devised to mature private companies with stable cash flows. These financial products are also structured according to the “paid back first” principle; if the borrower goes bankrupt, apart from paying monthly dividends. Some 19% of HLEND’s portfolio is tied up in software, another sector that has been hogging the limelight for aggressive selling as investors fear AI-related disruptions.