Blackstone’s private credit fund hands investors record redemptions
The world’s largest alternative asset manager is allowing investors to pull a record amount of cash from its flagship private credit fund as anxiety continues to ripple through the trillion-dollar industry.
Blackstone will permit investors to redeem 7.9 per cent of shares from the fund – the equivalent to a whopping $3.8bn.
The financial giant said it would meet the requests through the firm and its employees stepping in with its own capital to bridge a 0.9 per cent gap, according to Bloomberg. Blackstone’s BCRED fund has around $82bn in total assets.
A Blackstone spokesperson said: “These investments were about meeting 100% of requests for the quarter with certainty and timeliness.
“They underscore our conviction in BCRED and alignment with its investors.”
Funds like Blackstone’s BCRED are “semi-liquid,” meaning they are designed to be held for years but offer small windows for investors to exit.
To prevent a “run on the fund” that would force the manager to sell off long-term loans at a loss, vehicles typically cap redemptions at five per cent of the fund’s total value per quarter.
But managers often have the discretion to “upsize” these offers – as Blackstone did by moving to seven per cent – to satisfy high demand and signal to the market that they have more than enough cash on hand to handle the pressure.
Financial bigwigs warn on private credit crisis
The rush for the exits at the fund marks the latest in a slew of evidence that the massive private credit market is facing its toughest test in years.
Investors have become increasingly worried that the software and technology firms that make up a large portion of the industry’s loan portfolios are uniquely vulnerable to being disrupted or replaced by artificial intelligence.
A series of financial bigwigs have weighed in on the booming sector, with Goldman Sachs’ boss through the financial crisis warning this week he “smells” signs of another financial crisis.
Billionaire investment banker Lloyd Blankfein, who served at the helm of Goldman from 2006 until 2018, said: “I don’t feel the storm, but the horses are starting to whinny in the corral.”
The banking veteran specifically criticised private credit lenders for their recent moves to encourage retail access – opening complex investments to everyday savers – at a time when market conditions are becoming increasingly unstable.
In Britain, the private credit market is estimated to have grown by 56 per cent since 2015 to $185bn (£138bn) making it the second largest after the US, according to a recent report by the House of Lords.
JP Morgan chief Jamie Dimon, last week warned of parallels to the financial crisis, with people “getting a little comfortable”.
The Wall Street chief also took a jab at some of his peers warning he sees “a couple of people doing some dumb things”.