BlackRock Fund Limits Withdrawals As Redemptions Rattle Private Credit

NEW YORK, March 6 (Reuters) – Black Rock Withdrawals from its flagship debt fund are limited following a surge in repayment demands as investors grow concerned about the $2 trillion private lending industry, it said on Friday.

Shares in the world’s largest asset manager fell 6.7% on the New York Stock Exchange amid a broader selloff in the market following worse-than-expected US employment data and the escalating US-Israeli war against Iran.

Confidence in private lending has deteriorated in recent months and retail investors are increasingly seeking their money back from funds such as: Black RockThe $26 billion HPS Corporate Credit Fund (HLEND) is designed to be open to wealthy individuals.

“This should serve as a warning sign for the industry and regulators about the downside of illiquid funds for retail investors,” said Greggory Warren, senior equity analyst at Morningstar.

last year bankruptcies The bankruptcy of a US auto parts supplier and a subprime auto loan provider and the collapse of a company UK mortgage lender Questions about credit standards were raised last week.

Increasing demands earlier this week spurred the rival into action Karataş To increase the usual 5 percent redemption limit on the $82 billion fund to 7 percent, the company and its employees invested $400 million to allow all claims to be met. Blue Owl bought back 15.4% of one of its funds in January.

HLEND received withdrawal requests worth $1.2 billion in the first quarter, or roughly 9.3% of its net asset value.

It said it would pay investors $620 million as part of a quarterly repayment, reaching the 5% threshold, the standard point at which fund managers can restrict further withdrawals.

Blue Owl replaced customer payments in a single fund with promised payments.

“The biggest risk for alternative asset managers is that a significant increase in borrower loan defaults will have a negative impact on investment performance, impacting future fundraising and monetization,” Warren said.

Acquired by HLEND, a business development company (BDC) Black Rock $ with manager HPS Investment Partners12 billion With the transition to private loans in 2024, these withdrawal requests exceeded the 5% limit for the first time since the foundation of the fund.

BDCs raise money predominantly from retail investors and use it to make loans to mid-market companies that often cannot be sold quickly; This means problems if many investors want to sell at the same time.

Blackstone President Jon Gray said last week that institutional investors continue to book private loans.

HLEND said the 5% restriction prevents “a structural mismatch between investor capital and the expected duration of private credit facilities in which HLEND invests.”

“By preventing redemptions out of doors, fund managers can avoid being forced to sell assets, which would negatively impact investment returns for remaining fund investors given the opacity and illiquidity of assets in these funds,” said Morningstar’s Warren.

Subscriptions to the fund were $840 million in the first quarter; this was below the $1.2 billion investors initially wanted to withdraw.

HLEND says its loans are primarily aimed at mature private companies with stable cash flows and are structured to be repaid first if the borrower goes bankrupt. It pays dividends monthly.

According to company documents, 19% of HLEND’s portfolio is tied to software; This sector is facing aggressive selling as investors fear disruption from AI-first startups.

Investors are flocking to safe havens as markets have been rocked by rising volatility this year, amid concerns about an economic slowdown stemming from a protracted conflict in the Middle East, AI-driven disruptions and credit defaults.

HPS said in a statement that it had the opportunity to address volatility.

(Reporting by Ateev Bhandari in Bengaluru; Editing by Vijay Kishore and Sriraj Kalluvila and Chizu Nomiyama)