Quick overview

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BlackRock shares plunge after the firm limited withdrawals from one of its largest private credit funds following a surge in redemption requests. The move rattled investors and revived concerns about the $1.8 trillion market.

Financial giant BlackRock limited withdrawals from one of its major private credit funds after a sharp increase in redemption requests from investors, amid growing nervousness in the roughly $1.8 trillion alternative asset class, according to Bloomberg. The decision sent the asset manager’s shares down more than 7% on Wall Street.

The affected vehicle is the HPS Corporate Lending Fund, a roughly $26 billion fund specializing in direct loans to companies. According to the report, investors requested to redeem about 9.3% of their holdings, but the firm capped redemptions at 5%.

In dollar terms, redemption requests were estimated at around $1.2 billion, though investors will ultimately receive roughly $620 million — equivalent to the cash available in the fund at the end of last year.

The firm said the cap is part of its standard liquidity management in private credit vehicles, where the underlying assets — long-term corporate loans — are less liquid than traditional financial instruments.

“Without this mechanism there would be a structural mismatch between investor capital and the expected duration of the loans the fund invests in,” the company said in a statement cited by Bloomberg.

Rising caution in the market

The episode reflects growing investor concerns about the private credit market, which has expanded rapidly in recent years and become one of the most dynamic segments within alternative assets.

In recent weeks, doubts have increased over lending standards following several corporate collapses that raised alarms across the sector.

Another emerging factor is the potential impact of artificial intelligence on certain business models, which could affect the repayment capacity of some companies financed through this type of lending.

Against this backdrop, several funds are preparing for a possible wave of redemptions as investors look to reduce their exposure.

Pressure on sector stocks

The concerns have also spilled over into equity markets. Shares of BlackRock fell 7.2% in New York, while other alternative asset managers such as Ares Management and KKR are experiencing one of their worst starts to a year in a decade, according to Bloomberg.

The fund in question is managed by HPS Investment Partners, one of the world’s largest private credit firms, which BlackRock acquired last year as part of its strategy to expand in private markets.

Despite the volatility, the firm said limiting withdrawals will allow the fund to take advantage of new investment opportunities in a more uncertain environment.

Meanwhile, another vehicle — the BlackRock Private Credit Fund, which manages about $2.2 billion in assets — received redemption requests equal to 4.5% of its shares, though the company said it will honor all those requests.

The move comes as other major players in the sector try to avoid redemption limits. This week, for example, the flagship private credit fund of Blackstone met record repurchase requests totaling 7.9% of its shares, partly because the firm and its own employees absorbed some of the withdrawals.