This is not good news for a market segment that is already challenged to separate signal from noise...
Source: Bloomberg, Mo El Erian
Private Credit Faces Early-Year Withdrawal Pressure
In Q1, wealthy investors requested over $10B from major private credit funds. Blackstone, BlackRock, and Morgan Stanley are limiting withdrawals to ~70%. Apollo, Ares, and Goldman Sachs will report soon. Though small relative to $1.5T in direct lending, private credit’s fast growth and $9T U.S. retirement exposure mean liquidity strains could test the model’s foundations. Temporary squeeze or early warning? Source: FT
Private credit managers: “If you think debt is impaired, private equity is really cooked”
Also private credit managers: Source: @LeylaKuni, Gain.pro
UBS says private credit defaults could hit 15%.
That's 3x the peak bank loan default rate in 2008. Source: Leadlag report, Michel Gayed
The US private credit exit wave is picking up speed
Cliffwater’s $33B flagship fund capped redemptions at 7% after investors requested 14%—a record, per Bloomberg. Morgan Stanley limited withdrawals to 5% from its North Haven Private Income Fund, and BlackRock recently imposed limits at 9.3%. Pressure spreads as JPMorgan marks down software-linked loans and tightens lending to private credit firms due to concerns over credit quality, loan valuations, and AI disruption. Public BDCs are also under stress: FS KKR Capital ($FSK) saw its NAV premium collapse over 40 points, and Hercules Capital ($HTGC) dropped roughly 30 points. Investors seek liquidity, but options are shrinking. The key question: when will the broader market take notice? Source: FT, Global Markets Investor
Speed Matters in Credit Market Downturns
When credit markets unwind, timing is crucial. JPMorgan Chase, with its conservative private credit practices, may be among the first to reduce exposure and trigger margin calls. Early movers often limit losses, as seen with Goldman Sachs versus Credit Suisse during the Archegos collapse, where slow reaction cost Credit Suisse $5.5 billion. Credit cycles punish slow responses, not analysis. As leverage rises and growth slows, the key question is: which banks will be last to adjust? JPMorgan may demand more collateral on private credit loans, signaling declining collateral values since origination. Source: Desiree Fixler @desireefixler
Another one!! $33 Billion Cliffwater Private Credit Fund limits redemptions to 7%, half of what came in Blue Owl, Blackstone, BlackRock, JP Morgan, Cliffwater... so what's going on?
Private credit funds limit withdrawals because their assets private loans are illiquid and rarely traded. When redemption requests rise, managers must either sell assets at discounted prices or cap withdrawals; most choose caps to protect remaining investors. Semi-liquid funds therefore offer higher yields but reduced liquidity, especially during market stress. Source: Barchart
This chart keeps deteriorating.
The major private equity houses have had their stock prices collectively lopped by more than a third, yet the S&P 500 sits 3% below record highs. Disconcerting. Source: Jeff Weniger, WisdomTree Afficher la traduction
