Mumbai, Mar 07 : BlackRock has restricted investor withdrawals from one of its flagship private credit funds after a sharp increase in redemption requests, highlighting growing concerns about liquidity risks in the rapidly expanding private credit market.
The world’s largest asset manager announced the move after its $26 billion HPS Corporate Lending Fund (HLEND) received withdrawal requests exceeding the usual quarterly redemption limit. Investors sought to withdraw about $1.2 billion during the first quarter, roughly 9.3 per cent of the fund’s net asset value.
Under the fund’s rules, managers can limit payouts once redemption requests cross the 5 per cent threshold. As a result, the company said it will distribute around $620 million this quarter while restricting the remaining withdrawals.
Market reaction was swift, with BlackRock shares falling about 6.7 per cent on the New York Stock Exchange during a broader market decline driven by weak US jobs data and geopolitical tensions in the Middle East.
The latest development comes as sentiment weakens across the $2 trillion private credit industry, where funds lend to mid-sized companies that typically have limited access to traditional bank financing. Such loans are often illiquid, creating challenges when a large number of investors request their money back simultaneously.
Analysts say the situation exposes the structural mismatch between investor expectations for liquidity and the longer duration of private credit investments. Greggory Warren, a senior analyst at Morningstar, said the episode could serve as a warning for regulators and investors about the risks associated with illiquid funds marketed to wealthy individuals.
Pressure has been building across the sector following a series of high-profile bankruptcies, including a US auto parts supplier and a subprime auto lender, as well as the collapse of a UK mortgage provider.
Other major players have also faced redemption pressures. Blackstone recently raised the withdrawal cap on one of its funds to 7 per cent and injected $400 million to help meet investor requests, while Blue Owl Capital bought back a portion of one of its investment funds earlier this year.
BlackRock entered the private credit market more aggressively in 2024 after acquiring HPS Investment Partners in a $12 billion deal. The fund primarily lends to established private companies with stable cash flows and structures loans to ensure priority repayment in case of default.
However, market volatility and concerns about rising loan defaults have unsettled investors, pushing many toward safer assets. About 19 per cent of the fund’s portfolio is linked to the software sector, which has also faced heavy selling amid fears of disruption from artificial intelligence-driven startups.
Industry participants say such redemption limits are designed to prevent funds from being forced to sell assets quickly, which could hurt returns for remaining investors in markets where underlying loans are difficult to trade.