Private credit keeps US$14 billion trapped in bid to outlast storm

Published Fri, Jul 3, 2026 · 10:17 AM

[NEW YORK] Ahead of reporting their second-quarter results, private credit managers acknowledged a sobering reality: The redemption wave engulfing the US$1.8 trillion market was unlikely to abate swiftly.

Now, as the last half of 2026 gets underway, direct lenders are realising just how relentless that pressure can be. 

More often than not, second-quarter exit requests have exceeded those of the prior three-month period.

The latest round has left more than US$14.5 billion of investor capital trapped at over a dozen funds, compared with just US$8.6 billion that shareholders were able to get back, according to Bloomberg estimates and data from Robert A Stanger & Co.

That effectively means funds are locking up roughly US$1.70 for every US$1 an investor reclaims.

Many in the industry suggest the latest batch of redemption requests in part reflects backlogged demand from investors blocked by the 5 per cent withdrawal caps imposed by several funds in the prior quarter.

That cycle – which largely stems from anxiety over concerns about asset quality, in particular exposure to the artificial intelligence-disrupted software sector – is expected to remain elevated while the jam clears, industry participants say.

“We did expect redemptions to pick up in the second quarter as investors rotate out of private credit” and into tangible assets such as real estate and infrastructure, said Michael Covello, executive managing director at Robert A Stanger.

“We expect to have up to eight quarters left of the redemption queue clearing while flows are still suppressed.”

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Blue Owl Capital on Thursday (Jul 2) showed the challenges in swiftly turning around the redemption pressure once a large backlog grows.

The private credit giant reported that investors in its roughly US$34 billion Blue Owl Credit Income asked to pull 18.8 per cent of shares in the second quarter, while those in the smaller Blue Owl Technology Income looked to redeem 38.1 per cent, levels only slightly lower than the prior period and still outsized relative to major rivals. 

That is even as executives stepped up efforts to engage with clients over the past three months, flying around the world trying to educate investors, according to a person with knowledge of the matter.

Barclays analysts led by Peter Troisi echoed the sentiment on backlogs, writing in a report last week that new requests to claw back shares actually decreased in the second quarter among funds they analysed as investors with unfulfilled first-quarter demands likely carried over their requests. 

Among the slew of fund managers seeing demands climb was Ares Management, which last month curbed withdrawals from its Strategic Income Fund for the second consecutive quarter after requests rose to 14.4 per cent. Investors had asked to redeem 11.6 per cent in the prior period. 

Morgan Stanley’s US$7 billion private credit fund also limited redemption demands at 5 per cent after investors sought to yank 11.6 per cent of their shares, surpassing submissions made in the first quarter.

Apollo Global Management capped requests from its largest non-traded private credit fund for retail investors, after shareholders wanted to pull 16.8 per cent, similarly exceeding the prior period. 

Some were forced to limit redemptions for the first time: Blackstone restricted withdrawals from its US$79 billion flagship private credit fund, BCRED, at 5 per cent after investors sought to pull 10 per cent of the shares.

In the previous quarter, the vehicle went to unusual lengths to meet investor demands to cash out 7.9 per cent, tapping its own senior executives to help fund the withdrawals with their cash.

There were also some outliers. Goldman Sachs Group was able to meet all redemption requests across both quarters and said demand declined in the most recent three months.

An Oaktree Capital Management private credit fund saw redemption requests drop by nearly half in the second quarter.

International demand

Amid the continued surge, some fund managers noted another trend: Some of the demand influx is coming from outside the US. 

For example, Ares reported that nearly half of the second-quarter withdrawal requests for its Strategic Income Fund came from smaller institutions and family offices based mostly outside the US – a cohort that represents less than 1 per cent of its shareholders. 

Apollo detailed a similar geographic disparity with its Apollo Debt Solutions vehicle, where it said domestic withdrawal requests settled at 4.3 per cent while offshore redemption demands climbed to 12.5 per cent.

Meanwhile, Blackstone reported that while overall repurchase requests rose in the second quarter, they decelerated near the end of the offer period, with onshore demand below prior quarter levels.

By one account, it may be a case of the more you ask for. 

“A common practice to get out of these funds is to ask for more than you actually want, when you expect to get less,” said Erik Kratz, chief investment officer at Arena Private Wealth. 

He recalled a past client who transferred a private real estate investment trust to him when public real estate investment trusts were struggling following an interest rate adjustment. The fund had restricted investor withdrawals the previous quarter. 

“I wanted to reduce the position by 50 per cent but asked for 100 per cent each quarter for two quarters and got there faster,” he said. BLOOMBERG