Source: https://beincrypto.com/apollo-private-credit-withdrawal-cap-stress/
Apollo's $25 billion private credit fund received withdrawal requests of 11.2% this quarter and honored less than half of them, capped at 5%. BlackRock did the same with its $26 billion fund, Blue Owl replaced withdrawal requests with IOUs entirely, and Morgan Stanley got hit with 10.9% redemption requests.
This is now happening simultaneously across the entire $1.8 trillion private credit industry. The structural problem is simple: these funds hold illiquid corporate loans that can't be quickly sold, so when everyone wants out at once, the math doesn't work.
Fortune is calling it a $265 billion meltdown. Whether this is a manageable liquidity event or the leading edge of something larger is the question nobody can answer yet.
Apollo Just Gave Investors Only 45% of Requested Withdrawals. BlackRock, Morgan Stanley, and Blue Owl Are Doing the Same Thing.
byu/DustInside6861 ininvesting
Posted by DustInside6861
4 Comments
There was a lot of buzz in 2022 when Blackstone’s giant real estate fund [started gating redemptions](https://www.spglobal.com/market-intelligence/en/news-insights/articles/2022/12/gates-come-down-on-breit-private-equity-pursues-application-software-deals-73442531); ultimately nothing bad came out of it and it took down the gates a bit over a year later.
Strap in. This only gets worse
Strap in. This only gets better
These semi-liquid BDCs are just the tip of the iceberg cos they make up 15-20% of all funds. They have no choice but to gate withdrawals (as per their original agreements) but the pressure rises if the redemption requests keep rising.
The really bad part comes when a lot of private credit funds that started in 2019-2022 will mature in 2026-2028.
Given that we’re late in the credit cycle, a lot of private credit investors from those years will want their money back when the funds mature.
Unfortunately, the private credit borrowers aren’t ready to pay off their debt yet and many will need to rollover or refinance.
So a run on the private credit funds (starting with BDCs today and maturing funds over the next few years) will mean a lot of the borrowers will go into distress, further eroding confidence in private credit funds just as the maturity wall hits.
The industry is built for rising AUMs in good times. When the PC industry AUMs shrink, that’s when we know who was swimming naked.