Investors tried to pull $15.6 billion from private credit funds

The record number is 12.4 percent. Robert A. Stanger & Co. found that share of net asset value was what investors tried to pull out of private credit funds in the second quarter, its highest mark ever, up from 10.4 percent the previous quarter.

In July, the panic showed signs of easing. Trading Market Signals’ Private Credit Redemption Monitor reported on August 17 that tender requests across the three non-traded BDCs fell to 4.6 percent of net asset value, from 7.9 percent the quarter before, and Golub Capital’s GCRED cleared its July 29 tender in full below its cap. Whether the danger has passed or people have simply tired of waiting, belief now decides who gets paid as the line either moves or stalls.

The value of these wrappers is now over $300 billion, according to CoinCentral on May 18, with most of it sold to wealthy individuals seeking a replacement for bonds. Blackstone’s BCRED, Apollo’s Debt Solutions BDC, and Morgan Stanley’s North Haven Private Income Fund are structured to trade a steady income for so-called illiquidity: loans to companies that cannot be easily resold. Each fund prospectus includes a 5-percent-per-quarter exit cap.

CoinCentral noted that this cap left ten of sixteen monitored funds short of cash in the second quarter. Managers want to keep assets intact for the fees they generate; distribution channels want redemption stories to end so that clients stop blaming the adviser; and investors, after seeing their requests gated, are increasingly desperate to get out, which only tightens the gate further.

The June gates

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June set the stage. Morgan Stanley capped withdrawals at North Haven in one week after investors sought to redeem 11.6 percent of shares. Apollo gated its Debt Solutions vehicle when redemption requests reached 16.8 percent, the highest since the fund’s launch in January 2022, against $26 billion of net assets cited in its 10-Q. ECM Source reported on June 24 that, with Blackstone’s $79 billion BCRED already prorating requests above 10 percent of shares, America’s biggest non-traded credit funds all visibly gated in the same quarter for the first time since the product class topped $300 billion.

This is driven by arithmetic. A 5 percent quarterly cap means, even in optimal conditions, an investor can exit only about 18.5 percent a year, and unmet requests roll to the next quarter. ECM Source explained on June 24 that those in line now face year-long waits for their full exits. Trading Market Signals’ August 17 data showed sponsors fulfilled just 38 percent of second-quarter requests, returning about $5.9 billion and leaving roughly $9.6 billion outstanding.

Net outflows reached $3.8 billion, while fundraising hit its softest pace since 2020. Across the 25 monitored funds, redemptions in the first half outpaced new inflows by about $5.6 billion. A shrinking vehicle with fleeing investors can only sell loans down.

Private loan issuance has taken a hit. ECM Source reported on June 17 that issuance dropped to $45 billion in the three months through May, a 40 percent decline from the prior quarter, as funds locked in redemption queues slowed new lending.

This has real effects. Mid-sized companies that refinanced through these funds two years back now find lenders unwilling to answer calls.

Loan prices are already falling. Trading Market Signals’ August 17 data put public BDCs at about 80 percent of net asset value, drawing a public-market verdict on what the private books are worth. If the quoted versions of your holdings are marked down by a fifth, the quarterly NAV print no longer reassures anyone.

BREIT, Blackstone’s non-traded real estate trust, faced this before. Blackstone, as Angel Investors Network reported on July 28, hit its withdrawal wall in late 2022, locking the doors as requests exceeded its 2 percent monthly cap and maintaining gates through 2023. Eventually, performance steadied and flows reversed; by 2024, the event appeared only as a scare. The counter-example argues that credit is not real estate.

BREIT held visible, rent-generating assets with a tailwind from rate cuts; credit funds hold loans to leveraged firms, where defaults show up late. Angel Investors Network said on July 28 that BCRED's co-CEO Jonathan Bock resigned in June, leaving Brad Marshall to run the fund mid-gate. Real estate could wait for rates to drop. Credit must wait on defaults instead.

Who pays depends on timing. Investors who put in for redemption early were paid out at par. Later filers, as Trading Market Signals noted on August 17, saw prorated returns—Morgan Stanley filled just 43 percent of North Haven’s tender, below guidance to advisers. Buyers of secondary stakes and public BDCs profit now, acquiring assets at discounts surrendered by gated investors. Each point of discount is someone else's yield; sponsors, meanwhile, keep collecting management fees, as gating preserves the fee base by refusing investor cash-outs.

The best hope comes from third-quarter figures. Trading Market Signals reported on August 17 that GCRED’s July tender was met in full after a prior quarter where only 59 percent was filled. Early filers eased off once gates bit. If so, the gates may work as promised: punishing the impatient, rewarding the patient, and staunching a run before it takes hold. That is what the sponsors point to this month.

If defaults remain low and coupon payments keep coming in, queues clear and 2026 looks like a replay of BREIT. But if a recession brings actual loan losses to books still marked at par, the 20 percent NAV discount the public market already applies could become official. Then, the gate is no longer a release valve; it’s the lid that prevents an explosion.

The consequences fall on retirement savers who thought these were bond-equivalents, the advisers who sold them, and the mid-sized borrowers now left without their cheapest lender.

Trading Market Signals counted about $9.6 billion still waiting for exit on August 17. In private credit, liquidity is simply a promise kept in the order the requests come in.