Blackstone Private Credit Fund Caps Withdrawals as Redemption Requests Jump

• Blackstone has capped withdrawals at its flagship private credit fund as redemption requests rose in the second quarter, the world's largest alternative asset manager said on Thursday, following many peers. Investors sought to pull out 10% of shares in the second quarter, compared with 7.9% in the previous quarter, from the $79 billion Blackstone Private Credit Fund (BCRED). It limited withdrawals to 5%, the customary threshold for these vehicles.
• The attempts to cash out indicate wealthy individuals are continuing a recent retreat after many years of piling into funds that give them exposure to assets that rarely trade. They pulled more money out of funds like BCRED at the beginning of this year than they put in, a first for the asset class. While most fund managers had capped redemptions at 5% in the first quarter, Blackstone raised the threshold to pay back all the money requested. The company and some employees pooled money to help meet all the redemption requests.
• Blackstone said the limits were deliberate and designed to replace immediate access to capital with the prospect of better long-term returns. “BCRED's structure is a fundamental feature, with investors exchanging some liquidity at times for long-term outperformance,” it said in a statement. Analysts said the requests were in line with or lower than they expected, but flagged concerns about continued investor demand for the funds. “We think 10% is better than feared,” Evercore analysts said in a note, comparing the increasing redemptions with those seen at a $31.3 billion Cliffwater fund earlier this week.
• Non-traded business development companies (BDCs), like BCRED, generally offer to buy back some shares every quarter. But fewer new buyers came into the fund in the period, leading to net outflows of about 3% of the fund. Blackstone's shares rose 8%, with many peers following suit. The stock had fallen on Wednesday after Switzerland's Partners Group limited redemptions from a private equity fund and investors braced for more.
• BCRED remains well capitalised, with loan repayments combined with inflows outpacing share repurchases, the fund said. Its Class I shares have delivered a 9.3% annualised total return since inception, which the firm said represents a 50.0% premium to leveraged loans.
• BCRED's latest redemption window, via its tender offer, ran from May 1 to May 29, with repurchase requests slowing in the latter half of that period. More broadly, redemption windows at key U.S. non-traded private credit funds for the second quarter began closing last Friday, and market participants are now watching the results. A top asset-management executive said last week that requests are expected to remain high throughout the year, while fellow competitors like Partners Group also flagged more withdrawal requests.

(Source: Reuters)