The market may be in full-blown face-ripping bubble mode, and software stocks are now gripped in by a category 5 gamma squeeze hurricane, but not even that is helping the ongoing debacle that is private credit.
One week after Cliffwater's Private Credit fund gated investors for a second straight quarter, and days after Blackstone also gated investors in its private credit fund for the first time (recall during Q1, the fund allowed investors to redeem a record 7.9% after tapping senior executives to help finance the withdrawals with hundreds of millions of their own cash, but when faced with an even bigger flood of redemptions in Q2 it gave up and decided to join the gate parade), BlackRock capped redemptions from its flagship private credit fund for the second straight quarter after investors sought to pull about 13%, a sign that shareholders remain extremely nervous about the health of the $1.8 trillion private credit market.
Blackrock's HPS Corporate Lending Fund, known as HLEND, said it would allow only 5% redemptions, according to a filing Friday. The request for 13.3% was about 50% higher than the prior quarter when shareholders asked to redeem 9.3% of their shares.
So far this quarter we have seen an acceleration in redemption requests as private credit investors clearly are concerned about their liquidity despite the raging bull market in all other asset classes.
“This liquidity feature is critical to HLEND’s ability to provide its investors with a premium return to public credit markets,” the firm said in a letter to investors. “This profile is further bolstered by continued subscriptions and distribution reinvestment, which together are expected to more than fully offset repurchases during the first six months of 2026.”
As Bloomberg reminds us, HLEND’s decision to cap redemptions in the previous quarter was the first major instance of a private credit manager taking action to enforce the limit and manage liquidity since concerns over underwriting standards and exposure to software businesses vulnerable to AI disruption bubbled to the surface early in the year.
The move was a contrast to its top rivals including Blackstone, which had gone to great lengths to satisfy investor demands for cash. But this quarter, Blackstone also enforced the 5% limit on its flagship private credit fund after investors asked to redeem even more money than in the prior period.
Indeed, redemption requests are set to increase across the industry as investors redouble efforts to claw back money after being restricted. And there’s persistent concerns about the credit cycle turning, with industry leaders warning of a rise in defaults as artificial intelligence continues to disrupt businesses and borrowings from the era of ultra-low rates comes due.
HLEND has produced a 10.2% annualized total return since it was formed, the letter said, which is cold comfort to those investors who are hoping to redeem their profits and instead receive a gating notification.
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