Sudden plunge! Breaking news in the financial world: BlackRock's fund restricts redemptions!

【Introduction】Redemption pressures surge, BlackRock’s $26 billion private credit fund explicitly activates redemption gates

Brothers and sisters, after the Iran war, unexpectedly, a liquidity crisis has also arrived.

Last night, U.S. stocks, the world’s largest asset management company BlackRock, plummeted 7%.

According to reports, BlackRock has restricted redemptions for one of its large private credit funds after a significant increase in client redemption requests. This is the latest sign of investor anxiety about the $1.8 trillion private credit industry.

The company-managed $26 billion HPS Corporate Lending Fund (HLEND) is one of the largest non-listed Business Development Companies (BDCs). The fund stated on Friday that shareholders requested to redeem 9.3% of their shares, but management decided to limit the buyback to 5%.

The total value of these shares is about $1.2 billion, but investors can ultimately only recover about $620 million, which is the amount of liquidity available for redemptions as of the end of last year.

This is the most notable redemption “gate” (restriction) case among large private credit funds since the end of last year. At that time, the collapse of some well-known companies triggered concerns about lending standards, and investors became increasingly uneasy about this asset class. Previously, many fund companies typically chose to meet higher redemption demands or repay investors through other means.

BlackRock stated that this move aligns with its existing liquidity management mechanism for its flagship retail direct lending product HLEND, which is also a “fundamental” design feature of this investment product.

BlackRock said, “Without this mechanism, there would be a structural mismatch between investors’ funds and the maturity of the private credit loans invested in by HLEND.”

Last month, this non-listed BDC proposed a maximum repurchase of 5% of its shares as per usual. In the previous cycle, the fund faced about 4.1% redemption requests.

As concerns grow over the industry’s lending practices and exposure to companies potentially disrupted by artificial intelligence, private credit funds are preparing for a wave of redemptions.

HPS Investment Partners, one of the largest alternative credit management firms, was acquired by BlackRock last year as part of BlackRock’s strategy to expand its private asset business.

HPS executives stated on Friday that restricting redemptions will help the fund seize “attractive investment opportunities” in the current uncertain and highly volatile environment.

Analysts say that as redemption requests begin to exceed the usual 5% threshold, companies like BlackRock face tough decisions: whether to provide liquidity to clients. “Maintaining the 5% redemption limit for HPS was the right decision, as it preserves the integrity of non-listed investment tools, prevents forced asset sales, and avoids increasing leverage. Semi-liquid funds are inherently designed and marketed as products with limited liquidity, especially during market stress periods.”

Another BlackRock private credit fund—the BlackRock Private Credit Fund—had assets of about $2.2 billion as of the end of last year, and on Friday, it also disclosed that investors requested to redeem 4.5% of their shares. The fund will fully meet these redemption requests.

Other asset management firms are also taking measures to avoid restrictions like those at HLEND.

Earlier this week, Blackstone’s flagship private credit fund met a record 7.9% redemption request, partly funded by the company and its employees taking on some of the redemptions.

In January this year, Blue Owl Capital allowed investors in a technology-focused fund to cash out about $527 million, accounting for approximately 15% of the fund’s net assets.

In addition to BlackRock, the stock prices of alternative asset management firms like KKR and Ares Management have also fallen sharply.

(Source: China Fund News)