BlackRock has restricted investor redemptions from one of its major private credit funds following a sharp increase in client withdrawal requests. This move is seen as the latest indication of investor unease within the $1.8 trillion private credit industry.
The firm's $26 billion HPS Corporate Loan Fund stated in a declaration on Friday that shareholders had submitted requests to redeem 9.3% of their holdings. However, the fund's management decided to cap the repurchase limit at 5%. Based on calculations, the total value of shares requested for repurchase was approximately $1.2 billion, but investors will ultimately receive only about $620 million.
This represents the most explicit case of a major private credit fund limiting investor redemptions since late last year. At that time, investors grew increasingly cautious about the asset class following several high-profile defaults that raised concerns over lending standards. Previously, many institutions had chosen to meet higher redemption demands or return capital to investors through other means.
The company stated in its announcement that this action is consistent with the current liquidity management strategy of its flagship direct lending retail product, HLEND, and is a "fundamental" feature of the investment product.
The declaration noted, "Without this mechanism, there would be a structural mismatch between the duration of investor capital and the expected term of the private credit loans held by HLEND."
Shares of BlackRock fell more than 7% in early trading on Friday in New York. Alternative asset managers KKR & Co. and Ares Management Corporation also experienced similar declines.
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