March 6 (Reuters) – BlackRock said on Friday it has put limits on withdrawals from a flagship private credit fund after a surge in redemption requests, amid rising investor worries over the once red-hot asset class.
Shares of the world’s largest asset manager fell 4.6% in early trading.
Sentiment over private credit continues to worsen after Blue Owl replaced client redemptions with promised payouts, and the exposure of some players last year to the bankruptcies of a U.S. auto parts supplier and a subprime auto lender.
Earlier this week, mounting requests prompted rival Blackstone to lift its usual 5% redemption limit to 7%, while the company and its employees invested $400 million to allow all requests to be met.
BlackRock’s $26 billion HPS Corporate Lending Fund received withdrawal requests worth $1.2 billion in the first quarter, or roughly 9.3% of its net asset value.
It told investors it would pay out $620 million as part of the quarterly redemption, hitting a 5% threshold that allows the asset manager to restrict further withdrawals.
Redemption requests faced by some of the biggest players in the market reflect the liquidity mismatch in the sector, where investor money is often tied up in assets that cannot be sold immediately.
Investors are also rushing to safe havens as markets reel with heightened volatility this year, amid mounting concerns of an economic slowdown from a prolonged conflict in the Middle East, AI-fueled disruptions, and loan defaults.
HPS said in a statement that the uncertainty presents an opportunity.
“In our judgment, preserving the fund’s available capital to lean into this perceived opportunity set, while providing liquidity to shareholders consistently with the fund’s designed parameters, is in the best interest of the fund as a whole,” it said in a statement.
BlackRock bought HPS in a $12 billion deal last year, as part of its push to expand into the burgeoning private credit sector.
(Reporting by Ateev Bhandari in Bengaluru; Editing by Vijay Kishore and Sriraj Kalluvila)
