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Blackstone’s flagship private credit fund was hit with $1.7bn of net outflows in the first quarter after an exodus from the asset class cut off a crucial source of fundraising for the private investment giant.
Redemption requests from the $82bn Blackstone private credit fund, known as Bcred, rose to 7.9 per cent of its assets in the first quarter, eclipsing a 5 per cent threshold that allows the private investment group to limit payouts to withdrawing investors.
The redemptions will be closely watched across the wider $2tn private credit industry as an early sign of retail investors’ increasing unease with the asset class. It will also provide a test for so-called semi-liquid funds that have proliferated across Wall Street, which offer retail investors the ability to exit periodically even though the funds are invested in assets that rarely or never trade.
A series of high-profile writedowns and restructurings in the industry, as well as the decision by rival investment group Blue Owl to halt redemptions at a private fund, have spooked retail and wealthy investors who had committed hundreds of billions of dollars to the industry in recent years.
New fundraising from retail investors has slowed markedly, according to disclosures from some of the largest funds reviewed by the FT.
Blackstone paid out the redemptions in full after the company and its employees invested $400mn to help cover the requests, which it said further aligned the group with shareholders of the fund.
Blackstone said its decision to invest in Bcred was “driven by the tender offer structure”, which would have otherwise restricted redemptions to 7 per cent and “not by any constraints on Bcred’s liquidity”.
The New York-headquartered group drew in nearly $2bn of new commitments from investors in the quarter but suffered roughly $3.7bn of redemption requests.
“Our conviction in Bcred is grounded in its strong portfolio and track record,” the group said in a disclosure with the US securities regulator.
Bcred has been a crucial part of Blackstone’s growth, with the fund generating $1.2bn in management, advisory and performance fees last year, 13 per cent of what the investment group drew in.
Barclays analyst Benjamin Budish said before Bcred published its results: “Given the higher than average fee rates generated from these products . . . as well as quarterly performance fees included within [fee-related earnings], the flow profile of these funds is critical.”
He added: “The key question for us, which we think is the unknown at this point, is how long this lasts.”
Bcred is the first major fund to report quarterly redemptions, with similar vehicles run by rivals at Ares Management, Apollo Global, Blue Owl and BlackRock’s HPS Investment Partners all in a window where they allow investors to exit.
Funds have generally been able to cover redemption requests with inflows, but a shift to net outflows will start to draw down the industry’s liquidity buffers. Executives have said they are well prepared, pointing to bank credit lines as well as pools of more liquid loans they could sell to raise cash if needed.
