BlackRock’s flagship private credit vehicle saw withdrawal requests decline in the third quarter, providing a fresh indication that pressure on the sector’s non-traded funds may be beginning to moderate, according to a report by Reuters.
Investors have pulled back from private credit funds aimed at the wealth market this year amid concerns over underwriting standards and the potential impact of artificial intelligence on software companies, which account for a significant share of direct-lending portfolios. However, recent redemption data suggests some of that pressure could be subsiding as managers work through outstanding withdrawal requests.
The report cites a regulatory filing as showing that investors in BlackRock’s $23.1bn HPS Corporate Lending Fund sought to redeem approximately 11.5% of shares during the third quarter, down from 13.3% in the preceding three months. The fund will repurchase 5% of shares, in line with the standard quarterly limit for such vehicles.
Evercore analyst Glenn Schorr said the data indicated that the redemption backlog was now clearing, describing it as another positive signal for sentiment towards direct lending among wealth investors. He also expects redemption requests across business development companies to slow.
The figures come as managers across the private credit market continue to navigate elevated liquidity demands from investors in non-traded vehicles. BlackRock’s results follow data from other major funds showing varying degrees of improvement in redemption activity.
HLEND, one of the largest US non-traded private credit funds, has repurchased approximately $1.7bn of shares over three tender periods through 30 June, including around $600 million in its most recent offer. The fund said portfolio company performance remained strong and that its underlying investments continued to be well diversified.
Class I shares in HLEND have generated an annualised net total return of 9.9% since inception through July 31, according to the fund, outperforming broadly syndicated loan returns by around 3.5 percentage points.
Redemption requests also declined at BlackRock’s other private credit vehicles. Requests at BlackRock Private Credit Fund fell to 4.58% in the third quarter from approximately 5.3% previously, while HPS Corporate Capital Solutions Fund saw requests drop to 1.9% from 4.7%.
The latest figures follow Blackstone’s launch of the third-quarter redemption reporting season for major US non-traded private credit funds. TPG’s Twin Brook Capital Income Fund subsequently reported that repurchase requests had fallen to 1.2% from 2.1% in the previous quarter.
