Published on: 2026-03-26
Major private credit fund managers are imposing limits on investor withdrawals as redemption requests significantly exceed the funds’ available liquidity.
An increasing default rate, declining yields, and AI-driven disruption among technology borrowers are heightening investor concern.
Withdrawal gates are an inherent structural feature of these funds and do not necessarily indicate imminent collapse.
It is important to distinguish between stress in semi-liquid retail investment vehicles and the broader, more stable institutional private credit market.
Private credit is facing a public crisis test in the years after Ares Management and Apollo Global Management curbed withdrawals from flagship semi-liquid funds, pushing a long-standing structural tension into the open.
Ares said investors sought to redeem 11.6% of shares in its $21.5 billion Ares Strategic Income Fund for the quarter ended March 20, while Apollo capped redemptions at 5% of net asset value in its roughly $25 billion Apollo Debt Solutions BDC after requests reached 11.2% of outstanding shares, or more than $1.5 billion.
Earlier this month, BlackRock capped repurchases at 5% in its $26 billion HPS Corporate Lending Fund after requests climbed to 9.3% of shares, while Morgan Stanley also limited withdrawals from North Haven Private Income after investors sought to exit roughly 11% of shares.
This week, Ares Management and Apollo Global Management restricted investor withdrawals to less than half of the requested amounts in major semi-liquid private credit vehicles, bringing fresh attention to liquidity constraints in a market now estimated at about $1.8 trillion.
| Fund | Fund Size | Withdrawal Requests | Cap Imposed |
|---|---|---|---|
| Ares Strategic Income Fund | $10.7 billion | 11.6% | 5% |
| Apollo Debt Solutions | $15.1 billion | 11.2% | 5% |
| Cliffwater Corporate Lending Fund | Firm AUM about $70 billion | 14% | About 7% |
| Morgan Stanley North Haven Private Income | $7.6 billion | 11% in Q1 | Capped |
Other managers, including Blue Owl and Cliffwater, have also taken steps to slow or restrict withdrawals in recent weeks, adding to broader investor unease as concerns build over default risk, portfolio valuations, and the resilience of borrower cash flows.
Several factors have converged simultaneously, and the timing of these developments is significant.
As policy rates have moved down from their 2022 highs, the excess yield private credit once offered over comparable public debt has narrowed materially.
For investors willing to lock up capital in illiquid loans, that reduced premium no longer looks as compelling as it did when borrowing costs and base rates were much higher.
Credit performance is also beginning to deteriorate. By early 2026, the US private credit default rate had climbed to 5.8%, the highest level in several years, following high-profile failures such as Tricolor and First Brands in late 2025.
Within direct lending, the picture is more concerning still. Defaults are projected to rise to 8%, up from 5.6%, suggesting that pressure is no longer confined to a handful of idiosyncratic names.
A meaningful share of many private credit portfolios is tied to software and software-as-a-service borrowers, often in the 20% to 30% range.
That concentration is attracting closer scrutiny as generative AI begins to challenge parts of the traditional software model.
Investors are increasingly asking whether some of these companies will be able to sustain growth, preserve valuations, and service debt that was raised under far more forgiving financing conditions.
At the core of the current anxiety is a basic structural mismatch between the assets being held and the liquidity being offered to investors. The underlying loans are long-dated, illiquid, and typically intended to be held through the credit cycle.
The fund structures, however, often permit periodic redemptions. Loan maturities can run from three to seven years, while investors may be allowed to withdraw capital quarterly.
When redemption requests rise sharply, that gap becomes much harder to manage without gating withdrawals or relying on limited internal liquidity buffers.
Redemption limits are built into semi-liquid private credit funds because the underlying loans are illiquid and meant to be held over time, not traded in stressed markets to meet sudden withdrawals.
Still, the recent tension should not be dismissed. Warnings from senior market figures, including DoubleLine and JPMorgan, reflect growing concern that weaker underwriting, opaque valuations, and concentrated borrower exposures are becoming harder to ignore after failures such as Tricolor and First Brands.
The more important distinction is where the pressure is building. The strain is most visible in semi-liquid, retail-oriented vehicles that offer periodic liquidity against inherently illiquid assets.
That is not the same as a collapse across the broader private credit market, where most capital remains locked in longer-dated institutional structures backed by investors with far longer time horizons.
The closest recent parallel is the 2022 gating episode at Blackstone Real Estate Income Trust, but the resemblance is only partial.
That episode was largely seen as a valuation and sentiment shock. Private real estate values had not yet fully adjusted to public market conditions, and redemption pressure reflected that gap.
The current strain in private credit looks more serious because it is tied less to pricing optics and more to underlying borrower risk. When concern shifts from valuation marks to credit quality, the adjustment tends to be slower, more selective, and harder to reverse quickly.
For investors currently holding private credit exposure, a few practical considerations apply:
Know the fund structure: Semi-liquid interval funds and non-traded BDCs face liquidity risks distinct from those of institutional direct lending funds.
Read the redemption terms: Quarterly caps, often around 5%, are part of the structure and can limit access to cash when demand rises.
Check sector exposure: Funds with heavy software and SaaS concentration may face greater pressure if borrower fundamentals weaken.
Focus on underwriting quality: Manager discipline matters more than headline yield in a tougher credit environment.
Review liquidity buffers: Stronger platforms are better positioned to handle withdrawals without selling assets at poor prices.
Do not react to headlines alone: Short-term market noise can distort the underlying credit picture.
Watch the secondaries market: A deeper private secondaries market may offer an exit route without forcing distressed loan sales.
Redemption demand: If more funds begin hitting their withdrawal caps, pressure on confidence is likely to intensify.
Valuation marks: Broader markdowns in software or other stressed borrower groups would place further pressure on net asset values.
Bank financing: A more cautious stance from banks would reduce flexibility for private credit managers and make liquidity harder to manage.
Defaults and restructurings: More borrower failures would shift the story from a liquidity issue to a more serious credit deterioration cycle.
Because the underlying loans are illiquid. When withdrawal requests exceed a fund’s repurchase limit, managers can cap redemptions to avoid forced asset sales at weak prices.
It can be. The Federal Reserve says private credit borrowers are often riskier than syndicated-loan borrowers, and the sector is less transparent and less liquid than public credit markets.
It could amplify stress if defaults rise and bank financing tightens, as banks and private credit firms are increasingly interconnected. US banks have large lending and commitment exposure to the sector.
No. However, investors should review fund terms carefully, with particular attention to redemption limits, portfolio exposure, and valuation policy. The current environment resembles a liquidity and credit stress test rather than a full market collapse.
Private credit panic is real enough to deserve attention. This week, Ares and Apollo joined BlackRock and Morgan Stanley in limiting withdrawals, while banks, analysts, and fund investors grew more cautious about valuations, transparency, and default risk.
However, current evidence does not support a generalized call for panic. The market is experiencing a significant liquidity test in semi-liquid private credit funds, rather than a collapse of the entire private debt sector.
Investors should worry most about fund structure, portfolio quality, and sector exposure, because that is where the next phase of this story will be decided.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
