By Arasu Kannagi Basil and Isla Binnie
NEW YORK, June 4 (Reuters) – Blackstone has capped withdrawals at its flagship private credit fund as redemption requests rose in the second quarter, the world’s largest alternative asset manager said on Thursday, following many peers.
Investors sought to pull out 10% of shares in the second quarter, compared with 7.9% in the previous quarter, from the $79 billion Blackstone Private Credit Fund (BCRED). It limited withdrawals to 5%, the customary threshold for these vehicles.
The attempts to cash out indicate wealthy individuals are continuing a recent retreat after many years of piling into funds that give them exposure to assets that rarely trade. They pulled more money out of funds like BCRED at the beginning of this year than they put in, a first for the asset class.
While most fund managers had capped redemptions at 5% in the first quarter, Blackstone raised the threshold to pay back all the money requested. The company and some employees pooled money to help meet all the redemption requests.
But it said in a statement on Thursday that the limits were deliberate and designed to replace immediate access to capital with the prospect of better long-term returns.
“BCRED’s structure is a fundamental feature, with investors exchanging some liquidity at times for long-term outperformance,” it said in a statement.
Analysts said the requests were in line with or lower than they expected, but flagged concerns about continued investor demand for the funds.
“We think 10% is better than feared,” Evercore analysts said in a note, comparing the increasing redemptions with those seen at a $31.3 billion Cliffwater fund earlier this week.
Non-traded business development companies (BDCs), like BCRED, generally offer to buy back some shares every quarter.
But fewer new buyers came in to the fund in the period, leading to net outflows of about 3% of the fund. “The big slowdown in gross sales this quarter is a larger, and more prolonged issue, in our view, for both BCRED and the industry,” the Evercore analysts said.
Blackstone’s shares rose 8%, with many peers following suit. The stock had fallen on Wednesday after Switzerland’s Partners Group limited redemptions from a private equity fund and investors braced for more.
Private credit funds and analysts say limiting withdrawals cuts the risk of forced asset sales.
Blackstone said the repayment calendar was “aligned with the expected repayment cycle of investments, while preserving capital to deploy in attractive market environments.”