The private‑credit market has hit a rough patch in recent months, with weakening investor sentiment and rising redemption requests at non‑traded business development companies (BDCs) signaling mounting stress.



Michael Lebowitz, a portfolio manager at RIA Advisors, believes that the &#34;chaos and bad press&#34; surrounding private credit has dragged down both strong and weak players in the sector. 



&#34;The poor sentiment toward private credit funds has dragged down many high-quality BDCs, as well as weaker ones. The chaos and bad press surrounding private credit funds are not reasons to avoid BDCs. In fact, we think it's a reason to consider it,&#34; Lebowitz wrote on X.



According to a recent Bank of America report as cited by PitchBook, redemption activity in BDCs will reach its highest point in the second quarter of 2026, following record levels seen in the first quarter.



The increase will continue into the second quarter as &#34;advisors request more than needed in reaction to the prorations,&#34; which capped withdrawals at roughly 5% across most BDCs. As a result, some investors are expected to attempt to recover unmet redemption requests from the prior quarter, the report stated. 



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Analysts expect the market will continue to see elevated redemption pressure into Q3, before easing in Q4. However, redemption levels are still projected to remain above the typical 5% cap for all tracked BDCs throughout the year.



The analysts also said they expect retail alternative-fund inflows to pick up from April's low point, which they say was due to &#34;private credit misinformation and the Iran conflict.&#34;



<h2>Projected Fund Expectations In Q2</h2>



The report outlined projected Q2 redemption levels across several major private credit funds:



<ul>
<li>Apollo Debt Solutions: saw redemption of 11.2% in Q1, expected redemptions would rise to 15% in Q2</li>



<li>Ares Strategic Income Fund: saw redemptions of 11.6% in Q1, expected redemptions are projected at 14% in Q2</li>



<li>Blackstone BCRED: redemptions are expected to reach 12% in Q2, up from 7.9% in Q1. The report stated that BCRED recorded the lowest Q1 redemption rate among peers and was the only major private BDC that did not restrict withdrawals, though the analysts expect it to implement limits in Q2</li>



<li>HPS HLEND: forecast to increase to 13% in Q2, from 9.3% in Q1</li>



<li>For Blue Owls two non-traded BDCs: Blue Owl OCIC is projected at 28.5% in Q2, up from 21.9% and Blue Owl OTIC is expected to rise to 52.9% in Q2, compared with 40.7% in Q1</li>
</ul>



Despite this backdrop, the BofA analysts maintained buy ratings on Apollo Global (NYSE:APO), Ares Management (NYSE:ARES), Blackstone (NYSE:BX), KKR &amp; Co. (NYSE:KKR), and Blue Owl Capital (NYSE:OWL), citing their long-running buildout in the private-wealth distribution channel. 



The report also notes that private credit sales declined by more than 50% month-over-month across most funds in April, which analysts partially attribute to heightened media scrutiny.



Separately, it was announced earlier this year that BofA has pledged $25 billion of its own funds toward private-credit investments, building on its current direct-lending activities. 



The bank intends to source these transactions through its capital-markets unit, a division within its investment-banking arm.



Other banks have committed capital toward the private credit sector. 



In September, Citigroup entered into a strategic partnership with Apollo Global Management to launch a $25 billion private credit and direct lending program. That same month, Wells Fargo announced its partnership with Centerbridge, which was focused on direct lending to non-sponsor North American middle market companies. Overland was targeting a minimum of $5 billion in investible capital, including $2.5 billion in equity commitments for the strategy.



Image: AI image created using ChatGPT



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BIZD

PBDC

The private credit sector is facing challenges, with rising redemption requests at non-traded business development companies (BDCs) indicating market stress. Portfolio manager Michael Lebowitz suggests that negative sentiment has affected both strong and weak BDCs, but sees potential value in the sector. A Bank of America report predicts redemption levels will peak in Q2 2026, with elevated pressure expected into Q3. Despite the turmoil, analysts maintain buy ratings on several firms, and BofA has committed $25 billion to private-credit investments, alongside other banks entering the sector.

- The private-credit market faces challenges as investor sentiment declines and redemption requests rise, particularly among non-traded business development companies (BDCs).  
- Analysts predict Q2 2026 will see record redemption activity, anticipating continuous pressure into Q3 before a potential easing in Q4.  
- Despite the turmoil, Bank of America and other institutions remain optimistic, maintaining buy ratings on major firms while committing significant capital to private-credit investments.

benzinga_article

Bank of America

VanEck BDC Income ETF

Putnam BDC Income ETF

Pro Gbl Listed Pvt

Apollo Global

ARES Management LP

Blackstone

Blue Owl Capital

Citigroup

Wells Fargo

BANK OF AMERICA CORPORATION DEP SHS REP 1/1000TH INT NON CUM PFD QQ

BANK OF AMERICA CORPORATION DEP SHS REP 1/1200TH PRF SERIES '5'

BANK OF AMERICA CORPORATION 7.25% NON-CUM PERP CONV PFD SER L

BANK OF AMERICA CORPORATION 5.875%NON CUM DEP SHS REP1/1000TH SER HH

BANK OF AMERICA CORPORATION DEP SHS REP 1/1200TH PRF SERIES '2'

BANK OF AMERICA CORPORATION 5% DEP SHS REPR 1/1000TH NON CUM PFD LL

BANK OF AMERICA CORPORATION DEP SHARES REP 1/1000TH PERP PFD SER 'E'

BANK OF AMERICA CORPORATION INCOME CAPITAL OBLIG NTS DUE 15/12/2066

BANK OF AMERICA CORPORATION 4.375% DP SH RP 1/1000TH IN NON CU PF NN

BANK OF AMERICA CORPORATION DEP SH REP 1/1200TH PRF SER 1 USD25

BANK OF AMERICA CORPORATION 5.375%DEP SHS REP 1/1000TH NON CUM SR KK

BANK OF AMERICA CORPORATION 6%NON CUM DEP SHS EACH REP 1/1000 SER GG

BANK OF AMERICA CORPORATION DEP SHS REP 1/1200 PFD SER 4 USD25

BANK OF AMERICA CORPORATION DEP SHS REP 1/1000TH NON CUM PFD SER SS

BANK OF AMERICA CORPORATION 4.125%DEP SH REP 1/1000 PFD SER PP USD25

Bank of America Corp

APOLLO GLOBAL MANAGEMENT INC 6.75% CONV PFD STK SER A

Apollo Global Management Pref Share APO 7.625 09/15/53

ARES MANAGEMENT CORPORATION 6.75% MAN PFD CONV SER B

KKR Group Fin Co IX LLC Pref Share KKRS 4.625 04/01/61

KKR & CO INC 6.25% MAND CONV PREF SHARES SER D

KKR & Co. Inc.

Blue Owl Capital III

Blue Owl Tech Finance

CITIGROUP INC 6.250 NON CUM SER II PFD WI

WELLS FARGO & COMPANY DP SHS REP 1/1000TH INT NCUM PFD CL A DD

WELLS FARGO & COMPANY 7.5% PERP CONV PRF CLS 'A' SERIES 'L'

WELLS FARGO & COMPANY DEP SHS REP 1/1000 INT PER PFD SER Y A

WELLS FARGO & COMPANY DP SHS REP 1/1000TH INT NCUM PFD CL A CC

WELLS FARGO & COMPANY 4.75% DEP SHS 1/1000 NCUM PFD CL A SR Z

WELLS FARGO & COMPANY DEP SHS REP 1/1000TH INT PFD SR AA (CLA)

'Chaos And Bad Press' Roil Private Credit — And Bulls Smell Value