Blackstone Says Private Credit’s ‘Global Crisis’ Fears Are Overblown

Blackstone (NYSE:BX) President and COO Jon Gray says investor confidence in private credit will recover and inflows will return despite redemption pressure at the firm’s $77 billion private credit fund and broader concerns about valuations and underwriting.

"Over time, investor confidence will be rebuilt, and the inflows will return. There’s a lot of noise, a lot of critics; the town criers are proclaiming a global crisis — and then nothing happens," Gray said in an interview with Swiss newspaper NZZ, Bloomberg reported.

Gray noted that investor sentiment towards private credit has cooled amid negative headlines, but overall capital continues to flow into private markets, with stronger demand for private equity and infrastructure.

Blackstone’s private loan portfolio saw double-digit growth, but its weakest 5% of loans were valued at roughly 60% of face value, compared with roughly 95% for the overall BCRED senior portfolio.

Earlier this month, Blackstone kept its flagship private credit vehicles’ quarterly withdrawal limit unchanged at 5% after investors again asked to redeem more shares than the fund was willing to pay back.

Investors sought to tender roughly 10% of BCRED’s shares in the third quarter, similar to the prior quarter, Reuters reported, citing Blackstone’s regulatory filing. 

During the quarter, BCRED recorded net outflows of about 3% as new purchases slowed, even though it still brought in close to $750 million of inflows, Reuters reported. 

Private credit funds have been capping redemptions at 5% in recent months amid rising concerns about asset quality and valuations, particularly in software lending.

Cliffwater LLC’s flagship private credit fund capped redemptions at 5% in Q3 after investors asked to redeem approximately 16% of shares. Cliffwater Corporate Lending Fund told shareholders in a letter that it would fulfill approximately one-third of redemption requests.

Meanwhile, KKR & Co.’s (NYSE:KKR) private credit fund for wealthy clients outside the U.S. has seen redemption requests ease. KKR-Income Trust I, a non-traded private credit fund serving investors in Europe, the Middle East, Africa, and the Asia-Pacific region, received withdrawal requests equal to about 2.5% of its net asset value in Q3.

Photo: Shutterstock