BlackRock Limited withdrew funds from its private funds after investors rushed to redeem their holdings amid market volatility.

BlackRock Limited withdrew funds from its private funds as investors rushed to redeem their holdings amid market volatility risks stemming from economic slowdown, the Middle East conflict, changes brought about by AI technology, and the risk of default.

Reuters reported on March 6, 2569, that: BlackRock, the world's largest asset management company, revealed on Friday (March 6) that it has restricted withdrawals from its Private Credit Fund after a surge in investor redemptions exceeded its set limit. Amid investor concerns over the roughly $2 trillion private lending industry.

BlackRock shares fell 6.7% on the New York Stock Exchange (March 6) amid a general market sell-off following worse-than-expected U.S. employment figures and escalating tensions between the U.S., Israel, and Iran.

In recent months, confidence in private lending has weakened, with many retail investors beginning to withdraw from funds, such as BlackRock's $26,000 billion HPS Corporate Lending Fund, which is designed to attract wealthy individual investors.

Greggory Warren, a senior equity analyst at Morningstar, said that: "This should serve as a warning to the industry and regulators about the risks of illiquid funds to retail investors."

Factors weighing on confidence also stem from bankruptcies in the past year, including those of US auto parts suppliers and subprime auto lenders, as well as the collapse of mortgage lenders in the UK last week, raising questions about lending standards.

Earlier the same week, rival firm Blackstone raised its redemption limit from 5% to 7% for its $82,000 billion fund following increased withdrawal requests. The company and its employees also invested an additional $400 million to accommodate all withdrawal requests. Meanwhile, Blue Owl Capital repurchased a 15.4% stake in one of the funds in January.

For BlackRock's HLEND fund, withdrawal requests totaled $1,200 billion in the first quarter, representing approximately 9.3% of the fund's net asset value (NAV). However, the fund stated it could only repay $620 million in quarterly redemptions, hitting the 5% ceiling on further withdrawal limits set by the fund manager.

Morningstar analysts state that a major risk to alternative asset managers is a significant increase in borrower default rates, which would impact investment returns and future fundraising.

Liquidity structure problems

HLEND Fund is a business development (BDC) company that BlackRock acquired along with fund manager HPS Investment Partners in a $12,000 billion deal in 2024 to expand into the private lending market.

The fund stated that this withdrawal request exceeding 5% is the first of its kind since the fund's inception.

BDC's structure involves raising funds from mostly retail investors and then lending them to mid-sized companies. These loans are often difficult to sell if a large number of investors want to withdraw their funds simultaneously.

Jon Gray, chairman of Blackstone, said last week that institutional investors continue to allocate their investments to private lending.

HLEND stated that the 5% redemption limit is aimed at preventing “structural mismatch” between investor funds and the maturity of private loans held by the fund.

Analysts from Morningstar explained that withdrawal restrictions help fund managers avoid being forced to sell assets, which could reduce the remaining returns for investors, as assets in these types of funds are often illiquid and lack transparency.

In the first quarter, the fund received $840 million in new investments, which was less than the $1,200 billion that investors wanted to withdraw.

Risks from software stocks and market volatility.

HLEND states that most loans are granted to private companies with growing businesses and stable cash flow, and are designed to be repaid first in the event of borrower bankruptcy, with the fund paying monthly dividends.

Company documents indicate that 19% of the investment portfolio is related to software businesses, a sector facing heavy selling pressure as investors worry that startups primarily developing artificial intelligence technology could disrupt the industry.

Meanwhile, many investors are shifting money to safe-haven assets as global markets face high volatility this year due to concerns about economic slowdown, prolonged conflict in the Middle East, the impact of AI technology, and the risk of debt default.

HPS stated in a press release that the current market volatility also presents more investment opportunities for the company.

refer : reuters.com

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