Private credit portfolios show stress levels not seen since 2017

The $2 trillion private credit market is flashing warning signs that haven’t appeared in nearly a decade. Stress indicators across private credit portfolios have climbed back to levels last observed in 2017, according to Financial Times analysis, marking a moment that regulators and fund managers are quietly describing as the asset class’s first genuine trial by fire. Redemptions are piling up fast The most visible sign of strain is showing up in redemption queues. Blackstone’s BCRED, one of the largest and most prominent semi-liquid private credit vehicles, has seen redemption requests hit roughly 7.9% of net asset value, translating to approximately $3.8B in investor withdrawal demands. Blue Owl funds have experienced redemption demand reaching as high as 41%. These vehicles typically cap how much investors can withdraw in any given period, and those caps are now being hit regularly. The fundamental problem is what regulators call a “liquidity mismatch.” Semi-liquid funds promise investors periodic access to their money, but the underlying loans they hold are inherently illiquid. Default rates are climbing, but context matters Beyond the redemption pressure, the credit quality of...