Credit woes II

The private credit sector continues to be under pressure. As Blue Owl continues to deal with redemptions, now Blackstone Private credit fund BCRED ($82Bn), is facing record redemption requests in Q1 2026. Investors sought to withdraw 7.9% of shares, exceeding the typical 5% quarterly limit. If you look at the top chart below, BDCs (Business Development Companies) share price of those managers that are most exposed to redemptions continue to go down, experiencing drawdowns of up to 50% over the last 12 months. The good news can be seen in the top chart: the public credit market spreads have not widened, at least not yet. But as you can see also see in the chart, they usually end up widening. The canary in the coal mine is the leveraged loan market, perhaps the most sensible to these events. And so far seems to be stable. Absent other shocks (software related worries, etc) the sector will continue to work through redemptions. If the pressure doesn’t intensify, it will be manageable. But liquidity cannot dry up in other parts of the market, otherwise the problems will accelerate and they will spread to public markets.

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