By Arasu Kannagi Basil
Sept 3 (Reuters) - Blackstone is continuing to cap withdrawals at its flagship private credit fund as requests to pull money remained elevated in the third quarter, according to a regulatory filing on Thursday.
Wealthy investors have been pulling money from non-traded private credit funds in recent months amid concerns about lending standards and whether software companies, a key borrower base for direct lenders, can withstand disruption from artificial intelligence.
Investors
sought to withdraw about 10% of shares in the third quarter from the $77.2 billion Blackstone Private Credit Fund (BCRED), roughly matching the previous quarter's level. It will repurchase 5% of shares, the customary threshold for such vehicles.
"With the alts (alternative asset managers) catching a bid in recent weeks, there was some hope that the negative private credit headlines and wealth channel concerns were starting to fade. That said, today's BCRED redemption numbers were higher than expected," Evercore analyst Glenn Schorr said.
Blackstone shares see sawed in volatile trading and were last down 0.8%. The stock has gained 15% in the past three months, but remains 11.2% down this year through last close.
The world's largest private credit fund logged net outflows of about 3% as fewer new buyers came into the vehicle during the quarter, pulling in nearly $750 million of inflows.
Blackstone's other private wealth products, however, have seen stronger momentum in fundraising relative to the second quarter, according to the investor update.
Some Wall Street analysts expect redemptions to stay elevated through the rest of 2026 and into early 2027.
BACKLOG OF UNFULFILLED REQUESTS
A chunk of the $4.3 billion in repurchase requests BCRED received in the third quarter came from investors who had also tendered in the prior quarter, echoing prior commentary from some other major funds.
BCRED had fulfilled roughly half of the $4.5 billion repurchase requests in the second quarter, leaving a backlog of $2.3 billion in unfulfilled requests, a significant portion of which were resubmitted in the latest tender offer.
The fund remains well capitalized, with loan repayments and inflows continuing to outpace share repurchases, BCRED said, adding that "investors who sought liquidity in Q2 and Q3 will have received an estimated 75% of their requested capital."
Fundamentals remain healthy and the vast majority of portfolio companies are performing in line or better than expectations, the fund said.
Its Class I shares have returned a 9% annualized total return since inception, which the fund said represents a roughly 290 basis points premium to leveraged loans.
"BCRED's YTD performance of +0.9% has been a bit weaker than peers due to select credit issues & write downs – aka Medallia and Affordable care," Schorr said.
Redemption windows at major U.S. non-traded private credit funds for the third quarter began closing earlier this week. Tender offer windows across other vehicles are poised to expire throughout September.
(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Shilpi Majumdar and Vijay Kishore)
