Barings Private Credit Corp has limited withdrawals to 5% of shares after investors sought to redeem a substantial portion of the fund in the first quarter. According to a regulatory filing, redemption requests equaled 11.3% of the fund's shares for the quarter. To manage liquidity, the fund said it will satisfy roughly 44.3% of repurchase requests submitted by each shareholder.
The action is part of a wider pattern among private credit managers. Several major asset managers, including Apollo Global, Blue Owl, Ares Management and BlackRock, also implemented 5% caps on withdrawals during the first quarter as private credit funds confronted elevated redemption pressure.
Private credit funds, including non-traded vehicles such as Barings Private Credit, typically provide quarterly liquidity through tender offers that often net out at around 5% of shares. These funds tend to invest in illiquid loans that are not easily sold, a characteristic that complicates rapid responses to large pullbacks by investors.
Industry tracking by the investment bank Robert A. Stanger showed that such non-traded funds returned a record-breaking $7.4 billion to investors in the first quarter as of April 2. Some market participants argue that episodic surges in redemption requests are an expected feature of these semi-liquid structures rather than a structural defect.
Market sentiment toward private credit has been unsettled lately, with retail investors in particular seeking to exit positions amid concerns about transparency, valuation levels and potential disruption tied to artificial intelligence. The wave of redemption requests has drawn comparisons to the spike in redemptions that affected non-traded real estate investment trusts beginning in late 2022, when valuation uncertainty created similar investor unease.
In a shareholder letter, Barings Private Credit addressed the evolving conditions, saying: "As market conditions evolve, we expect differences in performance across managers to become more pronounced given that long-term results are driven in part by the importance of underwriting quality, portfolio construction, and balance sheet management."
Analysts have generally supported caps on withdrawals, arguing that limiting redemptions can reduce the risk of large cash drawdowns and the forced sale of illiquid assets at disadvantageous prices. The caps aim to protect remaining shareholders by tempering the pace of outflows and providing managers more time to manage portfolio liquidity.
While the caps may help stabilize funds in the short term, they also underline tensions inherent to vehicles that offer periodic liquidity while holding assets that are difficult to monetize quickly. The situation remains a test of how private credit funds balance investor access to liquidity with the realities of investing in less liquid loan markets.