Overview
Market unease in private credit has migrated onto Wall Street, prompting both lenders and fund managers to take protective actions. In response to rising concerns about asset valuations, transparency and specific borrower failures, a number of major U.S. banks have tightened financing to private credit vehicles while several large funds have capped or otherwise constrained investor redemptions. The developments come amid high-profile borrower defaults and concentrated exposures in sectors such as software.
Scale of bank exposure
Measured exposure between banks and private credit remains sizable. As of June 2025, U.S. banks had nearly $300 billion in loans outstanding to private-credit providers, with an additional $285 billion lent to private-equity funds and roughly $340 billion in unused lending commitments to those borrowers, according to data from Moody's. These linkages underscore the potential for private credit stress to ripple through broader institutional lending relationships.
Drivers of investor concern
Sentiment has been affected by several factors. Market participants cite worries over the accuracy and transparency of private credit valuations and point to recent corporate failures, including the bankruptcies of an auto-parts supplier, First Brands, and car dealership Tricolor, where some private-credit lenders held exposure. Pressure has also mounted around the valuations attached to software companies that many alternative asset managers own or finance, at a time when rapid advances in artificial intelligence are seen as a threat to established business models.
Bank-level actions
At the largest U.S. bank, management recalibrated loan marks on a subset of its financing to private credit funds after reviewing the consequences of market disturbances tied to software-company valuations. The firm carried out a detailed review of its financing portfolio, examining borrowers both individually and by sector, and applied different valuation marks to loans with software exposure. A source familiar with the situation described the re-marking as a response to market conditions rather than an indicator of a broad crisis; the source noted that the adjustments were not large. Under the bank's credit agreements in the private-credit space, it has the contractual ability to re-mark valuations based on fund collateral during a market dislocation. The result of these revaluations has the practical effect of reducing the bank's willingness or capacity to extend additional lending to certain private credit players.
Private credit fund responses - select firms
Morgan Stanley
Morgan Stanley limited redemptions at one of its private credit offerings after investors sought to withdraw nearly 11% of that fund's outstanding shares. Regulatory disclosures show that the North Haven Private Income Fund (PIF), which held investments in 312 borrowers across 44 industries as of January 31, returned approximately $169 million in the quarter, equal to about 45.8% of the redemption requests it received. In communications to investors, Morgan Stanley Private Credit cited a range of headwinds for the direct-lending industry, including an uncertain path for M&A activity, contracting asset yields and speculation about credit quality deterioration. The firm said that by preserving limits on quarterly repurchase offers, it aims to avoid asset sales that could harm remaining investors during periods of market stress.
BlackRock
BlackRock restricted withdrawals from its flagship HPS Corporate Lending Fund (HLEND) after a surge of requests. In the first quarter the fund registered roughly $1.2 billion in redemption requests, representing about 9.3% of its net asset value. HLEND announced it would distribute $620 million under its quarterly redemption program, which hit the 5% threshold at which managers can limit further redemptions. The fund said the 5% limit was intended to prevent a structural mismatch between investor capital and the expected duration of the private credit loans it holds. Subscriptions to the fund were about $840 million in the quarter, below the $1.2 billion requested for withdrawal. Company documents show that 19% of HLEND's portfolio is connected to software exposure.
Apollo Global
Apollo Global's $25 billion private credit vehicle capped redemptions at 5% after investors pushed to withdraw roughly 11.2% of the fund's outstanding shares. The firm said buying back less than the full amount requested was consistent with the fund's liquidity objectives and the desire to avoid actions that would damage asset values. For the period the fund recorded roughly $730 million of gross outflows, which were offset by approximately $724 million of inflows. Apollo said it expected to return about 45% of requested capital to each redeeming investor.
Ares Management
Ares' private credit fund also imposed a 5% redemption limit after investors had sought to pull roughly 11.6% of outstanding shares, according to a regulatory filing. The firm said most requests came from a small number of family offices and smaller institutions that together represent under 1% of its more than 20,000 shareholders. Ares Strategic Income Fund disclosed it would return $524.5 million, equal to 5% of outstanding shares.
KKR
KKR's non-traded private credit vehicle limited redemptions to 5% of shares after redemptions rose in the first quarter. The KKR FS Income Trust received repurchase requests equal to about 6.3% of its outstanding shares in the first three months of 2026, and the fund indicated it planned to satisfy roughly 80% of those requests.
Oaktree
An Oaktree Capital Management private credit fund honored the full 8.5% of redemption requests it received in the first quarter. The Oaktree Strategic Credit Fund (OSC) will repurchase around 13.9 million shares, equal to about 6.8% of outstanding shares, while Oaktree's parent company Brookfield agreed to purchase an additional 1.7% of shares to facilitate meeting 100% of the redemption requests.
Blackstone
Blackstone reported a notable rise in redemption activity at its BCRED private-credit fund in the first quarter. The company allowed $3.7 billion to be withdrawn from the $82 billion vehicle, and after adding about $2 billion of new commitments the fund recorded net withdrawals of $1.7 billion. In response to the surge, the firm increased the normal 5% quarterly redemption cap to 7% and its employees and the firm together contributed $400 million to satisfy redemption demands. Analysts at a major bank described this as BCRED's first quarter of outflows.
Blue Owl
Blue Owl Capital disclosed it was selling $1.4 billion of assets from three credit funds to generate capital to return to investors and to reduce debt, and that it had permanently halted redemptions at one of those funds. The positions being sold span loans to 128 portfolio companies across 27 industries, with the largest concentration - 13% - in the software and services sector. The sales are allocated as $600 million from Blue Owl Capital Corp II, $400 million from Blue Owl Technology Income Corp, and $400 million from Blue Owl Capital Corp. Blue Owl's co-president said the firm was not stopping redemptions but rather changing the method by which redemptions were being provided.
Cliffwater
Investors in Cliffwater LLC's flagship private credit fund sought to redeem about 14% of shares in the first quarter, which led the firm to cap repurchases at 7%, according to reporting. As an interval fund Cliffwater is required to repurchase shares each quarter; the firm set the rate at 5% with discretion to repurchase as much as 7%.
Flows and investor behavior
Across the sector, investors withdrew billions from some of the largest private credit funds in the first quarter. Some managers have not yet provided updates on the outcome of tender offers from the period. Concerns over valuations, liquidity and potential credit deterioration have driven both investor pullbacks and manager actions to preserve fund stability.
Concentration in software and valuation questions
Multiple fund disclosures highlight significant exposures to software and technology-related assets. That concentration has been particularly notable where funds or funds' portfolios have sizable allocations to software and services, amplifying investor sensitivity at a time when the sector's valuation dynamics are in flux and the potential for disruption from rapid technological change is front of mind for market participants.
What this means for market participants
The combination of bank re-markings, constrained funding and capped redemptions points to increased caution across both lenders and private credit managers. For banks with large outstanding loans and unused commitments to private credit providers and private-equity funds, the unfolding events represent a potential channel for stress transmission if conditions deteriorate further. For alternative asset managers, concentrated exposures and investor redemptions are generating both liquidity management challenges and potential downward pressure on valuations if forced sales become necessary.
Conclusion
Private credit market strain has begun to draw reactions from major financial institutions and managers, from re-marking loan values to imposing redemption caps and selling assets to meet investor demands. The pattern of moves reflects heightened scrutiny of valuation practices, liquidity mismatches and sector concentrations - particularly in software - that now sit at the center of investor concern.