LONDON, March 25 - Bonds linked to semi-liquid private credit vehicles have dropped sharply in value since early February, trading at their weakest levels in roughly a year, according to a letter from bond trading hedge fund Fourier Asset Management. The hedge fund said the move in public bond markets pointed to investor concern about liquidity in the private-credit sector prior to a recent rush of redemptions and subsequent withdrawal caps at some funds.
Private-credit market jitters have rippled through financial markets this month. Some large U.S. banks have tightened lending and several alternative asset managers have limited withdrawals from private credit funds after a surge in redemption requests, the letter said. The developments reflect mounting investor unease about valuations, transparency and the broader economic backdrop, which in turn have prompted some investors to exit the sector.
Signals in public bond markets
Fourier highlighted the behavior of bond yields tied to five major interval funds - also known as non-traded business development companies - and compared them with comparable government bonds. Those yield differentials widened ahead of the redemption waves faced by some of the funds, the hedge fund said. The funds named in the analysis included vehicles operated by Oaktree, BlackRock, Blue Owl, Blackstone and Ares Capital. The companies did not provide comments.
Interval funds provide periodic windows when investors may redeem shares. When a fund experiences heavy withdrawals, its net asset value can decline, and fund managers sometimes restrict or delay redemptions to prevent remaining investors from suffering sharp losses caused by those outflows. Fourier said the public bond market moves corroborated - and in some instances anticipated - stress within these semi-liquid fund structures.
Timing and pattern of spread moves
According to Fourier, bond spreads for the funds narrowed in the summer of 2025 and earlier in 2026 before widening significantly from early February onwards. The hedge fund's analysis extended slightly beyond March 8. Fourier said the widening of these spreads served as a visible marker of rising investor anxiety about private-credit exposure.
The firm pointed to Oaktree's Strategic Credit Fund as an example. Citing data from Barclays and S&P Global Market Intelligence, Fourier noted that the fund's credit bond spreads widened to around 250 basis points, levels near the highest seen since April 2025. Fourier added that Oaktree was facing elevated redemption pressure ahead of its next quarterly earnings report, due at the end of April. Oaktree's Strategic Credit Fund carries ratings of Baa3 from Moody's and BBB- from S&P, the latter one notch above junk status. Oaktree declined to comment.
BlackRock's HPS Corporate Lending Fund also showed material spread widening, reaching roughly 258 basis points in March, Fourier's letter showed. That fund is rated BBB- by S&P and Baa2 by Moody's. BlackRock declined to comment.
Broad market measures showed elevated but varied credit risk readings. ICE BofA's U.S. Corporate Index closed at 121 basis points on Tuesday, down from a peak earlier in March, while the ICE U.S. High Yield Index closed at 308 basis points, according to ICE data cited in Fourier's note.
Context on Fourier and interpretation
Fourier Asset Management, founded by Orlando Gemes - previously a credit manager at Hermes Fund Managers who has traded bonds since 2000, according to LinkedIn - said it takes both long and short positions across the credit landscape but does not hold a position specifically on these semi-liquid funds. The hedge fund described the bond spread widening as evidence of increasing investor concern about private credit.
Several alternative asset managers have capped withdrawals at private credit funds after spikes in redemption demand. Fourier's assessment suggests that market participants were pricing potential stress into publicly traded bonds tied to these funds ahead of widely reported withdrawal restrictions.
While Fourier's analysis stops shortly after March 8, the firm concluded that the movements observed in public bond markets were meaningful signals of stress within semi-liquid private credit structures rather than isolated or transitory price moves.
Key points
- Bonds issued by semi-liquid private credit funds fell sharply from early February, trading at their weakest in about a year.
- Fourier Asset Management found that widening bond spreads for several interval funds preceded heavy redemption requests and withdrawal caps.
- The developments affect the private-credit market, fixed-income investors and alternative asset managers managing redemption windows.
Risks and uncertainties
- Liquidity risk in semi-liquid private credit structures - heavy redemptions can force funds to restrict withdrawals, influencing NAVs and investor outcomes; this primarily affects asset managers and fixed-income investors.
- Credit spread volatility - widening spreads on bonds issued by interval funds signal elevated investor concern and may indicate further mark-to-market losses for investors; fixed-income markets and institutional portfolios are most exposed.
- Fund-specific redemption pressure - individual funds such as Oaktree's Strategic Credit Fund face elevated withdrawal demand ahead of reporting dates, creating uncertainty for holders of those funds and counterparties.