BlackRock private credit fund redemption requests ease in third quarter

BlackRock Private Credit Fund Redemptions Ease, Industry Pressure Drops

Redemption Trends and Market Impacts in Private Credit Funds

BlackRock's Flagship Fund Shows Signs of Recovery

Sept 11 (Reuters) - Asset manager BlackRock's flagship private credit fund received fewer withdrawal requests in the third quarter than in the previous period, offering an early sign that redemption pressures across the industry may be easing.

Wealthy Investors and Market Concerns

Wealthy individuals have retreated from non-traded private credit funds this year over concerns about lending standards and the potential impact of AI on software companies, a key borrower base for direct lenders. Although, the redemption pressure may be starting to ease as asset managers work through a backlog of unfulfilled withdrawal requests.

Withdrawal Requests and Fund Performance

Investors in BlackRock's $23.1 billion HPS Corporate Lending Fund sought to pull roughly 11.5% of shares, compared with 13.3% in the prior quarter, according to a regulatory filing on Friday. It will repurchase 5% of shares, the customary threshold ⁠for such vehicles.

Analyst Perspectives on Redemption Backlog

"The redemption backlog is now clearing. This is another encouraging data point on direct lending sentiment in the wealth channel, and we expect redemption trajectory for the BDC group (business development company) to decelerate," Evercore analyst Glenn Schorr said.

"Overall, we expect BLK to trade positively today on the back of this release," he said. BlackRock shares were up 2.4%.

Performance and Outflows Across Major Funds

HLEND and Portfolio Performance

HLEND, one of the largest U.S. non-traded private credit funds, has bought back roughly $1.7 billion of shares across three repurchase periods ended June 30. For the latest tender offer, it was about $600 million.

The fund said its underlying portfolio company performance remains strong and its portfolio remains highly diversified.

Since inception, its Class I shares have delivered a 9.9% annualized total net return through July 31, representing a 3.5% premium to broadly syndicated loan total returns.

Signs of Easing Outflows in Other BlackRock Vehicles

Outflows from BlackRock's other smaller vehicles also showed signs of easing.

Withdrawal requests at BlackRock Private Credit Fund fell to 4.58% in the third quarter, from roughly 5.3% in the prior quarter, while that in HPS Corporate Capital Solutions Fund dropped to 1.9% from 4.7%.

Industry-Wide Redemption Activity

Blackstone and TPG Twin Brook Capital Income Fund Updates

Blackstone kicked off the third-quarter redemption season for major U.S. non-traded private credit funds last week.

Late Thursday, TPG Twin Brook Capital Income Fund disclosed repurchase requests fell to 1.2% from 2.1% in the prior quarter. Other vehicles are also expected to release data throughout September.

Reporting and Editorial Credits

(Reporting by Arasu Kannagi Basil and Pragyan Kalita in Bengaluru; Editing by Shilpi Majumdar)