Private Credit Funding Stress: Insights from Berlin’s Private Markets Conference
Current Challenges and Trends in Private Credit and Private Equity Markets
Industry Leaders Highlight Funding Pressures
LONDON, June 12 (Reuters) - Senior executives in the private markets sector pointed to weaker incomes and challenges raising money at the industry's largest annual conference in Berlin this week, while consultancy Bain & Co said private equity is in a prolonged "liquidity crunch".
Investor Sentiment and Capital Flows
Nicolas Brugere, a partner at Swedish buyout firm EQT, said limited partners - the institutional investors that provide capital - wanted to see money returning in order to reinvest and that the industry is concentrating.
"Investors want fewer relationships and they value scale," he said at the conference.
Matt Theodorakis, a partner at Ares Management, one of the world's largest private credit managers, pointed to a slowdown in inflows and capital retrenchment.
"What we see in our investment committee, which is over the last three to six months, is that money subsided," he said on a panel, highlighting how the slowdown in distributions is rippling across markets, from buyouts to credit.
Market Data and Industry Analysis
Liquidity Crunch and Portfolio Challenges
Bain's report said a growing number of companies were stuck in portfolios, as a combination of falling software valuations, uncertainty around the Iran war and stress in private credit markets cools dealmaking, fundraising and exits.
Private equity firms now hold assets for around seven years on average, beyond the traditional three to five years, Bain said, while the backlog of unsold companies has climbed to about 33,000.
Dividend Coverage and Investor Risks
A Reuters analysis of regulatory filings showed dividends at U.S.-listed private-credit lenders rest on thinner cash cushions than headline earnings suggest, raising risks for investors drawn to the sector's high yields.
Median dividend coverage across 46 business development companies (BDCs) slipped to 0.99 times in the first quarter of 2026, meaning reported net investment income no longer fully covered regular and supplemental payouts.
Excluding payment-in-kind interest, which allows borrowers to defer interest payments by adding them to their loan balances, median coverage fell to 0.89 times.
Redemptions and Market Outlook
Redemption Trends in Private Credit Funds
Second-quarter redemptions continued. A $25 billion BlackRock private credit fund received requests to redeem 13.3% of the value of its assets in the first quarter, and will buy back 5%, the world's largest asset manager said on Friday.
Redemption windows at key U.S. non-traded BDCs began closing last month, with market participants watching the rate of withdrawal requests.
Investor Expectations for Future Redemptions
J.P. Morgan analyst Kabir Caprihan released a survey showing roughly 85% of investors believe total second-quarter redemption requests across non-traded U.S. business development companies will be greater than in the first quarter.
(Compiled by Vidya Ranganathan; Editing by Paul Simao)