Key Takeaways
- • Ares Strategic Income Fund ($10.7 billion) limited withdrawals to 5% of shares after clients sought to redeem 11.6%, according to a shareholder letter issued Tuesday.
- • Apollo Debt Solutions ($15.1 billion business development company) imposed the same 5% cap on Monday after redemption requests equaled 11.2% of shares.
- • Ares expects granted redemptions to total roughly $524.5 million and said it held around $5 billion of undrawn capacity, while stating the majority of requests came from a limited number of family offices and smaller institutions representing less than 1% of its more than 20,000 shareholders.
- • Investment in non-traded business development companies fell around 43% last month versus the prior year, per Robert A. Stanger data, signaling slowing inflows into the $1.8 trillion private credit market.
- • Shares of Ares, Apollo, Blackstone and KKR fell more than 2% at one point Tuesday, wiping out $10.2 billion of combined market capitalization.
Summary
Ares Management Corp. and Apollo Global Management Inc. blocked investors from withdrawing even half of the money they requested from their private credit funds, a development that Bloomberg reporter Olivia Fishlow characterized as a sign of mounting strain in the $1.8 trillion market. The Ares Strategic Income Fund, with $10.7 billion in assets, capped withdrawals at 5% of shares after clients sought to redeem 11.6%, according to a letter to shareholders on Tuesday. The move followed Apollo Debt Solutions, a $15.1 billion business development company, which said on Monday it was imposing the same cap after requests to redeem 11.2%.
The redemption requests, larger on a percentage basis than those earlier in March from Blackstone Inc. and BlackRock Inc., suggest growing investor anxiety about a liquidity squeeze in the illiquid private credit market. The largest alternative asset managers, which have fueled the private credit boom for years, are now contending with investors concerned about the industry's lending practices and its exposure to businesses vulnerable to artificial intelligence. The pace of the requests has also raised questions about whether direct lending is suitable for investors seeking periodic liquidity.
Managers have responded in different ways. Blue Owl Capital moved to sell assets, and Blackstone injected employee cash to help meet redemption requests. Most managers, however, have limited redemptions and emphasized the benefits of doing so. Shares of Ares, Apollo, Blackstone and KKR & Co. fell more than 2% at one point on Tuesday, erasing $10.2 billion of market capitalization across the four firms.
Inflows into the asset class have also slowed. Weakening demand and rising redemption requests could constrain liquidity further, making it harder to underwrite new loans, and limiting withdrawals could itself deepen negative sentiment. Investment in non-traded business development companies was down around 43% last month compared with the prior year, according to Robert A. Stanger data.
Ares stressed that only a small share of its shareholders sought redemptions. In its letter, the firm said "the majority of repurchase requests were made by a limited number of family offices and smaller institutions in select geographies who represent less than 1% of our over 20,000 shareholders." Ares expects granted redemptions to total roughly $524.5 million and said the fund had around $5 billion of undrawn capacity, including debt facilities, repayments from existing investments, inflows and a performing liquid credit sleeve. Both Apollo Debt Solutions and the Ares Strategic Income Fund said they will offer withdrawals of up to 5% of shares again next quarter.
The redemption requests, larger on a percentage basis than those earlier in March from Blackstone Inc. and BlackRock Inc., suggest growing investor anxiety about a liquidity squeeze in the illiquid private credit market. The largest alternative asset managers, which have fueled the private credit boom for years, are now contending with investors concerned about the industry's lending practices and its exposure to businesses vulnerable to artificial intelligence. The pace of the requests has also raised questions about whether direct lending is suitable for investors seeking periodic liquidity.
Managers have responded in different ways. Blue Owl Capital moved to sell assets, and Blackstone injected employee cash to help meet redemption requests. Most managers, however, have limited redemptions and emphasized the benefits of doing so. Shares of Ares, Apollo, Blackstone and KKR & Co. fell more than 2% at one point on Tuesday, erasing $10.2 billion of market capitalization across the four firms.
Inflows into the asset class have also slowed. Weakening demand and rising redemption requests could constrain liquidity further, making it harder to underwrite new loans, and limiting withdrawals could itself deepen negative sentiment. Investment in non-traded business development companies was down around 43% last month compared with the prior year, according to Robert A. Stanger data.
Ares stressed that only a small share of its shareholders sought redemptions. In its letter, the firm said "the majority of repurchase requests were made by a limited number of family offices and smaller institutions in select geographies who represent less than 1% of our over 20,000 shareholders." Ares expects granted redemptions to total roughly $524.5 million and said the fund had around $5 billion of undrawn capacity, including debt facilities, repayments from existing investments, inflows and a performing liquid credit sleeve. Both Apollo Debt Solutions and the Ares Strategic Income Fund said they will offer withdrawals of up to 5% of shares again next quarter.
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