Key Takeaways
- • iCapital argues that recent redemption pressure in private markets should be treated as a post-mortem rather than evidence that the private market model is broken, with the core lesson being clearer upfront communication of liquidity terms to investors.
- • Redemption limits at major private credit vehicles, including Apollo's flagship private credit fund (third straight quarter of limits), Blackstone's BCRED (capped at 5% against roughly 10% of NAV sought) and Ares Strategic Income Fund (requests equal to 14.4% of NAV, up from 11.6% in Q1), prompted the scrutiny.
- • iCapital's preliminary estimate puts redemption requests at the largest non-public BDCs at 12.1% in Q3, versus 12.8% in Q2 and 12.3% in Q1, all well above the 5% industry-standard liquidity threshold.
- • The firm calls on managers to stop using 'semi-liquid' as a catch-all term, to consider phased-exit mechanisms, and to pair product innovation with investor education.
- • iCapital says the lessons may extend to private equity as evergreen structures broaden access for individual investors.
Summary
iCapital, a fintech platform, has stated that the recent wave of redemption pressure in private markets should be viewed as a post-mortem rather than proof that the model is broken. According to the firm, the key lesson is that liquidity features must be explained clearly and directly to investors from the outset, before stress arrives. In its statement, iCapital noted that private market product innovation has introduced varied governance structures and liquidity provisions, offering more choice but also greater complexity, and that these features can constrain how much capital is returned in any given period, meaning full redemption may take time.
The commentary follows a series of redemption limits at some of the largest private credit funds. Apollo Global Management limited withdrawals from its flagship private credit fund for a third consecutive quarter. Blackstone's BCRED limited second-quarter withdrawals to 5% of NAV although investors sought about 10%. The Ares Strategic Income Fund received redemption requests equal to 14.4% of NAV, up from 11.6% in the first quarter, and earlier in the year BlackRock curbed withdrawals from its $26 billion HPS Corporate Lending Fund after requests spiked. In Australia, the collapse of property developer Bathla Group in late August, with more than A$3.5 billion in liabilities largely owed to private credit lenders, has added to investor questions about the sector.
iCapital argues that the industry should reconsider how it describes these products, since 'semi-liquid' has become a catch-all for funds with potentially very different redemption terms. The firm also highlighted a behavioural feedback loop: when requests approach a fund's threshold, investors who had not planned to redeem may join the queue, so liquidity concerns generate additional demand for liquidity. Clearer terminology cannot eliminate this dynamic, the firm said, but it may help investors understand the trade-off they accepted.
iCapital said non-public BDC liquidity mechanisms appear to have worked as designed in many respects, with quarterly tender offers intended to provide limited liquidity rather than liquidity on demand, but the episode exposed a gap between how liquidity is structured and how some investors perceive it. Its analysis of SEC filings for private credit funds above US$1 billion in assets points to broadly steady redemptions at the largest BDCs in the third quarter, at a preliminary 12.1%, compared with 12.8% in the second quarter and 12.3% in the first. The figure was 4.9% in the fourth quarter of 2025. For advisers, the firm recommends greater emphasis on suitability, portfolio-level liquidity planning and expectation-setting before investing. For managers, it recommends pairing innovation with investor education and transparent terminology, and it proposes a more explicit phased-exit mechanism to give investors visibility into how requests are processed. iCapital added that these lessons may extend to private equity as evergreen structures widen access for individual investors.
The commentary follows a series of redemption limits at some of the largest private credit funds. Apollo Global Management limited withdrawals from its flagship private credit fund for a third consecutive quarter. Blackstone's BCRED limited second-quarter withdrawals to 5% of NAV although investors sought about 10%. The Ares Strategic Income Fund received redemption requests equal to 14.4% of NAV, up from 11.6% in the first quarter, and earlier in the year BlackRock curbed withdrawals from its $26 billion HPS Corporate Lending Fund after requests spiked. In Australia, the collapse of property developer Bathla Group in late August, with more than A$3.5 billion in liabilities largely owed to private credit lenders, has added to investor questions about the sector.
iCapital argues that the industry should reconsider how it describes these products, since 'semi-liquid' has become a catch-all for funds with potentially very different redemption terms. The firm also highlighted a behavioural feedback loop: when requests approach a fund's threshold, investors who had not planned to redeem may join the queue, so liquidity concerns generate additional demand for liquidity. Clearer terminology cannot eliminate this dynamic, the firm said, but it may help investors understand the trade-off they accepted.
iCapital said non-public BDC liquidity mechanisms appear to have worked as designed in many respects, with quarterly tender offers intended to provide limited liquidity rather than liquidity on demand, but the episode exposed a gap between how liquidity is structured and how some investors perceive it. Its analysis of SEC filings for private credit funds above US$1 billion in assets points to broadly steady redemptions at the largest BDCs in the third quarter, at a preliminary 12.1%, compared with 12.8% in the second quarter and 12.3% in the first. The figure was 4.9% in the fourth quarter of 2025. For advisers, the firm recommends greater emphasis on suitability, portfolio-level liquidity planning and expectation-setting before investing. For managers, it recommends pairing innovation with investor education and transparent terminology, and it proposes a more explicit phased-exit mechanism to give investors visibility into how requests are processed. iCapital added that these lessons may extend to private equity as evergreen structures widen access for individual investors.
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