Key Takeaways
- • KKR, BlackRock, and Apollo are deploying distinct remediation strategies for their underperforming private credit business development companies (BDCs), which represent a small fraction of their assets but carry outsized reputational risk in the $1.8 trillion private credit market.
- • KKR's FS KKR Capital Corp. ($12.3 billion) is executing a $300 million share buyback program ($150 million in preferred equity and $150 million in share tenders at $11 per share) following investor pressure to address persistent valuation and performance issues.
- • BlackRock is installing HPS Investment Partners executives onto the investment committee of BlackRock TCP Capital Corp. ($1.5 billion fund) to improve loan selection and performance, leveraging expertise from its $12 billion HPS acquisition.
- • Apollo Global Management is exploring the sale of its $3 billion MidCap Financial Investment Corp., which—while avoiding the steeper discounts of KKR and BlackRock offerings—has experienced asset declines and no longer aligns with CEO Marc Rowan's strategic vision of a $40 trillion investment-grade private credit market.
- • Troubled loans are escalating across these funds, with reported jumps in problem assets and withdrawal pressures signaling broader credit quality deterioration amid the sector's 2026 turbulence.
Summary
Three of Wall Street's largest alternative asset managers are taking corrective action on their struggling private credit funds as reputational damage mounts during a turbulent 2026 for the $1.8 trillion market. While these underperforming vehicles represent only a small portion of KKR, BlackRock, and Apollo's combined assets, their public visibility and trading discounts have become increasingly problematic as institutional investors reassess private credit exposures across the industry.
KKR elevated the matter to its executive leadership and board level for FS KKR Capital Corp., the $12.3 billion publicly traded fund that has faced persistent valuation challenges. The firm determined that a $300 million capital return initiative—comprising $150 million in preferred equity investments and $150 million in share repurchases at $11 per share—would address investor demands for value creation. The buyback signals KKR's confidence in underlying value while providing liquidity to shareholders frustrated by the fund's trading discount.
BlackRock's approach to BlackRock TCP Capital Corp. ($1.5 billion) centers on operational improvement rather than capital restructuring. The asset manager is elevating executives from HPS Investment Partners—acquired for $12 billion—to its investment committee, granting them material influence over new loan origination and portfolio decisions. This governance shift suggests BlackRock attributes underperformance partly to investment selection processes and aims to apply HPS's expertise to stabilize the fund's trajectory.
Apollo's response diverges further. Rather than restructure or inject capital, the firm is actively marketing MidCap Financial Investment Corp. ($3 billion) for sale. While the fund has avoided trading at extreme discounts like its KKR and BlackRock counterparts, it has still experienced asset value declines and net asset erosion. Apollo's decision to explore divestiture reflects strategic misalignment: CEO Marc Rowan is prioritizing a vision of an enormous, investment-grade-dominated private credit market ($40 trillion addressable), while MidCap's focus on middle-market lending represents a narrower opportunity set.
Across all three platforms, credit quality deterioration has materialized, with KKR reporting jumps in troubled loans and broader sector indicators showing rising redemption pressure and withdrawal restrictions. These interventions underscore that while BDCs remain modest relative to these firms' total asset bases, their public failure could undermine confidence in the wider private credit ecosystem that has become strategically central to alternative asset managers' growth narratives.
KKR elevated the matter to its executive leadership and board level for FS KKR Capital Corp., the $12.3 billion publicly traded fund that has faced persistent valuation challenges. The firm determined that a $300 million capital return initiative—comprising $150 million in preferred equity investments and $150 million in share repurchases at $11 per share—would address investor demands for value creation. The buyback signals KKR's confidence in underlying value while providing liquidity to shareholders frustrated by the fund's trading discount.
BlackRock's approach to BlackRock TCP Capital Corp. ($1.5 billion) centers on operational improvement rather than capital restructuring. The asset manager is elevating executives from HPS Investment Partners—acquired for $12 billion—to its investment committee, granting them material influence over new loan origination and portfolio decisions. This governance shift suggests BlackRock attributes underperformance partly to investment selection processes and aims to apply HPS's expertise to stabilize the fund's trajectory.
Apollo's response diverges further. Rather than restructure or inject capital, the firm is actively marketing MidCap Financial Investment Corp. ($3 billion) for sale. While the fund has avoided trading at extreme discounts like its KKR and BlackRock counterparts, it has still experienced asset value declines and net asset erosion. Apollo's decision to explore divestiture reflects strategic misalignment: CEO Marc Rowan is prioritizing a vision of an enormous, investment-grade-dominated private credit market ($40 trillion addressable), while MidCap's focus on middle-market lending represents a narrower opportunity set.
Across all three platforms, credit quality deterioration has materialized, with KKR reporting jumps in troubled loans and broader sector indicators showing rising redemption pressure and withdrawal restrictions. These interventions underscore that while BDCs remain modest relative to these firms' total asset bases, their public failure could undermine confidence in the wider private credit ecosystem that has become strategically central to alternative asset managers' growth narratives.
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