(Bloomberg) — BlackRock Inc. It stopped pulling out of its largest private credit fund after rising client demand for bailouts, the latest sign of investor concern over the $1.8 trillion private credit industry.
The company’s $26 billion HPS Corporate Loan Fund, one of the largest non-traded business development firms, said in a statement on Friday that shareholders had requested 9.3% of their shares, but management decided to limit the buyback to 5%. While the total value of the shares will be about $1.2 billion, according to Bloomberg calculations, investors will get back about $620 million of what the fund holds at the end of the year.
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It is the clearest example of an exodus among large private credit funds since late last year, when investors raised concerns about lending standards after high-profile divestitures became increasingly disaffected about the asset class. Many companies have so far chosen to meet higher redemption demands or seek to repay investors through other means.
BlackRock said the move is in line with its existing liquidity management for direct lending retail product, known as HLEND, and the “fundamentals” feature of the investment.
“Otherwise there will be a structural difference between the investor’s capital and the expected duration of the private credit loans that HLEND invests in.”
Last month, the non-commercial BDC proposed to tender up to 5% of its shares, as is customary for such entities. It faced a withdrawal of about 4.1% in the previous period.
BlackRock shares fell 8.3% on Friday, while stocks of alternative asset managers including KKR & Co. and Ares Management Corp. Also cooled, as they are coming off their worst start to a year in a decade.
Private credit funds are fueling a wave of calls for bailouts as anger grows over the industry’s exposure to lending practices and businesses that could be powered by artificial intelligence. HPS Investment Partners, among the largest alternative credit managers, was acquired by BlackRock last year as part of its expansion into private equity.
HPS executives said on Friday that the move to limit exposure would help the fund buy into “compelling investment opportunities” amid uncertainty and volatility.
