The stock ended at $955 on the New York Stock Exchange, weighed down by a broad market sell-off on weak US jobs data and tensions over the ongoing US-Israel war with Iran.
At the center of the development is BlackRock’s $26 billion HPS Corporate Lending Fund (HLEND), which has seen a surge in redemption requests from investors. The fund received $1.2 billion worth of withdrawals in the first quarter, equivalent to about 9.3% of its net asset value. BlackRock said it would pay $620 million as part of a quarterly redemption, reaching the 5% limit that typically allows managers of such funds to limit further withdrawals.
HLEND, the business development company that BlackRock acquired with its manager HPS Investment Partners in an effort to add $12 billion to private credit by 2024, said redemption requests breached the 5% threshold for the first time since the fund’s inception.
Business development companies typically raise money, largely from retail investors, and use those funds to make loans to mid-sized companies. These loans are often difficult to sell quickly. If a large number of investors withdraw money at the same time, it can create liquidity challenges for the fund.
BlackRock said the redemption cap helps avoid a structural mismatch between the investor’s capital and the duration of the private credit loans in which the fund invests. By limiting withdrawals, fund managers can avoid selling assets at unfavorable prices, which could result in returns for remaining investors.
Recent credit events have also increased uncertainty. Last year saw bankruptcies involving a US auto parts supplier and a subprime auto lender. Most recently, a UK mortgage lender collapsed last week, raising fresh questions about lending standards in the sector. The pressure is not limited to BlackRock. Earlier this week, rival Blackstone raised the usual 5% redemption cap on the $82 billion fund to 7%. The company and its employees have also invested $400 million to ensure that all exit requests can be met. Blue Oval, another player in the sector, bought back 15.4% of its funds in January and replaced customer redemptions with promised payments.
Despite the increase in exits, HLEND continued to attract some new capital. Subscriptions totaled $840 million in the first quarter, though that was lower than the $1.2 billion investors had originally sought to unlock.
According to reports, about 19% of HLEND’s portfolio is invested in software companies. The sector has recently been hit by heavy selling as investors worry about disruption from AI-first start-ups. The fund says its loans are extended primarily to mature private companies that have stable cash flow and are structured to be repaid first if the borrower goes bankrupt. HLEND distributes dividends to investors on a monthly basis.
The developments come at a time when investors are increasingly moving money into safer assets amid concerns about market volatility, a potential economic slowdown and uncertainty linked to the ongoing conflict in the Middle East.
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