US asset managers fall as investors brace for private credit fund updates

Shares of major US alternative asset managers dropped in premarket trading on June 3 as investors prepared for what could be an ugly round of second-quarter redemption updates from non-traded private credit funds.

Blue Owl Capital, Apollo Global Management, Ares Management, and Blackstone all faced selling pressure. The catalyst: redemption windows for many private credit funds closed the previous Friday, and the early data trickling out is not reassuring.

The numbers are getting worse

Cliffwater became the first major manager to report its Q2 figures. Redemption requests for its $31.3 billion flagship private credit fund climbed to 17%, up from 14% in the first quarter.

In Q1, some funds saw withdrawal requests spike dramatically. Blue Owl’s flagship $36 billion private credit fund received 22% redemption requests. Its $6 billion technology-focused vehicle was hit even harder, with 41% of investors asking for their money back.

Most managers enforce a 5% quarterly redemption cap, meaning that even if 41% of a fund’s investors want out, only 5% actually get paid in any given quarter.

Why everyone wants out at once

A significant portion of private credit fund portfolios are exposed to software and SaaS companies facing existential questions as AI tools threaten to automate functions that companies previously paid software subscriptions to handle.

The 41% withdrawal demand hitting Blue Owl’s tech-focused fund illustrates the concern directly. A fund concentrated in technology lending is essentially a leveraged bet that those borrowers will keep generating enough revenue to service their debt.

What this means for investors

If a fund has 17% of its investors requesting withdrawals and can only honor 5% per quarter, it takes more than three quarters just to work through the current backlog, assuming zero new redemption requests come in.

These firms earn management fees based on assets under management. When investors redeem, the fee base shrinks. When redemption caps force managers to sell portfolio assets to generate cash, they may have to accept discounts on loans that were previously marked at par on their books.

Insurance companies, pension funds, and endowments all have significant allocations to private credit. If retail redemptions force enough asset sales to move pricing benchmarks, institutional investors holding similar assets could face mark-to-market pressures that ripple beyond the alternative asset management sector.

The jump from 14% to 17% at Cliffwater suggests momentum is still building. The next few weeks of redemption disclosures will determine whether this is a manageable stress event for the $2 trillion private credit market.

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