{"id":140630,"date":"2026-03-13T15:37:29","date_gmt":"2026-03-13T14:37:29","guid":{"rendered":"https:\/\/www.we-wealth.com\/?post_type=news&p=140630"},"modified":"2026-03-13T15:39:35","modified_gmt":"2026-03-13T14:39:35","slug":"private-credit-defaults-could-double","status":"publish","type":"news","link":"https:\/\/www.we-wealth.com\/en\/news\/private-credit-defaults-could-double","title":{"rendered":"Private credit: \u201cDefaults could double\u201d"},"content":{"rendered":"\n

Following BlackRock and Blue Owl, the semi-liquid private credit funds of Morgan Stanley and Cliffwater<\/strong> have begun to leave investor redemption requests unfilled, after exceeding their safety thresholds. These are, respectively, the $7.6 billion North Haven Private Income Fund and Cliffwater\u2019s flagship $33 billion fund\u2014the latter, in particular, has received redemption requests amounting to 14% of its value, compared to a quarterly limit set at 7%.<\/p>\n\n\n\n

While the industry continues to advocate for orderly management of the credit portfolio, with losses so far very limited, the fear spreading among investors is that exposure to the software sector could drive down valuations in the near future\u2014which is a strong incentive to exit while there is still an opportunity to do so. Limits on redemption volume serve to prevent the sale of underlying credits on unfavorable terms, but also to limit the funds\u2019 leverage\u2014another option on the table when it comes to repaying investors.<\/p>\n\n\n\n

In fact, managers argue that failing to limit redemption capacity could reduce the return on the entire portfolio\u2014which in many cases is higher than in the standard bond market. Like a building without a panic bar, the simultaneous outflow of large amounts of capital from semi-liquid funds may allow the manager to \u201cleave behind\u201d some of those who wanted their investments back: a dynamic inherent in the concept of conditional liquidity that risks backfiring on the image of the entire sector.<\/p>\n\n\n\n

Reimburse everyone or adhere to the established thresholds?<\/strong> Not all players have opted for the hard line: last week, in fact, Blackstone announced that it would reimburse all applicants for one of its private credit funds that had come under stress. A move that reassures investors, even if it could send the wrong message in the long term: fueling the idea that the liquidity of these funds is more readily available than it actually is.<\/p>\n\n\n\n

The real issue is the quality of the underlying loans<\/strong><\/h2>\n\n\n\n

Another factor causing concern among industry insiders is the actual value of the underlying loans. The Blue Owl fund\u2014which sparked industry-wide fears and permanently closed off the possibility of early redemption\u2014has so far sold off loans at just under face value, a factor that, on paper, should reassure exposed investors. In practice, however, some doubt that all underlying assets are of the same quality.<\/p>\n\n\n\n

First and foremost, it is shareholders who do not believe that business is going well for the giants of the private markets. Over the past six months, Blue Owl\u2019s stock has lost more than half its value on the stock market, while KKR, Blackstone, and Ares have all fallen by over 40%<\/strong>. These are significant losses, particularly because in the private markets\u2014unlike in asset management\u2014the interests of fund managers are directly aligned with those of investors: if the portfolio underperforms, the loss or underperformance also affects the fund managers.<\/p>\n\n\n\n

For private credit, the major problem does not appear to be the risk of recession, but rather the impact of artificial intelligence on a long list of technology companies that have been the sector\u2019s most frequent investment. According to Partners Group Chairman Steffen Meister, \u201cthere is a good chance that the default rate in private credit will double in the coming years,\u201d compared to the 2.6% average recorded over the past decade.<\/strong><\/p>\n\n\n\n

\u201cCredit has this problem: if a company is doing very well, your upside potential is limited\u2014you only collect interest,\u201d he told the Financial Times<\/em>, \u201cbut you\u2019re fully exposed to the downside\u2014and that\u2019s where the problem arises.\u201d<\/p>\n\n\n\n

Investors are rushing for the exit as uncertainty grows<\/strong><\/h2>\n\n\n\n

Semi-liquid funds do not currently factor such pessimistic scenarios into their valuations: those who request and receive redemption walk away \u201cclean\u201d and eliminate any doubt about future losses. The problem is that this awareness is spreading, and investors\u2014to return to the image of the panic bar\u2014are already crowding the exit door.<\/p>\n\n\n\n

Paradoxically, the war in Iran would have been met with relief by some of the private credit clients managed by Goldman Sachs, said Kunal Shah, co-CEO of Goldman Sachs International and global co-head of fixed income, currencies, and commodities, during a call: some of the bank\u2019s \u201cprivate markets clients\u201d are \u201csimply glad there is something to talk about other than exposures to software and private credit. And this [the conflict in Iran] is at least a distraction from that issue.\u201d


<\/p>\n","protected":false},"excerpt":{"rendered":"

Morgan Stanley has suspended redemptions from one of its private credit funds following a surge in redemption requests. Investors fear a deterioration in valuations linked to exposure to the software sector and the impact of artificial intelligence. \u201cThere is a good chance that defaults will double in the coming years,\u201d warns Partners Group Chairman Steffen Meister.<\/p>\n","protected":false},"author":85135,"featured_media":140631,"template":"","categories":[3779],"tags":[3889],"collana-video":[],"class_list":["post-140630","news","type-news","status-publish","has-post-thumbnail","hentry","category-private-market-istituzionali","tag-private-debt"],"acf":[],"yoast_head":"\nPrivate credit: \u201cDefaults could double\u201d | WeWealth<\/title>\n<meta name=\"description\" content=\"Morgan Stanley has suspended redemptions from one of its private credit funds following a surge in redemption requests.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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