Blackstone Limits Withdrawals From Blackstone Private Credit Fund
From the desk of Jim Eccleston at Eccleston Law
Blackstone's flagship private credit fund faces continued pressure from investors seeking liquidity. The Blackstone Private Credit Fund, known as BCRED, received approximately $4.3 billion in withdrawal requests during the third quarter, representing about 10 percent of shares outstanding. According to InvestmentNews, the fund will fulfill requests representing 5 percent of shares outstanding, according to a letter Blackstone sent to investors.
According to InvestmentNews, BCRED has maintained the 5 percent quarterly withdrawal limit for months. The latest cap means the fund will fulfill only about half of the requested withdrawals.
As a nontraded business development company, BCRED offers investors limited liquidity. Alternative investments such as BCRED can increase portfolio yields, but their limited liquidity can create challenges when investors seek to exit.
Blackstone continues to point to BCRED's performance. A company spokesperson said in an email that Class I shares generated a 9 percent annualized total net return since inception, nearly 300 basis points above leveraged loans.
InvestmentNews reports that investor concerns nevertheless have intensified across the private credit market. A series of missteps involving prominent BDC manager Blue Owl Capital last fall heightened concerns among clients and financial advisors. Those concerns come after private credit funds experienced substantial sales growth over the past five years.
Business development companies, both traded and nontraded, finance loans to mid-sized private companies. The market expanded significantly after the 2008 credit crisis as restrictions on bank lending created additional opportunities for private lenders.
Investors have also raised concerns about BDC exposure to loans issued to private software companies. Those companies face pressure from the potential impact of artificial intelligence on their businesses.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, blackstone, private credit funds, liquidity constraints, fund withdrawals, securities law
