(Bloomberg) — Investors who poured billions of dollars into private credit over the past half-decade are now rushing to yank their cash from vehicles holding direct loans, amid lower returns and fears over credit quality in the $1.7 trillion asset class.<\/p>\n
From Ares Management Corp. to Blue Owl Capital Inc. and Blackstone Inc., the biggest lenders were hit with a spike in requests from investors to withdraw money from their large non-traded business development companies in the three months through December.\u00a0<\/p>\n
Investors in BDCs holding more than $1 billion asked to pull a total of more than $2.9 billion in the fourth quarter, up 200% from the prior period, according to a report from Robert A Stanger & Co., a boutique investment bank that tracks the industry closely.<\/p>\n
Even amid the withdrawal requests, many of these funds are drawing more investor cash than they are losing. So far, fund managers have agreed to honor all redemption requests.<\/p>\n
The climb in withdrawals shows how sentiment has soured toward private credit in recent months. Fears have set in over lower returns, rising signs of stress and increased scrutiny from regulators and policymakers.<\/p>\n
\u201cThe current environment represents one of the first real tests for the largely non-institutional client base of many of these funds since Covid,\u201d said Alfonso Rodriguez, an associate director of alternative investment research at EP Wealth.\u00a0<\/p>\n