Private credit funds see redemption pressure ease but results weaken
Apollo's private credit fund sees redemptions halve, while BCP and MSDL report weaker results and Ares scales back a fund.
Redemption pressure in private credit markets is showing signs of easing, even as fund managers report weaker quarterly results and face pushback from investors on valuations.
Apollo Global's president, Jim Zelter, said Tuesday that withdrawal requests from its $26 billion non-traded private credit fund have fallen to roughly half the level seen during the previous redemption window. In June, investors had sought to pull about 16.8% of the fund, triggering the customary maximum redemption of 5% of shares. Zelter cautioned that it was still early, but noted the decline in requests.
Apollo CEO Marc Rowan said the firm remains on track to offer daily pricing in its funds by October, a move aimed at broadening appeal to retirement plans and individual investors. "The more we do this, the more we will make ourselves acceptable to 401k, to DC, traditional asset managers, individuals," he said.
The easing at Apollo comes amid broader concerns in the sector over competition, falling returns, and the potential impact of artificial intelligence on software businesses that private credit funds have financed.
Ares Management was forced to shrink a planned €1 billion private credit vehicle to about €400 million after investors pushed back on the valuation of loans being placed into a continuation fund. Potential backers sought a larger discount on the loans than Ares was willing to accept.
Meanwhile, the Federal Reserve Banks of Dallas and New York said Wednesday they plan to launch a pilot survey of the estimated $1.3 trillion private credit market after the third quarter, with findings expected in early 2027.
Results from business development companies were mixed. BCP Investment reported a decline in net asset value for the second quarter, driven by unrealized mark-to-market losses in software holdings. Morgan Stanley Direct Lending Fund saw net investment income dip due to non-accrual positions, though it repurchased over 830,000 shares during the quarter.
Golub Capital Private Credit Fund reported repurchase requests of 4.8% of common shares outstanding in its latest tender period, with all requests to be honored at net asset value as of June 30. The fund said it had about $4 billion in diversified liquidity sources at that date.