Three of the world’s largest alternative asset managers gated flagship funds this week in a cascading series of withdrawal restrictions that began in private credit and spread into private equity, marking a new phase in a liquidity crunch building since the start of the year.
On June 2, Cliffwater LLC capped redemptions from its $31 billion Corporate Lending Fund at 5% after investors sought to pull 17% of shares in the second quarter — up from 14% in Q1, when the fund honored requests up to 7%. Investors received back less than a third of what they asked for.
The following day, Switzerland’s Partners Group imposed a 5% gate on its $8.6 billion Global Value SICAV fund, an open-ended private equity vehicle, after redemption requests climbed to an estimated 9.8% of net asset value in Q2 — almost twice its preset quarterly cap. Partners Group shares crashed 17% in Zurich, the steepest one-day loss in the company’s two-decade trading history, pulling down Blackstone, KKR, Ares, EQT, and European peers.
On Thursday, Blackstone followed. The world’s largest alternative asset manager capped withdrawals from its flagship $79 billion Blackstone Private Credit Fund, known as BCRED, at 5% after redemption requests hit roughly 10% — approximately $4.4 billion — during the second quarter, according to a June 4 investor letter filed with the SEC.
A Reversal for Blackstone
Thursday’s announcement reversed a posture Blackstone had held just three months earlier. In Q1, Blackstone honored all redemption requests from BCRED at a then-record 7.9%, drawing on roughly $400 million in combined contributions from the firm and senior employees to close the gap. That accommodation is gone.
“The Fund’s repurchase framework provides shareholder liquidity aligned with the expected repayment cycle of investments, while preserving capital to deploy in attractive market environments,” the letter said.
The firm defended BCRED’s overall health. The fund holds more than $15 billion in available liquidity, and loan repayments combined with inflows have outpaced share repurchases, Blackstone said. BCRED’s Class I shares have returned 9.3% annualized since inception, which the firm describes as a 50% premium over leveraged loans.
Blackstone shares rose more than 5% Thursday, clawing back a 4% loss from Wednesday triggered by the Partners Group news, which may show that markets read the Blackstone disclosure as managed and not distressed.
From Credit to Equity
Partners Group CEO David Layton told Bloomberg TV that “some of this redemption pressure in private credit started to make its way over into other asset classes.” Investors and analysts are watching whether this migration will continue.
Partners Group expects a US-domiciled private equity vehicle to face Q2 redemption requests of around 6% of NAV. The firm also expects three additional evergreen funds, with combined assets of $9.7 billion, to see requests of 3.5% to 5% in Q2, and said it would impose 5% liquidity limits across all of them if withdrawal requests exceed that threshold.
The private credit market has been under strain throughout 2026. BlackRock’s HLEND fund and Morgan Stanley both capped redemptions in Q1. Cliffwater’s Q2 figure of 17% — up from 14% the prior quarter — shows a steady escalation, not a one-time event.
S&P Global Ratings cut the fund’s outlook to negative from stable in March, citing Cliffwater’s approximately 25% exposure to software companies — a sector facing heightened scrutiny as private credit investors reassess risks posed by AI-driven disruption and slowing growth.
Fundraising has also collapsed. Total credit fundraising fell 63% year over year in April to approximately $3.7 billion, while fundraising for business development companies — the semi-liquid vehicles at the center of the redemption wave — plunged 74% over the same period to its lowest monthly level since May 2023.
Non-listed BDCs saw investor withdrawals outpace new capital for the first time this year, a milestone that marks the effective end of an extended growth phase.
The Underlying Stress
The gates expose a fundamental tension built into evergreen private funds, which offer wealthy retail investors periodic liquidity — typically quarterly withdrawal windows — on assets that cannot quickly change hands without steep discounts. Private loans and private equity stakes rarely trade in any volume, and selling them under pressure, while multiple funds face simultaneous demands, risks crystallizing losses across the sector.
Deteriorating loan quality also adds to the concern. Paid-in-kind arrangements — where companies defer cash interest payments and pile on additional debt instead — have climbed from approximately 7% to 11% of private credit market investments since 2021, according to Lincoln International, a valuation firm that tracks thousands of private company holdings globally.
So-called “bad PIK” arrangements, where existing cash-paying loans are converted to PIK terms after the fact, have risen from 2% to 6% over the same period — a figure some analysts describe as a shadow default rate.
Cliffwater said its fund holds enough liquidity to meet 5% quarterly redemptions for more than a year without selling any position. Partners Group executive chair Steffen Meister and CEO David Layton told investors in a letter that the firm honored 62% of May exit requests but would keep the vehicle locked down through June. The firm cited 15% organic liquidity backed by a fully undrawn revolving credit facility of equal size.
What to Watch
The Q2 redemption season is still unfolding. Blue Owl, Apollo, and Ares have not yet reported Q2 redemption figures for their semi-liquid vehicles. After Cliffwater on June 2, Partners Group on June 3, and Blackstone on June 4, it’s possible that those disclosures could bring more turbulence. And if Q2 redemption requests at other large evergreen PE vehicles prove similarly elevated, the gating that rattled markets last week may just be the beginning of a broader repricing of liquidity across private markets.
The $1.8 trillion private credit market expanded rapidly on the promise of private market returns with some liquidity. Redemption gates are now testing that promise at scale.
Information for this story was found via the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
