The least satisfying, but most accurate, thing to be said about private credit right now is that it’s working exactly as it’s supposed to.
Funds are limiting customer withdrawals just as they said they would and if it all sounds a bit paternalistic — protecting unsophisticated investors from the consequences of their own panic — well, that’s the point. BlackRock CEO Larry Fink, whose firm has gated investors who wanted out of its $26 billion HPS Corporate Lending Fund, told the BBC he would be violating his fiduciary duties by waiving the redemption cap, which would force the fund to sell assets at steep haircuts.
“Those are the rules — live with it,” he told the British broadcaster this week. “It’s not like it’s on page 92 of a prospectus. It’s on page one.”
When Blackstone dipped into its own pockets, as well as its employees’, earlier this month to meet more than the 5% of customer redemptions it was required to, fund managers worried that the generosity would spread. But others have stuck to the minimum. Munificence, for the moment, is not contagious.