When Everyone Wants the Exit at Once

Private Credit

For a long time, private credit felt like a simple bargain. Investors accepted that their money

would not be instantly available, and in return they received higher yields from loans that were not traded every day in public markets. Private-credit funds raise money from investors, lend it directly to companies, and typically hold those loans rather than trade them. That arrangement worked because it was never tested all at once. The Wall Street Journal reported in late March that investors had already pulled more than $11 billion from private-credit funds over the previous two quarters, while the Financial Times later reported that withdrawal pressure had risen further, with more than $13 billion of redemption requests across major funds by late March. That is the important backdrop here: the pressure did not arrive at one dramatic moment. It built quietly, and then it became visible, which is often how structural stress emerges in markets. 1 2

What makes this episode interesting is that almost nobody can claim surprise about the core

weakness. Investors always knew these assets were illiquid. That was the point. These were

private loans, often made directly to companies, designed to be held rather than easily sold. The extra yield came precisely because the loans were harder to move. As the Financial Times put it in March, the whole rationale of private credit was getting paid extra for making almost-unsellable loans. So the problem was not ignorance. The problem was behavior and the gap between what investors know structurally and how they act under changing conditions. Investors knew the assets were hard to sell, but as long as the system felt calm, that fact remained theoretical. 3

Then the story in investors’ heads began to change.

What matters here is not only what changed in the market, but how investors reacted to that

change together. People rarely move all at once because they all discover a hidden clause or a new risk on the same day. They move together because the same signals start to reshape the story in their minds at the same time. Higher interest rates made private loans feel less forgiving. At the same time, the rise of AI began to cast doubt over parts of the software sector that had previously been seen as dependable, scalable, and resilient. That did not automatically make every loan bad. But it changed the mood around a large group of similar assets. And once investors begin to feel that the story is changing, behaviour can shift very quickly. Caution becomes contagious. Each investor sees others growing more uneasy and becomes more focused on liquidity, not because the assets suddenly became illiquid overnight, but because confidence in waiting begins to weaken. In that way, perception itself becomes part of the pressure. In that sense, liquidity is not only a property of the asset, but a function of collective behaviour. The more investors suspect that others may want their money back, the stronger their own incentive becomes to move early. That is how an illiquid market that looked stable can start to feel fragile very quickly.

Higher rates made refinancing harder. Credit losses and restructurings became harder to ignore. At the same time, a market that had become heavily exposed to software started to look less comfortable than it had a year earlier. The Financial Times reported that software companies sit at the center of Wall Street’s private-markets boom and account for about a quarter of private- credit portfolios. The Wall Street Journal, looking across several large funds, found software exposure was often higher than advertised and closer to 25 per cent than 19 per cent. Many of these borrowers are also asset-light businesses, which means they depend more on recurring revenue and intangible value than on factories, inventory, or other hard collateral. That can look efficient in good times, but it can make recoveries harder when lenders need something more concrete to fall back on. Once AI began to cast doubt over the durability of many software business models, that concentration stopped looking like a sign of strength and started looking like a crowded trade, particularly in an environment where technological shifts can quickly reprice entire sectors. 4 5

That shift in perception matters because this is not just a story about assets. It is a story about people reacting to the same signal at the same time.

In calm periods, illiquidity feels manageable because most investors are not asking for their

money back together. In stressed periods, the same structure suddenly looks fragile, because everybody starts focusing on the same weakness at once. Everything worked until it did not; investors knew the assets were illiquid, but they did not act on it; then perception shifted; and suddenly everyone wanted liquidity at the same time. The Financial Times described this as a rush by nervous retail investors for the exits. The Wall Street Journal described the same mechanism more bluntly: the engine that powered private credit’s growth began to sputter once investors started trying to pull money out of the large funds that had come to depend on steady inflows. 6 7

This is where gates and caps stop sounding technical and start becoming the whole story.

A gate is simply the point at which a fund says: we can only let out so much cash in this period, even if more investors want to leave. In normal times, that rule sits quietly in the background. In stressful times, it becomes the central fact. It tells investors that liquidity was never unlimited; it was conditional, and access to it depends as much on timing as on underlying value. The Financial Times reported that BlackRock’s HPS Corporate Lending Fund received withdrawal requests equal to 9.3 per cent of net asset value in the first quarter and met only enough requests to hit its 5 per cent threshold. The FT also reported that Blackstone’s flagship private-credit fund received redemption requests equal to 7.9 per cent of assets, above its usual 5 per cent cap, though Blackstone chose to meet them in full. The Wall Street Journal similarly noted that Blackstone allowed almost 8 per cent of its fund to redeem, above the initial 5 per cent cap. The mechanics are simple: if too many people ask for cash at once, the structure cannot pretend the underlying assets are more liquid than they are. 8 9 10

And that is why the behavioral dimension matters more than the technical one.

Investors do not move together because they all suddenly discover the same clause in a fund document. They move together because they stop believing the same reassuring story. For years, the reassuring story was that private credit was steady, insulated, income-producing, and professionally managed. The new story is less comfortable: some of the loans are concentrated in similar companies, some of those companies face uncertainty from AI and slower growth, and liquidity that looked available on paper may not feel available when many people reach for it together. Once that new story takes hold, behavior changes fast. And once behavior changes fast, even a structure that looked stable can start to feel fragile.

What is changing is not the existence of illiquidity, but the market’s tolerance for it. That is also why this should not be read as a normal market update. It is not mainly a story about quarterly flows, or which manager had the worst month. It is a story about what a system reveals about itself under pressure. Private credit did not suddenly become illiquid in 2026. It was always illiquid. What changed was that more investors began behaving as if liquidity now mattered more than yield. A shift that may continue to reprice how risk is assessed across private markets. The stress came not from discovering a hidden flaw, but from collectively reacting to one that had been visible all along.

That is why this moment matters even for a reader who does not follow private markets day to day. It is a reminder that systems can look stable for a long time because they rely on confidence, not because they are built to withstand everyone changing their mind at once. And once perception shifts, markets that seemed patient can turn urgent very quickly.

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News in brief

1. Blue Owl becomes the clearest symbol of the strain. The Financial Times reported that

investors sought to withdraw $5.4 billion from two Blue Owl private-credit funds, part of

a broader wave that has seen roughly $19 billion of redemption requests across the sector. That makes Blue Owl one of the clearest examples of how quickly a semi-liquid structure can come under pressure once sentiment turns. 11

2. Goldman shows the story is not identical everywhere. The Wall Street Journal reported

on April 6 that Goldman Sachs’ private-credit fund kept first-quarter redemption requests just below its 5 per cent cap and met them in full, helped by about $1.04 billion in new subscriptions. Goldman attributed the resilience in part to its more institutional investor base, suggesting that who owns the product matters almost as much as what the product owns. 12

3. Secondary buyers are already circling. The Wall Street Journal reported that redemption

pressure in private-credit interval funds was creating opportunities for secondary buyers

to purchase assets at discounts. That is often what happens next in a stress cycle: one

group’s need for liquidity becomes another group’s chance to buy mispriced assets. 13

Label R view

Liquidity is no longer a background assumption. It is becoming an active constraint shaping market behaviour. In that environment, the ability to control timing may matter more than the assets themselves.

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1 The Wall Street Journal, “The Private-Credit Industry’s Trouble: Surging Redemptions, Slower Fundraising, ”March 26, 2026, https://www.wsj.com/finance/investing/the-private-credit-industrys-trouble-surging-redemptions-slower-fundraising-2f209383

2 Financial Times, “Ares limits withdrawals from $10.7bn private credit fund,” March 24, 2026, https://www.ft.com/content/9a1b60c5-7015-4314-9608-d02c00c3a574

3 Financial Times Alphaville, “Who cares if private credit goes kaput?,” March 17, 2026, https://www.ft.com/content/742edb09-a856-41ad-aea6-207862cfd952

4 Financial Times, “Private capital: what are the risks?”, March 29, 2026, https://www.ft.com/content/214371b3-aad0-405d-88f3-28b371f4c776

5 The Wall Street Journal, “Private Credit’s Exposure to Ailing Software Industry Is Bigger Than Advertised, ”March 30, 2026, https://www.wsj.com/finance/investing/private-credits-exposure-to-ailing-software-industry-is-bigger-than-advertised-d80da378

6 Financial Times, “Wall Street’s big private capital problem,” March 22, 2026, https://www.ft.com/content/14adbdd8-ef0a-40a9-afb9-cd3d233586f4

7 The Wall Street Journal, “An Exodus of Money Endangers Wall Street’s Private-Credit Craze,” March 12, 2026, https://www.wsj.com/finance/investing/an-exodus-of-money-endangers-wall-streets-private-credit-craze-d0fbb8af

8 Financial Times, “BlackRock limits redemptions at private credit fund as outflows swell,” March 6, 2026, https://www.ft.com/content/2336fccb-745d-4f3b-8ade-d84f0027e70f

9 Financial Times, “Blackstone’s flagship private credit fund hit with wave of redemptions,” March 2, 2026, https://www.ft.com/content/7dadc5b5-d5d2-40d6-9ee0-abcb03e0a598

10 The Wall Street Journal, “Why Blackstone and BlackRock Can Ride Out the Private-Credit Storm,” March 10, 2026, https://www.wsj.com/finance/investing/blackstone-blackrock-private-credit-663b5f00

11 Financial Times, “Blue Owl struck by $5.4bn of redemption requests,” April 2, 2026, https://www.ft.com/content/f4320148-3d81-4bd0-9ab6-053a5bade188

12 The Wall Street Journal, “Goldman Private Credit Fund Sees Less Than 5% Redemptions in First Quarter,” April 6, 2026, https://www.wsj.com/livecoverage/stock-market-today-dow-sp-500-nasdaq-04-06-2026/card/goldman-private-credit-fund-sees-less-than-5-redemptions-in-first-quarter-L2136gbpFcqZjWRa5nDh

13 The Wall Street Journal, “Secondary Buyers Eye Private-Credit Assets as Redemptions Mount,” March 6, 2026, https://www.wsj.com/articles/secondary-buyers-eye-private-credit-assets-as-redemptions-mount-73566238