Blackstone says withdrawal limits are a 'feature and not a flaw' designed to 'protect investors from themselves'

By Nora Redmond

Dan Oneglia, liquid credit strategist at Blackstone, said the group capped withdrawals from its flagship private credit fund to "protect long-term investors."

Blackstone's decision to cap withdrawals from its flagship fund is a "feature and not a flaw" of the system, designed to "protect investors from themselves," according to one strategist.

At the beginning of June, the New York-based investment-management company said it was limiting redemptions from its $82 billion Blackstone Private Credit Fund, known as BCRED, to 5% of shares after a rise in requests. The move came after investors in the fund tried to redeem 8% in the first quarter and 10% in the second quarter, as concerns grew over artificial intelligence's potential to disrupt the industry as a whole.

A number of private-credit funds, including Cliffwater Corporate Lending Fund, Apollo Debt Solutions and Morgan Stanley's North Haven Private Income Fund, have also introduced caps on withdrawals.

Higher rates of redemption requests have mainly been driven by fears that have arisen from negative headlines, Dan Oneglia, liquid credit strategist at Blackstone, told UBS Market Moves host Daniel Cassidy in a recent episode of the podcast. "The fundamentals wouldn't necessarily say there's a significant issue here," he said, adding that this is why the company views its capping mechanism as "a feature and not a flaw of the structure."

"It's a way to protect investors from themselves," Oneglia, who previously led the multistrategy investment team for the Americas at Goldman Sachs, said. "These features are there to protect long-term investors from that fearmongering that can go on."

He said that from Blackstone's perspective, businesses as a lender, businesses that have borrowed are proving resilient, with growing revenue and Ebitda - a company's earnings before interest, taxes, depreciation and amortization.

Before the global financial crisis of 2008-09, loan-to-value ratios, which measure the value of the loan and the value of the asset, were upward of 90%, with mostly under-vetted borrowers, he said. In today's private-credit landscape, loan-to-value ratios are closer to between 45% and 50%, with a primarily institutional investment base, he said.

-Nora Redmond

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06-24-26 0811ET