Redemption wave hits: Goldman Sachs narrowly avoids crossing the line, Baring Private Equity forced to limit withdrawals, private credit liquidity pressures emerge

Private credit markets are showing a clear loosening of capital.

Under the multiple pressures of interest rates at elevated levels, concerns about credit quality, and expectations of an AI-driven impact, investors have begun to accelerate their exit from this once-hot asset class. Although some top-tier firms are still barely managing to hold the redemption threshold, more and more funds have been forced to limit withdrawals, and industry liquidity pressure is rapidly becoming apparent.

Goldman Sachs: narrowly guarding the redemption threshold

According to a filing dated Monday, Goldman Sachs Private Credit Corp., with a size of $15.7 billion (a so-called non-listed business development company), met redemption requests equivalent to 4.999% of its outstanding shares in the first quarter, barely avoiding a broad redemption wave that would have forced some peers to limit redemptions. By contrast, peers including Blue Owl Capital had redemption requests far above the industry-wide 5% cap commonly set.

However, this redemption ratio is still higher than the 3.5% level in the fourth quarter of last year.

Private credit funds aimed at retail investors have seen a clear demand slowdown since the beginning of this year, and many investors have tried to exit their holdings. Many fund managers have chosen to restrict redemptions; to date, more than $8 billion has been “stuck” in these products.

In a letter to shareholders, the fund said:

“Among comparable non-listed BDCs, we are the only fund with redemption requests below the standard 5% quarterly cap.”

Driven by subscription inflows of about $1.04 billion, the fund recorded net inflows for the quarter, while Goldman Sachs said many of its competitors experienced net outflows.

The fund noted that it relies more on institutional capital than on retail investors. And in today’s market environment, retail investors are withdrawing at scale, driven by concerns including worries about lending standards, as well as concerns about exposure to companies that may be affected by artificial intelligence.

The fund manager wrote:

“It needs to be made clear that we are in the same market environment as other non-listed BDCs, and of course we also cannot completely avoid changes in the industry as a whole.”

“We still believe that what matters more are structural factors: by maintaining a private credit platform oriented toward institutional capital, we achieve strategic diversification of our funding sources. This means we can be more patient, deploy investments at our own pace, and, combined with our deal-sourcing system, we can maintain a competitive advantage throughout the credit cycle.”

The filing shows that as of the end of February, the fund’s return since the beginning of the year was 0.4%, below 1.3% for the same period last year. The performance across the entire industry has generally declined—for example, a fund under Ares Management recorded a loss of 0.68% in February, its largest single-month drop since it was launched in 2022.

Goldman Sachs also said that reduced inflows into this asset class have brought some benefits, including wider spreads and better terms—because lenders that rely on traditional retail inflows are starting to scale back their operations.

Barings private credit: redemption pressure is off the charts, forced to cap redemptions

A Barings LLC private credit fund with a size of $4.9 billion limited its redemption ratio in the first quarter. Previously, investors had requested redemptions totaling as much as 11.3%.

According to media reports, based on a filing dated Monday, Barings Private Credit Corp. paid less than half of its redemption requests, limiting the redemption ratio to 5%. This means the fund retained roughly $180 million of capital that investors had originally requested to redeem.

In a letter to shareholders, the fund said:

“We seek to manage capital responsibly for both investors looking to exit and those continuing to hold investments, while meeting short-term liquidity needs.”

One of the largest holders of this Barings fund is Cliffwater LLC. Its private credit interval fund, managed at a scale of $33.0 billion, is the largest product in its peer group. In the first quarter of this year, investors requested to redeem 14% of capital from Cliffwater’s flagship fund, but were ultimately limited to 7%.

Barings said that limiting the redemption ratio to 5% helps it seize investment opportunities arising from market volatility.

Barings also said that despite redemptions, the credit quality of its investment portfolio remains “strong.” So-called “non-accrual loans” (loans that no longer generate interest income) accounted for 0.4% of the portfolio as of the end of December last year, below the industry’s historical average of 0.9% over the long term.

The fund also said that since it began investing in 2021, its annualized return has been 10.6%.

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