"Redemption Wave" Sweeps U.S. Private Credit Industry, PE Giants' Stock Prices Decline Across the Board

The U.S. private credit market is facing a concentrated liquidity stress test. Ares Management and Apollo Global Management have announced restrictions on redemptions for their private credit funds, sparking widespread market concerns, with shares of several alternative asset managers falling sharply.

On Monday evening, Apollo was the first to disclose that its $25 billion commercial development company, Apollo Debt Solutions, would limit quarterly redemptions to 5% after investors requested to redeem 11.2% of their shares.

Ares quickly followed, with its $10.7 billion Ares Strategic Income Fund also triggering a 5% redemption cap, after redemption requests for the quarter had already risen to 11.6%. These moves have further fueled market doubts about liquidity in private credit.

Following the news, Ares and Apollo’s stock prices both dropped over 4% in New York trading on Tuesday. Peers like TPG, Blackstone, KKR, and Blue Owl Capital also declined across the board, with the financial sector index falling as much as 0.8% intraday. Since the start of the year, many alternative asset management firms’ stocks have fallen by double digits.

Redemption wave spreads as major players tighten gates

This round of redemption pressure is not an isolated event but part of a broader industry-wide trend. According to Bloomberg, Morgan Stanley, Cliffwater LLC, and BlackRock have earlier this month imposed redemption restrictions on their multi-billion dollar private credit funds, with Ares and Apollo being the latest to follow suit.

In the first quarter of this year, related funds received a total of $13 billion in redemption requests, out of an estimated $211 billion in total assets under management. Currently, only about two-thirds of these requests have been fulfilled, leaving $4.6 billion in redemption requests pending.

For example, the Ares Strategic Income Fund received $1.2 billion in redemption requests in Q1 but only paid out $524 million, roughly 45% of the requested amount. Ares attributed the redemption pressure to “a small number” of family offices and small-to-medium institutional investors, accounting for less than 1% of over 20,000 investors, yet holding assets exceeding 11% of the fund’s total size. Notably, the fund also saw $708 million in new subscriptions during the same period, keeping its assets stable, but analysts generally believe that the inflow momentum has peaked.

Behind the redemption wave are ongoing investor concerns about private credit lending practices and exposure to industries vulnerable to AI disruptions. Mark Malek, Chief Investment Officer at Siebert Financial, pointed out in a client report that Apollo’s disclosures reveal a significant gap between its public statements and actual portfolio exposure, with the software industry remaining its largest holding. “This gap, at a time when confidence is most critical, can undermine trust,” he wrote.

Liquidity illusion questioned, systemic risk debate heats up

The concentrated emergence of redemption restrictions has brought the long-standing liquidity structural issues in the private credit market to the forefront. These non-traded private credit funds, often targeted at retail and high-net-worth investors, hold relatively illiquid underlying assets but offer quarterly redemption mechanisms for investors, creating a mismatch that becomes evident under redemption pressures.

Industry experts are divided on whether this turbulence signals deeper risks. Notable figures like JPMorgan CEO Jamie Dimon and former Goldman Sachs CEO Lloyd Blankfein have compared the current private credit market turmoil to the conditions before the 2008 global financial crisis.

However, some dissent from this analogy. Malek stated, “This is not a systemic banking crisis like 2008 because private credit largely operates outside the traditional deposit-funded banking system. The core issues are valuation, transparency, and the fact that this asset class has never truly been liquid but has created a liquidity illusion.”

Looking further ahead, the spread of redemption restrictions is already beginning to dampen overall fundraising prospects for the industry. Analysts expect fundraising from high-net-worth individuals for firms like Blackstone, Ares, and Blue Owl to slow significantly, as this channel has been a key driver of industry growth. Meanwhile, the private credit industry is actively lobbying regulators to open access for private investments in 401(k) retirement plans, but this liquidity turmoil may complicate such policy efforts.

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