Investors are pulling money out of private markets funds faster than the funds are built to return it. The pressure started in private credit in late 2025 and has since spread to private equity. In Q4 2025, average redemptions across perpetual evergreen credit funds rose to 4.8% of NAV, up from 1.6% the quarter before. By the first quarter of 2026, wealthy investors were seeking to withdraw more than $10 billion from the largest private credit funds. Because most of these funds cap quarterly withdrawals at 5% of assets, one provider after another has had to "gate", pay out only part of what investors asked for.
Who has gated, and by how much
The pressure has been heaviest at Blue Owl. Investors asked for roughly $5.4 billion back in Q1: 21.9% of its $36 billion flagship credit fund (OCIC) and 40.7% of its $6.2 billion technology lending fund (OTIC). Both paid out only the 5% cap. A third, smaller Blue Owl fund of $1.6 billion froze redemptions entirely in February and is being wound down. The rest of the industry followed a similar pattern. BlackRock's $26 billion HLEND fund received $1.2 billion in requests and paid out $620 million, the first time it ever hit its cap. BlackRock's own shares fell 6.7% on the news. Morgan Stanley's North Haven Private Income Fund met just under half of requests after investors sought to pull nearly 11%. Apollo capped its $15.1 billion Debt Solutions fund after 11.2% in requests; Ares did the same on its $10.7 billion Strategic Income Fund after 11.6%. At Cliffwater's $31 billion lending fund, requests climbed from 14% in Q1 to 17% in Q2 investors got back roughly a third of what they asked for.
Blackstone was the exception. Rather than gate its $82 billion BCRED fund, it lifted the cap from 5% to 7% and put in $400 million of firm and employee money to meet a record $3.8 billion in requests.
The spread to private equity, in June the anxiety reached private equity evergreens. Partners Group became the 1st PE provider capping its $8.6 billion Global Value fund at 5% per quarter after Q2 requests hit an estimated 9.8%. Its shares fell as much as 18.2% in Zurich, the firm's biggest intraday loss on record.
Why investors are heading for the exit
Four things have come together at once .
1. Defaults and fraud. Subprime auto lender Tricolor collapsed in September 2025 after allegedly pledging the same collateral twice and manipulating loan files. Auto parts maker First Brands filed for bankruptcy shortly after, having hidden debt in off-balance-sheet financing. A UK mortgage lender then collapsed in early March. Together, these shook confidence in lending standards.
2. Borrower stress. Loans where borrowers pay interest with more debt rather than cash ("PIK") have more than doubled, from 5% of the market in 2022 to 11% by end-2025 a classic sign that companies are struggling to service their debt.
3. AI fears. Private credit lent heavily to software companies an estimated $500 billion of exposure as of December 2025 just as markets began to fear AI could undermine those businesses. Blue Owl itself blamed its redemption surge on "heightened market concerns around AI-related disruption to software companies".
4. A flightier investor base. These funds were sold heavily to wealthy individuals and private banks, who behave very differently from the pension funds that traditionally held private assets. And gating feeds on itself: once investors fear being locked in, they file requests pre-emptively, making the queues longer.
Why the headlines overstate it
The request percentages sound dramatic, but far less cash has actually left. A surge in redemption requests is a sentiment signal it is not, on its own, evidence that the loans are going bad. Blue Owl's flagship fund shows the gap: after netting its $988 million payout against $872 million of new money coming in, the actual outflow was just $116 million under 1% of the fund. Roughly 90% of its 90,000 investors asked for nothing, and 1% of investors drove most of the requests. Reported portfolio quality also remains solid: 96% of BlackRock's HLEND is first-lien senior secured debt with a 39% loan-to-value.
Our view - Moody's cut its outlook on the sector to negative in April, and Fitch flagged rising redemptions and slowing fundraising. The gating wave has drawn congressional attention to the risks of the nearly $2 trillion market. Whilst managers insist the system is working as designed BlackRock called the 5% cap "foundational" to its returns, since the loans simply can't be sold on demand. Our view for what it’s worth is very simple, the above should serve as a warning sign for the industry and the rule makers about the downside of illiquid funds that are marketed as being semi-liquid in an asset class that is clearly not liquid !