Executive Summary
In recent weeks, a significant liquidity event has shaken the core of the private credit market, with major implications for global capital flows and risk assessment.
- BlackRock’s flagship $26 billion private credit fund, HPS Corporate Lending Fund (HLEND), triggered its redemption deferral mechanism after requests surged to 9.3% of net assets, far exceeding its 5% quarterly limit.
- This is not an isolated incident; peers like Blue Owl Capital and Blackstone have faced similar redemption pressures, signaling a sector-wide re-evaluation of risk.
- The crisis is rooted in a fundamental value reassessment of underlying assets, particularly software and SaaS companies, whose business models are being disrupted by the advent of artificial intelligence (AI).
- The lucrative ‘stable fee-based growth’ model that powered private equity giants for a decade is now under severe threat, impacting their valuations and investor confidence.
- For international investors, especially those focused on Chinese equity markets, this event underscores the interconnectedness of global liquidity and the critical need for robust due diligence on non-traditional credit exposures.
The Unfolding Liquidity Crisis in Private Credit
A sudden wave of redemption requests has exposed fragility in a market long considered a bastion of stability. The liquidity crisis in private credit, once a niche concern, has erupted onto the main stage with BlackRock at the epicenter. This development serves as a stark reminder that even assets managed by the world’s largest asset manager are not immune to rapid shifts in investor sentiment and underlying asset valuation.
BlackRock’s HLEND Fund Hits a Wall
BlackRock’s HPS Corporate Lending Fund (HLEND), a $26 billion behemoth in the private credit space, recently received redemption requests totaling approximately $1.2 billion, or 9.3% of its net asset value. This immediate liquidity crisis in private credit forced the firm to enact a contractual deferral mechanism. According to its disclosure, BlackRock only allowed investors to redeem 5% of the fund’s shares, roughly $620 million, and deferred the remaining $580 million in requests to the next quarter.
The market reaction was swift and severe. On the day of the announcement, BlackRock’s stock price fell over 7%, and it continued to decline in the following sessions, shedding more than 10% of its value in just five trading days. This event has fundamentally challenged the perception of private credit as a highly liquid core holding for institutional portfolios.
A Sector-Wide Phenomenon
This liquidity crisis in private credit extends far beyond a single firm. Earlier this year, Blue Owl Capital’s retail-focused private credit fund, OBDC II, faced substantial redemption pressure. While exact figures were not disclosed, the requests exceeded the fund’s 5% threshold, prompting Blue Owl to take the drastic step of permanently suspending quarterly redemption rights. The firm stated it would return capital through the sale of underlying assets, a process that could indefinitely lock investor funds if asset disposals are slow.
Similarly, Blackstone’s $48 billion flagship private credit fund, BCRED, confronted redemption requests of about 7.9%, or $3.8 billion, in the first quarter. To navigate this liquidity crisis in private credit, Blackstone temporarily raised its quarterly payout limit to 7% and saw its executives and employees inject $400 million of their own capital to meet all requests and avoid a default scenario.
The situation at Cliffwater was even more acute, with redemption requests hitting 14% of its $33 billion fund, creating a $4.62 billion liquidity gap that starkly contrasted with its annual operating expense ratio of just 3.27%. What began as isolated fund stress is rapidly morphing into a systemic crisis of confidence for the entire private credit asset class.
The AI Catalyst: Triggering a Deep Value Reassessment
The root of this turmoil lies not in fund management but in a seismic shift in the valuation of the assets these funds hold. The liquidity crisis in private credit is, at its core, a crisis of underlying asset value. Software and Software-as-a-Service (SaaS) companies, once darlings of private equity and credit for their predictable cash flows, are now facing a profound existential threat from generative AI.
Software Assets Under Siege
The investment thesis for loading private credit portfolios with software debt is cracking. As AI tools offer core functionalities for free or at a fraction of the cost, the pricing power and long-term viability of many standalone software firms are being questioned. This sentiment is vividly reflected in secondary market prices and transaction levels for corporate debt.
Take ServiceNow (NYSE: NOW), often seen as an industry bellwether. Despite reporting decent business and cash flow growth, its stock price plummeted from $184 to $105 between November 2025 and March 2026—a 43% drop that far outpaced the broader market. Its price-to-earnings (P/E) multiple compressed from 99x to 65x, indicating deep market skepticism about its future growth and pricing resilience in an AI-dominated landscape.
Another telling example is Cornerstone OnDemand, a company held in the debt portfolios of several major private credit funds. Since its 2021 privatization, the trading price of its term loan has fallen about 10 points to approximately 83 cents on the dollar. Meanwhile, six Business Development Companies (BDCs) holding this debt carry it on their books at an average valuation of 97 cents, highlighting a significant and worrying mark-to-market gap.
Broad Market Re-pricing Becomes Evident
The negative reassessment is now evident at the index level. In January 2026, the S&P North American Software Index fell 15% in a single month, its worst monthly performance since 2008. Key valuation metrics for the sector have collapsed:
- Enterprise Value to Annual Recurring Revenue (EV/ARR) multiples have crashed from the 2021 peak of 15–25x down to a range of 6–10x, with premium leaders fetching only 8–12x.
- Forward P/E ratios have declined from around 35x at the end of 2025 to approximately 20x currently, touching lows not seen since 2014.
This repricing signals a fundamental shift in market logic. The era of funding capital expansion at any cost is over. Investors are now ruthlessly focused on return on investment and profit conversion, unwilling to finance companies that burn cash without a clear path to profitability. This shift is the primary engine driving the current liquidity crisis in private credit.
The Fee-Based Growth Model Confronts Reality
For over a decade, private credit has been a golden goose for major private equity firms. Pension funds, insurance companies, sovereign wealth funds, and high-net-worth individuals flooded in via funds-of-funds (FOFs) and separately managed accounts (SMAs), pushing assets under management (AUM) in the U.S. from about $200 billion in 2015 to over $800 billion in 2021—an 18% compound annual growth rate.
The Software-Fueled Profit Engine
Software was the cornerstone of this boom. As light-asset businesses with limited physical collateral, software companies found it difficult to secure traditional bank loans, creating a perfect niche for private credit providers. The sector’s high valuation expectations and wealth-generating merger activity further fueled the fire.
Firms like Vista Equity Partners and Thoma Bravo became titans by mastering software buyouts and post-investment integration. Vista founder Robert F. Smith (罗伯特・F・史密斯) has seen his net worth remain consistently above $10 billion, largely built on the ‘buy low, sell high’ dynamics of software assets. Thoma Bravo co-founder Orlando Bravo (奥兰多・布拉沃) boasts a net worth of $12.8 billion. In this environment, even unprofitable software service companies commanded astounding price-to-sales (P/S) ratios of 20-30x, dwarfing the 5-8x multiples of legacy giants like Microsoft and Oracle.
Cracks in the Foundation
The ‘stable fee-based growth’ story that propelled PE stock prices is now showing severe cracks. As underlying software asset values deflate, numerous IPO and sale plans are being shelved, and refinancing pressures for the next 3-4 years could concentrate, forcing a brutal reckoning.
Major players are already adjusting. Apollo Global Management reduced its software industry allocation from 20% to 10% in 2025. JPMorgan Chase has recently notified several private credit funds that it is marking down the collateral value of some software industry loans in their portfolios. This move directly reduces the funds’ available leverage, potentially triggering a dangerous deleveraging spiral.
The financial impact on publicly traded alternative asset managers has been dramatic. Over the past five years, private credit became a critical profit driver. For instance, fee income from Blackstone’s $82 billion BCRED fund constitutes its largest single source, accounting for about 13% of the firm’s total fee revenue and generating $1.2 billion in 2025 alone. Blue Owl’s $35 billion flagship credit fund produced $447 million in revenue last year, with related fee income comprising 21% of its total.
As confidence in the ‘fee base growth’ narrative has evaporated, stocks of listed PE firms like Blackstone, KKR, Ares, Blue Owl, and Apollo have普遍下跌 25% or more, wiping out a combined market capitalization exceeding $100 billion. The central question now is whether these giants can manage the pressure from shrinking software asset values and maintain their fee growth, which will determine the future prosperity of the entire private credit赛道.
Global Ripples and Strategic Lessons for Chinese Equity Investors
While this liquidity crisis in private credit is centered in U.S. markets, its implications are profoundly global. For sophisticated investors worldwide, including those with significant exposure to Chinese equities, this event offers critical lessons on liquidity risk, sector concentration, and the interconnected nature of modern finance.
Interconnectedness of Global Liquidity
Stress in one major asset class and geographic market does not occur in a vacuum. The redemption pressures and valuation reassessments hitting U.S. private credit funds can influence global risk appetites and capital allocation decisions. Institutional investors facing losses or liquidity lock-ups in their private credit allocations may become more risk-averse overall, potentially reducing their appetite for emerging market equities, including Chinese stocks. Furthermore, the repricing of technology and software assets globally could have a knock-on effect on valuation benchmarks for similar sectors within China’s dynamic equity market.
Due Diligence and Portfolio Construction Takeaways
For fund managers and corporate executives analyzing Chinese equities, this crisis underscores several non-negotiable principles:
- Scrutinize Liquidity Provisions: Understand the redemption terms and gates in any fund structure, whether investing directly or through vehicles with Chinese exposure. The assumption of constant liquidity is dangerous.
- Look Through to Underlying Assets: The crisis originated from a sector-specific (software) value shock. Investors must analyze not just fund-level metrics but the health and vulnerability of the ultimate borrowers or companies in a fund’s portfolio.
- Beware of Crowded Trades: The private credit boom was fueled by a herd mentality into software debt. Similar concentration risks can exist in any hot sector within Chinese equities, from electric vehicles to consumer tech.
- Stress-Test for Disruption: AI’s role in this crisis is a powerful reminder to continuously assess how technological disruption could undermine the core business models of companies held in a portfolio.
Synthesizing the Crisis and Path Forward
The liquidity crisis in private credit marks a pivotal moment for global investors. It has exposed the vulnerabilities of a previously revered asset class, highlighted the transformative and destructive power of AI on established industries, and questioned the sustainability of the fee-based growth models that propelled alternative asset managers to new heights.
The key takeaway is that the era of easy money in private credit, particularly in sectors like software, is over. A more discerning and cautious investment climate is emerging, one that prioritizes fundamental value, clear profitability, and robust liquidity management. For investors with interests in Chinese equities, this episode is a valuable case study in systemic risk. It reinforces the need for rigorous, bottom-up analysis, diversified exposures, and a keen eye on how global macroeconomic and technological trends can cascade into local markets.
The call to action is clear: institutional investors and fund managers must immediately review their exposures to private credit and similar illiquid alternative assets. Assess the concentration risks in your portfolios, both in terms of asset classes and underlying sectors. Engage with fund managers to understand their liquidity management plans and their views on the durability of their portfolio companies’ business models in the face of rapid technological change. In the dynamic landscape of Chinese equities, let the lessons from this Westen liquidity crisis inform a more resilient and forward-looking investment strategy. The next phase of market growth will belong to those who prioritize substance over narrative and durability over momentum.