BlackRock's flagship private credit fund experienced a notable decrease in redemption requests during the third quarter, signaling potential improvement in investor sentiment toward the asset class. According to regulatory filings reported by Reuters, investors in the $23.1 billion HPS Corporate Lending Fund sought to withdraw approximately 11.5% of their shares in the third quarter, down from 13.3% in the previous quarter. The fund will repurchase 5% of shares, in line with customary thresholds for such vehicles. Since inception, the fund's Class I shares have delivered a 9.9% annualized total net return through July 31, representing a 3.5% premium to broadly syndicated loan total returns.
The redemption pressure reduction extended beyond BlackRock's flagship fund to other private credit vehicles. As reported by Reuters, withdrawal requests at the BlackRock Private Credit Fund fell to 4.58% in the third quarter from approximately 5.3% in the previous quarter. Additionally, requests at the HPS Corporate Capital Solutions Fund declined to 1.9% from 4.7%. Blackstone began the third-quarter redemption season for major US non-traded private credit funds last week, with TPG Twin Brook Capital Income Fund reporting repurchase requests had fallen to 1.2% from 2.1% in the previous quarter. Other vehicles are expected to disclose their third-quarter redemption figures throughout September.
The easing redemption pressure has positively impacted market sentiment toward private credit funds. According to Reuters, Evercore analyst Glenn Schorr noted that "the redemption backlog is now clearing" and expects the redemption trajectory for the BDC group to decelerate. BlackRock shares were up 2.4% following the release of the redemption data. The analyst expects BlackRock to trade positively on the back of this release, citing it as another encouraging data point on direct lending sentiment in the wealth channel. Asset manager HLEND, one of the largest US non-traded private credit funds, has bought back roughly $1.7 billion of shares across three repurchase periods ended June 30, with the latest tender offer being about $600 million. The key question for the broader private credit industry is whether new redemption requests keep falling toward the 5% ceiling, which is the point where the queue can shrink instead of just being managed. Even with requests cooling, 11.5% is still more than double what HLEND is willing to repurchase in a quarter.
