Private Credit Market Wobbles Shake Up Wall Street Lending and Funds

Wall Street's private credit sector is catching a cold, with some of the largest U.S. banks tightening the purse strings and private credit funds slamming the brakes on withdrawals. The recent jitters stem from worries about transparency, asset valuations, and hit headlines like the bankruptcy of auto-parts supplier First Brands and car dealer Tricolor, where private lenders had skin in the game.

In sheer numbers, U.S. banks had nearly $300 billion lent to private credit providers by mid-2025, with an additional $285 billion pumped into private equity funds, plus a $340 billion slush fund of unused lending commitments, all according to Moody's data. That's a hefty exposure to keep an eye on, especially with fresh doubts emerging about the health of these loans.

Alternative asset managers haven't been cruising either. Stocks tied to software companies - a common theme in private credit portfolios - have taken a hit, particularly as rapid AI advancements threaten to turn conventional business models upside down. This tech disruption is making investors rethink the risk-reward balance in these pools.

Capital outflows from leading private-credit funds have hit the billions in the opening quarter of 2026, a trend that shows no sign of slowing. Some notable fund managers like Ares Management, Oaktree, and Goldman Sachs are keeping mum on the final tally of their tender offers, adding a foggy layer to the scene.

JPMorgan Chase (JPM) recently took a close look at its private credit loan portfolio, slashing values on loans with software sector ties. These revaluations aren't routine but are filed under "better safe than sorry," signaling the bank's intent to address potential market disturbances head-on rather than waiting for trouble to blow up.

The re-marking isn't drastic but important. JPMorgan's loan agreements let it adjust collateral valuations if market tremors appear-a move that could quietly tighten credit access to private credit funds if the downward adjustment sticks.

Meanwhile, Morgan Stanley (MS) has placed a cap on redemptions from its North Haven Private Income Fund after investors tried to cash out nearly 11% of shares. Returning about 46% of the requested redemptions, the firm is signaling challenges in the direct lending space, citing uncertainties in M&A activity and falling asset yields.

BlackRock (BLK) also restricted withdrawals after their flagship HPS Corporate Lending Fund faced $1.2 billion in redemption requests, roughly 9.3% of assets under management. The fund capped redemptions at 5% to avoid a liquidity mismatch, recalling the age-old issue of private credit funds' illiquid assets under all-out redemption pressure. Nearly a fifth of this fund's investments are in software, adding fuel to the fire.

Other big players are feeling the pinch, too. Apollo Global Management (APO) capped redemptions at 5% after facing requests for 11.2% withdrawal, and Blackstone (BX) saw its flagship private credit fund BCRED handle $3.7 billion in outflows, prompting a temporary hike in its redemption cap to 7%. The firm itself chipped in $400 million to calm the waters.

Blue Owl Capital (OWL) has been forced to unload $1.4 billion in assets and suspend redemptions at one fund to manage debts. And Cliffwater LLC has had to set repurchase limits on its flagship private credit fund after investors sought to redeem about 14% of shares this quarter.