Why investors are pulling money from Wall Street’s private credit funds

Investors pulled more than $7 billion from some of Wall Street’s largest private credit funds in the final months of 2025, signalling growing unease in one of the fastest-growing corners of global finance.

Funds managed by firms including Apollo Global Management, Ares Management, Blackstone, Blue Owl, BlackRock and Oaktree Capital Management reported a noticeable increase in redemption requests, according to regulatory filings and people familiar with the matter.

The pullback followed the bankruptcies of First Brands and Tricolor late last year, events that unsettled investors across credit markets. Although both companies were largely financed through bank-arranged loans rather than private credit funds, their collapses raised broader questions about credit quality, the Financial Times reported.

Investor unease spreads across the sector

Across the affected funds, redemptions were running at roughly 5 per cent of portfolio value, net of leverage. Industry executives said the total could rise further as more funds report year-end figures, pointing to a rapid shift in investor sentiment.

One senior private credit executive said withdrawal requests were rising across most strategies. Warnings from Jamie Dimon, who last year said that isolated corporate failures often signal deeper problems, have added to the sense of caution.

Governance concerns add to pressure

Investor anxiety has also been fuelled by governance-related issues. Blue Owl’s decision to abandon a planned merger of two of its funds, which would have imposed losses on investors in one vehicle, added to concerns about how private credit funds are managed during periods of stress.

Several executives said the episode reinforced worries about transparency and investor protections in parts of the private credit market, particularly among retail-focused products.

Rate outlook weighs on returns

Demand for private credit had already begun to soften as the US Federal Reserve signalled it would start cutting interest rates. Because many private credit funds invest in floating-rate debt, expectations of lower rates reduced the appeal of the asset class.

In response, some major funds cut dividends last year, further dampening investor appetite and contributing to the rise in redemptions.

Retail vehicles see the biggest withdrawals

Withdrawals have been concentrated in non-traded business development companies and interval funds, which have become the primary way retail and high-net-worth investors access the $2.3 trillion private credit industry.

Despite the increase in redemptions, most managers have continued to meet withdrawal requests, even when they exceeded quarterly limits that would normally allow redemptions to be capped.

Liquidity holds for now, but scrutiny rises

Analysts say continued inflows at many large firms have so far outweighed outflows, limiting the need for asset sales or emergency borrowing. Most funds also maintain bank credit lines and hold portfolios of relatively liquid loans that could be sold if necessary.

Investors are now watching closely for signs of rising defaults. While analysts say credit quality remains broadly stable, the recent withdrawals suggest private credit’s long run of rapid growth may be entering a more challenging phase.