March 20 (Reuters) – Blackstone’s flagship private credit fund posted its first monthly loss in more than three years in February, the fund’s website showed on Friday, amid surging investor worries over the sector’s liquidity strains.
The fund, BCRED, reported a total loss of 0.4% in February, its first since September 2022, when it posted a loss of 1.3%. The Morningstar LSTA index of publicly traded leveraged loans is down 0.37% over the past three months.
Private credit funds have become a focal point of concern due to weakening credit quality as a result of their high exposure to vulnerable sectors such as software, as well as lack of transparency.
Blackstone’s $82 billion fund allows investors to take out a portion of their holdings every quarter. This year it was hit by a surge in withdrawals in the first quarter, as investors pulled a bigger-than-usual $3.7 billion.
Shares of the world’s largest alternative asset manager have lost more than 28% of their value so far this year.
BCRED wrote down the value of a “select” number of loans during the month, the Financial Times reported earlier in the day, citing a letter to financial advisers. The report said customer service software firm Medallia was among the companies.
“BCRED continues to deliver strong performance for its investors, with a 9.5% annualized total return since inception for Class I shares, a 360 bps premium to leveraged loans,” Blackstone said, adding the fund has outperformed the leveraged loan market by 100 basis points so far this year.
Investor jitters over the state of private credit funds have spilled on to Wall Street, with some major U.S. banks tightening lending to the industry even as funds cap withdrawals.
JPMorgan Chase marked down the value of certain loans to private credit players earlier this month, a move that will reduce lending to the funds.
Wall Street giant Morgan Stanley and rival BlackRock were among the firms that limited withdrawals from their funds after a surge in redemption requests.
(Reporting by Utkarsh Shetti and in Bengaluru and Isla Binnie in New York; Editing by Arun Koyyur)
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