Private credit firms prepare for bank run-type panic by gating investor withdrawals

Headline, private credit firms prepare for bank run type panic by gating investor withdrawals,

published at 7.42pm, March 24th, 2026. Private credit giant Apollo Global Management

capped withdrawals on Monday. As a group, retail investors were able to take out just 45% of the money

they'd originally asked to withdraw. Escalating a well-publicized crisis in private equity

and credit, Apollo is the sixth major asset manager this year to tell investors they need to slow

down their withdrawal requests. Apollo debt solutions, a non-publicly traded credit company,

with a net asset value of about $15 billion received redemption requests exceeding 11%

of its outstanding shares in the first quarter. The fund enforced a 5% quarterly cap

and returned roughly $730 million of the more than $1.5 billion in requests it received.

Redeeming investors received less than half of the full disbursements they requested.

Private credit peers Blackstone and Blue Owl have also been restructuring their withdrawal policies

under pressure. Apollo held its 5% withdrawal limit.

PE and private credit under stress. Apollo joins Blackstone, BlackRock, Blue Owl Capital,

Morgan Stanley and Cliffwater in gating investor withdrawals this quarter.

The industry sold these funds to individuals as a path to democratization

of institutional grade yields. In fact, private equity, PE and private credit companies

merely democratized purchases by regular people who often didn't understand that PE managers

can choose the valuations of their assets with far less oversight and regulatory obligations

than public fund managers. Because the valuations of these assets occur privately,

there's no real-time price-seeking mechanism to determine the proper valuation of these assets.

As such, PE managers typically mark up their assets consistently, quarter after quarter,

until they suddenly plunge in value during a crisis or liquidity crunch, such as the current

Iran War or AI-induced layoffs. Because it's impossible to sell out of these credit and equity

instruments on secondary exchanges, investors may only request redemption quarterly.

However, funds typically cap total withdrawals at 5% of their net asset value per quarter.

If more people want out than the cap allows, everyone gets a haircut on their redemption

request. The problem, therefore, is structural. The underlying loans are illiquid and artificially

marked up. The quarterly redemption window created an illusion of liquidity for a small number of

withdrawal requests that doesn't match the immense size of the assets. This is seen particularly during

any type of bank-run type scenario where withdrawal requests arrive on mass. About 80% of traditional

private credit investors are institutions according to JP Morgan, yet many retail investors have joined

them in recent years. Main street investors who piled in chasing yields of 8% to 10% have far

less patience. PE Giant Blue Owl, for example, drew roughly 40% of its over $300 billion in assets

from individuals according to Fortune. Record withdrawal requests. Blackstone's private credit fund

recorded a record 7.9% redemption request totaling nearly $4 billion. Blackstone actually raised

its quarterly cap to 7% and injected $400 million of its own capital to help calm some of that panic.

Equally alarming, BlackRock's $26 billion HPS corporate lending fund received $1.2 billion in

withdrawal requests or 9.3% of assets and paid out $620 million. Morgan Stanley's North Haven

private income fund received requests for over 10% of shares and capped payouts at 5%. Cliffwater's

$33 billion flagship fund saw the worst of it. Investors demanded 14% of shares back. The firm

slashed that in half to a 7% limit. Blue Owl nearly went off the deep end. In February,

the firm permanently halted quarterly redemptions from its retail focused Blue Owl Capital Corp 2.

Read more, Tether, 10 years, 100 billion USDT, and still no audit.

AI, war, and up only market to market valuations.

The wave of redemptions has many causes, not least of which is a sudden realization

that PE managers have broad discretion to market value of assets, with little to no secondary

market transactions forcing them to properly or conservatively value those holdings.

Moreover, there are fears that AI will trigger sudden job losses this year, creating a bank run

type scenario by fixed income investors. The escalating war in Iran is also not helping.

Private credit funds loaded up on loans to mid-sized software firms during the boom years as well,

which are now at risk due to AI. Justifiably, investors now question how good those loans are.

The private credit default rate reached 5.8% through January 2026, according to Fitch.

That's the highest since the index launched. UBS has warned that severe AI disruption

could push defaults to 13%. Wall Street spent years pitching private credit as a better way

to optimize yield. Now investors are feeling the pinch of illiquidity and mark-to-market valuations.

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