Redemption problems at a number of private credit funds have shone a bright, harsh light on the sector and the risks associated with it. 

Jay Rogers, a figure in the financial and wealth management industry who has written in these pages before, writes about the dramas unfolding in the private credit sector (a topic the editor of Family Wealth Report has commented upon here). The redemption crises at Blackstone's BCRED, BlackRock's HLEND, and Blue Owl's OBDC II have put the structural vulnerabilities of retail-oriented evergreen private credit vehicles in the spotlight. Goldman's Solomon, Blankfein, and JP Morgan have issued warnings in the past 10 days that are unusually direct for senior executives at their level. 

To comment on such material, please email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com 

The usual disclaimers apply to views of guest writers, and we thank Jay Rogers for his contribution to conversations on these topics. Rogers is also a guest lecturer at the USC Marshall School of Business.

The private credit market's first real stress test in the semi-liquid retail era is unfolding in real time, and it is exposing a truth many mega-managers would prefer to ignore: scale has become a liability, not an advantage. Three events in early 2026 made that plain. Blackstone's $82 billion BCRED faced record redemption requests of about $3.7 billion (7.9 per cent of assets) in the first quarter, forcing the firm to lift its quarterly tender cap from 5 per cent to 7 per cent and inject $400 million of its own capital to honor 100 per cent of demands. BlackRock capped withdrawals from its $26 billion HLEND after receiving $1.2 billion in requests representing 9.3 per cent of net asset value. Blue Owl permanently halted redemptions in OBDC II and executed a $1.4 billion asset sale to fund an orderly wind down. Blue Owl shares have since fallen roughly 40 per cent year-to-date.

These are not isolated liquidity blips. They are the predictable consequence of massive fundraising colliding with deployment pressure and mismatched investor expectations.

The industry's most credible voices are now saying so explicitly. In his annual shareholder letter released this week, Goldman Sachs CEO David Solomon wrote that concerns about private credit – including "underwriting quality or exposure to software companies that may be negatively affected by AI" – are "a reminder that the credit cycle has not been repealed." His predecessor Lloyd Blankfein, who steered Goldman through the 2008 financial crisis, went further on a Bloomberg podcast appearance alongside Citadel co-CIO Pablo Salame: "I don't feel the storm, but the horses are starting to whinny in the corral." His specific concern was hidden leverage and opaque valuations, the same structural features that amplified 2008's damage once it began.

Meanwhile, JP Morgan has acted before the crisis rather than reacting to it. According to CNBC and the Financial Times, JP Morgan marked down the value of software company loans held as collateral by private credit funds, reducing borrowing capacity for those funds without waiting for a default. Unlike most competitors, JP Morgan contractually retains the right to revalue collateral at any time. "As the world gets more volatile, this outcome should be expected. I'm shocked that people are shocked," said Troy Rohrbaugh, co-CEO of JP Morgan's commercial and investment bank.

I have been tracking this structural problem for 15 years. The scale dynamic in private credit is not a new phenomenon – it is the same pattern I described in our 2010 white paper on institutional groupthink in manager selection. The explosion of investment consultants and benchmark-chasing databases has funneled capital toward the largest, most visible managers in every cycle. 

In 2025 alone, the 10 largest private credit funds captured nearly 46 per cent of all capital raised – the highest concentration in over a decade. That capital tsunami forces flagship platforms into ever-larger deals – typically companies with $200 million or more in EBITDA – where they compete head-to-head with broadly syndicated loan syndicates and public high-yield. The result is spread compression and yield erosion. Selective is a word that rarely survives contact with a $50 billion mandate.

The AI disruption angle is not incidental; it is the engine accelerating the downturn. Software represents roughly 25 per cent of all private credit loans by most estimates, and the sector's underwriting assumptions – stable recurring revenue, low churn, high barriers to entry – are precisely what AI tooling is challenging. When the cash flows underpinning leveraged loan structures turn out to be less durable than underwritten, the math gets ugly fast. JP Morgan's markdowns are not a reaction to defaults. They are a forward judgment about where software-heavy portfolios are heading, and the bank is acting accordingly.

Default data confirms the divergence. Fitch's privately monitored ratings portfolio posted a record 9.2 per cent default rate in 2025, up from 8.1 per cent in 2024. Companies with $25 million or less in EBITDA posted a 15.8 per cent default rate, versus 4 per cent for those above $100 million, a four-to-one ratio that tells a clear story about where structural vulnerabilities sit.

Contrast this with smaller and mid-sized managers focused on the lower middle market – companies typically below $100 million in EBITDA, many in the $10–$50 million range. Middle-market direct-lending spreads have stabilized in the 500 to 550 bps range over SOFR, carrying a 100 to 150 bps premium to syndicated markets. Q3 2025 BDC data showed all-in yields still at 9.76 per cent after 150 bps of rate cuts, with trailing one-year realized losses of just 0.66 per cent. Preqin return dispersion data shows top-quartile North America direct-lending IRRs outpacing medians at widening margins, precisely because scale-driven managers are chasing volume over selectivity.

Blankfein's concern about retail exposure is the most pressing element of this story. The $1.8 trillion private credit market has grown to roughly the size of the subprime mortgage market at its 2007 peak. The administration's push to route private credit exposure through 401(k) plans, at the precise moment the cycle is turning, represents a risk that deserves to be named clearly and addressed directly.

Howard Marks has warned for decades that the pendulum of investor psychology swings hardest at extremes of scale and popularity. Blankfein, in a separate Financial Times interview, extended the logic: "The longer it takes between reckonings, there is a potential for a more severe reckoning." That detail deserves weight when an allocator tells you a $30 billion fund is "best in class."

For family offices and long-term investors, the allocation framework is clear. Avoid the liquidity mismatch of retail evergreen vehicles, the redemption crises of early 2026 were structural features, not anomalies. Avoid software-heavy direct lending portfolios until the AI disruption cycle completes its repricing. Favor closed-end, institutional-grade mid-market funds or co-investments alongside proven general partners who still underwrite as if it is their own capital. Private credit is not broken. The credit cycle has not been repealed. It has merely been deferred – and deferred cycles, as anyone who survived 2008 can attest, tend to collect interest.