Western private credit markets face a stress wave over AI and transparency concerns

Private credit funds are showing signs of liquidity stress as investors rush to redeem their capital amid transparency and AI-related risks. Firms including BlackRock, Apollo, Ares, and KKR have capped withdrawals to avoid selling illiquid loans at steep reductions, highlighting the sector’s vulnerability to shifting sentiment despite its rapid growth in recent years, Reuters reports.

Private credit providers are handling the stress wave in different ways

Several firms curbed redemptions to the limit: Blue Owl Capital faced USD 5.4 bn in redemption requests from two key funds in 1Q 2026, but capped withdrawals at 5% of each fund’s value, far below the 21.9% of investors who requested redemptions in its Credit Income Corp fund and the 40.7% in its tech lending fund. Several private credit funds also capped withdrawals at 5%, far below the requested redemption rates, including Barings (11.3%), Apollo (11.2%), Ares (11.6%), and BlackRock (9.3%).

Others decided to fully honor the requests: Goldman Sachs met all of its redemption requests while remaining below its cap, with investors requesting to repurchase just under 5% of shares in this quarter, Reuters reported separately. Meanwhile, Oaktree Capital Management decided to honor the entire 8.5% redemption requests it received in the same period.

What triggered the flight

Private credit’s murky loans come under the spotlight: Growing concerns over weak lending standards in private credit have emerged after a series of corporate failures — including Tricolor, First Brands, and Market Financial Solutions — highlighted how the sector’s opaque debt structures can quickly produce losses for both private and public lenders, even though the funds themselves are not highly leveraged, the New York Times reports.

And AI fears stoked investor caution: Investors’ worries were amplified by the circulatingfears that AI might disrupt the business models of tech and software sectors, decreasing their earnings.

BUT- Blackstone blames the buzz for the flight: Blackstone President Jonathan Gray attributed the rising redemption requests to “noise” in the market, telling CNBC that there is a gap between what is happening with the underlying portfolios and what investors read in the news.

Running the scenarios

Built for the storm: Private credit funds could weather moderate stress thanks to set amortization schedules, regular loan prepayments, and liquid reserves that typically cover most redemptions, Reuters reports. Even under conditions like 2008, these buffers allowed funds to manage outflows while staying within borrowing limits.

Still, the main risk arises if rising defaults coincide with investor withdrawals, which could strain the semi-liquid structures and force asset sales. While these funds are not banks, their growing exposure to retail investors and reliance on semiliquid and ins.-linked capital means panic could amplify pressure. However, the USD 2 tn market is small relative to banking, so any fallout would likely be contained.

THE CLOSING BELL-

The ADX fell 0.3% yesterday on turnover of AED 660.9 mn. The index is down 4% YTD.

In the green: Gulf Cement (+3.4%), Sharjah Cement and Industrial Development Co. (+2.9%), and Fujairah Cement Industries (+1.8%).

In the red: Gulf Financial Holding (-5%), Ins. House (-4.6%), and Hayah Ins. (-4.5%).

Over on the DFM, the index fell 0.8% on turnover of AED 981.5 mn. Meanwhile, Nasdaq Dubai was down 1.2%.