The markdown in a niche direct loan is sharpening focus on how semi-liquid funds handle redemption spikes from clients.
A move by BlackRock to slash the value of a single private loan to zero – which was revealed in its Q4 results pre-announced on January 23rd and in full last week – is rippling through an already anxious private credit market and putting fresh focus on how advisors explain risk and liquidity to clients.
The asset manager marked down a roughly $25 million loan to Infinite Commercial Holdings, an Amazon storefront aggregator, from par to effectively worthless.
As reported by Barron’s, that position is tiny relative to BlackRock’s roughly $14 trillion in assets. The loan was still valued at par just three months earlier, and the markdown was made effective at the end of December.
For many investors, the move reinforces a nagging fear around private credit: valuations can look stable until they suddenly are not. The sector has grown into an estimated multi‑trillion‑dollar market, with structures that are often less liquid and more opaque than traditional bonds, even as managers with a specialization in it have pushed aggressively into the US retail and advisor channel.
Those concerns were already elevated after Blue Owl’s decision last month to halt regular redemptions at one of its flagship retail‑oriented private credit vehicles and agreed to sell about $1.4 billion in loan assets from certain business development companies. Blackstone, meanwhile, disclosed record redemption requests from its $82 billion Blackstone Private Credit Fund, or BCRED, with investors seeking to pull about 7.9% of assets in a single quarter.
Credit specialists warn that the combination of leverage, complex structures and slow‑moving valuations can make stress appear suddenly. Bill Eigen, who runs the absolute return and opportunistic fixed income team at JPMorgan Asset Management, told CNBC he is seeing “a lot of interesting things happening in the market right now, and none of them are great for private credit.” He added that “private markets mean private pricing, and bad news often happens all at once and the opacity and the leverage in the sector is concerning.”
Another fault line runs through the sector’s heavy exposure to software and other technology borrowers, just as investors debate what fast‑advancing artificial intelligence could do to traditional software business models. Ed Yardeni, president and founder of Yardeni Research, said recent advances have “raised concerns that companies will no longer pay large annual subscriptions for software because they can have an AI-assisted employee create the software instead.” If that pressure pushes software companies into distress, he cautioned, they often have limited hard assets to support recoveries.
Still, not everyone sees a 2008‑style crisis in the making. Oppenheimer analyst Chris Kotowski, a longtime Blue Owl bull, argued in a recent note, “We do not believe in the narrative of a broad-based deterioration in private credit,” pointing instead to what he describes as generally solid credit quality and robust institutional fundraising.
Goldman Sachs analysts have also said they do not view nontraded private credit vehicles as a systemic risk, citing the relatively small size of the retail segment, available liquidity on fund balance sheets and strong demand from buyers of direct loans.
For advisors, the more immediate issue may be liquidity rather than outright defaults. Blackstone president Jon Gray told CNBC that private credit and similar vehicles “are designed as semi-liquid products,” and that caps on withdrawals are “really a feature, not a bug of these products.” The trade‑off, he said, is giving up some liquidity for the potential of higher returns.
Along those same lines, Morningstar analyst Jack Shannon has flagged the potential for certain managers of semiliquid funds to gate or change the redemption terms on those vehicles, raising the stakes for advisors to ensure their clients are appropriately aware and educated going in.
“The Blue Owl lesson, to me, is how are these firms actually selling this to people?” he said in a recent interview with InvestmentNews. “Are [they] being upfront about the liquidity?”
