Private credit managers are shifting away from traditional direct lending as fundraising slows, investor withdrawals stay elevated and new loan origination declines, according to Private Equity Wire.
BDC Fundraising and Withdrawals
Non-traded business development companies raised about $2bn in the second quarter, an 82% drop from the $11bn raised in the same period a year earlier, according to Robert A Stanger & Co. The quarterly total marked the lowest level since 2020. Investors requested a record $23bn in withdrawals from private credit funds during the quarter. Managers continued to cap redemptions at 5% of assets, leaving large portions of capital locked up.
Stanger chief executive Kevin Gannon stated that weaker fundraising, persistent redemptions and declining market flows are visibly reducing the size of the sector. The pressure has not produced the systemic crisis some investors anticipated. Listed BDCs have shown more resilience, with managers focusing on portfolio clean-up and reducing exposure to weaker investments. Those results have supported BDC share prices.
Manager Diversification
Apollo Global Management has highlighted the breadth of its private credit platform, noting that direct lending forms only a small part of the opportunity set. Blue Owl Capital reduced direct lending to around 35% of assets under management in July from approximately half two years earlier while expanding lending to data centres. Blackstone has pointed to growing AI-related investments as a contributor to recent performance, offsetting slower growth in management fees from its broader credit operations.
Listed BDC Activity and New Mandates
According to PitchBook LCD data, the largest listed BDCs have reduced loan portfolio sizes, with repayments exceeding new originations for a third consecutive quarter. BDCs must maintain $1.50 of total investments for every $1 of debt under regulatory asset-coverage rules.
Recent activity includes Jefferies Credit Partners targeting about €1bn for a private credit secondaries fund and Partners Group closing a $1bn private credit mandate with a major Asian institutional investor. Blackstone Private Credit Fund and Blue Owl Technology Finance Corp. have attracted demand for investment-grade bond offerings above initial targets, according to Private Equity Wire.
