Investors are lining up to leave private credit funds, but only a few get out each quarter. The rest stay trapped.
Private credit funds make loans to companies outside of the banking system. When investors want their money back, that is called a redemption. In the second quarter of 2026, these funds received far more redemption requests than they could fill.
Some funds faced huge pressure. Blue Owl Credit Income Corp. saw 18.8% of investors ask to leave. Blue Owl Technology Income Corp. had 38.1% request exits.
Ares Management Corp.'s Strategic Income Fund saw requests rise to 14.4%, up from 11.6% the prior quarter. Morgan Stanley's $7 billion private credit fund got 11.6% requests. Apollo Global Management's largest non-traded retail fund had 16.8%.
Blackstone's $79 billion BCRED fund saw 10% of investors want out.
Most of these funds capped exits at 5% to slow the rush.
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The report quoted Robert A. Stanger & Co.'s executive managing director, Michael Covello, saying, "We did expect redemptions to pick up in the second quarter as investors rotate out of private credit, and into tangible assets such as real estate and infrastructure." He added, "We expect to have up to eight quarters left of the redemption queue clearing while flows are still suppressed."
The redemption wave comes partly from pent-up demand. Many investors tried to leave last quarter but were blocked by the 5% withdrawal caps. Now they are trying again.
Anxiety about asset quality is another reason. Many private credit funds have loans to software companies. Those companies are getting disrupted by artificial intelligence. Investors worry those loans could turn bad.
Some investors use a clever trick to get out faster. Erik Kratz, CIO of Arena Private Wealth, explained, "A common practice to get out of these funds is to ask for more than you actually want, when you expect to get less." He added, "I wanted to reduce the position by 50% but asked for 100% each quarter for two quarters and got there faster."
Oaktree Capital Group Holdings LP saw redemptions drop by nearly half in Q2. Goldman Sachs Group Inc. met all requests in both quarters and reported lower demand in the most recent period. But those are exceptions.
Funds are limiting withdrawals to survive. Blackstone restricted exits from BCRED for the first time. Morgan Stanley capped redemptions on its $7 billion fund.
Ares limited withdrawals for a second straight quarter. Apollo capped requests from its large non-traded retail fund.
Some funds are raising new money to handle the pressure. Main Street Capital increased its revolving credit facility to $1.24 billion, up from $1.175 billion. Ardian is bundling about $1 billion of debt from some of its secondhand fund stakes.
But new money inflows remain low. The total private credit market is roughly $1.8 trillion. Michael Covello of Robert A. Stanger expects the redemption queue to take up to eight quarters to clear.
Redemption pressure will stay high as long as the backlog remains. Expect more caps and slow exits.
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