Investors pull billions from private credit funds

In today’s newsletter:

• Private credit investors pull $7bn from Wall Street’s biggest funds

• Can Europe still afford its generous state pensions?

• Lebanon’s bonds rally anticipating that Iran’s influence weakens

Private credit investors pull $7bn from Wall Street’s biggest funds

One of the hottest markets for alternative asset managers has been private credit. That is until last year when negative headlines began to appear and some investors took fright.

Private credit investors withdrew $7bn from some of the biggest funds on Wall Street at the end of 2025, as jitters grew over credit quality following the bankruptcies of First Brands and Tricolor, writes Eric Platt.

Funds managed by Ares Management, Barings, Blackstone, BlackRock’s HPS Investment Partners, Blue Owl, Cliffwater and Oaktree all were hit by an uptick in redemption requests, according to filings with the Securities and Exchange Commission and people familiar with the matter.

“Redemptions are up across the board,” one senior private credit executive told the FT.

Executives say the $7bn figure will grow as funds report results of their redemption offerings in the weeks ahead, underscoring how investor appetite for private credit has deteriorated.

The asset class has been tarnished by the failures of First Brands and Tricolor, despite those companies largely financing themselves through loans and asset backed securities provided or organised by banks.

JPMorgan Chase boss Jamie Dimon warned last year that more losses linked to private credit could be ahead, noting that “when you see one cockroach, there are probably more”. Those comments only added to investor concerns.

“I think there is a lot of fear in the air and time will tell if those fears are well founded,” said Philip Hasbrouck, the co-head of Cliffwater’s asset management business.

Investor interest in the asset class had already started to wane last year as the Federal Reserve signalled it would begin to lower interest rates, reducing the returns on offer across credit markets. That prompted several major private credit funds — which invest in floating rate debt — to cut their dividends.

Europe state pension systems cause financial stress

Rising numbers of older people across the continent are straining the budgets of individual countries and forcing some difficult political decisions on state pensions, write Mary McDougall, Amy Kazmin, Olaf Storbeck and Leila Abboud.

When Emmanuel Macron ran for re-election in 2022, he did what few French politicians dare to do: tell voters that the retirement age would have to rise. He did this to ensure the continued viability of the country’s generous pensions system.

He delivered on that pledge a year later at great political cost, forcing the change from 62 to 64 years through a divided parliament and facing down massive national protests that left some streets of Paris and other cities in flames. 

The episode showed yet again that pensions are the third rail of politics in France. But similar, less extreme debates over how to pay for the retirement social safety net are under way all over Europe as the continent ages. 

Across the EU, 47 per cent of the bloc’s social protection expenditure is spent on old age and survivors’ benefits, ahead of 36.7 per cent spent on sickness and disability and 8.7 per cent on families and children.

Even in the UK, where private provision plays a greater role, the country’s fiscal watchdog has forecast that spending on the state pension — the second-largest item in the government budget after health — will rise from almost 5 per cent of GDP to 7.7 per cent by the early 2070s.

Italy has the EU’s highest pension costs at just over 15 per cent of GDP, according to statistics from the European Commission. France and Greece each spend over 14 per cent. In Germany, a third of all federal tax revenue will be spent plugging holes in the state pension system this year, according to an estimate by Munich economic think-tank Ifo.

“The root of the problem is: how do we fund increased spending on defence, the energy transition and new technologies, while spending so much on pensions?” says Antoine Bozio, professor at École des Hautes Études en Sciences Sociales in Paris. “If we want to keep spending so much on pensions then we have to raise taxes.”

Chart of the week

Traders in frontier market debt have found that the previously unloved bonds of some countries are attracting more attention in recent months. No, not just Venezuela, but Lebanon.

Lebanon’s defaulted dollar bonds have jumped in price since the turn of the year by more than 25 per cent as investors bet that recent nationwide protests in Iran could reduce the Islamic republic’s influence in the region, write Joseph Cotterill and Costas Mourselas.

The country’s debts with a face value of $30bn have risen from 23 to 29 cents on the dollar this month — the highest level since its 2020 default amid an economic crisis — on hopes that Beirut has begun to improve its financial situation and that Iran-backed groups across the region, such as Hizbollah in Lebanon, will weaken.

International investors have sought out defaulted sovereign debt trading at knockdown prices, which they hope could surge in value just as Venezuela’s bonds did this month following the US capture of Nicolás Maduro.

“Lebanon is probably trading well because of the Iranian situation . . . Money dries up for Hizbollah” if the regime is weakened further, said one fund manager who is a specialist in distressed sovereign bonds and who is monitoring the situation.

Lebanon’s bonds had already been rallying over signs of the waning political influence of militant group Hizbollah, which has previously opposed a debt restructuring led by the International Monetary Fund.

The US’s dramatic capture of Maduro this month has driven a sharp rally in the South American country’s bonds over hopes of a restructuring, and investors are now fearful of missing out on similar rallies in other bonds previously seen as near-worthless.

“The unexpected 30 per cent rally in Venezuela [bonds] has shown [institutional investors] that being underweight can be dangerous,” said one hedge fund manager.

Five unmissable stories this week

The Wellcome Trust, one of the world’s wealthiest charitable foundations, is holding elevated levels of cash, citing concerns over record-high equity markets.

China Asset Management, one of China’s largest, has become the first company in the country to pass Rmb1tn ($143bn) in exchange traded funds under management, becoming a beneficiary of Beijing’s push to get the “national team” to support stocks.

BlackRock reported record quarterly inflows on Thursday, pushing its assets under management above $14tn for the first time.

Donald Trump’s “unpredictable” policies have prompted bond giant Pimco to diversify away from US assets, as Wall Street frets over the long-term consequences of the president’s attacks on the Federal Reserve.

Terry Smith’s Fundsmith will pocket more than £160mn in charges despite returning a measly 0.8 per cent to investors last year. That is thanks to Fundsmith’s assets of £16.1bn and annual management fee of 1.04 per cent. Investors can’t say Smith didn’t warn them.

And finally

The Gagosian gallery in west London is showcasing all 126 photographs from Nan Goldin’s photobook The Ballad of Sexual Dependency. The presentation represents the first time Goldin’s entire body of work will be shown in the UK.

Runs till March 21