Private credit is experiencing a divergence in investor sentiment, with institutional investors showing continued commitment to the asset class, often with an increasing preference for larger managers. In the fourth quarter of 2025, private credit accounted for 6.8% of institutional investors' alternative-asset holdings, a decrease from 9.7% in December 2024. However, the net asset value of private credit increased by roughly 20% from June 2024, indicating growth in assets even as its share of the overall portfolio declined due to faster growth in other alternative assets. The 50 biggest managers by assets under management (AUM) saw their share of investors' net value rise to 51% in Q4 2025, a 6% increase in one quarter, with new capital commitments nearly doubling for investors with over $500 billion.
This institutional preference contrasts sharply with the challenges faced by retail private credit funds. Since the start of this year, large public firms in private credit have received withdrawal requests exceeding $10 billion, prompting several managers to implement redemption limits. For example, Blackstone's BCRED fund faced requests for $3.8 billion, or 7.9% of its assets, leading the firm to raise $400 million internally to meet some demands. Similarly, Blue Owl restricted withdrawals in one fund in November and in another, ended regular quarterly liquidity payments. BlackRock restricted withdrawals on its $26 billion HPS Lending Fund, and Morgan Stanley capped payouts at 5% for its North Haven Private Income fund, despite receiving repurchase requests for 10.9% of shares. These retail-focused funds are experiencing record redemptions due to concerns about performance and the potential impact of AI on underlying loan quality.
The overall private credit market has seen dramatic expansion, peaking at $340 billion in Q4 2024, up from approximately $10 billion in the mid-2000s, with dry powder more than tripling from $100 billion in 2020 to record levels four years later. The market is now estimated at roughly $1.8 trillion. Michael Covello of Robert A. Stanger expects the redemption queue for retail investors to take up to eight quarters to clear, with redemption pressure remaining high. Despite the retail turmoil, institutional investors continue to view private credit as a viable asset class, with some large players like Blackstone reporting near-record private credit fundraising from institutions. This suggests that while retail investors are pulling back, institutional money is still flowing in, particularly to the industry's biggest players, leveraging the higher spreads and opportunities in private credit.
Several firms have imposed withdrawal caps, typically at 5% of net asset value per quarter, to manage the redemption requests, a feature that some, like Blackstone's President and CEO Jon Gray, argue is by design to ensure long-term value. However, the rush to withdraw has led to situations where investors are "gated," or unable to retrieve their money. Funds like Blue Owl, Ares Management, Apollo Global Management, and Morgan Stanley have all limited investor redemptions, with some facing withdrawal requests exceeding 10% of their fund's value. The anxiety is partly driven by concerns over the quality of loans, particularly to software companies, which are perceived to be vulnerable to AI disruption.
