Investors in evergreen funds apparently did not fully grasp what they were getting into when they entrusted their capital to these “semi-liquid” vehicles investing in private markets. After Blue Owl, two large private credit funds managed by Blackstone and Blackrock were hit last week with a surge in redemption requests.
Over the past several years, private-market investing has been “democratized,” based on the promise that the attractive returns long enjoyed by institutional investors would also become accessible to retail clients. A number of private banks, family offices and asset managers have pushed hard into this space over the past two years.
They often rely on evergreen funds, vehicles that distinguish themselves, among other things, by lower minimum investment thresholds than traditional closed-end funds. They describe themselves as “semi-liquid.”
‘Evergreen run’
That feature is now at the heart of the “evergreen run” that has hit several major U.S. asset managers in recent weeks. Private credit funds run by Blue Owl, Blackstone and Blackrock have each faced such a wave of redemption requests that they could not meet them under their own fund rules. Those rules generally limit redemptions to a maximum of 5 percent of share capital per quarter.
That proved insufficient for investors in Blackrock’s HPS Corporate Lending Fund (HLEND). As of the end of January, the fund had a fair value of 25.6 billion dollars, yet shareholders representing 9.3 percent of the capital sought to exit in the first quarter alone. Unfortunately for them, the fund said only the first 5 percentage points of requests will be honored. Other investors will have to try again in the second quarter of 2026.
Blackrock was the third large asset manager to face such a situation, after it emerged days earlier that investors in private credit funds managed by Blue Owl and Blackstone were also heading for the exits. Like Blackrock, Blue Owl closed the redemption window after paying out the 5 percent limit. Blackstone, however, said it was able to meet all redemption requests, which amounted to roughly 7.5 percent of share capital.
That did little to spare Blackstone from a market backlash. Asset managers with large private credit franchises had already been under pressure on the stock market for some time, collectively losing tens of billions of dollars in market value over the past month.
Share price declines at major U.S. asset managers
‘By definition not liquid’
So is the private credit market facing a crisis? Regulators and market observers have long warned about overcapacity in private lending and private equity funds. Koen Ronda, head of private markets at IBS Capital Allies, which manages roughly 6 billion euro for clients, dismisses that suggestion.
“You could see this coming,” he said. “This is not a broad crisis in private credit. It’s a crisis for this particular type of investment fund. And rightly so, because offering continuous liquidity in private markets is a bad idea to begin with.”
Investments in private markets are, by definition, not liquid, Ronda said. “The whole point of private investing is to give companies and fund managers time to realize their growth. With that in mind, you want to attract investors who can leave their capital in a fund for five to ten years.”
The “semi-liquidity” offered by evergreen funds, he calls “phantom liquidity.”
“A manager has to resort to all kinds of financial engineering to meet redemption requests, and that can never be good for overall returns, or for the companies being invested in or lent to. In the worst case, you’re forced to sell assets at unfavorable interim prices. No one benefits from that.”
The fact that investors are warned in advance about liquidity caps does little to change the situation, said Ronda. “They should simply be told that private markets are not liquid. If you choose private markets, you are choosing a long-term commitment. Not a quick fix.”
‘An important addition’
Michiel Elshof, head of private markets products at ING, sees things differently. Since 2023, ING has offered several evergreen funds, including a European private credit fund managed by Blackstone.
Elshof said the bank has received a number of questions from clients in recent days, but this has not led to redemption requests. “We’re not seeing movement on that front. Most of our clients are still building up their diversified portfolios in private markets. They’re coming from relatively small allocations.”
He also underland that ING has no concerns about the quality of its managers. “A number of factors contributed to these developments in the U.S., including concerns about concentrations in the software sector and the potential impact of AI, combined with scrutiny of specific funds managed by Blue Owl.”
The fact that asset managers now have to disappoint investors because they cannot provide more than 5 percent liquidity per quarter is, in his view, precisely a defining feature of this type of investment.
“We remain convinced that these funds are an important addition to the ways investors can access private markets,” Elshof said. “Of course they are designed for the long term, but they do offer investors additional flexibility.”
The liquidity cap, he added, also serves to protect both investors and the underlying investments. “Offering more liquidity would increase the risk of forced asset sales, which ultimately comes at the expense of returns.”
Does this give ING reason to reconsider the structure? “Quite the opposite,” Elshof said. “Different types of funds can coexist perfectly well alongside each other.”