Private Credit Market Hit by Redemptions and AI Fears

The private credit market, a fast-growing sector valued at more than $1.8 trillion, is facing significant turmoil as investor redemptions surge and concerns mount over loans to software companies vulnerable to artificial intelligence disruptions. Major funds managed by firms such as BlackRock, Blackstone, and Blue Owl have imposed limits on withdrawals in recent months, while investment banks including Goldman Sachs and JPMorgan Chase are offering hedge fund clients tools to bet against the industry.

The stress in private credit, which involves non-bank lending to businesses deemed too risky for traditional banks, has intensified since September 2025, when two companies backed by private credit lenders—auto lender Tricolor and car parts maker Firstbrands—filed for bankruptcy. These events raised questions about underwriting standards and the sector's exposure to borrowers in the software industry, where AI advances are threatening to upend established players. Investors have grown wary that such disruptions could lead to defaults, prompting a wave of redemption requests that has strained fund liquidity.

In response, BlackRock capped withdrawals from its $26 billion HPS Corporate...