Wall Street’s biggest banks are pulling back on lending as turbulence in the private credit market creates widespread concern among investors and financial institutions.
The upheaval stems from worries about how these investments are valued and questions about transparency, made worse by high-profile bankruptcies including auto-parts company First Brands and car dealer Tricolor, where private credit lenders had significant exposure.
According to Moody’s data, U.S. banks have nearly $300 billion in outstanding loans to private credit providers as of June 2025, plus another $285 billion loaned to private-equity firms and $340 billion in unused credit lines available to these borrowers.
Stock prices for alternative investment managers have dropped this year as concerns mount about the value of software companies in their portfolios, with artificial intelligence advances potentially disrupting established business models.
Billions of dollars have flowed out of major private credit funds during the first quarter, with more outflows potentially ahead.
Investment firms including Ares Management, Apollo Global, Oaktree and Goldman Sachs have not yet disclosed results from their first-quarter withdrawal programs at their private credit funds.
JPMorgan Chase Actions
The nation’s largest bank has lowered the assessed value of certain loans made to private credit funds following a review of market disruption affecting software companies, Reuters reported last week, according to two sources with knowledge of the situation.
JPMorgan conducted a comprehensive review of its financing portfolio, examining individual names and entire sectors, then applied different valuations to loans with underlying software exposure, one source explained.
While such revaluations don’t occur frequently, this isn’t JPMorgan’s first time adjusting loan values, the first source noted, calling the action “important to do when markets warrant it rather than waiting for a crisis to come along.”
JPMorgan’s lending agreements for private credit allow the bank to adjust valuations based on fund collateral during market disruptions, the source said, though the adjustments are not substantial.
The decision to reduce certain loan values will result in decreased lending to these funds, Reuters reported, citing a knowledgeable source.
Morgan Stanley Limits
The investment bank restricted withdrawals from one of its private credit funds after investors requested to pull out nearly 11% of outstanding shares, according to regulatory documents.
Morgan Stanley’s North Haven Private Income Fund, which held investments in 312 borrowers across 44 industries as of January 31, returned approximately $169 million, representing about 45.8% of what investors requested for the quarter.
In correspondence to investors, Morgan Stanley Private Credit cited multiple challenges facing the direct-lending sector, including uncertainty about merger and acquisition recovery, declining asset yields, and concerns about credit quality deterioration.
“By maintaining appropriate limits on the quarterly repurchase offer, the company seeks to avoid asset sales during periods of market dislocation,” the bank’s investment management division stated in the letter.
BlackRock Restrictions
The world’s largest asset management company announced March 6 that it limited withdrawals from its primary HPS Corporate Lending Fund following increased withdrawal requests.
The fund received $1.2 billion in withdrawal requests during the first quarter, equivalent to approximately 9.3% of its net asset value. Fund managers informed investors they would distribute $620 million through their quarterly withdrawal program, hitting the 5% threshold where managers can restrict additional withdrawals.
The fund explained the 5% restriction prevents “a structural mismatch between investor capital and the expected duration of the private credit loans in which HLEND invests.”
New investments in the fund totaled $840 million in the first quarter, falling short of the $1.2 billion investors initially sought to withdraw. Company records show 19% of the fund’s portfolio involves software investments.
Blackstone Increases Cap
Alternative investment firm Blackstone reported March 2 that its primary private credit fund, BCRED, experienced a dramatic increase in withdrawal requests during the first quarter.
The company allowed clients to withdraw a larger-than-normal $3.7 billion from the $82 billion fund. With $2 billion in new commitments, net withdrawals reached $1.7 billion.
The spike in requests prompted the fund to increase its typical 5% quarterly withdrawal limit to 7%, while Blackstone and its staff contributed $400 million to fulfill all withdrawal requests, the firm announced.
JPMorgan analysts noted this marked the first quarter of outflows for BCRED, the largest fund of its type that doesn’t trade publicly.
Blue Owl Asset Sales
Private capital company Blue Owl Capital announced February 19 it would sell $1.4 billion in assets from three credit funds to return money to investors and reduce debt, while permanently stopping withdrawals from one fund.
The debt being sold spans 128 different portfolio companies across 27 industries, with the largest concentration of 13% in the struggling software and services sector, the company reported.
The loans come from three credit funds: $600 million from Blue Owl Capital Corp II, $400 million from Blue Owl Technology Income Corp, and $400 million from Blue Owl Capital Corp.
“We’re not halting redemptions, we are simply changing the method by which we’re providing redemptions,” Blue Owl co-President Craig Packer explained.
Cliffwater Caps Withdrawals
Investors in Cliffwater LLC’s main private credit fund sought to withdraw approximately 14% of shares in the first quarter, leading the company to limit repurchases at 7%, Bloomberg News reported.
As an interval fund, it must repurchase shares quarterly. The company set that rate at 5%, with authority to repurchase up to 7%, the report stated.
