By Isla Binnie and Manya Saini
NEW YORK, April 9 (Reuters) – Investors have asked to pull more than 15% of their assets from Carlyle’s flagship private credit interval fund, the group said in a shareholder letter on Thursday, in the latest rush away from funds that give broad access to the rarely-traded asset class.
Scrutiny is intensifying on the multi-trillion-dollar private credit market, as investors question the health of loan portfolios and how the software companies that have borrowed from funds will manage disruption from artificial intelligence.
The Carlyle Tactical Private Credit Fund (CTAC), which has more than $7 billion in assets, received repurchase requests totaling about 15.7% of its shares in the first quarter, more than three times the 5% threshold it usually offers to repurchase.
“Recent market volatility has led to increased repurchase activity across private credit funds,” it said in the letter.
Managers of so-called semi-liquid funds, which give investors the chance to redeem a limited amount of capital at set intervals, have capped redemptions as some asset markdowns spooked markets and dragged on funds’ performance.
Morgan Stanley, BlackRock and Apollo Global Management, among others, have imposed limits in recent weeks.
PRIVATE CREDIT INDUSTRY REELS
Concerns that AI could erode software companies’ earnings and weaken their ability to repay loans have deepened and shares in alternative asset managers have compounded months of losses. Carlyle’s stock was last down 1.5% in morning trading.
CTAC is an interval fund, which means it is legally obliged to allow shareholders to redeem their holdings periodically. At business development companies (BDCs), whose investors have put in historically high redemption requests this year, boards can decide whether to buy the holdings back or not.
A Carlyle spokesperson said the fund has 950 positions and no single credit is more than 1.5% of the portfolio. Its assets under management have risen 15% year on year, the spokesperson added.
Direct lending makes up some 40% of the portfolio, as of January 30, according to CTAC’s website. Software accounts for 12% of the fund’s portfolio, and there have been no defaults on its loans to software companies over the past five years, the spokesperson said.
The fund said in the letter that its structure allows it to manage liquidity and avoid forced asset sales, particularly during market volatility.
The news of redemption requests at CTAC was first reported by the Wall Street Journal.
(Reporting by Isla Binnie in New York and Manya Saini in Bengaluru; Editing by Shinjini Ganguli and Anil D’Silva)
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