Blackstone’s Gray defends world’s largest private credit fund

Blackstone president Jon Gray recently defended the quality of loans within the firm’s flagship private credit fund, BCRED, after investors withdrew nearly 8% from it in the last quarter. The alternative asset management giant allowed investors to withdraw 7.9% of the fund, which is considered the largest private credit fund in the world with approximately $82 billion invested. To facilitate these withdrawals, Blackstone’s own investors contributed $150 million to the fund.

The announcement of these withdrawals caused a sell-off in Blackstone shares, with prices dropping by about 8.5% in morning trading. Gray, however, remains confident in the credit quality of the fund, citing the 10% EBITDA growth of its 400-plus borrowers last year as a positive indicator.

Despite Gray’s reassurances, recent moves by alternative asset managers to allow investors to cash out of funds have only added to concerns surrounding private credit and loans to the software industry. Blue Owl, for example, recently sold $1.4 billion of its loans to facilitate a cash out of 30% of its credit fund.

With Blackstone now caught up in these concerns, the spotlight on private credit seems to be widening. A Blackstone spokesman emphasized that the firm and its employees’ investment in BCRED aimed to meet all withdrawal requests promptly and with certainty. The fund has delivered 9.8% annualized returns since its inception for Class I shares.

Gray acknowledged the ongoing “spin cycle” of concerns in the industry, particularly following the collapses of Tricolor and First Brands last fall. Despite the challenges, he remains optimistic about the fund’s exposure to software firms, which make up roughly 25% of its investments. While Gray recognizes the potential for disruption in the software industry due to AI advancements, he believes that debt lenders are in a more secure position than equity holders.

Ultimately, Gray believes that the current disconnect between market perceptions and the actual performance of underlying portfolios will resolve itself over time. As the industry navigates these challenges, Blackstone remains committed to managing its private credit fund effectively and delivering strong returns for its investors.