Private credit fund bonds were flagging risks before recent redemptions, hedge fund says 

By Nell Mackenzie

LONDON, March 25 (Reuters) – Bonds issued by semi-liquid private credit funds have fallen sharply in value since early February to trade at their weakest in a year, in a sign that investors were bracing for stress in the sector even before a rush of recent redemptions, according to bond trading hedge fund Fourier Asset Management.

Private-credit market jitters have coursed through the markets this month, with some major U.S. banks tightening lending while the funds have capped withdrawals as mounting concerns over valuations, transparency and the health of the overall economy have prompted some investors to exit the sector.

“The $2 trillion semi-liquid private credit market is navigating its most significant liquidity stress test since inception,” Fourier said in a March letter seen by Reuters. 

Interval funds, or non-traded BDCs, offer windows when investors can take their money back. 

Because a fund value falls when investors withdraw money, sometimes funds restrict or delay full redemptions to prevent other investors who have chosen to remain in the fund seeing their shares sharply drop due to such redemptions.

Fourier takes long and short positions in the overall credit market but does not have a position on these funds. 

Some alternative asset managers have recently capped withdrawals at private credit funds after a surge in redemption requests.

The difference between bond yields from five major interval funds and comparable government bonds rose before some of these funds faced high redemption requests, Fourier said.

This included bonds issued by the funds of Oaktree, BlackRock, Blue Owl, Blackstone and Ares Capital. The companies declined to comment. 

These bond spreads, often seen as an indicator of how risky a bond is, narrowed in the summer of 2025 and earlier this year, before widening sharply from early February onwards, the hedge fund added. The fund’s analysis ran just beyond March 8. 

“The stress in semi-liquid fund structures is corroborated – and in some cases preceded – by signals in the public bond markets,” the letter said.

It pointed to Oaktree’s Strategic Credit Fund as one example, noting the fund has seen its credit bond spreads widen to around 250 basis points (bps), near the highest levels since April 2025, citing data from Barclays and S&P Global Market Intelligence.

Oaktree faces elevated redemption pressure heading into its next quarterly earnings report, due at the end of April, the letter said. 

Oaktree’s Strategic Credit Fund is rated Baa3 by Moody’s and BBB-, one notch above junk territory. Oaktree declined to comment. 

BlackRock’s HPS Corporate Lending Fund, rated BBB- by S&P and Baa2 by Moody’s, saw its bond spreads widen to as much as around 258 bps in March, data from the letter showed.  BlackRock declined to comment.

The ICE BofA U.S. Corporate Index closed at 121 bps on Tuesday, down from a peak earlier in March. The ICE U.S. High Yield Index closed at 308 bps, ICE data showed. 

Fourier Asset Management was founded by Orlando Gemes, previously a Hermes Fund Managers credit manager who began trading bonds in 2000, according to LinkedIn. 

The bond spread widening was a sign of increasing investor angst about private credit, Fourier said. 

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe, Tommy Reggiore Wilkes and Hugh Lawson)