Private Credit Sector Faces Redemption Pressures Amid Liquidity Concerns, Though Some Managers See Opportunities

Speaking at the SuperReturn International conference in Berlin, Kevin Marchetti, CIO and Head of U.S. Direct Lending at Man Group, acknowledged significant 'growing pains' in private credit but maintained an optimistic outlook for disciplined lenders. His comments came shortly after Blackstone capped withdrawals from its flagship fund and Switzerland's Partners Group indicated it may curb capital withdrawals across several vehicles, both moves triggered by spikes in redemption requests. Marchetti attributed the liquidity stress to retail investors who did not fully appreciate the illiquid nature of private credit assets. Despite these pressures, he said credit fundamentals in the core middle market remain strong, with default rates, losses, and non-accruals running well below long-term averages. Because Man Group's middle market direct lending is entirely floating rate, rising benchmarks driven by elevated inflation — U.S. CPI reached 4.2% in May — are expected to boost yields on underlying assets. Marchetti also flagged a key risk: deals underwritten two to three years ago in a near-zero interest rate environment may face sustainability questions around debt service coverage. He warned that managers who loosened underwriting standards to accelerate deployment during the capital influx of the past decade are likely to show the worst performance dispersion going forward.