Blackstone's private credit fund for rich lands 30% inflow, reaches $2.4 bn

By Lisa Lee

Blackstone Inc.’s nearly $50 billion private credit fund for affluent individuals attracted the most capital in more than a year, as the asset class sees a rebound in fundraising. 
 

Capital inflows to Blackstone Private Credit Fund, BCRED, rose 30% to $2.4 billion in the third quarter to date from the prior three months, according to an investor letter on Wednesday seen by Bloomberg. Current annualized distribution yield was 10.6% based on net asset value for Class I Common shares, the letter said. 

The hefty inflows highlight a broad rebound for private credit strategies in the second quarter, during which 34 new funds raised $71.2 billion, more than double compared with the previous three months. Institutional investors around the globe have continued to add more capital into private credit funds. Some 45% of investors expect to boost their allocation to private credit next year.

The increased capital to BCRED in the third quarter came mainly from wealthy individuals in Asia and the US, according to people familiar with the matter who aren’t authorized to speak publicly. BCRED has been making inroads in Asia, most notably in Japan where Blackstone partnered with Daiwa Securities Group Inc. in April to launch a fund offering.

It was the first publicly offered private credit fund in Japan that follows an offshore strategy and raised more than $287 million in its first two months. While the brisk start that tapped pent-up demand has since moderated, BCRED continues to see inflows from Japanese retail investors, according to the people. Other Asian regions include Singapore, China, Thailand and Korea, according to one of the people. 

Turnaround 
 

For nearly two years, the flagship fund had an incredible run, attracting billion of dollars each month and helping Blackstone dominate the industry. 

But at the end of last year, the threat of a recession softened demand for riskier assets like the debt of highly levered companies and buyout deals that BCRED is involved with. Because of that, BCRED’s redemption rate hit 5% for the first time. 

The withdrawals followed news that Blackstone had limited redemption requests from its BREIT, the massive real estate fund with a similar structure to BCRED. A bulk of the withdrawals came from wealthy investors in Asia who were booking profits.  

Redemptions are estimated to be about 2% of the fund in the quarterly repurchase window ended Aug. 31. BCRED intends to honor all tender request, the letter said. 

While BREIT continues to be hit by redemptions that began last year, it has been limiting how much investors can withdraw. Redemption requests have also dropped to the lowest in 10 months.  

BCRED specializes in providing direct loans to companies in financing leveraged buyouts. The fund typically provides floating-rate loans that are backed by collateral. 

The main benchmark for floating rate loans has climbed to around 5.4% as the Federal Reserve raises rates to combat inflation. That compares with 3% a year ago, and 0.05% two years ago. With the spread over the benchmark also rising, some private credit loans are returning double-digit yields.