Why is Blackstone stock gaining despite a withdrawal cap on its flagship fund?

Shares of Blackstone BX climbed sharply on Thursday even after the alternative asset manager imposed withdrawal limits on its flagship private credit fund, a move that has unsettled investors across the sector in recent months.

Blackstone stock rose more than 7% in trading, recovering from a roughly 4% decline a day earlier when private markets firms sold off after Switzerland's Partners Group announced redemption restrictions in one of its European private equity vehicles.

The rally came after Blackstone disclosed that investor withdrawal requests for its $79 billion Blackstone Private Credit Fund (BCRED) reached 10% of outstanding shares during the second quarter.

The firm, however, maintained its standard quarterly repurchase cap of 5%.

The latest update marked a reversal from the first quarter, when Blackstone satisfied all redemption requests, which totaled 7% of the fund.

Investors look past withdrawal restrictions

The positive stock reaction contrasted with concerns that have weighed on the private credit sector as redemption requests increase.

BCRED is one of the first major semi-liquid private credit vehicles to report second-quarter withdrawal activity, making its update a closely watched indicator for broader investor sentiment.

Several details in the filing appeared to reassure the market.

Blackstone said redemption activity slowed during the second half of the offer period, while fundraising across its other private wealth products has recently accelerated.

In an investor letter, BCRED's managers said: “We are entering an investment environment that we believe is especially compelling for corporate direct lending. Following a period of volatility early this year, markets are stabilizing, and deal activity is increasing at wider spreads compared to the prior quarter.”

The firm also highlighted the health of its underlying portfolio, noting that BCRED's borrowers have recorded 11% growth in earnings before interest, taxes, depreciation, and amortization over the past 12 months, with software borrowers outperforming.

Redemption pressures spread across private markets

The announcement follows a record first quarter for BCRED, when investor redemption requests climbed to 7.9%, or approximately $3.8 billion.

Blackstone fulfilled those requests by temporarily increasing its quarterly repurchase limit and using employee capital to cover the balance.

Although the fund attracted around $1 billion in inflows during the quarter, it ultimately recorded a net capital outflow after meeting withdrawals.

The broader sector has come under pressure after Partners Group disclosed that it was limiting redemptions in one of its evergreen private equity funds.

On Thursday, the Swiss asset manager said it was prepared to extend restrictions to additional vehicles, warning that elevated withdrawals were spreading from private credit into private equity.

Chief Executive Officer David Layton said, “Liquidity features are designed to protect long-term investors, and to ensure that returns continue to be driven by the quality of the underlying private assets rather than by short-term flow dynamics.”

Liquidity concerns remain in focus

Blackstone executives have previously defended the use of withdrawal caps in semi-liquid investment products.

“The idea that there are caps is really a feature, not a bug, of these products,” Blackstone Chief Operating Officer and President Jon Gray told CNBC in March.

At the same time, some market participants have become more cautious about credit conditions.

Last week, Pimco Chief Investment Officer Daniel Ivascyn warned that higher losses could be emerging across the industry.

“There’s a lot going on beneath the surface,” he said in a video shared by the company. “We are, we think, in the midst of the first sustained default or loss cycle in many, many years.”

Despite the increase in redemption requests, investors appeared encouraged by Blackstone's comments on portfolio quality and fundraising momentum, helping the stock rebound even as liquidity concerns continue to ripple through private markets.