Blackstone President and COO Jon Gray speaks during the Axios BFD event in New York, U.S. October 12, 2023. REUTERS/Brendan McDermid
Brendan McDermid | Reuters
black stone Chairman Jon Gray on Tuesday defended the quality of loans at the firm’s flagship private credit fund after investors withdrew nearly 8% in the most recent quarter.
The alternative asset management giant said late Monday that it had allowed investors to withdraw 7.9% from BCRED, which it calls the world’s largest private credit fund, with about $82 billion invested. Blackstone achieved this in part by allowing the company’s investors to invest $150 million in the fund.
The move sparked a selloff in Blackstone shares, which fell about 8.5% Tuesday morning, along with those of other private credit companies.
“When you think about credit quality, the 400-plus borrowers here saw 10% EBITDA growth last year,” Gray told CNBC’s David Faber, using a term referring to a company’s financial performance. “So when we look at that, we feel really good.”
Instead of calming markets, recent moves by alternative asset managers to allow investors to withdraw their funds have only added to the nervousness around private credit and lending to the software industry. Last month, the storm intensified when Blue Owl said it had found buyers for $1.4 billion of its loans, in part to help draw down 30% of a troubled credit fund.
Now, with the involvement of the much larger asset manager Blackstone, concerns around private credit appear to be widening.
“We had a lot of noise,” Gray told CNBC. “As you know better than anyone in the press, this has become a story.”
Concerns were first sparked last fall with the collapse of Tricolor and First Brands, companies that also received financing from banks, the Blackstone executive noted.
“There’s a constant turnover cycle, and so when that happens, it’s not surprising that investors can get nervous,” Gray said. “Financial advisors can say, ‘Hey, I want to buy back.'”
A Blackstone spokesperson said the company and its employees’ investment in BCRED was aimed at “meeting 100% of requests for the quarter with certainty and speed.” They underline our conviction in BCRED and our alignment with its investors.”
The fund has generated annualized returns of 9.8% since inception for Class I shares, the spokesperson said.