From Redemption Restrictions to Overall Bank Runs: Why Global Asset Prices Are Losing Momentum

Huitong Finance APP News — Once considered the core pillar of “shadow banking,” the US private credit market is experiencing unprecedented turmoil.

These shadow banks offer wealth management products to the first-tier wealthy and tend to concentrate loans to core tech companies.

This $1.8 trillion market is now under triple pressure from redemption demands, regulatory scrutiny, and technological changes. The crisis has spread from non-bank institutions to traditional banks, with Deutsche Bank’s $30 billion risk exposure causing a sharp stock price decline, highlighting this transmission trend.

The crisis was triggered by credit risks in the tech industry.

A joint report by Barclays and UBS shows that private credit exposure to software and tech companies is extremely high, with some portfolios comprising up to 55% such assets.

With breakthroughs in artificial intelligence technology, market doubts about the viability and cash flow stability of traditional software companies have intensified, leading to sharp declines in related asset prices and triggering investor panic withdrawals.

The domino effect triggered by redemption waves

The crisis shows a clear chain reaction: Blue Owl Capital, managing over $300 billion, was forced to sell $140 million of loans at a discount to meet redemption demands, exposing liquidity shortages in the secondary market.

Following that, Blackstone’s BCRED fund faced massive redemption pressure, with senior partners using $150 million of their own funds to fill the gap and avoid triggering redemption restrictions.

Meanwhile, BlackRock’s actions became the final straw undermining market confidence — announcing a full write-down of $25 million in subordinate debt to zero, and setting a 5% redemption limit on its $26 billion HPS fund, far below the 9.3% redemption rate actually requested.

BlackRock’s move sparked industry-wide panic. The well-known financial blog ZeroHedge pointed out that this was exactly the kind of operation Blue Owl and Blackstone try to avoid, as it could trigger a vicious cycle of “passive selling — asset devaluation — more redemptions.”

As expected, then, Clifwater’s flagship fund with $33 billion in assets faced a record 14% redemption request, forcing a quarterly redemption cap of 7%. In Western terms, this is akin to the market’s “canary in the coal mine” — historically, miners carried canaries underground because they are more sensitive to toxic gases like methane and CO, and their early distress warned miners of danger.

Analysts compare the current situation to the 2022 real estate fund crisis, believing that while redemption restrictions can prevent short-term collapse, capital outflows will remain high in the coming months, and industry recovery could take years.

Risks spreading into the traditional banking system

More concerning is that the crisis has broken out of shadow banking and is spreading deeply into the traditional banking sector.

Deutsche Bank’s annual report disclosed that its private credit risk exposure has risen to €25.9 billion (about $30 billion), accounting for 5% of its total loans, with €15.8 billion in exposure to the tech industry. This news caused the bank’s stock to plummet nearly 7% in a single day.

Moody’s data shows that by mid-2025, US banks had lent $12 trillion to non-deposit financial institutions, nearly doubling from ten years earlier.

The FDIC further disclosed that by the end of 2025, US bank loans to such institutions totaled $14 trillion, and with undrawn loan commitments, the potential risk exposure reaches $42 trillion.

In response, JPMorgan Chase has taken the lead by lowering valuations of some private credit funds and reducing credit limits.

Several large banks have also launched comprehensive reviews of their private credit exposures, including loan structures and collateral prepayment rates.

Meanwhile, the crisis has also impacted the collateralized loan obligation (CLO) market. Data from Santander Capital Markets shows that in February 2026, high-yield CLO bonds held by private credit funds fell 4.1%, contrasting sharply with the 1% increase in the previous two months, marking a complete reversal of market sentiment.

Market controversy and warning signals

There are clear disagreements about the nature of the current crisis. Industry veterans in private credit believe the market overreacts. Stephen L. Sbit of Cliffwater pointed out that in 2025, private debt returned 9.33% for the year, with an actual loss rate of only 0.70%, well below historical levels, and credit losses are less related to the current economic environment.

Tom Stark of the Cambridge Association also said that defaults like Tricolor are isolated incidents caused by fraud or unique business models, not systemic industry issues.

However, opposing voices are also strong. JPMorgan CEO Jamie Dimon once called private credit funds “cockroaches,” implying hidden risks and high contagion potential. Allianz Group’s chief economist, Mohamed El-Erian, warned that the current liquidity crunch could lead to “typical risk contagion,” forcing investors into a passive situation of “illiquid high-quality assets and forced sales of liquid assets.”

The IMF had already called for increased regulation of private credit as early as April 2024, focusing on leverage, interconnectedness, and risk concentration.

This crisis is essentially a consequence of the ultra-low interest rate environment after the 2008 financial crisis, which led to an unregulated flow of funds into shadow banking. Tightening bank capital rules pushed credit demand toward non-bank institutions, with private credit offering high yields attracting large capital inflows, even opening to retail investors under policy encouragement.

Summary and technical analysis:

Now, as the global economy cools and interest rates change, issues like lack of transparency and regulatory gaps in this sector are erupting.

Regardless of how the crisis unfolds, it serves as a warning: the $1.8 trillion private credit market is deeply intertwined with the traditional financial system, and its risks are no longer isolated.

Even for top-tier investors, high yields inevitably come with high risks, especially in non-listed instruments with specific redemption rules, which are not suitable for all “mainstream” investors.

For policymakers and regulators, bridging the regulatory gap between shadow banking and traditional banks, balancing financial innovation with risk control, has become an urgent task to maintain financial stability.

As markets warn, any field branded as “shadow” requires extreme caution.

Previously, the article emphasized that gold with no recent yield and tech stocks with long dividend durations are highly sensitive to interest rates. Recent gold adjustments have also been affected by equity market sell-offs. Once risks are fully released, gold prices are expected to rebound.

From a technical perspective, gold prices are supported at the lower boundary of the upward channel, and the downward trend may ease, with a potential stage low.

(Spot gold daily chart, source: Yihuitong)

As of 15:16 Beijing time, spot gold is trading at $5,005 per ounce.

(Editor: Wang Zhiqiang HF013)