BlackRock encountered some trouble.

Behind AI · BlackRock Fund Redemption Crisis: How AI Is Disrupting Software Asset Valuations

A liquidity crisis is spreading through private credit.

Recently, BlackRock’s private credit fund HPS Corporate Lending Fund (referred to as “HLEND”), with approximately $26 billion in assets, saw redemption requests surge to 9.3% of net assets, triggering a deferral mechanism. Some redemption demands were postponed to the next quarter, raising market concerns.

Previously, other market players—Blue Owl Capital and Blackstone—also faced redemption issues. Private credit, once considered a “core asset” by PE firms, has quickly shifted from a “hot commodity” to a “sell-off” target.

Breaking the 5% Red Line, Blackstone Emergency Injection of $400 Million

According to disclosures, BlackRock’s HLEND fund received about $1.2 billion in redemption requests, accounting for 9.3% of the fund’s net asset value. This far exceeds the 5% quarterly redemption limit stipulated in the fund agreement, prompting BlackRock to activate redemption restrictions.

In the announcement, BlackRock stated that only 5% of shares—about $620 million—would be redeemed; the remaining 4.3% (around $580 million) was deferred to the next quarter. This news caused BlackRock’s stock to plummet. On the day of the announcement, the stock fell over 7%, and within four trading days, it further declined to $917.39. Roughly speaking, within just five trading days since the announcement, the stock price dropped over 10%.

This isn’t an isolated problem for BlackRock. Before this liquidity crisis, Blue Owl, Blackstone, and Cliffwater also experienced redemption issues. Blue Owl Capital’s retail private credit fund OBDC II faced massive redemptions in February this year.

Although specific redemption ratios weren’t disclosed, the amount far exceeded 5%, the threshold limit. Unlike BlackRock, Blue Owl implemented a permanent redemption restriction, canceling quarterly redemption rights and distributing cash to investors by selling underlying assets.

This means investors must wait for underlying assets to be liquidated before receiving principal and returns. If asset disposal is hindered, investors risk having their funds “locked up” indefinitely.

Blackstone’s flagship fund BCRED, with a scale of $48 billion, faced about 7.9% redemption requests in Q1 this year, roughly $3.8 billion. As the “King of Wall Street,” Blackstone temporarily increased the quarterly payout limit to 7%, and senior management and employees personally injected $400 million to meet full redemption requests, avoiding default risk.

Additionally, Cliffwater, a private credit giant, faced redemption requests reaching 14% in Q1, for its approximately $33 billion private credit fund, with a redemption pressure of $4.62 billion. Yet, the fund’s annual operating expense ratio is only 3.27%. This “liquidity crisis of a single fund” is evolving into a “trust crisis” in the entire private credit asset class.

AI Arrives, Underlying Assets’ “Revaluation of Value”

The root of this liquidity crisis lies in the “reassessment” of underlying asset values.

Compared to the booming valuations of AI tech companies in the primary market, these assets favored by PE giants are starting to “discount.” Especially software and SaaS companies.

Historically, due to stable cash flows and reliable business models, private credit funds favored software and SaaS companies. But with AI’s advent—particularly the free core functionalities—these software companies’ valuations have “shrunk.”

An investor noted that from secondary market trading prices and valuation changes, one can already glimpse the pricing expectations for default risk.

Take ServiceNow (NYSE: NOW), a bellwether in the industry. Although its latest financial report shows steady business growth and cash flow, the market still anticipates that AI’s impact could worsen ServiceNow’s fundamentals. Especially as AI causes software companies’ pricing power to “collapse.”

Between November 2025 and March 2026, ServiceNow’s stock price fell from $184 to $105, a 43% drop, far exceeding the broader market. Meanwhile, PE multiples declined from 99x to 65x, reflecting market concerns over growth prospects and pricing power.

Another company with debt held by multiple PE giants—Cornerstone OnDemand—also illustrates this trend. Since its privatization in 2021, its term loan prices have fallen by 10 percentage points to around $83, while the average valuation of six BDCs holding its debt is about $97, indicating a significant discount.

Most importantly, these negative expectations are now reflected at the index level. In January 2026, the S&P North American Software Index dropped 15% in a single month—the largest monthly decline since 2008. Market valuations for the software sector—EV/ARR (Enterprise Value / Annual Recurring Revenue)—have fallen sharply from their 2021 peak of 15–25x to 6–10x, with top-tier companies around 8–12x; forward P/E ratios have declined from about 35x at the end of 2025 to around 20x now, reaching the lowest levels since 2014.

All signs indicate that this liquidity crisis is not a “short-term fad,” but a fundamental impact on the entire private credit investment logic: markets are shifting from capital expenditure expansion to a more rigorous focus on return on investment and profit realization, no longer willing to pay for “money-losing, unprofitable” companies.

How Long Can the “Stable Fee Growth” Myth Last?

Once, private credit was one of the most profitable businesses for PE giants, with institutional investors like pension funds, insurance companies, and sovereign wealth funds including it in their strategic allocations; high-net-worth individuals also flooded in through FOFs (funds of funds) and SMAs (separately managed accounts), boosting the scale of private credit assets.

In the US, private credit assets grew from about $200 billion in 2015 to over $800 billion in 2021, with a compound annual growth rate of 18%, making it the largest private credit market globally.

In this boom, software has been the core track in PE and private credit. This is partly because software companies, as asset-light businesses lacking physical collateral, find it difficult to obtain loans from traditional banks; partly because of high valuation expectations in the US software industry and the wealth effects from M&A activity, which have supported this sector’s prosperity.

Vista Equity Partners and Thoma Bravo are beneficiaries of this trend. Through software M&A and post-acquisition integration strategies, both have rapidly grown into billion-dollar private equity giants, with founders among the world’s top billionaires.

Forbes data shows that between 2025 and 2026, Vista founder Robert F. Smith’s net worth remains above $10 billion, ranking as the wealthiest Black American, mostly derived from “buy low, sell high” software asset trades; Thoma Bravo co-founder Orlando Bravo’s net worth reaches $12.8 billion, placing him among the global billionaires.

In this environment, unprofitable software service companies also achieved astonishing PS (price-to-sales) valuations, peaking at 20–30x—three to four times the 5–8x PS of giants like Microsoft and Oracle.

In other words, the past decade (2015–2025) has been the “golden decade” for private credit in the software sector. But with the revaluation of underlying assets, many software IPOs and sales plans have been paused, and the refinancing pressure over the next 3–4 years could surge, forcing PE giants to reassess this business.

Apollo Global Management already reduced its software allocation from 20% to 10% in 2025; JPMorgan recently notified several private credit firms to lower the collateral value of some software-related loans, which will directly squeeze the leverage capacity of related funds, triggering a chain reaction.

Over the past five years, private credit has become a key profit engine for PE giants, with nearly all emphasizing “stable fee growth.” For example, Blackstone’s $82 billion BCRED fund’s fee income has become its largest single source, accounting for about 13% of total fee revenue, generating $1.2 billion in 2025 alone.

Blue Owl’s flagship $35 billion credit fund earned $447 million last year. As an institution heavily reliant on retail credit products, Blue Owl’s fee income from this sector accounts for up to 21%.

But when the “fee base steady growth” story shows cracks, the stock prices of Blackstone, KKR, Ares, Blue Owl, Apollo, and other listed PE firms have generally fallen by 25% or more, with a total market cap loss exceeding $100 billion.

In the current environment of “sudden market perception shift,” whether PE giants can offset the shrinking software asset values and the resulting “fee base” growth pressure will be crucial to whether this sector remains prosperous.