BlackRock HPS: 5% is in line with the usual quarterly redemption limit.

Recently, BlackRock’s private credit fund HPS Corporate Lending Fund (referred to as “HLEND”), with a size of approximately $26 billion, has sparked concerns in the market regarding liquidity in US private credit due to restrictions on certain redemption requests. Previously, leading alternative asset management firms like Blackstone and Blue Owl also faced large-scale redemption requests.

HPS was once a well-known private credit group on Wall Street, and BlackRock announced its acquisition by the end of 2024. Currently, HPS is the core department for private credit under BlackRock.

At the recent HLEND product shareholder briefing for the first quarter of 2026, HPS management provided explanations regarding the restrictions on redemptions and liquidity issues.

“5% is the consistent quarterly redemption limit”

BlackRock HPS’s explanatory letter indicated that since its inception, HLEND has provided liquidity to shareholders by redeeming 5% of the circulating shares each quarter according to the fund’s mechanism. In the first quarter of 2026, HLEND received redemption requests from shareholders corresponding to approximately 9.3% of the circulating shares as of December 31, 2025, marking the first time this fund has exceeded the 5% framework since its establishment. The company decided to execute the redemption requests for 5% of the circulating shares as of December 31, 2025 (approximately $620 million).

HPS co-founder and co-president Mike Patterson stated at the briefing, “Each quarter, we provide a redemption of shares, and the board authorizes a maximum redemption of 5%. The 5% redemption limit has been uniformly applied each quarter since HLEND’s establishment. The number of shares requested for redemption in the first quarter exceeded the 5% limit, but we believe that the long-term decision that is most beneficial for all shareholders is to adhere to the 5% redemption limit each quarter.”

“Liquidity exceeds $4.4 billion”

Market attention is focused on whether there is a “liquidity crisis” behind the restrictions on redemptions of the HLEND product.

Mike Patterson stated that the fund product has ample liquidity. As of the end of February 2026, the product had over $4.4 billion in liquid funds. Additionally, there was a significant inflow of funds in the first quarter, including reinvested dividends, totaling $840 million.

“After offsetting the $840 million inflow against the 5% redemptions, there was actually a net inflow of funds,” Mike Patterson stated.

Data shows that over the past four years since the fund was launched, it has achieved an annualized total net return rate of 10.7% for shareholders. In 2025, it achieved a total net return rate of 9.1% and a distribution yield of 10.1%.

Why insist on a 5% redemption limit?

Regarding why they insist on a 5% redemption limit, Mike Patterson stated, “This structural design helps optimize investment performance because we only need to address foreseeable liquidity demands and do not wish to be forced to sell illiquid assets due to short-term funding needs. Therefore, the design of this structure aims to prudently balance the long-term liquidity needs of individual investors with the stability needs of the underlying assets.”

“During the existence of HLEND, we have actually limited the inflow of funds rather than accepting funds and investing them into assets that are less attractive than other markets, which is well known,” Mike Patterson stated. “The current situation is a perfect reflection of this principle.”

“We are able to execute redemptions at the maximum rate of 5% while maintaining ample available funds in markets that we believe are becoming increasingly attractive,” Mike Patterson said.

How to view current investment opportunities in the private credit market?

Mike Patterson stated that in an environment where the supply of credit capital may not be as abundant as in the past, it is conducive to better utilization of credit spreads. “We find that this is typically an environment that generates attractive private credit investment opportunities. Therefore, our choice is to reserve as much capital as possible to take advantage of what we believe will become increasingly interesting markets for investment,” Mike Patterson said.

Institutions: Low probability of evolving into systemic risk

In response to the recent redemption restrictions imposed by BlackRock’s private credit fund, several brokerage firms and industry insiders believe that this event does not indicate a “blow-up” of the underlying assets and that the short-term impact on the financial market is limited, with a low probability of evolving into systemic risk.

Some institutions believe that HLEND’s asset quality is relatively safe, with loan interest rates around 10% and a default rate of only 0.8%. The fund is directed towards approximately 380 companies (mainly medium to large enterprises), with the largest single investment accounting for 2% and the top ten investments accounting for 14%, indicating a diversified portfolio without single company risk. By industry, investments include software (22%), healthcare services (11%), industrial services (10%), and medical devices (8%); first-lien loans account for 97%, and the vast majority of loans are secured.

“This event reflects more of a redemption pressure on the product side, rather than a deterioration in the underlying credit quality,” an industry insider told reporters. In private credit, a 5% redemption limit is relatively common, and the typical duration of private credit is 3 to 5 years, making it difficult to meet a large number of redemption requests in the short term; therefore, restricting redemptions is a normal phenomenon.

The banking team at Guosen Securities stated that so far, the impact of this event on the financial market is limited. The size of the private credit market is not large compared to traditional loans and bond markets. Additionally, private credit operates in a closed-end fund format, primarily through debt investments, with no large derivatives involved, making the risk contagion relatively weak. Furthermore, its funds primarily come from institutional investors and high-net-worth individuals, which have little impact on banks or deposit-taking institutions.

Huatai Securities Research Institute holds a similar view. The institution pointed out that although the US private credit market has rapidly expanded in the past, accumulating certain vulnerabilities, it does not rule out the possibility of sporadic risk events in the future. However, considering the operating conditions of enterprises, market size, and banks’ direct exposure to it, the probability of this risk evolving into systemic risk is low.