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Blackstone’s flagship $48bn private credit fund suffered its first monthly loss in more than three years in February, as loan markdowns and market declines weighed on returns.
The Blackstone private credit fund, known as Bcred, reported a total return of -0.4 per cent in February, its first decline since September 2022, when a broad sell-off rocked global financial markets.
The fund, the industry’s largest, wrote down the value of a “select” number of loans during the month, including the debt it extended to customer service software company Medallia, according to a letter to financial advisers reviewed by the FT.
The update also pointed to declines in the broader liquid loan market, which the fund invests in, as weighing on its overall performance in the period.
Investor scrutiny of the $2tn private credit market has intensified over the past year as returns have slid. Advances in AI have raised doubts over the long-term durability of enterprise software companies, many of which were bought up by private equity groups and financed by private credit loans.
That has sparked a surge in investor redemption demands from private credit funds that had been marketed to wealthy individuals. Blackstone earlier this month disclosed Bcred suffered $1.7bn of net outflows in the first quarter, as withdrawal requests jumped to 7.9 per cent of its assets.
Blackstone honoured all of the redemptions in the period, standing out from a handful of its peers who limited withdrawals as requests surpassed thresholds that allow managers to cap outflows. Funds managed by Morgan Stanley, Cliffwater and BlackRock’s HPS Investment Partners unit limited redemptions in the quarter.
“Slowing flows and rising redemption requests have been more of a market phenomenon than a Bcred specific phenomenon,” JPMorgan Chase analyst Kenneth Worthington said. He noted that “leading peers such as BlackRock, Blue Owl and Cliffwater” were “also citing significantly higher than historically typical redemption requests”.
Bcred’s returns have slid since the Federal Reserve began cutting interest rates, with its total return falling to 6.4 per cent over the past year.
In a statement, Blackstone said the fund continued to “deliver strong performance for its investors, with a 9.5 per cent annualised total return since inception”.
The world’s largest private investment group said the 6.4 per cent total return over the past year represented a 2.5 percentage point premium to leveraged loans, a comparable benchmark for the industry.
In the note to financial advisers, Blackstone said its performance “underscores the potential benefits of private credit in volatile markets”.
Blackstone has been marking down the value of the loan it provided Medallia in 2022 for more than a year, and the update indicates it expects an ever-larger impairment on the deal. The 2022 buyout by Thoma Bravo has become a problem for a number of private credit groups as its business has struggled.
Medallia, which helps businesses survey their clients and track customer interactions, has not grown as rapidly as expected. Some lenders pointed to more intense competition from other software providers.
Blackstone most recently marked the loan at 78 cents on the dollar at the end of 2025, an update to investors earlier this month showed, down from 94 cents on the dollar in December 2024.
Orlando Bravo, the co-founder of private equity group Thoma Bravo, told CNBC earlier this week that the equity value of Medallia had been impaired for “a long time”.
“When we bought it, we way overestimated or extrapolated the very high rates of growth of that company into the future,” he said. “We made a mistake and that caused us to pay too much.”
