BlackRock Inc. limited withdrawals from its $26 billion HPS Corporate Lending Fund after investors requested unusually high redemptions, reflecting growing anxiety in the $1.8 trillion private credit sector. Shareholders sought to redeem 9.3% of their shares, but management capped repurchases at 5%. The total value of requested redemptions would have been about $1.2 billion, but the fund can only return roughly $620 million held at year-end. This move is the clearest example of gating withdrawals among major private credit funds since late last year, when concerns over lending standards emerged following high-profile collapses. Until now, many funds either fulfilled large redemption requests or repaid investors by alternative means. BlackRock said limiting withdrawals aligns with its management of liquidity in the flagship direct lending product, HLEND. “Without it, there would be a structural mismatch between investor capital and the expected duration of the private credit loans in which HLEND invests,” the firm said. Non-traded business development companies like HPS typically offer to repurchase up to 5% of shares each period. Last month, the fund faced withdrawals of 4.1%, close to its usual threshold. The news sent BlackRock shares down as much as 8.3% on Friday. Stocks of other alternative asset managers, including KKR & Co. and Ares Management Corp., also fell sharply, marking the worst start to a year for the sector in a decade. Private credit firms are bracing for further redemption requests amid investor concerns over lending practices and exposure to businesses affected by artificial intelligence. HPS Investment Partners, acquired by BlackRock last year, said restricting redemptions allows the fund to pursue “compelling investment opportunities” during periods of uncertainty and volatility. Evercore ISI analyst Glenn Schorr noted that capping withdrawals at 5% is crucial. “It preserves the integrity of non-traded vehicles, protects the fund from being a forced seller of assets, and avoids incremental leverage,” he said. “Semi-liquid funds were designed and marketed as products offering limited liquidity, especially during times of stress.” A smaller BlackRock private credit fund, with $2.2 billion in assets, received redemption requests for 4.5% of shares and will meet all those requests. Other asset managers are taking different approaches. Blackstone Inc.’s private credit fund recently fulfilled 7.9% of tendered shares, partially offset by contributions from the firm and employees. Blue Owl Capital allowed redemptions of about 15% of net assets from a technology-focused fund in January, totaling $527 million. The surge in redemption requests highlights the tension in the private credit market, which has seen rapid growth but limited liquidity. BlackRock’s decision to gate the HPS fund underscores the need for balance between investor access and the stability of long-term lending strategies. As private credit continues to attract capital, firms must carefully manage liquidity to prevent forced asset sales and protect investors in periods of market stress.