Senior executives personally invest 1.5 billion to "stabilize military morale": Blackstone faces redemption test, and the $1.8 trillion private credit market launches a trust defense battle.

President of Blackstone Inc., one of the world's largest alternative asset management institutions, Joe Gray revealed that there has been a wave of investor redemptions in the private credit market recently, with assets totaling 1.8 trillion dollars. This has prompted Blackstone Inc. to mobilize senior executives to inject funds to strengthen the flagship fund. Gray stated that this unconventional strategy emphasizes to nervous investors that company employees are confident in Blackstone's private credit funds and are willing to stand with them despite personal financial risks. Like competitors Apollo Global Management Inc. and Blue Owl Capital, Blackstone Inc. is also facing an increase in investor withdrawal requests. According to sources, in March, more than 25 employees of the company invested about 1.5 billion dollars in Blackstone funds. Gray revealed in an interview, "The key here is that you are in the investment business, which is fundamentally a trust business. When there is a lot of noise outside, and people are discussing, there is nothing more convincing than putting in money and saying 'Hey, look, my interests are aligned with yours'." Redemption tidal wave hits industry giants After experiencing explosive growth for several years, the private credit market is facing its most severe "stress test" in history. This 2.1 trillion dollar market, once seen as a safe haven, is currently in the center of a triple vortex of liquidity tightening, rising default rates, and valuation questioning. Private credit default rates rise Private credit has long attracted investors seeking high returns with its "illiquidity premium." However, as market volatility intensified from the end of 2025 to early 2026, this illiquidity is turning into a liquidity crisis. The iconic event of this liquidity crisis began in February 2026 when the U.S. alternative asset management company Blue Owl Capital announced permanent redemption restrictions on one of its private credit funds with a size of 1.6 billion dollars, where investors couldn't exit actively and could only wait for the fund to gradually unwind. Subsequently, a series of dominoes fell: Blackstone's flagship fund BCRED, with 820 billion dollars under management, in the first quarter received redemption requests totaling 7.9% of net assets, far exceeding the 5% quarterly limit. The company had to break the rules and raise the limit to 7% and inject about 400 million dollars of own funds with employees to meet redemption demands. BlackRock, Inc.'s HPS corporate credit fund of 260 billion dollars also reached the limit for the first time, facing a 9.3% redemption request, but only paid out 5%. According to Bank of America Securities, redemption requests in the second quarter may further increase, with some fund redemption ratios potentially reaching 15% to 53%. Mismatched liquidity The core of the private credit crisis lies in severe term mismatch. The underlying assets of these funds are typically non-liquid corporate loans with 3 to 7-year terms, but the product design promises quarterly redemptions to investors, creating an illusion of "semi-liquidity." When the market sentiment is stable, scattered redemptions can be covered by new fundraising; once panic spreads, investors collectively rush for exits, turning the redemption mechanism from a buffer to a barrier. In the first quarter, funds managing about 300 billion dollars in assets paid out slightly more than half of redemption requests, leaving many investors forced to wait for the next redemption window. AI disruption and deteriorating asset quality Behind the run on funding is the rapid deterioration of asset quality. The software industry is the biggest risk exposure in private credit, accounting for more than 40%, but the surge in artificial intelligence is shaking up the business models of SaaS companies. The automation ability of AI near-zero marginal costs is compressing the value of traditional software tools, weakening companies' high margins and renewal capabilities. Morgan Stanley warns that in this scenario, private credit default rates may rise to around 8%. At the same time, to conceal cash flow pressures, more and more borrowing companies are choosing PIK (payment-in-kind) mechanisms, where interest is rolled into principal and deferred payment, the accumulation of these "paper profits" often heralds an impending wave of defaults. Facing the escalating risks, Wall Street has begun to use tools such as credit default swaps (CDS) to hedge against private credit pricing risks, and the Federal Reserve, Treasury Department, and Financial Stability Board (FSB) have also intervened. The Federal Reserve admitted net redemptions in the first quarter in its financial stability report last Friday, but considered the scale to be "manageable," while warning that continued outflows could threaten the credit availability of high-risk borrowers. The report pointed out that continued redemptions combined with negative market sentiment could lead to pressures on credit supply for some borrowers, especially those with relatively weaker credit ratings. This statement marks a further escalation of regulators' concerns about potential spillover effects in the market. At the same time, surveys show that market participants' concern about the risks of private credit has significantly increased compared to the last survey, with GEO Group Inc. political tensions and AI-related risks also ranking among the top concerns of respondents. Although most viewpoints believe that the risk of private credit is currently limited to the industry level, the probability of evolving into a systemic financial crisis is low. This crisis has shattered the fantasy of the market that this asset class is a guaranteed profit. Just as Jamie Dimon, CEO of JPMorgan Chase, warned last year - when you see one "cockroach," there are usually more nearby. Can Blackstone save itself by own contribution? Gray mobilized 25 core executives to collectively contribute about 1.5 billion dollars to the flagship private credit fund of Blackstone, BCRED. This amount of money might be a drop in the bucket for the vast management scale of Blackstone, but in the current environment where confidence is more valuable than gold, its symbolic significance far outweighs its financial value. Can this action temporarily reassure the market? The answer is yes, but it is more like a strong "painkiller" rather than a "cure." Finance is fundamentally a business of trust. When investors are exiting due to fear, the executives' funding action sends a core signal: "Skin in the Game." Gray's move is telling anxious LPs: if this ship is about to sink, we helmsmen will be the first to drown. This kind of "pledge" can effectively hedge against irrational panic caused by information asymmetry and buy Blackstone a valuable buffer period to deal with liquidity issues. However, calm investors will see that 1.5 billion dollars compared to the redemption pressure faced by BCRED, it seems weak. When redemption requests reach the 5% limit of total assets, or even involve a gap of several billion dollars, executives' own funds cannot fundamentally alleviate liquidity tightening. This "self-rescue" is more like a carefully orchestrated PR show, aimed at glossing over the asset side pressure caused by the interest rate hike cycles. In the short term, Blackstone successfully distinguishes itself from competitors through this action, demonstrating leadership responsibility and confidence as an industry leader, which can indeed temporarily reassure retail and some institutional investors. However, in the long run, the "trouble" of private credit stems from structural challenges in the macroeconomy. If default rates of underlying assets continue to rise, it may be difficult to bridge the trust gap in the market with just the executives' personal wallets. In LingUIstics: Monolingual translation from Chinese to English.