Singapore’s wealthy reassess private credit exposure after US funds trigger redemption curbs

[SINGAPORE] Accredited investors in Singapore are reassessing their exposure to evergreen private credit funds after a wave of redemption requests at major US managers triggered “gating” mechanisms, limiting withdrawals.

“Some investors, especially those less experienced, might view liquidity provisions as guaranteed rights, overlooking redemption limits such as gating,” said Paul Pak, Asia-Pacific asset and wealth management leader, PwC Singapore.

Gating allows fund managers to cap the amount that investors can withdraw during periods of heavy redemptions to preserve the fund.

Private credit managers such as Blue Owl, BlackRock, Blackstone, Cliffwater, Apollo Global Management and, more recently, Ares Management have faced elevated redemption requests. As outflows exceeded limits, several managers activated gating mechanisms, capping investor withdrawals.

Many of these funds are distributed to accredited investors in Singapore through digital wealth platforms and private banks offering evergreen private credit products.

Liquidity mismatch exposed as access widens

Recent redemption pressures have been driven by concerns over private credit managers’ exposure to software companies facing disruption from artificial intelligence.

While evergreen private credit funds were sold as semi-liquid, commonly with a quarterly redemption option, the underlying assets are illiquid, with capital locked into direct loans over fixed terms. This creates a structural liquidity mismatch.

“When you buy illiquids, you need to be very much aware of the liquidity profile,” said Peter Branner, chief investment officer of Aberdeen, flagging concerns around investor protection.

This liquidity mismatch becomes more visible during periods of stress. When redemption requests surge, funds may impose gates to avoid a fire sale of assets.

Most evergreen funds cap redemptions at up to 5 per cent of net asset value per quarter, meaning investors caught in a gating event may have to wait several quarters to fully exit.

Meanwhile, private credit, once the exclusive domain of institutional investors, has become increasingly accessible to accredited investors in Singapore.

Digital wealth platforms and private banks have broadened distribution through evergreen fund structures, with minimum investment sizes going as low as US$25,000.

“The appeal lies in attractively high levels of yield along with a stable risk-return profile, as these are traits not commonly found in public credit,” said Hugh Chung, CIO of Endowus.

However, recent events have exposed gaps in investor understanding, particularly in their understanding of the semi-liquid products they hold.

David Ng, chief executive officer and co-founder of digital wealth advisory Arki Finance, has observed an increase in client inquiries for advice on private credit in the past months, particularly around redemption mechanics and portfolio quality and suitability.

“I would describe the mood as more selective rather than broadly negative. Many investors understand the yield opportunity, but not everyone fully appreciates that evergreen does not mean fully liquid,” said Ng.

“Investors still see the appeal of private credit, but they are paying much closer attention to how these products are built and how liquidity works in practice.”

As redemption pressures intensify, the burden of responsibility is shifting to distributors – including digital wealth platforms and private banks – to bridge the gap between product complexity and investor expectations.

Endowus’ Chung said investor education needs to start before capital is deployed, with ongoing communication even more important amid recent developments.

“While private market fund structures may allow for periodic liquidity, the key message we present to clients is that the underlying asset class is inherently illiquid,” he added.

Jason Ng, alternatives specialist for Asia and the Middle East at Julius Baer, concurred, observing that private wealth clients are increasingly participating in open-ended evergreen funds, which operate differently from the more familiar daily-liquid mutual funds, or the traditional 10-year closed-ended private equity fund.

He added that all market participants share the responsibility to ensure clients clearly understand how redemption gates work and why they exist, not just when the funds actually gate but at the point of investment.

It is also their role to “ensure that redemption decisions are based on facts, not short-term market sentiment shaped by emotion”, he noted.

Scrutiny rising, but investors still hold

Despite the turbulence, most investors have held their ground, suggesting that reassessment does not necessarily translate into immediate exits.

“The vast majority of investors, between 85 per cent and 95 per cent, have retained their positions,” Ng said.

He added that instances where funds processed redemptions above standard limits – such as more than 5 per cent of net asset value – in both the fourth quarter of 2025 and first quarter of 2026 should be seen as “exceptions rather than the norm”.

In his view, current concerns over credit quality “appear overstated”, with part of the redemption activity reflecting behavioural responses rather than fundamentals.

“A portion of investors simply do not want to be the ‘last one left holding the bag’,” Ng observed. “In periods of heightened redemptions, decisions can become driven more by a desire to exit before gates are activated, rather than by a shift in fundamentals or changes in credit outlook.”

Looking ahead, PWC’s Pak believes that semi-liquid private credit funds are likely to remain a core part of private wealth portfolios, but with clearer segmentation of liquidity profiles and tighter suitability criteria.

Advancements in valuation technology and the growth of secondary markets could further enhance liquidity management within this asset class, Pak added.

“Ultimately, investor sophistication, robust governance, and prudent fund structuring are critical to preserving trust and ensuring the long-term sustainability of semi-liquid private credit funds,” he said.