Redemption gates in private credit: stress signal or protective feature?

TO INVESTORS, particularly in Asia, investments that offer three things are compelling: a strong sponsor, high returns and liquidity.

Until recently, private credit appeared to possess those attributes in spades, with a historical return of 8 to 10 per cent, and managed by blue-chip firms. Evergreen funds which typically allow quarterly redemptions are a solution to a traditionally illiquid asset class.

But now the surge in redemptions from private credit funds, downward revaluations of portfolio assets, and gating appear to threaten the viability of the asset class, especially for the private wealth market.