Yesterday I told you about the $7 trillion AI data center bet Wall Street is making with your retirement money. Today I want to tell you what’s happening to the people who tried to get their money back.
They can’t.
Over the past few weeks, some of the biggest names in finance have been quietly locking the exits. Investors who put money into private credit funds are finding out that “semi-liquid” was really just a polite word for “we’ll let you out when we feel like it.”
A Yale Law professor who studies financial markets called it a “slow-motion bank run.” Her words, not mine. And she’s not wrong.
The Numbers Are Ugly
At Blue Owl, investors asked to pull 21.9% of their money in the first quarter. At Ares, 11.6%. At Apollo, 11.2%. At Blackstone, nearly 8%. At Carlyle, 15.7%.
These aren’t small funds run by nobody. These are some of the most powerful firms on Wall Street. Combined, the private credit industry manages around $3 trillion.
And here’s the part that should make you pay attention: when investors asked for their money, these firms said no. Or more accurately, they said “you can have 5%.”
Carlyle honored 5% of its 15.7% in requests. BlackRock did the same after investors tried to pull $1.57 billion. Across the industry, more than $4.6 billion in investor money is currently sitting behind locked gates.
Why Everyone Wants Out at the Same Time
The trigger is software companies. Private credit funds lent heavily to software firms over the past several years, betting that their recurring subscription revenue made them safe borrowers. For a while, it worked.
Then AI started eating into those business models. Suddenly, the companies that were supposed to be safe borrowers didn’t look so safe anymore. The Wall Street Journal found that the biggest funds had been understating their exposure to software loans by as much as 46%.
Wall Street has a name for this. They’re calling it the “SaaSpocalypse.” SaaS stands for software-as-a-service. The pocalypse part, I think you can figure out.
The Bear Stearns Comparison
When Blackstone’s president was asked on CNBC why his investors were heading for the exits, he blamed “noise.” Just a disjointed environment, he said. Underlying portfolios are fine.
That Yale Law professor had a sharp response. She pointed out that in March 2008, the CEO of Bear Stearns went on the same network and insisted his company’s balance sheet was solid. Bear Stearns failed days later.
She’s not saying these firms are about to collapse. Neither am I. But the pattern is familiar: executives reassuring the public while investors rush for the door. When that starts happening at this scale, you pay attention.
What This Means for Regular Investors
Most of you probably aren’t invested directly in a Carlyle or Blue Owl private credit fund. But the ripple effects matter.
Private credit is now a $3 trillion market. It’s woven into pension funds, insurance company portfolios, and endowments. When $4.6 billion gets locked behind gates and redemptions spike 217% in a single quarter, the stress doesn’t stay contained. It shows up in bond markets, in credit spreads, and eventually in the returns on your own portfolio.
And the bigger issue is transparency. These funds don’t trade on exchanges. They don’t mark their holdings to market the way public funds do. One investigation found that some funds were only reporting a fraction of a percent discount on loans to companies that had been hacked, sued, and gutted by layoffs.
If the math is that creative on the way up, imagine what it looks like on the way down.
What to Watch
I’m not telling you to panic. But I am telling you to watch this space. Here’s what I’m tracking:
Keep an eye on whether redemption caps get extended past Q1. If these firms are still gating investors in Q2, that tells you this isn’t just “noise.”
Watch credit spreads on leveraged loans. If they start widening meaningfully, the stress has moved from private to public markets.
And if you own any private credit or alternative income funds in your portfolio, read the fine print on liquidity. Know what your actual exit options are before you need them.
Yesterday it was your 401(k). Today it’s locked gates and slow-motion bank runs. I’d rather tell you about this stuff now than after the fact.
— Tom
