Barings' private credit fund limits withdrawals after redemption requests surge

April 6 (Reuters) - A private credit fund managed by Barings capped withdrawals at 5% of shares after a surge in redemption requests, the latest in a series of similar moves by asset managers in recent months.

Investors in the Barings Private Credit Corp fund sought to pull 11.3% of shares in the first quarter, according to a regulatory filing on Monday. The fund will fulfill roughly 44.3% of the repurchase requests from each shareholder.

Private credit funds have faced high redemption requests as jittery retail investors bolt for the door amid concerns over transparency, valuations and artificial intelligence-related disruption.

Majority of the asset managers, including Apollo Global APO.N, Blue Owl OWL.N, Ares Management ARES.N and BlackRock BLK.N, capped withdrawals at 5% in the first quarter as private credit funds face their ​first litmus test.

The saga is reminiscent of the redemption requests wave that hit non-traded real estate investment trusts beginning in late 2022, when valuation jitters had unnerved investors.

Non-traded funds, like Barings Private Credit, offer quarterly liquidity to investors through tender offers typically of up to 5% of shares. They usually invest in illiquid loans that are hard to sell.

Such investment vehicles tracked by investment bank Robert A. Stanger have returned a record-breaking $7.4 billion to investors in the first quarter as of April 2.

Some market participants say periods of high redemption are a feature of such semi-liquid vehicles, rather than a flaw.

"As market conditions evolve, we expect differences in performance across managers to become more pronounced given that long-term results are driven in part by the importance of underwriting quality, portfolio construction, and balance sheet management," Barings Private Credit said in a shareholder letter.

Analysts have backed the caps on withdrawals as it reduces the risk of large cash drawdowns or forced ⁠asset sales.