Private Credit Funds: Liquidity? More Like "Hold My Bag While I Sell (But Nah)" as AI Crushes Software Loans

Apollo Global Management just put a 5% redemption cap on its Apollo Debt Solutions fund—because when investors tried to yank out ~11.2% of the bag, the fund manager’s like, “Cool, but let’s take it slow, yeah?” This isn’t a one-off: across the $1.8 trillion private credit market, “please stop asking for your money back” is the new “happy holidays.”

BlackRock kicked off the “we see your redemption request, but we see your bag too” trend back in early March, slapping a 5% cap on its $26 billion HPS Corporate Lending Fund after withdrawal pleas hit 9.3% of NAV. Blue Owl didn’t want to be outshone, though—it nixed quarterly redemptions on its retail-focused Blue Owl Capital Corp II fund, replacing them with asset-sale-funded “不定期打钱” (translation: “we’ll send you cash when we can, maybe”).

More folks are begging to hit the “withdraw” button as investors squint at lenders’ massive software company bets—a sector that’s basically taking a L to AI, no cap. Remember when “AI will save the world” was the crypto bro mantra? Now it’s “AI will burn down the software loan portfolio.”

Big banks? They’re over here playing poker with the deck marked. Goldman Sachs and JPMorgan are allegedly letting hedge fund clients short the private credit market—because what says “we trust our own sector” like a prime broker handing you a “bet against us” toolkit? Rich Uncle Pennybags would be proud.

Let’s crunch the numbers like we’re calculating APY on a scam coin—but with more “oh no” than “huge gains.” The default rate hit 9.2% in 2025, the worst on record (congrats, private credit, you just won the “Most Dramatic Crash” award). Fitch’s 12-month default rate is 5.8% and climbing as of Jan 2026—because nothing says “stable” like a slow-mo train to the default station. Morgan Stanley thinks it’ll hit 8%, UBS? They’re the drama kings, forecasting 15%.

To make the party even more fun, Moody’s downgraded FS KKR Capital Corp. from Baa3 to Ba1. The rating agency listed the usual suspects: “asset quality issues,” weaker profits, NAV bleeding, high leverage, and “less senior-friendly assets.” But wait—they did say FSK has “sufficient liquidity” and “well-laddered debt maturities.” Translation: “It’s broke, but it’s got a good vibe.” Classic finance speak, if you know what we mean.

These moves? They’re just the tip of the iceberg for private credit’s stress. Redemption requests are piling up, AI’s crushing the software loans that built this sector, and the cracks are getting wider than a meme coin pump. Whether this is just a “we’ll fix it in Q2” moment or the start of the “we told you so” parade from the bears depends on how fund managers dance between investor liquidity demands and portfolios that are about as liquid as a bag of bagels in a black hole.