Private Markets Community

BDCs have become a mainstream vehicle for private credit exposure - but 2025-2026 is testing the model hard. Redemptions surged to 4.8% in Q4 2025, dangerously close to the standard 5% quarterly gate. Now the gates are actually being triggered: Blue Owl restructured OBDC II so that shareholders can no longer request redemptions, effectively converting it into a drawdown vehicle. BlackRock's HPS Corporate Lending Fund also limited redemptions after requests exceeded its usual threshold by more than 4 percentage points. Blue Owl also faces a shareholder lawsuit alleging executives made misleading statements about redemption pressures while investors were quietly pulling capital.

Add to this rising PIK income, fading floating-rate tailwinds, and public BDCs now trading at a median 20%+ discount to NAV - and the structural cracks are hard to ignore.

Worth debating: Are redemption gates a prudent structural safeguard - or a sign that the semi-liquid BDC promise was oversold to retail investors? With major managers restricting exits, how should practitioners reassess liquidity risk premiums in private credit allocations? And is manager selection now the dominant risk factor - what due diligence frameworks actually differentiate quality platforms?

What's your read - a temporary stress episode, or a structural reckoning for the BDC model?

I won't answer your question directly - but would add that we've been in a credit market bull run for 18 years (with some blips along the way). If the cycle is turning, which GPs have good workout expertise?
Also, there is no industry standard documentation on these vehicles - policies on how to gate, value, sell assets etc all vary. None of which is tested...until it is.