Apollo, Ares Cap Redemptions in Private Credit

Lead

On March 24, 2026 Bloomberg reported that leading alternative credit managers including Apollo Global Management and Ares Management have moved to cap redemptions from certain private credit funds, triggering scrutiny of liquidity structures across the private debt sector. The firms’ actions—reported on Bloomberg Open Interest—represent a discrete but significant response to elevated redemption pressures in closed-ended strategies offering periodic liquidity. Private credit has materially expanded over the last decade, and these caps expose a governance and liquidity mismatch between investor expectations for periodic withdrawals and the underlying long-duration, illiquid loan and covenant-lite exposure. Market participants are treating the announcement as a signal that liquidity management tools typically seen in public funds could be deployed more frequently in private markets. This note synthesizes the available data, compares current measures to historical precedents, and assesses potential implications for institutional allocators and secondary markets.

Context

Bloomberg’s video report on March 24, 2026 is the proximate trigger for renewed attention to liquidity in private credit; the piece identifies Apollo and Ares among managers restricting redemptions but notes firm-level disclosures remain limited. Private credit has been one of the fastest-growing segments of private markets since 2015; according to Preqin, global private debt AUM surpassed roughly $1.0 trillion by 2023, underscoring the scale of assets managed in strategies that blend illiquid loan exposures with periodic withdrawal terms (Preqin, 2023). These structures were designed to satisfy demand for income and yield, but they also introduce a structural mismatch: investors often expect shorter-notice redemptions while the underlying loans have contractual maturities that can exceed three to five years.

The move by large managers to impose caps is not unprecedented, but it is notable because it occurred for high-profile groups that collectively manage hundreds of billions across alternatives. Bloomberg’s coverage—sourced March 24, 2026—places the development within a broader market context of tighter liquidity and rising mark-to-market sensitivity that began to intensify in 2024–25. Importantly, the caps reported so far appear to be temporary and targeted, rather than universal suspensions; managers have framed them as calibration tools to protect remaining investors and preserve orderly portfolio dispositions.

Institutional investors already face an evolving due diligence burden. Limited partners need to reconcile fund liquidity terms with redemption behavior and an allocator’s policy horizon; a mismatch can produce realized losses or forced secondary sales at discounts. Compliance and governance teams should revisit redemption schedules, gating provisions, and side letters, and ensure that valuation policies explicitly account for periods where portfolio loans have limited immediate marketability.

Data Deep Dive

The Bloomberg report (Mar 24, 2026) provides the immediate datapoint: several managers instituted caps on redemptions in specific private credit vehicles. Beyond that headline, three numerical anchors frame the issue: first, Preqin’s estimate that private debt exceeded $1.0 trillion in assets under management by 2023; second, industry surveys from 2024–25 showing that a typical direct lending loan has a contractual tenor of three to seven years, creating a duration mismatch with monthly or quarterly redemption features (Preqin; participant surveys, 2024–25); and third, secondary market evidence that privately originated loans have traded at discounts averaging mid-single digits to low-double digits in stressed windows—indicative of price discovery when liquidity is constrained (secondary market reports, 2022–25).

Comparatively, the current response is more surgical than the broad fund freezes and mutual fund liquidity events seen in 2008–09. During the global financial crisis, several pooled vehicles across asset classes used gates and suspensions; the quantitative scale then involved public mutual funds and bank runs with redemption rates that in many cases exceeded 10%–20% within weeks (SEC, 2008). Today’s caps—applied by private credit managers with discretion—appear calibrated to avert forced sales while maintaining continuity for longer‑term investors, and they are being communicated with more targeted disclosure to LPs.

From a pricing perspective, middle-market private loans typically lack continuous mark-to-market pricing and instead rely on quarterly valuations based on models and recent transaction evidence. When redemptions accelerate, managers face a binary choice: (1) hold to maturity and apply redemption limits or (2) sell into a thin secondary market and crystallize discounts. The reported caps therefore represent an attempt to preserve NAV for longer-term holders while avoiding material forced liquidation. Institutional allocators should note that the NAVs reported in funds with gated liquidity may become less informative about short-run realizable value.

Sector Implications

For fund managers and investors, the immediate implication is a recalibration of liquidity risk premiums. Private credit has been marketed on stable yield generation, with managers highlighting contractual covenants, senior secured structures, and floating-rate features as protective. However, covenant-lite issuance and weaker documentation in portions of the market over recent years have increased exposure to credit deterioration and reduced resale value. If redemption caps become more prevalent, expected returns will need to be assessed net of liquidity premia that investors will demand when committing capital to funds that can constrain withdrawals.

Secondary markets for private loans and private fund interests will likely activate. Existing secondary platforms are positioned to intermediate liquidity but will demand discounts and fees that reflect immediate disposition risk; sellers should expect bid/ask spreads to widen. For institutional portfolios with rebalancing targets, managers may need to rely more heavily on private secondary pricing and market-implied discounts when aggregating portfolio-level liquidity estimates.

Benchmarking and peer comparisons will take on new importance. Allocators will compare funds not only on gross/ net IRR and default metrics but also on realized liquidity outcomes—how often funds impose gates, the duration of caps, and the historical frequency of side‑pocketing or other emergency measures. Firms that communicate transparent, pre-specified liquidity management policies and demonstrate conservative leverage practices will attract a relative valuation advantage in fundraising rounds that follow these events.

Risk Assessment

Short-term market risk centers on confidence transmission: redemption caps at marquee managers could prompt re-pricing across private credit strategies, narrower liquidity provision in secondaries, and reallocation pressures in multi-asset portfolios. If a significant percentage of funds were to implement similar measures, institutional liquidity buffers—pools of cash or liquid short-duration instruments earmarked for redemptions—would be stressed and could necessitate tactical reallocations away from private credit to public fixed income or cash. Scenario analysis should include a stressed redemption shock (e.g., 5%–10% monthly redemptions) versus a baseline steady-state run-rate, with sensitivity to assumed secondary market discounts of 5%–15%.

Operational risk is also important. Implementing caps requires accurate and timely investor communications, robust fund accounting, and governance documentation that align with LP agreements. Poorly executed caps or asymmetrical application across investor classes can produce investor litigation and reputational damage, which further impairs fundraising. Compliance teams should verify that redemption policies are enforceable under existing fund documents and that side letters do not create preferential treatment that becomes unsustainable under stress.

Macro risk drivers include rate volatility and economic slowdown. If interest rate volatility increases and default rates rise across leveraged loan pools, the expected impairment and the depth of secondary market demand will both increase, exacerbating liquidity shortfalls. Conversely, if economic data stabilizes and credit spreads compress, pressures may ease and caps can be lifted with minimal asset realizations. Active scenario-based forecasting will be essential for trustees and CIOs overseeing allocations to private credit strategies.

Fazen Capital Perspective

Fazen Capital views the reported redemption caps as a structural stress‑test revealing latent liquidity mismatch rather than an outright systemic failure. The contrarian implication is that tighter liquidity management, transparently applied, can be accretive to long-term returns for remaining investors by preventing fire sales; however, it also permanently raises the required liquidity premium for new inflows. Institutional investors should not reflexively de-risk from the private credit asset class; instead, they should demand standardized disclosure of liquidity frameworks, quarterly stress-test results, and historical instances where gates or caps were used.

In practice, allocators that adopt a stewardship mindset—insisting on pre-agreed contingency mechanics and pro rata treatments—will be better positioned to manage both realized and perceived liquidity risk. Fazen Capital recommends three practical steps: 1) require managers to provide modeled redemption shock scenarios and secondary market bids on a quarterly basis, 2) re-price expected private credit allocations to incorporate a liquidity haircut (we model a 5%–10% immediate liquidity haircut in stressed conditions), and 3) develop cross-portfolio liquidity cushions tied to private credit exposure rather than absolute portfolio cash targets. These steps are consistent with our broader view that private markets will increasingly adopt public-market style transparency practices as they mature—see our broader work on private markets transparency and liquidity management topic.

For allocators considering re-entry or increased exposure, the opportunity set may broaden if managers demonstrating disciplined underwriting and conservative leverage attract cheaper capital. A well-structured secondary transaction can be an efficient means to rebalance exposures, and platforms facilitating deal-by-deal liquidity will play a larger role. We discuss practical secondary-deal frameworks and valuation governance in our institutional notes topic.

FAQ

Q: How common are redemption caps in private credit historically?

A: Historically, gates and caps were more frequently observed during extreme stress events—for example during the 2008–09 crisis across various pooled vehicles. In private credit specifically, formal caps have been rare outside idiosyncratic fund restructurings; the recent moves in March 2026 are notable because they involve large, diversified managers and multiple vehicles. The frequency going forward will depend on macroeconomic stress and fundraising dynamics.

Q: What are the practical implications for an institutional allocator with a 5% portfolio target to private credit?

A: Practically, allocators should re-run liquidity stress-tests with redemption shock assumptions and include an expected secondary-market haircut; we suggest modeling a near-term liquidity haircut in the range of 5%–10% under stress and revisiting asset allocation policy limits. Where possible, negotiate liquidity-safe side letters or staggered liquidity windows to align commitments with tactical cash flow needs.

Q: Will redemption caps increase returns for remaining investors?

A: Caps can prevent forced sales and preserve NAV, which in some cases protects remaining investors from crystallizing losses. However, caps also increase illiquidity and may raise the yield investors demand going forward. The net effect on returns depends on realization outcomes, secondary market pricing, and the length of the cap period.

Bottom Line

Bloomberg’s March 24, 2026 report that Apollo and Ares have capped redemptions crystallizes a latent structural risk in private credit: robust yield has been paired with imperfect liquidity alignment. Institutional allocators should urgently recalibrate liquidity stress-testing, demand standardized disclosure of contingency mechanisms, and treat recent caps as a governance signal rather than an isolated event.

Disclaimer: This article is for informational purposes only and does not constitute investment advice.