Sentiment remains sour on private credit.

That's apparent from the first reports on redemption requests at non-trading credit funds this September quarter. Blackstone and Cliffwater said that they will be limiting redemptions to 5% of overall shares in the large funds they run after receiving exit requests for much larger amounts.

In a Thursday morning letter to investors, the $77 billion Blackstone Private Credit Fund-popularly known as BCRED-revealed that it got redemption requests this quarter that amounted to about 10% of its shares outstanding. That would have amounted to $4.3 billion of equity, or net asset value, at the fund, which leverages the loan assets it can hold by borrowing money.

Like other nontraded credit funds, BCRED's charter allows it to refuse requests above 5%, in any particular period. The Blackstone fund said it had more than enough liquidity to cover the 5% of shares it will redeem. Many large funds have had to gate their exits this year, as more than 5% of shares sought to cash out in a cooling of last year's enthusiasm for private credit.

That cooling has made publicly traded credit funds a cheaper and higher-yielding alternative to nontraded funds like BCRED. Some investors also worry about the industry's considerable loans to software companies, whose businesses may be threatened by the increasingly powerful new tools of artificial intelligence.

Blackstone's letter said that cash flow profits at its software borrowers is growing even faster than the 10% annual rate of BCRED's average corporate borrower. Since the year began, the fund has reduced its level of loans that are behind in their interest payments, as well as the loans that allow noncash payments-in-kind. Its distributions amount to an annual yield of 9.1%.

"Fundamentals have remained healthy this quarter," said the Blackstone letter. "We continue to see opportunities across thematic areas including AI and digital infrastructure, infrastructure services, aerospace and defense, and life science."

Also on Thursday, Bloomberg reported that Cliffwater's flagship Cliffwater Corporate Lending Fund told investors that it will limit redemptions to 5% of its shares-after investors asked to redeem some 16% worth.

The $31 billion Cliffwater fund is an interval fund, which invests much of its money in other funds that make direct loans. Investors in the fund sought to cash out 17% of all shares in the June quarter and 14% in the March quarter.

Since June, equity investors have greatly lifted the shares of private credit managers like Ares Management and Blue Owl Capital. It will be interesting to see how investors in their nontraded funds are feeling when those firms report their September quarter redemption requests in the next month.