Blackstone’s Gray defends the world’s largest private credit fund

Blackstone President John Gray on Tuesday defended the quality of loans within the company’s flagship private credit fund after investors pulled nearly 8% from it last quarter.

The alternative asset management giant said in a late filing on Monday that it has allowed investors to withdraw 7.9% from BCRED, which it calls the world’s largest private credit fund, with an investment of about $82 billion. Blackstone did this in part by allowing the company’s investors to pump $150 million into the fund.

The move sparked heavy selling in Blackstone shares, which fell as much as about 8.5% in morning trading on Tuesday, as well as in other private credit stocks.

“When you think about credit quality, the 400-plus borrowers here, they had 10% EBITDA growth last year,” Gray told CNBC’s David Faber, using a term for a company’s financial performance. “So when we look at this, we feel pretty good.”

Rather than calming markets, recent moves by alternative asset managers to allow investors to cash out of their funds have only heightened concerns about private credit and loans to the software industry. Last month, the storm intensified when Blue Owl said it had found buyers for $1.4 billion worth of its loans, in part to help disburse 30% of its beleaguered credit fund.

Now, with the inroads of larger asset manager Blackstone, concerns about private credit appear to be widening.

“We’ve had a lot of noise,” Gray told CNBC. “As you know better than anyone else in the press, this has become a story.”

The Blackstone executive noted that concerns first began last fall with the collapse of Tricolor and First Brands, two companies that also received financing from banks.

“There’s a constant cycle, so when that happens, it’s not surprising that investors get nervous,” Gray said. “Financial advisors can say, ‘Hey, I want a refund.’”

A Blackstone spokesperson said the company’s and its employees’ investment in BCRED was “about filling 100% of the quarter’s orders confidently and in a timely manner. It underscores our conviction in BCRED and alignment with its investors.”

The fund has achieved annual returns of 9.8% since its inception for Class A shares, the spokesman said.