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Banks · Liquidity · Private Credit · Redemptions
Private credit funds face significant pressure as individual investors withdrew over $11 billion from business-development companies (BDCs) in the past two quarters, while fundraising cooled, creating an opening for Wall Street banks to reclaim market share in leveraged finance.
This shift in the market debate from returns to redemption mechanics highlights liquidity concerns. Investment-banking firm Robert A. Stanger's data shows funds raised $12.4 billion in new capital in the five months through February, but inflows slowed.
Many funds have quarterly withdrawal limits, typically 5% of the fund, as reported by the Wall Street Journal, and some limited first-quarter withdrawals when requests exceeded these caps. Mark Zandi, chief economist at Moody’s, states this is an opportune time for banks to regain market share, citing declining interest rates, loosening bank regulations, and private credit lenders' struggles from aggressive past lending.
PitchBook data indicates banks' share of buyout financings above $1 billion fell to 39% in 2023 before recovering to over 50% in 2025. Shannon Saccocia, chief investment officer at Neuberger Berman, attributes banks' potential comeback to anticipated deregulation from the Trump administration, specifically a weakening of Basel III Endgame implementation.
Despite banks becoming more competitive, private credit retains structural advantages like speed, certainty of execution, and flexible deal terms. UBS notes that while private credit still offers attractive yields and diversification for long-term investors, selectivity is crucial, recommending a bias towards senior, sponsor-backed, upper-middle-market loans in non-cyclical sectors due to concerns about AI disruption, higher energy prices, and geopolitical developments.
