The $265 billion private credit meltdown: How Wall Street's hottest investment craze turned into a panic | Fortune

"From early summer 2023 to the close of January 2025, private equity stocks staged what may rank as the single biggest surge, over a tight time frame, in the annals of financial services. In that eighteen month span, Blackstone notched total returns 58.2%, Ares, Apollo, and Blue Owl achieved 68.1%, 77.9%, and 80.6% respectively, and KKR led the charge at 103.4%."

"The wipeout has erased over $265 billion in market cap; Blackstone and Blue Owl are now trading far below their levels of late 2021, and the sudden drop left KKR, Apollo and Ares showing puny, market-trailing gains over that near half-decade."

"The problem is that the regular folk drawn to these funds high yields, in many cases, are proving far less patient than the super-long term holders that are the traditional pillars of private credit. Now enough of those newcomers are seeking large redemptions that it's causing major distress at the PE world's biggest and most profitable funds."

"It resembles a run on a bank. The PE business has suffered from overpaying for its buyout picks in the period of ultra-low interest rates, a problem that's forcing them to hold their portfolio companies for extended periods, and curtailed profits when they're sold."

Private equity firms experienced exceptional stock performance between summer 2023 and January 2025, with KKR leading at 103.4% returns and others achieving 58-80% gains. However, a severe market correction beginning in September 2024 reversed these gains dramatically, with stocks declining 41-67% from peaks. The collapse stems from multiple factors: overpayment for acquisitions during low-interest periods, extended holding periods reducing profits, and panic in private debt funds. Growth in private debt initially offset traditional business weakness, but retail investors newly attracted to high yields are now demanding large redemptions, creating bank-run-like conditions. These redemption pressures are causing significant distress at major private equity firms.

Read at Fortune