(Bloomberg) -- Private credit funds already under strain from heavy redemptions have a new pain point: losses in February are shaping up as the worst in more than three years.
Two of the biggest retail-focused funds from Blue Owl Capital Inc. and BlackRock Inc.’s HPS Investment Partners joined peers in reporting negative returns for the month.
Blue Owl Credit Income Corp., a non-traded business development company, lost 0.86% in February, according to Bloomberg calculations based on regulatory filings. The $26 billion HPS Corporate Lending Fund was down 0.3% for the month, according to its website. For both funds, the losses were the worst since 2022, which tracks with the leveraged loan market’s steepest monthly decline since that year.
In spite of their relatively poor showing in February, the funds are posting divergent results for the year so far. The $35 billion Blue Owl fund is having its worst start to a year since it began investing in 2021, with a loss of about 0.75%. The HPS fund is rare among major peers to still show a positive performance in 2026, with a 0.51% return. Apollo Debt Solutions is also up for the year, with a 0.39% gain.
Representatives for Blue Owl, BlackRock and Apollo declined to comment.
The negative returns come as investors rush to pull their money from funds aimed at retail buyers on concerns over loan quality and exposure to software businesses threatened by artificial intelligence.
Asset managers in the $1.8 trillion market continue to differ in how they have dealt with the withdrawal requests, with some going to unusual lengths to pay out more than 5%, while others have stuck to their limit.
Investors asked to redeem — and were paid out — 5.2% of the shares in the Blue Owl fund last quarter. The tender offer for the current quarter closes next week.
The February losses from the Blue Owl and HPS funds followed similar performance declines from funds managed by Blackstone Inc. and Ares Management Corp.
“When private credit funds position themselves more defensively and buy more investments in the broadly syndicated market, that can cause returns to drop a bit” since those loans are lower-returning investments, said Jeffrey Griffiths, global head of private credit at Campbell Lutyens.
The biggest funds are still outperforming the leveraged loan market, which has delivered returns of -0.82% in February and -1.08% for the year through February, according to the S&P UBS Leveraged Loan Index.
While the benchmark staged a recovery in March, with returns at 0.69% for the month so far, the funds may “continue to face some downward pressure” on shareholder distributions, said Corry Short, a strategist at Barclays.