Leading global alternative asset manager, Carlyle Group (NASDAQ: CG), has capped withdrawals from its flagship private credit interval fund after investors sought to redeem more than three times the vehicle’s quarterly limit, underscoring mounting pressure across a rapidly expanding but increasingly scrutinised asset class.
In a shareholder letter reported by Reuters and Bloomberg, the $7 billion Carlyle Tactical Private Credit Fund (CTAC) said repurchase requests reached 15.7% of outstanding shares in the first quarter, well above its standard 5% redemption cap.
The fund fulfilled only the capped amount, meaning investors seeking to withdraw an estimated $750 million received roughly $240 million based on its last reported net asset value.
The surge in redemption requests highlights growing investor unease about liquidity, valuations and credit quality in private credit markets, which have swelled into a multi-trillion-dollar sector offering loans outside traditional banking channels.
Semi-liquid funds such as CTAC provide periodic redemption windows but restrict withdrawals, creating potential mismatches between investor demand for liquidity and the underlying assets, which are rarely traded.
Carlyle told investors that the “recent market volatility has led to increased repurchase activity across private credit funds”, echoing a broader trend.
Asset managers, including Morgan Stanley, BlackRock and Apollo Global Management, have also imposed redemption limits in recent weeks.
Investor concerns have been amplified by questions about how borrowers - particularly software companies - will perform amid disruption from artificial intelligence and higher interest rates.
The sector is a major lender to technology firms, and fears that AI could compress earnings have raised doubts about debt servicing capacity.
While these concerns have contributed to a broader sell-off in listed alternative asset managers, Carlyle sought to reassure investors about the resilience of its portfolio.
A spokesperson said the fund holds about 950 positions, with no single credit exceeding 1.5% of assets.
Direct lending accounts for roughly 40% of the portfolio, while software exposure is about 12%, and the firm reported no defaults on software loans over the past five years.
The fund’s assets under management have risen 15% year-on-year, it added.
The firm also emphasised that the interval fund structure is designed to manage liquidity and avoid forced asset sales during periods of stress - an issue that has come into focus as redemption requests climb.
Unlike business development companies, which can choose whether to honour redemptions, interval funds are required to offer periodic liquidity but can limit the amount repurchased.
The pressure on CTAC reflects wider strains in private credit, where rising borrowing costs, valuation uncertainties and tighter liquidity are testing a model that has grown rapidly since the global financial crisis.
Elevated redemption requests across funds this year have prompted rating agencies to reassess the outlook for parts of the sector.
Carlyle, which manages $476.9 billion across private equity, credit and investment solutions, remains one of the largest players in alternative assets.
However, the spike in withdrawal requests at its flagship credit fund signals a shift in investor sentiment that could challenge fundraising and performance across the industry if market volatility persists.
