Wall Street Lunch: Private Credit Funds Face $10B Investor Exit Wave

Listen below or on the go on Apple Podcasts and Spotify

Private credit funds limit withdrawals after wealthy investors seek $10B. (0:15) Alibaba prepares enterprise AI agents launch. (1:38) Record number of companies mention AI on earnings calls. (2:09)

This is an abridged transcript of the podcast:

Our top story so far, wealthy investors sought to pull more than $10B from some of the largest private credit funds in the first quarter, forcing managers to limit redemptions and threatening one of Wall Street’s fastest-growing businesses.

The FT reports that funds run by Blackstone (BX), BlackRock (BLK), Cliffwater, Morgan Stanley (MS) and Monroe Capital agreed to honor roughly 70% of the $10.1B in redemption requests received so far.

More withdrawals are expected in coming weeks as Ares (ARES), Apollo (APO), Blue Owl (OWL), Oaktree and Goldman Sachs (GS) tally their figures.

Retail credit funds ballooned from $34B at the end of 2021 to $222B by the end of last year, according to Goldman Sachs. That growth has now reversed, and Goldman expects the sector could shrink by $45B to $70B over the next two years.

Morningstar analyst Jack Shannon put it bluntly: “They will chase performance. They will leave the moment they sense danger.”

CT Fitzpatrick of Vulcan Value Partners told the FT, “The air has come out of the balloon.”

From flood of inflows to gates on the exits — private credit is hearing an echo it hasn’t heard before.

Among active stocks, Dollar Tree (DLTR) is trading choppy after better-than-expected quarterly results were offset by cautious guidance.

The discount retailer sees adjusted EPS of $1.45 to $1.60 on revenue of $4.9B to $5.0B. The midpoints — $1.52 and $4.95B — came in slightly below consensus estimates of $1.56 and $4.97B. Comparable sales are expected to rise 3% to 4.

Alibaba (BABA) is preparing to launch an enterprise-focused agentic AI service as soon as this week. Bloomberg reports the tool will help companies deploy task-performing assistants, as interest in AI agents accelerates across China.

And Nebius (NBIS) is surging after Meta Platforms (META) committed to spend up to $27B over five years for access to advanced AI infrastructure.

Under the agreement, Nebius will provide $12B of dedicated capacity across multiple locations, powered by one of the first large-scale deployments of Nvidia’s (NVDA) Vera Rubin platform.

In other news of note, a record 331 S&P 500 companies cited “AI” on earnings calls between December 15 and March 11, according to FactSet — that’s 68% of all calls during the period.

The figure dwarfs the 5-year average of 149.

By sector, Financials (XLF) and Information Technology (XLK) led with 67 calls each mentioning AI. Measured by percentage, Info Tech topped the list at 94%, followed by Financials at 91% and Communication Services (XLC) at 89%.

From Silicon Valley to Hollywood, the AI drumbeat keeps getting louder.

Warner Bros. (WBD) had a big Oscars night. “One Battle After Another” took home six awards, including Best Picture and Best Director. “Sinners,” which led the field with 16 nominations, won four, including Best Actor and Original Screenplay.

The only question now: when does an AI-generated film win an Oscar — or just start picking the winners?

And in the Wall Street Research Corner, Bank of America is out with its list of stocks hedge funds most love to short.

Moderna (MRNA) tops the list, with 18.3% of its float sold short. Next up: Brown-Forman, Super Micro Computer (SMCI), Charter Communications (CHTR) and Fox (FOXA).

You can see the full top 20 here.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.