Private Credit in a Vise: Cliffwater’s $33 Billion Fund Faces Redemption Crisis as JPMorgan Cuts Collateral Valuations

The private credit market is under "double pressure": one end sees banks becoming more cautious about repurchase-style financing, while the other faces mounting redemption pressures from large funds, straining both liquidity and new lending capacity.

According to sources cited by the Financial Times, JPMorgan has reduced valuations on certain loan portfolios held by private credit investment funds—loans used as collateral when these funds borrow from the bank.

While the adjustment did not trigger margin calls, it will limit the amount of future funding JPMorgan can provide based on these assets, effectively tightening external leverage across the industry.

Meanwhile, Bloomberg reported citing informed sources that Cliffwater LLC’s flagship private credit product, the Cliffwater Corporate Lending Fund, is facing redemption requests exceeding 7%, surpassing its standard quarterly redemption cap.

Amid growing concerns over AI’s impact on software firms, markets have become increasingly sensitive to the quality and transparency of private credit loan valuations. The combination of capital outflows and tighter financing is already reflected in the share prices of publicly traded asset managers, prompting some institutions to impose redemption limits or deploy internal capital to manage redemptions.

JPMorgan Leads the Tightening: Valuation Write-downs Preemptively Constrain Credit Capacity

According to the Financial Times, JPMorgan has informed several private credit lenders that it has downgraded valuations on certain loan collateral, directly reducing the amount of repo financing available to related funds. This move is a "preemptive" reduction in available credit rather than a reactive measure triggered by default or missed interest payments, so no margin calls were issued.

The report notes that the affected loans primarily relate to software company assets. In a closed-door session during last week’s leveraged finance meeting, JPMorgan CEO Jamie Dimon told investors, "Banks will be more cautious about financing secured by software assets."

Troy Rohrbaugh, co-head of JPMorgan’s commercial and investment banking division, told analysts in February that the bank takes a "more conservative stance" on private credit risk compared to peers, adding, "As the world grows more turbulent… this outcome is expected. I’m surprised people are surprised."

Unlike some peers, the Financial Times reports that JPMorgan retains the right to revalue assets at any time within private credit financing agreements, whereas most banks typically require a triggering event such as a missed interest payment.

Cliffwater’s Redemption Requests Top 7%—Decision on 5% vs. 7% Still Pending

Bloomberg cited informed sources saying Cliffwater Corporate Lending Fund, with assets of approximately $33 billion, currently faces redemption requests exceeding 7%.

The fund operates as an interval fund; if redemption requests reach a threshold, the fund must repurchase up to 5% of shares per quarter. When redemptions exceed 5%, managers may choose to raise the repurchase limit to as high as 7%.

Sources said the redemption window closes Tuesday, and Cliffwater has not yet decided whether to stick with the 5% cap or increase it to 7%.

Founded by Stephen Nesbitt, Cliffwater has come under pressure amid broader industry withdrawal trends. The firm disputes concerns about underlying asset quality, arguing that recent selling has been driven more by sentiment than fundamentals.

S&P Global Ratings assigned the fund an A rating in November last year, citing high diversification, relatively low leverage, and strong asset quality and cash flow performance.

Software Assets and AI Fears Converge, Exacerbating Valuation Disputes

Two stress factors converge on "software loans." The Financial Times noted that the loans whose valuations JPMorgan reduced are linked to software firms, which market participants believe may be more vulnerable to disruption from the AI wave. At the same time, Bloomberg highlighted that investor concerns about private credit include exposure to software companies potentially disrupted by AI.

The Financial Times also wrote that public market software stocks and bonds have plunged this year, while private credit firms typically hold loans to maturity and have not made parallel mark-to-market reductions. Private lenders argue that enterprise software companies continue to grow, and expect loans to perform well, as investors are likely to support borrowers.

In this context, traditional banks’ more proactive revaluation of collateral could amplify tensions between "public market price signals" and "private credit valuation stability," influencing lending pace through repo financing availability.

Redemption Pressures Spread, Impacting Managers’ Stock Prices

Capital outflows in private credit are not isolated incidents. Bloomberg reported that Blackstone recently capped withdrawals from its HPS Corporate Lending Fund at 5%, as investor redemption requests approached twice that level—marking the first time since recent turbulence that a major private credit manager imposed redemption limits on a perpetual product.

By contrast, days earlier, Blackstone allowed its flagship BCRED fund to experience record 7.9% share redemptions and offset the outflow using about $150 million in executive personal capital and roughly $250 million in corporate funds.

Secondary markets are reflecting the strain: Blue Owl Capital’s stock has fallen 37% this year, Ares Management 33%. When redemption pressure coincides with tightened financing, investors are re-pricing growth expectations and profit resilience for private credit platforms.

Marginally Tightened Leverage May Shrink Private Credit’s Lending and Return Potential

The Financial Times pointed out that part of the private credit industry’s growth has been fueled by leverage provided by regulated banks, which is crucial for lifting returns above those of high-yield bonds or leveraged loan funds. Banks including JPMorgan, Wells Fargo, and Bank of America have all provided substantial financing to the sector.

At the same time, private credit firms’ fundraising capabilities have significantly strengthened in recent years. The Financial Times reported that since late 2020, private credit firms have raised around $400 billion from wealthy individuals and attracted additional capital from institutional investors, competing with banks in multi-billion-dollar leveraged buyout financings.

Under this framework, JPMorgan’s move to lower collateral valuations is tightening "back-end leverage" for private credit. Combined with Cliffwater and others exceeding redemption thresholds, this means the industry now faces greater reliance on liquidity management on both the funding source and deployment sides. Investors are increasingly focused on redemption mechanisms, valuation methodologies, and the interplay between collateral re-pricing and funding availability.