ACCELERATION: Private Equity Is the Next Big Thing Coming for YOU: Part XIX

You have been reading regularly about the withdrawal requests coming in at private equity and credit funds. But despite the limits, requests for redemptions are only accelerating. Jack Pitcher reports at The Wall Street Journal:

Investors in BlackRock’s flagship private-credit fund asked to redeem a collective 13.3% of the fund’s shares in the second quarter, an increase from 9.3% in the previous period.

BlackRock will repurchase 5% of the shares, it said in a letter Friday, sticking with the previously stated threshold and cashing out shareholders on a prorated basis.

The fund is known as HLEND, and is run by HPS, part of BlackRock. HPS released this statement about the redemption requests:

Dear Shareholders,

The HPS Corporate Lending Fund (“HLEND”) was built with a clear purpose: to seek to deliver individual investors the core benefits of institutional direct lending strategies, providing attractive risk-adjusted returns and generating reliable, consistent income across varied market environments.

The fund continues to deliver on these objectives. Since inception through April 30, 2026, HLEND has delivered a 10.2% annualized total net return for Class I shareholders,1 representing a 3.8% premium to broadly syndicated loan total returns over the same timeframe.2 HLEND has also continued to generate a reliable current income stream, with an annualized distribution rate of 9.9% for Class I shareholders as of May 2026.3 We believe these results reflect the quality of HLEND’s portfolio and our disciplined capital management process.

As we discussed last quarter, we believe HLEND’s performance results are predicated upon the fund’s quarterly liquidity framework, which aligns investor capital with the expected duration of private credit investments, while also providing recurring liquidity to requesting shareholders.4 This liquidity feature is critical to HLEND’s ability to provide its investors with a premium return to public credit markets.

During the second quarter, HLEND received repurchase requests totaling approximately 13.3% of shares outstanding as of March 31, 2026.5 Consistent with HLEND’s liquidity parameters and past practice, the fund will fulfill repurchase requests for 5% of shares outstanding as of March 31, 2026 (approx. $620 million).

Looking ahead, we believe the opportunity set is becoming increasingly attractive. The market has shifted from an expectation of declining rates toward a view that current rates may persist or move higher. Direct lending credit spreads have also begun to widen relative to late 2025 levels, and there are early indications of increasing activity levels.6

The fund maintains a highly diversified portfolio focused on the most senior debt of larger scale businesses. First lien senior secured loans made up more than 95% of the portfolio,7 and the weighted average EBITDA across HLEND’s private holdings was $251 million.8 HLEND’s private credit portfolio companies have been performing well – growing both revenue and EBITDA at 11% on a trailing twelve-month basis as of March 31, 2026.9 HLEND’s portfolio also remains conservatively positioned, with a weighted average loan-to-value of 39%8 and a weighted average interest coverage ratio of 2.3×10 across the private credit portfolio.

HLEND maintains significant capital flexibility. Leverage remained at 1.0x,11 the low end of our target range, and the fund had approximately $7.2 billion of estimated liquidity, including $4.9 billion of available debt capacity,12 over $700 million of cash on hand,13 and a $1.6 billion portfolio of liquid assets,14 as of March 31, 2026. This profile is further bolstered by continued subscriptions and distribution reinvestment, which together are expected to more than fully offset repurchases during the first six months of 2026.15

We thank you for your ongoing trust and partnership and look forward to continuing to execute on your behalf in this exciting environment.

Sincerely,

HPS Corporate Lending Fund