Newsletter · · Ashutosh Agarwal

Blackstone Defends Private Credit as Banks Pull Back Fund Leverage - Private Credit & Alternatives - Week of July 15, 2026

Private credit and alternatives newsletter for July 15, 2026. Blackstone's head of private wealth came to the microphone to defend semi-liquid funds, while the bears shifted their focus to HSBC and other banks reportedly pulling back the leverage behind private-credit funds, and Apollo's chief economist sized the software loan problem at roughly 500 billion dollars.

Private Credit & Alternatives

July 15, 2026: The Managers Grab the Mic as Their Banks Retreat

For two weeks running, the loudest thing in private credit was a silence: while their flagship funds were being gated, no senior executive from the big alternative-asset managers would come to a microphone to defend them. This week that changed. Blackstone's head of private wealth sat down and made the full case: the system is not melting down, the "locked-up" structure of these funds is a feature and not a flaw, and there is a trillion-dollar runway ahead. But he made that case in the same week the bears found a sharper target than defaults or redemptions: the banks. According to Financial Times and Bloomberg reporting relayed on one of the podcasts, HSBC and other big banks that quietly finance the private-credit machine are pulling back, raising their prices, and marking down the loans that funds post as collateral. So this week's picture is a genuine split screen. The people who run the funds are on offense, and the people who lend to the funds are heading for the door. Underneath that clash, the operators kept circling the same real hole: software loans and a wall of debt that comes due in 2028 and 2029.

TL;DR

  • The defense finally showed up. Blackstone's Farhad Karim called the "new-GFC" talk "irresponsible and just wrong," said the wealth channel now holds $302 billion of Blackstone's money (up from $250 billion about a year and a half ago) with an ambition to reach $1 trillion, and argued the semi-liquid structure everyone frets about is actually what lets these funds compound instead of being forced to sell in a panic.
  • The bears switched targets, from defaults to the banks. A widely followed macro commentator, citing FT and Bloomberg reporting, says HSBC is declining to renew credit lines to some private-credit funds and pulling back the leverage it provides, while JPMorgan, Goldman Sachs and Barclays have marked down loans posted as collateral. His point: the banks see inside these portfolios, and they are voting with their balance sheets.
  • Everyone still agrees on where the real hole is: software. Apollo's chief economist put hard numbers on it: roughly $500 billion of the ~$2 trillion private-credit market is software loans made in the last six or seven years, now changing hands at 12–12.5% yields, with most of the debt coming due in 2028–2029.

What's new

1. Blackstone comes off the sidelines to defend the whole model. The single most important voice of the week was an operator, not a pundit: Farhad Karim, who runs Blackstone's private-wealth business, on Alt Goes Mainstream (Jul 9). His pushback on the doom coverage was blunt: "You read many of the articles, you think the whole private credit or the whole private sort of market is melting down. The system is not melting down." On the comparison to 2008 he went further: "are we in the new GFC? We're not. In fact, some of this commentary I find pretty irresponsible and just wrong." The numbers behind his confidence: Blackstone's wealth channel (money raised from individual investors and their advisors, as opposed to pensions or endowments) is now $302 billion, "about a fourth of the total," up from $250 billion "a year and a half ago," with a stated ambition to reach $1 trillion. His runway argument is a simple contrast: a typical old-style pension plan (a "defined benefit" program) has "probably 30 percent allocated to private markets," while the broad wealth channel is at just "3 percent." "There is a long way to go."

His most interesting argument was about the very thing the redemption headlines have been built on. These retail funds are "evergreen" or "perpetual," meaning that, unlike an old-style private fund that raises money once and hands it back years later, they stay open, but they only let investors pull cash out slowly (typically capped at 5% of the fund each quarter). Critics call that a trap. Karim called it the point: "this notion that the semi-liquid nature of these things is somehow inherently bad… I don't see that at all. I actually see that structure is what makes these structures able to compound through cycles over time." His reasoning drew on his real-estate days: "some of the best investment opportunities was somebody who was forced to sell. Why would you set up a structure that you want to compound wealth over time where you're forced to sell?" His advice to the wealth channel was to stop treating these funds like a bank account: "you shouldn't think of it as an ATM. It's not a proxy for cash where you come in and out when you need it." For scale, he said Blackstone's flagship retail real-estate fund has compounded "since inception for the last 10 years at 9.3%." He also flagged where the growth is heading next: bundled, multi-strategy products (credit, real estate, private equity and infrastructure "in one solution," "one tax form… one subscription form"), pointing to Blackstone's new alliance with Vanguard and Wellington to sell a combined public-and-private product.

2. The bears stop watching defaults and start watching the banks. The sharpest bear argument of the week came from macro commentator Jeff Snider on Eurodollar University (Jul 9), and, importantly, it was aimed at a new place. Citing Financial Times reporting, he said HSBC has told some private-credit funds it will not renew their credit lines and is pulling back the leverage it lends them, with "questions about collateral." His framing: "Private credit has always been marketed as an alternative to banks, but behind the curtain, the banks never really left. They just moved back one layer." The mechanism he walked through is worth understanding plainly. Private-credit funds don't just lend their investors' cash; they borrow against the loans they've already made (this is called "back leverage") to make even more loans and boost returns. That works beautifully on the way up. But it means the fund depends on a bank believing its loans are worth what the fund says. If the bank stops believing, the fund has to post more collateral, borrow less, or sell loans: "all those options, they hurt returns or they hurt liquidity."

That, Snider argued, is exactly what's now happening. Citing Bloomberg, he said JPMorgan, Goldman Sachs and Barclays, alongside HSBC, have "exercised their right to write down specific assets, the collateral, forcing some of these fund managers to swap holdings out of these collateral pools," and have been raising the rates they charge on leverage. The key sentence he pulled from the reporting: HSBC decided the returns from lending to these funds are "no longer justified by the risk." His bigger point is a "split screen" between insiders and outsiders: the banks that can see inside the loan books are quietly retreating, while retail money keeps pouring into risky credit at unusually low spreads (extra yield over safe bonds). "While the Blue Owls and the John Grays are running around telling you their numbers all work… the banks who are looking right at those same portfolios are getting the hell away from them." He also noted Apollo is "moving up in the credit quality" and holding more cash, reading it as a defensive crouch. Treat the specific bank actions as newspaper reporting relayed on the podcast rather than something confirmed here, but note that this is the operator-versus-banker tension that credit downturns usually start with.

3. A Sixth Street operator makes the case for discipline over asset-gathering. The most useful counterweight to Blackstone's growth story came from another operator with a very different philosophy: Julian Salisbury, co-CIO and co-president of Sixth Street, on the Money Maze Podcast (Jul 9). Where Blackstone talks about a trillion-dollar target, Salisbury openly distrusts the whole idea of chasing size: "you don't hear people talk about AUM targets. It's just… an unhelpful metric." His warning was pointed: as firms grow, some flip "from being investment firms to being sales led organizations," and if you raise money too indiscriminately "you find yourself under pressure to invest more capital than is prudent. And this is going to degrade returns, essentially become like a factory where you're just churning out product."

He also mapped where the smart money is working right now. One theme is being a "capital solutions provider" to companies hitting their debt deadlines: many private-equity, infrastructure and real-estate owners locked in cheap debt in 2020–2021, but haven't grown their businesses enough to refinance cleanly, so Sixth Street steps in to pay down debt, hand investors some cash back, or fund growth. The other is asset-based finance, lending against pools of real-world assets like consumer loans or equipment leases rather than to a single company. He confirmed the same demand others have flagged: "increasing amount of demand from insurance companies in particular looking to earn a liquidity premium or a complexity premium above what they can earn in the public bond markets." But he threw cold water on the crowd rushing in: "there's a lot of chatter around ABF and… people trying to reinvent themselves as ABF specialists after the fact. It's actually quite a specialist area… one of the more operationally complex areas of investing," and "a bit of a scale game." For a sense of how they operate, he noted Sixth Street recently closed a European direct-lending fund big enough to "be in the market writing a $100 million check, a $200 million check," and recalled turning around an Airbnb investment "in six days" during the COVID panic, when even the safest slices of loan bundles (CLO AAA) were trading at a distressed "700 over."

4. Apollo's economist sizes the software problem, and the reasons not to panic. On The Real Eisman Playbook (Jul 13), Apollo chief economist Torsten Slok gave the most precise anatomy yet of the fault line everyone keeps circling, with Steve Eisman (of "Big Short" fame) pressing him. The number: roughly "$500 billion of private credit is software" out of a "$2 trillion market," made "in the last six, seven years." Those loans now change hands below their face value, yielding "12%… moving up towards 12.5%" if you buy them in the open market. The reason is a "double whammy": AI could hollow out the value of some software businesses, and, separately, a lot of this debt was borrowed in 2021–2022 on seven-year terms, so it comes due "exactly in 2028 and 29." If interest rates are still high then, these companies "will have significant problems rolling over their debt." Eisman added the equity-holder's version: public software names like Salesforce and ServiceNow are "down 50%, 60% from their peaks," so when a loan comes due in 2028 the lender can tell the private-equity owner, "the value of your equity is basically gone. You got to pony up more money."

But Slok was equally clear on why this is not 2008. First, size: $500 billion "is not… anywhere near those systemic levels that we had with subprime," in a ~$31–33 trillion economy. Second, and more importantly, where the risk sits. In the financial crisis, banks were "levered 20, 30 times… in some cases, 40." The funds that hold most private credit today, business development companies or BDCs, are "by law… only levered twice," 2-to-1. So even if software loans sour, there's no giant leverage machine to magnify the losses across the system. The rest of the credit market, he stressed, is "actually in good shape," with default rates, distressed debt exchanges and out-of-court restructurings all falling. Slok also framed the deeper shift feeding all of this: pensions and insurers are moving money out of 30-year government bonds and into "privately issued long-duration assets… in data centers, infrastructure, climate, energy transition," which is precisely the demand engine funding the next story.

5. Where the AI money actually lands: power, not just data centers. For a ground-level view of that data-center build, David Pearson of Quinbrook Infrastructure Partners on Redefining Energy (Jul 13) explained why the financing is flowing where it is. His data-center developer, started from "employee number one" in 2021, is now "the number three data center developer in the United States… has got 350 people," and recently "announced a deal with Blackstone." His one-line thesis for what these projects are really about: "power first… It's the only thing that gets you a lease with any of the compute firms is power and timing of power." The new twist is that grid bottlenecks and local opposition are forcing developers to "bring your own power": batteries, truck-mounted gas turbines, long-duration storage sitting right at the site. That's turned power delivery into the scarce, valuable piece, and it's why the money is chasing developers who own the whole chain (land, permits, grid connection, generation) rather than the old model of data-center landlords who simply passed the electric bill through to their tenant. It's a concrete example of the "privately issued long-duration assets" Slok described, and another data point that the AI build is increasingly financed on private balance sheets, with Blackstone's name attached.

6. A read from the lending trenches: too much money, too few deals. Away from the AI story, two Canadian commercial-real-estate lenders on the Commercial Real Estate Podcast (Jul 9) described the same over-supply of capital that's compressing lending profits everywhere. Their summary: "a lot of capital chasing fewer deals," pushing pricing "basically at the lowest that I can remember." Top-quality property loans are being done at spreads "in the 120s" over the government benchmark, only "20, 25 basis points wide" of the all-time low set before the 2008 crisis, back "during the heat of the CMBS market." A big reason: condo construction "fully dried up," so the banks that used to fund those towers now have cash "looking for a new home." Different corner of the market, same lesson the credit operators have been repeating for weeks: when everyone has money to lend, the lender's edge disappears.

The debate

The manager says it's fine; his banker is leaving. Who do you believe? This is the cleanest split the podcasts have produced all cycle. The steel-man for calm is now the strongest it's been: an operator, on the record, arguing that redemption caps are a design feature that protects long-term compounding (Karim), plus hard reassurance on why this isn't 2008: $500 billion of trouble is small against a $33 trillion economy, and today's holders are levered 2-to-1, not 40-to-1 (Slok). The steel-man for worry has moved to firmer ground too: instead of guessing at defaults, the bears now point to the banks that fund the funds, who (per FT and Bloomberg reporting) are declining to renew credit lines and marking down collateral (Snider). Both can be true at once. The managers are probably right that the structure holds and the system isn't collapsing. The bears are probably right that the funding layer is tightening and that tighter, pricier leverage will grind down returns even without a wave of defaults. The swing factor is which one bites first: a slow squeeze on returns, or a genuine credit event.

Discipline versus asset-gathering: the fight inside the industry. The more revealing debate this week wasn't bull vs. bear; it was manager vs. manager. Blackstone's pitch is scale as a superpower: scale gets you the data, the biggest deals, and the ability to "speak for" a massive data-center financing without assembling a syndicate. Sixth Street's Salisbury made the opposite case: that beyond a point, chasing size turns an investment firm into a sales machine and quietly degrades returns. Both are describing the same industry from the top and the middle. If the bears are right that leverage is tightening, the discipline camp's caution about "churning out product" is the more valuable instinct into 2028.

The names in play

  • Blackstone (BX): took the microphone no rival would. $302 billion of wealth-channel money (up from $250 billion ~18 months ago), a $1 trillion ambition, a real-estate flagship compounding at 9.3% over a decade, and a Vanguard/Wellington public-private bundle as the next product. Also the buyer behind Quinbrook's data-center deal; its name keeps showing up wherever the AI build gets financed.
  • Sixth Street (private): the discipline counterpoint. No AUM targets, a warning against becoming a "sales led" factory, and a hunt for "capital solutions" as 2020–2021 debt comes due. Recently closed a European direct-lending fund sized to write $100–200 million checks.
  • Apollo (APO): named twice, in opposite lights. Its chief economist supplied the calm, quantified case ($500bn of software in a $2tn market, 2-to-1 BDC leverage); a bear separately flagged Apollo "moving up in credit quality" and holding more cash as a defensive tell.
  • HSBC, JPMorgan, Goldman Sachs (GS), Barclays: the banks reportedly retreating from, or repricing, the leverage they provide to private-credit funds. If this is real and it spreads, it's the quiet mechanism that tightens the whole asset class.
  • Blue Owl (OWL): named on tape only as a foil, the bear's shorthand for managers insisting "their numbers all work" while their bankers step back.
  • Quinbrook (private): the #3 US data-center developer (350 people, Blackstone deal), and a live example of where "privately issued long-duration assets" are actually being built: around power, not just servers.

Read-throughs

  • Watch the banks, not just the redemption queue. The next tell for private credit may not be a fund gating; it may be the price and availability of the "back leverage" banks provide behind the scenes. Rising leverage costs and collateral markdowns squeeze returns before any borrower defaults.
  • The 2028–2029 maturity wall is the date to circle. Roughly $500 billion of software loans, mostly due then, is where the AI-disruption fear and the higher-for-longer rate fear collide. If rates aren't lower by 2028, that's when the hard conversations between lenders and private-equity owners happen.
  • The industry's own split, scale vs. discipline, is a signal. When a respected mid-sized manager openly warns that giants risk "churning out product," it's a reminder that the safest returns from here may come from firms that can say no to money.
  • Asset-based finance stays the consensus "quality" trade, but it's not a free lunch. Operators keep pointing to it as the place to hide, while also warning it's a specialist, scale-heavy business that newcomers can't fake.
  • Follow the AI money into power. The financing edge in data centers has moved from the building to the electricity: developers who control land, permits, grid connection and generation are the ones getting paid, and the big alternative managers are backing them.

What changed

The defense finally showed up. After two weeks of conspicuous silence, a mega-cap alternative-manager executive came to a microphone to argue that the redemption panic is overblown and the fund structure is a strength, not a flaw. In the same week, the bear case matured from "defaults are coming" to something more concrete and more worrying: the banks that quietly fund private credit are, per news reporting, pulling back leverage and marking down collateral. The debate is no longer really about whether retail investors can get their money out on time; it's about whether the wholesale funding underneath the whole asset class is beginning to tighten.