Publicly registered non-listed business development companies (BDCs) saw a sharp decline in fundraising in Q1, with quarterly redemptions exceeding fundraising for the first time.

Q1 gross sales totaled $4.9 billion, down 46% from Q4 2025 and 59% from Q1 2025, according to a report from Robert A. Stranger & Co.

"Fundraising has slowed, redemptions have risen, and for the first time, more capital left non-listed BDCs in a quarter than came in,” said Kevin T. Gannon, Chairman and CEO of Stanger.

Sponsors delivered “a record level of liquidity” in Q1, Gannon added. Plus, no Net Asset Value (NAV) BDC had gated redemptions. In other words, all NAV BDCs allowed investors to withdraw money as usual. None of them had to block or limit redemptions, even though there was heavy demand for cash.

“As we saw with NAV REITs in 2022, these vehicles were built to manage periods of elevated redemptions, and Q1 showed that the structure can absorb meaningful liquidity pressure," Gannon said.

The Stanger NL BDC Total Return Index saw its first negative quarterly return since Q2 2022, dropping -0.03%. Over the trailing twelve months, the Stanger Index returned 6.2%, compared with a 14% decline for the S&P BDC Total Return Index. The S&P BDC Total Return Index declined 10.1% in Q1 alone, the firm noted.

The sector experienced elevated redemption activity in the first quarter, with $6.9 billion in accepted withdrawal requests, surpassing the $4.9 billion in new capital raised by publicly registered BDCs.

Redemption Requests

Investors sought to withdraw more than $15 billion during the first quarter, prompting several funds to impose quarterly redemption caps of 5%, Bloomberg reported.

Firms such as Apollo Global, Ares Management, BlackRock, JPMorgan, and Morgan Stanley have capped redemptions in response to investor withdrawal requests, driven by concerns about the private credit sector.

The report noted that despite elevated redemption activity, NAV BDCs have continued to provide liquidity without imposing redemption gates, instead capping redemptions at 5% rather than suspending them entirely.

Investors in the private credit space have sought to withdraw funds in recent months as concerns grew over underwriting standards, loan quality, and the software sector’s relevance amid advancements in artificial intelligence.

Blackstone Private Credit Fund and Oaktree Strategic Credit Fund exceeded the standard 5% quarterly repurchase limit to satisfy 100% of investor requests, the report noted.

Meanwhile, Golub Capital's Private Credit Fund received repurchase requests equal to roughly 8.5% of its outstanding common shares during the tender period, opening May 1, 2026, exceeding the fund's 5% quarterly limit. The firm said it will satisfy about 59% of those requests on a prorated basis, according to a shareholder letter released this month.

Fitch Ratings 2026 outlook for BDCs noted that the sector is “deteriorating, reflecting expectations for further pressure on net investment income (NII) and dividend coverage, and the potential for reduced funding flexibility and liquidity if secured credit facilities are used to refinance 2026 unsecured debt maturities or fund redemptions,” according to a report.

The ratings company also expects BDCs to face a competitive underwriting environment and for non-accruals to remain above historical averages in 2026.

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