A stark contrast to peers! Oak Tree Capital states it will fully meet the 8.5% redemption requests; the current environment is a correction rather than a crisis.

Oak Tree Capital announced that it will fully meet the redemption requests of its retail private credit fund, distinguishing itself from peers like HPS and Apollo, which are enforcing redemption caps, as the industry faces a wave of redemptions.

On March 27, Bloomberg reported that Oak Tree Capital Management is fully satisfying redemption requests received from its $7.7 billion retail private credit fund, allowing investors to redeem an amount equivalent to 8.5% of net assets. Its parent company, Brookfield, will use approximately $80 million of its own funds to assist in meeting these redemption requests. Oak Tree Capital stated in a letter to investors that the company has consistently managed the fund’s assets and liabilities conservatively, maintaining a focus on liquidity reserves while seizing investment opportunities.

This move sends an important signal to the private credit market. Against the backdrop of widespread pressure on retail private credit funds, Oak Tree Capital’s choice to fully redeem, rather than invoking the industry-standard quarterly redemption cap of 5%, indicates a clear divergence in liquidity management strategies among leading institutions.

Full Redemption: Divergence from Peer Strategies

Private credit funds typically set a cap of no more than 5% of net assets for quarterly redemptions to prevent the forced sale of illiquid assets at discounted prices. In the face of the current wave of redemptions, institutions’ response strategies have shown clear divergence.

HPS Investment Partners, Apollo Global Management, and Ares Management, all under BlackRock, have chosen to enforce the 5% redemption cap, stating that this move is in the best interest of all investors. In contrast, Oak Tree Capital has opted to follow the path of Blackstone and Blue Owl Capital, striving to meet 100% of redemption requests.

According to Bloomberg, Blackstone earlier this month used $250 million of its own funds, along with contributions of an additional $150 million from over twenty executives, to meet about 7.9% of redemption requests for its flagship private credit fund. Oak Tree Capital’s operation this time is remarkably similar.

In specific arrangements, the fund will repurchase shares equivalent to 6.8% of its net assets, while Brookfield will purchase an additional 1.7% from a single investor, which Oak Tree Capital characterizes as a “supportive statement” of this strategy.

Ample Liquidity Reserves, Proactively Reducing Software Loan Exposure

Oak Tree Capital disclosed in a letter to shareholders that as of March 23, the fund held a total of $1.8 billion in cash and unused credit lines. The company indicated that the fund has consistently maintained underweight positions in areas where market discipline is weakest, including PIK (payment-in-kind) loans and annual recurring revenue loans.

Since the beginning of the year, the fund has partially sold publicly traded loans and bonds, aiming to both reduce exposure to the software sector and accumulate more cash reserves to increase investment positioning during market dislocations.

At the same time, Oak Tree Capital has lowered the fund’s per-share dividend by 2 cents to 16 cents to promote the “long-term sustainability” of the strategy. The company stated that after this adjustment, the fund’s annualized net distribution rate will still be maintained at 8.5%.

Threefold Risks Intertwined, Oak Tree Capital Judging “Adjustment Rather Than Crisis”

Oak Tree Capital explicitly pointed out in its letter that the current private credit market is facing three independent risks: the rising risk of software loan defaults, liquidity concerns triggered by the surge in redemption requests, and commodity price shocks increasing the probability of stagflation.

“We did not foresee any of these risks as we entered 2026, just as we did not predict the COVID-19 pandemic when we entered 2020,” Oak Tree Capital wrote in the letter. “However, in both scenarios, we maintained low leverage and ample cash reserves to respond to market dislocations.”

Nevertheless, Oak Tree Capital’s overall assessment of the current situation is relatively cautiously optimistic. “We ultimately believe that the current environment represents an adjustment rather than a crisis,” the letter states. This characterization may have a stabilizing effect on investor sentiment and the redemption pressure on similar funds.

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