The big elephant in the Oval Office of the White House is not Iran, but the private funds managing assets valued at over 13 trillion euros, where a real investor stampede is taking place. Giants of capital and private debt like BlackRock, Blackstone, Apollo, or Morgan Stanley have restricted money withdrawals from their funds during the first quarter. What's happening? There is fear that the companies being financed by these managers, which are usually developing SMEs, may have a higher risk of bankruptcy or, at the very least, have somewhat inflated valuations considering the impact that artificial intelligence could have on the accounts of companies linked to sectors like software - the largest of them all, with 1 in every 5 companies. This fear has led market heavyweights to want to withdraw their money from investment vehicles that, by definition, are illiquid and, above all, much more opaque than publicly traded companies because what lies behind them is not really known. This is where financial engineering comes in: it's not just about granting loans to American SMEs; but also about complex products like the famous CLOs or securitizations, which involve packaging and selling a third party debt from these companies, which, in principle, is healthy, although some authoritative voices like JP Morgan's CEO, Jamie Dimon, have cast doubt on it. The banker believes that there are some "cockroaches," or low-quality credit, hidden in these portfolios.
In just the last month, stock market declines for major private equity firms exceed 15% and reach up to 30% in the case of Blue Owl or Ares Capital. The picture this year is of collapses ranging from over 30% for Blackstone, Apollo, or KKR (well-known in Spain as well) to over 40% losses for Ares or Blue Owl, which are once again the most affected. Another specialized manager, Main Street, is down almost 9%. We are talking about combined losses close to $150 billion in the stock market among the four largest private equity managers. In addition to this, there are the declines of other fund firms like BlackRock or UBS, which are around 20% this year, or the losses of over 11% for banks like JP Morgan or Morgan Stanley, which are also owners of very important fund managers globally.
Behind the stock market crash, there is a cascade of news accumulating in the archives. The hare was startled by the bankruptcy of First Brands, a manufacturer of car parts, which had an indefinite debt of between $10 billion and $50 billion (five times more than its assets) and which affected a large part of the financial industry - including Banco Santander, UBS, or Jefferies. It is a common occurrence. Banks usually come together in consortia to finance private companies with the aim of also reducing risk. The New York-based manager Blue Owl admitted at the end of February to having limited withdrawals from one of its $17 billion funds; it was followed by names like BlackRock, which also announced limitations on money withdrawals for its HPS Corporate Lending Fund - with another $26 billion; Cliffwater did the same, in a $33 billion vehicle; or Morgan Stanley in its North Haven Private Income fund, with another $8 billion. Blackstone's flagship private credit fund, with $82 billion under management, announced ten days ago that requested withdrawals had also exceeded the 5% allowed by these vehicles. It must be understood that in private markets, there are very few liquidity windows due to the type of investments they make, and investors are aware of where they are putting their money: they receive higher returns in exchange for higher risk. The issue, experts say, is not that there is a liquidity problem (for now), but that the managers themselves acknowledge that their investors want to exit. Leaving before what may come. And that is something that is difficult not to be afraid of, especially in such an opaque universe as private markets.
When Donald Trump comes out to say that the war in Iran is practically over, he does so knowing that his debt market was starting to tighten again, as it did after the famous Liberation Day, which forced him to backtrack to avoid a collapse of public debt. In the two weeks of the armed conflict, the U.S. 10-year bond has risen from 3.96% to 4.28%, reaching summer 2025 highs, which impacts private markets because it raises the financing costs for growing companies and also makes it less attractive for investors to finance private company debt when public debt (safer) offers interesting returns.
The boom of private capital or credit is not new. It has been brewing for years in an environment, first, of 0% interest rates that pushed investors to take on more risk than usual to achieve higher returns; and it has become a part of investors' portfolios, where it is advised to have up to 20%, despite its illiquidity. This trend came hand in hand with the megafunds that are conquering our country and are present in a myriad of corporate operations. Last week, for example, Apollo completed the purchase of 57% of Atlético de Madrid's capital. The fund's CEO, Marc Rowan, acknowledged last week that investor withdrawals would not be contained "in the short term."
THE POSSIBLE CONTAGION TO BANKING
According to data collected by the European Central Bank (ECB), the private funds industry reached 13.2 trillion euros by the end of 2024. Of these, only a tiny part is in Europe: 0.43 trillion in credit and another 1.2 trillion in corporate financing through equity. Although concerning, "by comparison," says the ECB, banks had 5.7 trillion euros in loans to non-financial companies on their books in 2024. "Banks provide liquidity to other institutions that may even be outside the regulatory perimeter" and do so through different channels, the central bank maintains, which means that any "market shock can be transmitted or amplified throughout the entire financial system." An example of this was the closure of several real estate funds in the UK in 2022. "The portfolios of these firms show high valuations that expose the sector to credit risks or sudden price adjustments," as what could be happening currently.
ECB sources assure that, for now, the institution has not made major requests to European banks to know their exposure to private funds. A recent report by the rating agency S&P tries to shed some light on the "opaque" world of private money. "The implications are significant considering that the software sector and related sectors, including health technology or IT services, represent 20% of the total credit exposure of these companies," their analysts maintain in a trend that has been ongoing for some time. In fact, the last quarter of 2025 was the first of the last three years in which the downgrades of the companies in the portfolio were lower than the upgrades. Although this has not prevented the wheel from continuing to turn. The placements of SME debt in the form of securitizations (CLOs, by their English acronym) amounted to $37.2 billion in 70 agreements in 2025. It is expected that this year they will reach $40,000 to $45,000 million. S&P believes that if there is an impact on the market, it will be gradual, even though "the initial market reaction is being indiscriminate." The high net worth individuals invested the smallest amount of money in companies in these private funds in the last year, with data up to February when inflows were $1.27 billion, three times less than twelve months ago.
"The proportion of companies (in the portfolios) with a 'ccc' rating [junk bond] remains low, at 16% of the total, comfortably below the 22% peak during the pandemic," notes S&P. But maturities are worrisome, in a geopolitical landscape of enormous uncertainty. This 2026, software firms will have to refinance loans worth $10 billion, which will be around $54 billion in 2027 and almost $60 billion in 2028, plus another $45 billion in 2029. This is the real crux of the matter. Globally, of all private equity firms, the real wall of maturities will be in 2028, with over $200 billion to refinance, compared to the $55 billion in 2026, and the $140 billion in 2027. In 2029, over $200 billion in maturities are due.