It only took a constant barrage of negative news surrounding the private credit space, including a surge in redemptions, investor gating, questions about loan markets as well as outright fraud, not to mention relentless criticism from of some of the biggest luminaries in credit, including Saba's Boaz Weinstein and Diameter's Scott Goodwin, for Blackstone to concede that its private credit book may have been mismarked.

According to Bloomberg, Blackstone's flagship private credit fund - and the world's largest - posted its first monthly loss in more than three years, one of the clearest signs yet of weakening performance in the $1.8 trillion market.

The $83 billion fund, known as BCRED, lost 0.4% in February, the first monthly decline since September 2022. Performance was flat for the first two months of the year after an 8% gain in 2025, the website shows. While we haven't done the math, we wonder what that means in terms of BCRED's Sharpe ratio, and how that compares to, say, Bernie Madoff's while the music was still playing (not when it had already stopped, of course). 

Blackstone told investors its February loss reflected wider spreads across public and private markets, as well as unrealized marks on individual names including Medallia, according to a message to financial advisers seen by Bloomberg.

In the message, Blackstone pointed out that despite the pullback, the fund outperformed the leveraged loan market by around 0.4 percentage points in February and 1 percentage point since the start of the year, which it said underscored the benefits of private credit during volatile markets.

“BCRED continues to deliver strong performance for its investors, with a 9.5% annualized total return since inception for Class I shares,” a spokesperson for the firm said in an emailed statement. The fund was set up in January 2021.

Blackstone disclosed in February that it had marked down the value of its loan to Medallia Inc., a software company owned by Thoma Bravo, to 78 cents on the dollar. The loan has become a weak spot for private credit lenders, exposing sharp differences in valuations across managers.

BCRED is among a number of private credit vehicles that have faced elevated redemptions in recent quarters, amid concerns about valuations and underwriting standards in credit markets, as well as the potential for artificial intelligence to disrupt software businesses.

As reported previously, the alternative asset manager also took the unusual step of using its own cash as well as contributions from senior leaders to meet redemption requests for BCRED that exceeded the fund’s previously set limit of 5% of net assets.

Now that Blackstone's own money is flowing out to investors to avoid gating, it is understandable that Blackstone’s President and COO Jon Gray would make a full-throated defense of the private credit space, declining marks notwithstanding, and he did just that at a recent annual meeting with top financial advisors, saying that since private credit represents mostly "lowly leveraged vehicles that made low, 40% loan-to-value loans to very good quality companies", even 15% default rates and 50% recoveries wouldn't lead to a crisis, especially since BCRED has already remarked itself to 97, when the mathematical worst case scenario using those assumptions is 92.5, or 7.5 points of loss.

Judging by the collapsing prices of private credit names in the space, the market does not exactly agree. 

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