BlackRock's $12 billion acquisition of HPS Investment Partners is hitting turbulence just eight months after the deal closed. The asset manager is now restricting withdrawals from HPS's $26 billion non-traded direct-lending fund, with some clients receiving only half of their requested $1.2 billion in redemptions. BlackRock shares tumbled to their lowest level since May, erasing gains made before the HPS acquisition.

Wall Street is grappling with anxiety across the $1.8 trillion private credit market, where years of easy lending and complex fund structures are creating challenges. The recent collapse of First Brands Group and Tricolor Holdings, followed by sudden markdowns of holdings from 100 to zero, has spooked investors. Larry Herman of Raymond James questioned whether BlackRock overpaid for HPS based on current industry dynamics, though he noted the platform's solid reputation.

Despite the early setbacks, BlackRock executives remain committed to their private credit strategy. The firm aims to generate $60 billion in fee-paying assets from its wealth business through retail funds like HLEND and plans to add private credit to target-date retirement funds. Scott Kapnick, HPS founding partner, told investors that periods of uncertainty create compelling opportunities, while BlackRock's broader strategy hinges on expanding retail access to alternative assets.