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Morning Edition · Friday, July 10, 2026Published at 1:11 AM EDT · New York

UBS Advised Clients to Cut a Private Credit Fund It Helped Build

The bank's advice contributed to an exodus from a Blue Owl private credit vehicle, exposing the sector's liquidity strains.

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UBS Advised Clients to Cut a Private Credit Fund It Helped Build

UBS advised some of its clients to reduce exposure to a Blue Owl private credit fund, a move that helped trigger a wave of withdrawals from a vehicle the bank had been instrumental in setting up, the Financial Times reported. The reversal is a rare public sign of stress inside private credit, the fast-grown business of non-bank lending to companies.

A related strain surfaced in Asia. HSBC is seeking buyers for risky loans held by its Hong Kong subsidiary Hang Seng, an early sign of how the UK bank intends to overhaul the retail lender after taking it private this year. Both cases involve institutions trying to shed credit exposure they had earlier accumulated.

Private credit expanded rapidly through years of loose money, funding borrowers that banks stepped back from. The risk in the model is a mismatch between funds that promise investors periodic liquidity and underlying loans that are hard to value and harder to sell quickly. When a major adviser tells clients to withdraw, that mismatch becomes visible.

Part of a tracked trend

Private Credit Under Strain

As investors and advisers pull back from private credit funds, the liquidity mismatch built up during years of loose money surfaces, recurring as redemptions test opaque valuations across the sector.

What this means

The mechanism is a liquidity mismatch. Private credit funds hold illiquid, opaquely valued loans while offering investors ways out, so a wave of redemptions forces either asset sales at reduced prices or redemption limits that lock investors in. The exposed parties are private credit managers such as Blue Owl, the wealth clients steered into these funds, and banks like HSBC carrying risky loan books they now want to offload.

What to watch

  • Whether other banks or advisers publicly cut recommendations on private credit funds, which would show the caution is spreading beyond one vehicle.
  • Whether any fund imposes redemption limits, the clearest evidence that outflows have outrun available liquidity.
  • The prices HSBC obtains for Hang Seng's risky loans, a real-world mark on how much distressed credit is actually worth.

Observations to monitor, not financial advice.

2 sources

Synthesized from: Financial Times (Blue Owl) · Financial Times (Hang Seng)

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