A surge in private credit redemption requests has forced major funds to cap investor withdrawals in 2026.
Gibson Capital, a $3 billion wealth-management firm, avoided the squeeze by pulling $80 million from the Cliffwater Corporate Lending Fund in December — weeks before redemption requests spiked and forced widespread caps across the industry.
This article breaks down the warning signs that triggered Gibson’s exit, what happened to investors who waited, and what the private credit redemption crunch means for anyone holding similar funds.
When Chad Hileman started pushing his colleagues at Gibson Capital to exit one of their best-performing investments, nobody was panicking yet. There was no run on the bank, no headline crisis — just a research director who’d spent months quietly convinced that something was off about the fund’s risk profile.
That instinct, and the decision to act on it before the broader private credit redemption wave hit, turned out to be worth a great deal to his clients.
What Is Private Credit, and Why Did Gibson Capital Invest in It?
Private credit refers to loans made directly to companies — often mid-sized businesses financing private-equity buyouts — by investment firms rather than traditional banks. The asset class grew into a multitrillion-dollar industry after the 2008 financial crisis, as new banking regulations made traditional lenders more reluctant to issue these loans themselves. Private credit funds typically pay investors a floating interest rate set above a benchmark borrowing rate, which made the asset class attractive when interest rates were near zero.
Gibson Capital, a $3 billion wealth-management firm based in Wexford, Pennsylvania, had been an early believer in private credit. The firm’s founder built his reputation on diversifying client portfolios beyond traditional stocks and bonds, and private credit — direct lending to mid-sized companies — fit that philosophy well.
In January 2021, Gibson’s investment team recommended clients put money into the Cliffwater Corporate Lending Fund, then a roughly $1 billion vehicle. The appeal was straightforward: floating-rate loans with attractive spreads above benchmark rates, some with rate floors that protected returns even if benchmarks fell. With interest rates near zero at the time, those yields looked exceptional.
Eventually, Gibson clients had $80 million riding on the fund. And for years, it performed well. By the time Gibson decided to exit, the investment had returned roughly 60% cumulatively — a result that would make almost any wealth manager hesitant to sell, let alone start planning a private credit redemption.
What Warning Signs Triggered Gibson Capital’s Private Credit Redemption Decision?
Private credit’s boom years brought an explosion of competition. Industry-wide assets roughly doubled between 2020 and 2025, ballooning into a multitrillion-dollar market. The Cliffwater fund itself grew from $1 billion to more than $30 billion in that stretch.
More capital chasing the same pool of borrowers tends to erode lending standards, and Gibson’s team started noticing exactly that pattern. Loan spreads were compressing. Investor protections, known as covenants, were thinning out. A growing share of borrowers were paying interest “in kind” — meaning they were piling on more debt instead of paying cash, a red flag that cash flow was getting tight.
One discovery in particular stood out. While reviewing Cliffwater’s regulatory filings, Gibson’s research team noticed a roughly $20 million loan to a Bermuda-based AI software company that had blown past its maturity date — yet was still being valued at essentially full price. The company later filed for bankruptcy protection and restructured its debt, but the loan’s marked value barely moved in the fund’s filings.
When Gibson raised the issue directly with Cliffwater, the firm pointed to reassurances from the loan’s lead lender and argued the debt itself was unlikely to be impaired even though the equity value would take a hit. Gibson’s team weren’t fully convinced — they felt the loan should have reflected more risk well before any restructuring was announced. A spokesperson for Cliffwater later said the lender group relied on an independent third-party valuation firm to assess the loan both before and after the restructuring.
For Gibson, it wasn’t a single smoking gun. It was one data point among many suggesting the asset class’s risk-reward balance had shifted — and a strong signal that a private credit redemption made sense sooner rather than later.
When and Why Did Gibson Capital Decide to Pull Out?
By late summer, industry-wide data reinforced what Gibson’s team suspected: the vast majority of new private-credit loans were being issued at thinner spreads than in years past, and the trend was heading lower still.
That September, Gibson’s research director put his reasoning into a memo and shared it internally. By October, the firm’s advisers agreed: it was time to exit the Cliffwater fund entirely and redeploy client money into intermediate-term bonds and inflation-protected Treasury securities.
Not every client loved the idea of walking away from an investment yielding more than 8%. But most trusted the firm’s reasoning and went along with the plan.
There was just one complication: private credit redemption isn’t immediate. Investors typically get one shot per quarter to request their money back, and if too many people try to leave at once, the fund can legally cap how much it pays out. Gibson’s clients would have to wait for the next redemption window and hope they weren’t crowded out.
What Happened to Investors Who Waited to Request a Private Credit Redemption?
While Gibson waited, the broader private-credit market began wobbling in ways that validated the firm’s caution. Two high-profile corporate bankruptcies rattled investor confidence. JPMorgan’s CEO publicly warned that more trouble could be lurking beneath the surface. A major private-credit manager scrapped a planned fund merger after investor pushback.
By the time Gibson’s redemption window opened in early December, anxiety across the industry was building fast. Gibson submitted its clients’ full $80 million redemption request — and, to the relief of its research team, Cliffwater paid it out in full the very next day.
The timing proved remarkably fortunate. Investors industry-wide tried to withdraw close to $20 billion from similar private-credit funds in the following quarter, forcing many funds — including Cliffwater’s — to start capping redemptions. When the next quarterly window came around, investors requested 14% of fund assets back; Cliffwater paid out only half of that, the maximum allowed under its rules. The quarter after that, demand for withdrawals climbed even higher, and the fund paid out just a fraction of what was requested.
One Gibson client, who runs a television station in Las Vegas, later spotted a news story describing the wave of private credit redemption requests sweeping the industry and realized his own advisers had gotten his money out months earlier. He couldn’t resist sending it along with a note of congratulations.
Key Numbers Behind This Private Credit Redemption Story
- $80 million — client money Gibson Capital withdrew from the Cliffwater fund
- 60% — cumulative return Gibson’s investment generated before exiting
- $30 billion+ — size the Cliffwater Corporate Lending Fund grew to, up from $1 billion in 2021
- ~$20 billion — amount investors industry-wide tried to withdraw from similar funds the following quarter
- 5% — typical quarterly cap private-credit funds place on investor redemptions
- 14% — share of fund assets investors requested back the quarter after Gibson exited (only half was paid out)
Read more:-
Anne Hathaway Expecting Baby No. 3: Actress Shares Exciting Family News
California Family Moves Back Into Rebuilt Home 16 Months After Palisades Fire Destroyed It
Why do private credit funds limit how much money investors can withdraw?
Most private credit funds use a structure that allows redemptions only once per quarter, capped at roughly 5% of fund assets. This protects the fund from having to sell illiquid loans at a loss to meet sudden demand, but it also means investors can get stuck waiting if too many people request a private credit redemption at the same time.
What tipped off Gibson Capital that private credit was getting riskier?
Gibson’s team noticed loan spreads narrowing, fewer investor protections (covenants) on new loans, more borrowers paying interest “in kind” instead of in cash, and a specific loan that stayed marked near full value even after its borrower missed its maturity date and later filed for bankruptcy protection.
Did Gibson Capital get all of its money out?
Yes. Gibson submitted its full $80 million private credit redemption request in early December, and Cliffwater paid it out in full the next day — before the fund began capping withdrawals in the following quarters.
Is private credit a bad investment now?
Not necessarily. Lower loan spreads and tighter redemption gates reflect a market correction rather than a collapse. Some analysts believe the recent wave of withdrawals could eventually push spreads back up, making the asset class more attractive again for investors willing to accept its illiquidity.
How can investors avoid getting stuck in a private credit redemption queue?
Reviewing a fund’s quarterly regulatory filings for signs of loan spread compression, weakening covenants, and stale valuations — the same red flags Gibson Capital identified — can help investors and advisers decide to request a private credit redemption before a broader rush makes exiting harder.
